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Valuer-General Victoria and Municipal Group of Valuers

Specialist Property Guidelines for Non-rateable Leviable Properties

November 2012

Published by the Victorian Government Department of Sustainability and Environment Melbourne November, 2012

© The State of Victoria Department of Sustainability and Environment 2012

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Victorian Statutory Revaluation

Guidelines on Valuation Methodology for Non-rateable Leviable Properties November 2012 – Version 3 Page 1 of 30

Valuer-General Victoria and Municipal Group of Valuers

Guidelines on Valuation Methodology for

Non-rateable Leviable Properties

Introduction The guideline is for the purpose of valuing non-rateable leviable properties. In accordance with the Fire Services Property Levy Act 2012 (Fire Services Property Levy Act) non-rateable leviable properties are to be valued for the purposes of the fire services levy (FSL). Land currently not rated will be valued for the purpose of the FSL under provisions of the Valuation of Land Act 1960 (Valuation of Land Act). The aim of the paper is to provide guidance on the valuations of:

places of worship, such as churches, chapels, mosques, synagogues and temples. private schools civic centres including

o council offices o town halls o libraries o community buildings.

The guideline needs to be used in conjunction with General Provisions for Specialist Guidelines, which refers to the general requirements, legislation and procedures relating to all statutory valuations. Definition The Victorian Planning Provisions provide definitions for the following land use terms:

Education centre1

Land used for education, such as a: o business college o employment training centre, o primary school, o secondary school, o tertiary institution.

Place of worship Land used for religious activities, such as a church, chapel, mosque, synagogue and temple.2

Place of assembly Land where people congregate for religious or cultural activities, entertainment or meetings. 3

Restricted place of assembly Land used by members of a club or group; or, by members' guests for religious or cultural activities, entertainment, or meetings. It may include food and drink for consumption on the premises and gaming.4

1 Department of Planning and Community Development 2010, Department of Planning and Community Development,

Victoria, viewed 28 September 2012, 70 Definitions – 74 Land Use Terms 08/08/2012 http://planningschemes.dpcd.vic.gov.au/VPPs/ 2 Department of Planning and Community Development 2010, Department of Planning and Community Development, Victoria, viewed 28 September 2012, 70 Definitions – 74 Land Use Terms 08/08/2012 http://planningschemes.dpcd.vic.gov.au/VPPs/ 3 Ibid 4 Ibid

http://planningschemes.dpcd.vic.gov.au/VPPs/





Other definitions and industry terms The following definitions and industry terms are in alphabetical order. Cathedral – the principal church of a diocese, with which the bishop is officially associated.5

Chapel – a part of a large church or cathedral with its own altar and dedication.6

Church – a building used for public Christian worship.7

Civic centre - Municipal offices, council chamber and associated community facilities,

such as: local government offices town hall library, community building.

Indoor recreation facility - A building used for indoor leisure, recreation, or sport.8

Leisure and recreation - Land used for leisure, recreation or sport.9

Manse – a house provided for a minister of certain Christian churches.10

Minor sports and recreation facility - Land used for leisure, recreation or sport, without

substantial provision for spectators, and which is usually open to non-paying spectators.11 Mosque – a Muslim place of worship.12 Open sports ground - Land used for sport, but which is available for informal outdoor

leisure or recreation when not being used or prepared for an organised game. It may include lights, change rooms, pavilions and shelters.13

Outdoor recreation facility - Land used for outdoor leisure, recreation, or sport.14 Pipe organ - a large musical instrument having rows of pipes supplied with air from bellows

(now usually electrically powered), and played using a keyboard or by an automatic mechanism. The pipes are generally arranged in ranks of a particular type, each controlled by a stop, and often into larger sets linked to separate keyboards15

Presbytery – the house of a Roman Catholic parish priest.16

Rectory – a rector’s house – a Church of England benefice held by a rector.17

5 Ibid 6 Oxford dictionary, 2012 Oxford University Press, viewed September 2012, http://oxforddictionaries.com/ 7 Ibid 8 Department of Planning and Community Development op. cit 9 Ibid 10 Oxford Dictionary op. cit 11 Department of Planning and Community Development op. cit 12 Oxford Dictionary op. cit 13 Department of Planning and Community Development op. cit 14 Ibid 15 Oxford Dictionary op. cit 16 Ibid 17 Ibid



Religious hall - Land used for purposes associated with religious activities and not providing any commercial opportunities.

Religious study centre - Land used for the training of people associated with religious

activities such as seminaries, novitiates’. Synagogue – the building where a Jewish assembly or congregation meets for religious

observance and instruction.18 Temple – a place of Christian public worship, especially a Protestant church in France.19 Vestry – a room or building attached to a church, used as an office and for changing into

ceremonial vestments.20

18 Ibid 19 Ibid 20 Ibid



Additional Victorian legislation and cases applicable to non-rateable leviable properties The following Acts are relevant to the valuing of non-rateable leviable land in Victoria:

The Fire Services Property Levy Act 2012 Valuation of Land Act 1960 Local Government Act 1989 Heritage Act 1995.

Valuation of Land Act heritage provisions Many properties across the state are listed on the Victorian Heritage Register (VHR) because of their cultural heritage significance. The listing may not only affect the main building but also include organs, objects, trees, special works or ancillary buildings on the site. The significance of some buildings on the VHR may be for their previous uses, such as former municipal offices. Even though the use may have changed, the heritage significance is still relevant and needs to be taken into consideration. The Valuation of Land Act contains provisions relating to heritage registered land that the valuer must consider when valuing properties registered in whole or in part on the VHR. Valuation of Land Act 1960 – Section 2(8) Despite anything in this Act or the Local Government Act 1989, calculation of the capital improved value, net annual value and site value of any rateable land that is a registered place within the meaning of the Heritage Act 1995, or a building included in the Heritage Register established under that Act must be made on the following basis:

(a) as to the part actually occupied by the building included in the Heritage Register established under the Heritage Act 1995:

(i) that the land may be used only for the purpose for which it was used at the date of

valuation; and

(ii) that all improvements on that land as at the date of valuation may be continued and maintained in order that the use of the land referred to in subparagraph (i) may be continued; and

(iii) that no improvements, other than those referred to in subparagraph (ii), may be

made to or on that land; or

(b) as to any part (not actually occupied by the building included in the Heritage Register and not land that is included in the Heritage Register), that the building included in the Heritage Register cannot be removed or demolished and that any land referred to in paragraph (c) must not be subdivided or developed unless a permit to subdivide or develop the land has been granted by the Heritage Council; or

(c) as to any land that is included in the Heritage Register established under the Heritage Act

1995, that the land cannot be subdivided or developed; or, if a permit to subdivide or develop the land has been granted by the Heritage Council, that it can be subdivided or developed only in accordance with that permit.



Valuation of Land Act refusal of permit provisions If a permit for demolition of a building has been refused Section 2(9) of the Valuation of Land Act applies. This provision requires that the land must be calculated on the basis that a building cannot be pulled down or removed. The valuer must value the site value, capital improved value and net annual value on the basis that the building and/or improvements to which the permit relates are to remain on the land. Valuation of Land Act 1960 – Section 2(9) If:

(a) a planning scheme under the Planning and Environment Act 1987 prohibits the pulling down or removal of a building; or

(b) a planning scheme under the Planning and Environment Act 1987 provides that a permit is

required before a building may be pulled down or removed and:

(i) the responsible authority has refused to grant a permit; or (ii) the Administrative Appeals Tribunal or the Victorian Civil and Administrative Tribunal has directed that no permit issue-

Then despite anything in the Local Government Act 1989 or this Act the capital improved value, net annual value and site value of any rateable land that includes the building must be calculated on the basis that the building cannot be pulled down or removed.

Extracts from cases and reference material Extract from Australian Postal Commission v Melbourne City Council [2005] VSCA 295

Under s.5A the determination of the value of land on the basis of the highest and best use of land requires that the land be considered with all its attributes, existing and potential, at the relevant moment for assessment of value. One must consider the potential uses to which it might be put assuming the restrictions to which it is subject at the time of valuation.[2] Therefore, putting aside the effect of s.2(8), a valuer of Heritage listed land would be required to value it on the basis of all potential uses to which the land might be put under the existing heritage restrictions and consequently would have to take into account any uses to which the land was not being put but might lawfully be put under existing restrictions. Under s.2(8), however, one is expressly directed that the valuation of Heritage listed land must be undertaken on the basis that the land may be used only for the purpose for which it was used at the date of valuation, and so, according to the plain and ordinary meaning of the terms of s.2(8), the valuer would not be permitted to take into account any other use to which the land might be put under existing restrictions. Furthermore, whereas under s.5A a valuer is directed also to take into account “any potential use”, which we take to mean any use to which the land might be put in future if existing restrictions were altered in a way which at present seems conceivable, under s.2(8) the valuer is expressly directed that the valuation is to be undertaken on a basis which excludes any use other than the existing use, and therefore, as it seems to us, which necessarily excludes any potential for change to existing restrictions. 21

21 Australian Postal Commission v Melbourne City Council [2005] VSCA 295, at 17

http://www.austlii.edu.au/au/legis/vic/consol_act/lga1989182/



Extract from The Law Affecting Valuation of Land in Australia For properties that have heritage significance (as outlined under capital improved value), in relation to site value, the following extract provides guidance:

For these reasons, when assessing the site value of land, it is necessary to have regard to any restriction upon the use and development of the subject land caused by the heritage listing of the improvements upon it. It is for these reasons also that I agree with the conclusion of Mullighan J in McEwin v Valuer-General (1993) 60 SASR 241 at 247 that the restrictions caused by the heritage listing must be considered when determining the site value.22

Court cases There are no court cases directly applicable to the categories in this paper. The following are some of the court cases that assist with regards to heritage considerations, highest and best use and Special Use/Public Use zoned land: Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor

[2011] VSC 184 VALUATION OF LAND – Meaning of ‛site value’ – Meaning of ‛capital improved value’ and whether ‛vacant to let’ deduction required – ‛highest and best use’ – Falconer principle – sales of other properties and their relevance as comparable sales or on other bases – Valuation of Land Act 1960. REAL PROPERTY – Meaning of fee simple in possession – ‛Whether lease an encumbrance’.

ISPT Pty Ltd v City of Melbourne and Valuer-General Victoria [2008] VSCA 180 VALUATION OF LAND – Application for leave to appeal decision of Victorian Civil and Administrative Tribunal – Role of the Tribunal – Whether expert tribunal – Whether Tribunal pieced together own valuation. VALUATION OF LAND – Highest and best use – Whether single precise use or combination of uses. VALUATION OF LAND – Comparable sales – Improved and unimproved sales – Vacant land sales – Weight to be given to valuer’s evidence.

Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365 VALUATION – Valuation of Land – Methods of Valuation – Where land subject to heritage restrictions – Valuation of Land Act 1916 ss 6A, 14G; STATUTES – Interpretation – Mischief rule.

22 Alan Hyam The Law Affecting Valuation of Land in Australia (Federation Press, 4th Ed 2009) 293



Blacktown City Council v Roads and Traffic Authority of NSW [2006] NSWLEC 37 (3 FEBRUARY 2006)

CATCH WORDS: Compulsory Acquisition of Land

Australian Postal Commission v Melbourne City Council [2005] VSCA 295

VALUATION OF LAND - Heritage Register – Valuation of building included in Heritage Register – Whether building included in Heritage Register to be valued as if devoid of potential for change of use and improvement - Statutes – Interpretation – Literal interpretation – Mischief rule – Whether s.2(8) of the Valuation of Land Act 1960 to be construed literally – Valuation of Land Act 1960, ss.2(8) and 5A; Heritage Act 1995.

New South Wales Golf Club Limited v Valuer General [1993] NSWLEC 202 (3 December 1993)

City of Brighton v Road Construction Authority [1985] VicSC 359

Refers to the valuation of land reserved as parkland. ‛The Authority’s case was that if the land could not be valued as parkland, the next most appropriate method of valuing it was upon the basis that it was, after some delay, rezoned to residential and the subdivided into 12 allotments.’23

Port Macquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63; (1972) LGRA 23

Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13

Land Tax - Land - Golfcourse - Golf club - Facilities and amenities - Use by members - Unimproved value of land - Valuation - Regard to provisions and effect of County of Cumberland Planning Scheme - ‛Vacant land’ - ‛Built-up land’ - Restrictions - ‛Land upon & which there are no buildings’24

Alpine Shire Council v MHSC Transportation Services Pty [2002] VSC 22 (25 February 2002)

VALUATION OF LAND for rating purposes of an operating commercial airport at the alpine site of Mount Hotham – where four separate valuations were presented to the Court, differently based and leading to different assessments of the capital improved value of the improved airport land – what was the correct methodology for valuing the airport?

23 City of Brighton v Road Construction Authority [1985] Supreme Court of Victoria, Unreported Judgments p 32. 24 Royal Sydney Golf Club v Federal Commissioner of Taxation [1955] HCA 13 at 1



Other relevant material:

The Internet is a valuable resource; the following sites may provide useful information:

Victorian Heritage Register Database http://vhd.heritage.vic.gov.au/

Note: advanced searches can be done by selecting the Heritage group and then the Heritage category within a municipality.

National Trust Listing – Victoria http://www.nattrust.com.au/advocacy/heritage_listing

Heritage places and objects technical guides and leaflets - http://www.dpcd.vic.gov.au/heritage/heritage-places-and-objects/technical-guides-and-leaflets

Valuer General Victoria Jam Factory Practice Note

http://www.dse.vic.gov.au/property-titles-and-maps/valuation-home-page/council-valuations-homepage

Department of Sustainability and Environment – Guidance Note Fair Value Asset Valuation Methodologies for Victorian Local Governments http://www.dpcd.vic.gov.au/__data/assets/pdf_file/0003/38181/0706-01FairValueAsset.pdf

Private schools directory

www.privateschoolsdirectory.com.au

http://vhd.heritage.vic.gov.au/

http://www.nattrust.com.au/advocacy/heritage_listing

http://www.dpcd.vic.gov.au/heritage/heritage-places-and-objects/technical-guides-and-leaflets

http://www.dpcd.vic.gov.au/heritage/heritage-places-and-objects/technical-guides-and-leaflets




http://www.dpcd.vic.gov.au/__data/assets/pdf_file/0003/38181/0706-01FairValueAsset.pdf

http://www.dpcd.vic.gov.au/__data/assets/pdf_file/0003/38181/0706-01FairValueAsset.pdf

http://www.privateschoolsdirectory.com.au/

http://www.privateschoolsdirectory.com.au/



ww.dse.vic.gov.au/property-titles-and-maps/valuation-home-page/council-valuations-homepage l Victoria

Identification of properties

Australian Valuation Property Classification Codes (AVPCC) The valuer is required to appropriately categorise non-rateable leviable properties within the municipality. The following Australian Valuation Property Classification Codes (AVPCC) are applicable to properties subject to these guidelines:

Religious

Church, Temple, Synagogue, etc. - 740

Religious Hall – 741

Rectory, Manse, Presbytery – 742

Religious Study Centre – 743

Education and Research

School Primary – Public/Private – 721

School/College Secondary/Technical School – Public/Private – 723

o Unspecified – 723.1

o Secondary School College – 723.2

o Private Education Centre – 723.3

o Public Education Centre – 723.4

o Technical School – 723.5

Special Needs School – 724

University – Private/Public – 725

Technical and Further Education – 726

Research Institute Public – 727

Community Service and Sporting Clubrooms and Halls

Halls and Service Clubrooms – 750

Community/Neighbourhood Facility – 752

Government Administration

Local Government – 762

Civic Buildings – 763

Local Cultural Heritage Sites, Memorials and Monuments

Library/Archives – 840

Museum/Art Gallery – 841



Information questionnaire – specific requirements applicable to non-rateable leviable properties

The following is a guide to the type of information required for non-rateable leviable properties. It is recommended that the information is requested with a covering letter in the same format as provided in the general rental questionnaire in General Provisions for Specialist Guidelines, with the following modifications: Covering letter

State Government legislation requires Victorian councils to revalue all rateable and non-rateable leviable properties once every two years.

The relevant date for the next revaluation is 1 January 2014. Council will use the new values for rating and levy purposes for the 2014-2015 and 2015-2016 financial years

Section 3A of the Valuation of Land Act 1960 requires and provides that:

(a) a valuer may enter at all reasonable hours in the daytime upon any land building or premises

(b) a valuer may put either verbally or in writing any relevant questions to enable the making of a true and correct valuation

(c) a valuer may inspect any books or documents and papers for the purpose of such valuation and without charge take extracts there from

(d) council (and their representatives) must treat the information as confidential

(e) a penalty not exceeding two penalty units per assessment applies for failure to allow such entry or inspection, refusal or willful omission in answering questions or providing information or falsifying any information provided

To assist in the carrying out of a true and correct valuation, the attached information questionnaire is required to be filled in and returned to council by the [xx date].

While it is preferred that documentation is returned in an electronic format, a hard copy is acceptable.

If you have any questions please do not hesitate to contact council’s valuer [insert details of valuer].



Questionnaire The following sections of the general rental questionnaire are applicable to this paper and should be incorporated in the request for information:

Section 1 – Occupancy details: 1. Occupancy details

Name of occupier:

Name of premise): ________________________________________________

Use(s) of premise:

Place of Worship

Place of worship Hall School Religious centre Residence

Sporting facilities (if yes please specify________________________)

Other (if yes please specify

Private School

School (both primary and secondary) Primary only Secondary only

Hall Chapel Indoor recreational facilities Boarding facilities Residence/caretaker

Sporting facilities (if yes please specify________________________)


Civic Centre

Office/Administration Town Hall Council Chambers (separate building)

Council Chambers (within Town Hall/Council Offices)

Library Community Building


Are any parts of the property occupied by separate tenants? Yes No

(If yes, please complete Section 4).

Section 2 – Land Details Section 3 – Property Details



4. Lease details (if any)

Is the property (or any parts of it) subject to a lease? Yes No (if yes, please provide the following

information)

Lease commencement date: ____/____/_____

Initial term: _______________ Lease options: ________________

Current rental: $______________ Per week Inclusive GST

Per calendar month Exclusive GST

Annual

Date last reviewed: ____/____/_____ Frequency of rent review:______________ (e.g. annual, two yearly)

Method of rent review: CPI To market

Fixed _______% Other___________

Outgoings: Owner $___________ Tenant $___________

5. Additional questions relating to Heritage and other issues

Are any buildings, monuments, trees or other works on the property listed under the Victorian Heritage

Register (VHR)?

Yes No

If yes, please complete answer the following questions.

o If so, what is listed on the VHR? _________________________________ o What is the significance? ______________________________________ o What is the Architectural style? _________________________________

Are there any significant fixtures on the property that may also have heritage significance?

(example pipe organ) Yes No

If yes, please provide a description and significance of fixture. _________________________________

Documents - The following documents are required.

(Please indicate if they have been attached to this request for information). a) Do you have a copy of the assets/depreciation schedule for the property? Yes No

If yes, is this attached? Yes No If No, please provide the reason:___________________________________

b) Do you have information on replacement costs and/or current depreciation costs? Yes No

This may be in the form of:

o an asset schedule or a depreciation schedule o a list of plant and equipment o details on age and economic life o other document or schedule

If yes, is this attached? Yes No

If No, please provide the reason:___________________________________ Section 6 – Declaration



Property inspection – specific requirements applicable to non-rateable leviable properties

In conjunction with the general procedure in carrying out a property inspection for statutory purposes, the following procedures are applicable to the categories in this guideline.

1. Investigate documents:

Are any buildings, fixtures, trees, objects or other works on the property listed

under the Heritage Register? o If so, what is the heritage register number? o What is the heritage status/level of significance? o What is the significance? o What is the architectural style?

Is the property subject to any heritage or other overlays or restrictions? If yes, what is the heritage overlay number? Planning permit – Does the land have an existing permit? What is the permitted

use or alternate uses? What are the car parking requirements? Certificate of Title – are there any restrictions to the title? Are there any

Section.173 agreements? Determine impact on site value, if any. The asset register should be sourced for the following information:

o An asset/depreciation schedule o A list of plant and equipment (this may be referred to in the

asset/depreciation schedule) o Details of age and economic life o Replacement cost.

2. Site attributes:

Confirm land area Determine title boundaries and number of parcels Determine zones and/or planning controls Does the land have potential for further development? If there are any trees on the land that are on the VHR, the valuer should sight them

and determine the impact (if any).

3. Inspect property and determine components of the property such as:

a) Building architecture and functionality:

Architectural significance Does the office building have any significant features? Does the building have

an original component that is of an older construction type and/or style? What is the condition, functionality and versatility of the accommodation? Is/are the building/s obsolete? Technology systems Sound/heating/cooling/security/fire systems Significant fixtures such as piped organ.

b) Size/capacity:

Place of worship – seating capacity School capacity

o average class size – junior School o average class size – senior School

Office facilities – lettable area of office space including meeting rooms and amenities if exclusively occupied.



c) Ancillary buildings: What other buildings are located on the site, such as: School/classrooms Town hall/council chambers Childcare or pre-school facilities Library Chapel Ancillary rooms such as major room/office, dining room, kitchen facilities,

and amenities. Laboratories/science buildings Office facilities/accommodation Boarding facilities/convent/residence Gymnasium, indoor swimming pools, indoor sporting facilities

d) Other improvements:

Outdoor sporting facilities, tennis courts, swimming pools etc. How many car parks are available on site? Other improvements on the site Are gardens/fences/gates/paving/monuments of any significance?



Methodology Site value

General Provisions for Specialist Guidelines outlines the general principles in determining site value. Prior to valuing the land, the valuer needs to determine if Section 2(8) of the Valuation of Land Act applies, by ascertaining if any part/s of the property are listed on the Victorian Heritage Register (VHR). If the property is listed on the VHR then, in accordance with Section 2(8) Valuation of Land Act, the valuer is to:

disregard or exclude any potential the site may have and value the land for the

purpose for which the site was being used at the date of valuation

assume that the existing building(s) on the site is the only building(s) that the existing use could be continued on the land

consider the building with all its perceived benefits of a heritage building and all the

perceived burdens such as functionality (the benefits and burden principle should apply).

If Section 2(8) does not apply (i.e. the property is not listed on the VHR) then the site should be valued with regard to its highest and best use. The following are more detailed considerations for site value:

Planning controls Planning controls include zoning overlays, development plans and controls and permits. The valuer needs to ascertain the highest and best use of the site, taking into consideration the permitted use/s and development controls. The current use may not be the highest and best use. Rezoning potential This is relevant in instances where there is a public use zone. The valuer needs to consider what the likelihood is of rezoning. Development of surrounding properties may give a guide. A time and cost allowance of the rezoning of the site also needs to be taken into consideration. Most civic centres will have a public use zone such as PUZ6, Public Use Zone – Local Government. Civic centre sites frequently comprise multiple parcels, which may be subject to different zoning. Heritage overlays Heritage overlays may be prevalent for places of worship, private schools and civic centres, particularly some town halls or council chambers. A heritage overlay, like any planning control, needs to be taken into consideration when determining the highest and best use and redevelopment potential of the site. Land affected by a heritage overlay is best compared with sales affected by similar provisions.



SV methodology

The primary approach (where section 2(8) of the Valuation of Land Act does not apply) is to apply a rate per square metre/hectare of site area based on a direct comparison of comparable vacant land sales. In ascertaining the highest and best use of the site and applying a rate per metre/hectare to land area, the valuer needs to consider the existing parcels, parcel configuration, zone of each parcel and the occupancies of the site. A secondary approach in the absence of comparable sales may be to undertake a hypothetical subdivision approach – refer to Specialist Property Guideline for Development Land. Site improvements as defined under Section 2 (b) of the Valuation of Land Act are improvements included in the site value unless those improvements can be shown by the owner or occupier of the land to have been made by the person, or were made at that person’s expense within 15 years before the valuation. If these improvements have been carried out within the 15 years the valuer must ascertain the added value of these works (if any) and assume they have not been made. If the property is affected by an overlay (but is not listed on the Victorian Heritage Register), then the most appropriate sales evidence will be of sites that have the same or very similar overlays. 1. Zoning is public use or special use

If the property is zoned for public use (PUZ) or special use zone (SUZ) the land is required to be valued taking account the zoning restrictions and/or any specific purpose for which the property is zoned. The primary approach where sales are available is direct comparison. In the absence of sales with similar zoning restrictions, the valuer needs to establish an underlying land value based on an alternative use and make an appropriate allowance for the zoning constraints. The land should be valued having regard to its alternative highest and best use and adopting a discount rate that reflects the zoning restrictions, risk associated with rezoning and costs in achieving the rezoning. If the valuer has comparable sales of PUZ/SUZ land and non-PUZ/SUZ land they are able to analyse the affect of existing zoning from an alternative underlying zone in order to support the applicable discount (if any). Example PUZ property: Subject: Private School Land: 4 Hectares Public Use Zone Buildings: 7,500 m2 Assumptions Underlying Land Value: Residential $1,000/m2

Site Value

Area (m2) Rate $/m2 Value Land Area 40,000 $1,000 $ 40,000,000 Less Allowance for Restriction/s Discount Rate 30%

$12,000,000

SV (rounded) $28,000,000



2. Land on which is situated a place that is on Victorian Heritage Register In assessing the site value when Section 2(8) of the VL Act 1960 applies, the appropriate approach is to calculate the capital improved value and then deduct the added value of the improvements to derive the site value. The added value of the improvements is determined via sales analysis of in use improved sales. Example heritage property: Subject: Church on Victorian Heritage Register Land: 1,000m2 Buildings: 500m2 Assumptions Added Value $500/m2

Site Value

Area (m2) Rate $/m2 Value CIV Direct Comparison

1,000 $800 $800,000

Less Added Value of Improvements

500 $500 $250,000

SV (rounded) $550,000

Capital improved value

In accordance with the Valuation of Land Act definition of Capital Improved Value (CIV) the estate in fee simple of the subject land must be assessed at its market value in the state in which it existed at the return date. The value is to be determined with regard to Section 5A of the Valuation of Land Act.

Refer also to General Provisions for Specialist Guidelines and Valuer-General Victoria Jam Factory Decision Practice Note – October 2011

When assessing CIV the land must be valued in accordance with one of the following criteria:

1. Land not included on the Victorian Heritage Register

The market value is based on the highest and best use determined from sales of similar zoned land with similar development potential. It is open for the valuer to consider the existing use as well as any other alternative uses that the valuer considers maximises the potential of the site and is permitted under the existing planning controls. The buildings on the site may or may not provide added value to the land. This will be established after determining the land value. If the site has no development potential, then the buildings may have alternative uses permitted under the planning regulations that provide a higher use of the property.



2. Land included on the Victorian Heritage Register For properties that are listed on the Victorian Heritage Register, Section 2(8) of the Valuation of Land Act provides guidance on the basis upon which CIV is calculated. The main considerations are: the existing use as at the date of valuation continues

improvements are maintained in the same state to enable the existing use

no other improvement can be made.

These provisions apply only to the building or part of the building that is the subject of the registration. The valuer should consider where the heritage significance applies to a fixture. The Valuation of Land Act provisions still apply to the affected part and the valuer has to determine the effect on the land. In the case of objects, these are considered to be a chattel and therefore cannot be reflected in the CIV. Highest and best use When determining value of land, the following Section 5A provisions of the Valuation of Land Act should be taken into account: Section 5A (3)(a) – the use to which such land is being put at the relevant time, the highest

and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

Section 5A (3)(f) – the actual and potential capacity of the land to yield a monetary return. It is not necessary to identify a precise highest and best use. Rather, it is open to the valuer to identify the highest and best use in terms of the various types of allowable uses. Existing use Where the existing use is considered to be the highest and best use, then the following considerations are relevant:

1. Architecture o Architectural style o Period o Significant features o Architectural obsolescence

2. Functionality o Funcionality/obsolescence o Quality/condition o Fit out o Services – heating/cooling/audio/security/fire systems o Halls/libraries/chambers/theatres o Amenities (bathrooms, change rooms, lunch rooms) o Administration support/meeting rooms

3. Size/capacity of building(s)

o GLA/NLA o Seating capacity o Classroom size



4. Associated structure and facilities such as:

o Indoor sporting facilities (swimming pools, gymnasium) o Outdoor sporting facilities (tennis courts, sports ovals, athletics

facilities) o Boarding facilities o Chapel/place of worship o Convent/ caretaker residence o Assembly hall/auditorium o Theatre/music/libraries o Art facilities

5. Car parking on site

6. Site design and topography

7. Development Potential

8. Market Evidence Actual occupation Future occupation Actual rentals Market rentals

Alternative use For land where an alternative use is considered to be the highest and best use, then the following factors need to be taken into consideration.

Compliance with planning provisions Effect of modifications and changes Occupation at market rates.

CIV methodology The four methodologies for valuing non-rateable leviable properties in this guideline paper are: 1. Direct comparison 2. Summation 3. Capitalisation 4. Contractors method (Depreciation replacement cost). Comparison factors applicable to all four methodologies are:

Heritage significance Location Zoning, overlays and other planning controls Land area, shape and topography Architectural style Building age, size, capacity, functionality Overall building facilities and amenities. Site amenities, car parking, security



1. Direct comparison This methodology is the recommended approach where sales of comparable properties are available. An analysis per square metre of an ‘all in’ land and building rate can be derived and applied to the subject land.

Comparison is performed on a $/m2 of site area or a $/m2 of building area. The following is an example of the direct comparison approach applied as an ‘all in’ value to the site area.

Sample property: Subject: Private school Land: 4.0 Hectares Public Use Zone Buildings: 7,500 m2 Assumptions Direct comparison ‘all in’ sales analysis $1000 - $1500/m2 of site area

Capital Improved Value

Area (m2) Rate $/m2 Value Land & Improvements

40,000 $1,250 $ 50,000,000

CIV (rounded) $ 50,000,000

Alternatively the following is an example of the direct comparison approach applied as an ‘all in’ value to the building area.

Assumptions Direct comparison ‘all in’ sales analysis $6,500 - $7,000/m2 of building area.

Area (m2) Rate $/m2 Value Land & Improvements

7,500 $6,650 $49,875,000

CIV (rounded) $ 50,000,000



2. Summation This methodology relies upon the assessed site value plus the added value of improvements gained from the analysis of comparable sales. The following is an example of the summation approach applied to the previous sample property.

Area (m2) Rate $/m2 Value Site value $28,000,000Plus Junior school 1000 $2,000 $2,000,000Plus Senior school 2000 $2,000 $4,000,000Plus Hall 1000 $1,500 $1,500,000Plus Administration

building 500 $4,000 $2,000,000Plus Science laboratory 600 $5,000 $3,000,000Plus Art building 600 $2,000 $1,200,000Plus Chapel (Heritage

Listed) 300 $2,000 $600,000Plus Indoor sports

centre 1500 $3,500 $5,250,000Plus Outdoor recreation

facilities

$ 2,000,000Plus Landscaping $ 750,000 Equals $ 50,300,000Total CIV (rounded)

$ 50,000,000



3. Capitalisation approach This method is adopted where comparable sales and rental evidence is available in order to derive market rent and market yield or capitalisation rate. The net rental on a fully let basis is adopted for the subject land and then capitalised at an appropriate market yield.

The following is an example of the capitalisation approach. Sample property: Subject: Civic centre and public car park Land: 2.0 Hectares of Residential 1 zoned land Buildings: 7,000m2

Parcel Land area

(m2) Rate $/m2 Site value

Civic centre Lot 1 PS12345 15,000 $800 $ 12,000,000

Car park Lot 2 PS12345 5,000

$1500 $ 7,500,000

Total SV (rounded) 20,000

$19,500,000

Net Lettable Area (m2)

Rental ($/m2)

Annual rental

Cap rate

CIV

Municipal offices 5,000 $400 $2,000,000 8.00% $ 25,000,000 Town hall, chambers and library

2,000 $300 $ 600,000 8.00% $ 7,500,000

Plus car park $7,500,000 Total CIV (rounded) $40,000,000



4. Contractors method This method of valuation is used in the case of land rarely let with limited, if any, sales evidence. By their nature they do not lend themselves to valuation by comparison with other classes where sales and rental evidence does exist. In these instances the contractors method may be appropriate. Contractors method is the replacement cost less depreciation (age) and underutilisation/obsolescence factor. Contractors method = cost – (depreciation + underutilisation/obsolescence) The valuation approach comprises three elements:

Building cost and other improvements Depreciation and obsolescence Land value.

Building cost Valuers should have regard to construction materials, architectural features and finishes. Private schools, places of worship and civic buildings often have special features and materials, that need to be accounted for in the cost. Examples are provided below. Roofs Material, together with any spire, bellcote, associated embellishments, gargoyles and other decorative features. Walls, ceilings, floors Materials, extra widths, eaves, gables, pillars, arches, parapets, pinnacles, timber features/panelling, ceiling/wall paintings. Window and doors Materials, surrounds, mullions and tracery. plain, coloured, stained, painted or engraved glass. Internal Classrooms, cupboards, benches, office/meeting room fit outs, kitchens/cafeteria’s, wet areas/bathrooms, dormitories, laboratories. Finishes All flooring materials, all levels and galleries, internal linings, ceilings and vaulting, including any decorative features. Services Fixed heating, cooling, lighting, security/alarms, fire services Electrical Data/audio equipment, fixed electronic screens/projectors, terracing of fixed seating, additional sound proofing for noise control.

Other improvements Valuers should have regard to other improvements on the land including gates, fencing, boundary walls, landscaping, driveways, carparking and ancillary improvements such as stores and sheds.



Depreciation and obsolescence The appropriate rate of depreciation adopted should reflect physical and functional obsolescence. Physical obsolescence Considered to be an allowance for the age of the improvements and economic life. Functional obsolescence Considered to be an allowance for utility, condition, quality, services and inferior access and finish. Land value Land value should be based on sales evidence and the appropriate rate applied to the total site area. See Site Value methodology. In carrying out this approach, the following information is useful: Owner/ratepayer depreciation schedule and asset register. Obsolescence/book values Estimates for insurance replacement cost Building surveys Engineering reports Quality of improvements, which refers to issues such as functionality, age, utilisation,

economic life. Cost guides

o Rawlinsons/Cordells o Costings submitted for building approvals o Information from other valuers or councils


The following is an example of the contractors approach applied to the sample school property adopting straight line depreciation.

Area (m2)

Replacement cost

(rate/m2)

Depreciation (%)

Underutilisation/obsolescence

(%)

Total depreciation

and obsolescence

Adjusted depreciated rate $/m2

Value

Site value $ 28,000,000 Plus Junior school 1000 $4,000 30% 10% 40% $2,400 $2,400,000 Plus Senior school 2000 $4,000 25% 15% 40% $2,400 $4,800,000 Plus Hall 1000 $3,000 30% 5% 35% $1,950 $1,950,000 Plus Administration

building 500 $6,000 30% 15% 45% $3,300 $1,650,000 Plus Science laboratory 600 $8,000 10% 10% 20% $6,400 $3,840,000 Plus Art building 600 $3,000 40% 25% 65% $1,050 $630,000 Plus Convent (Heritage

Listed) 300 $10,000 35% 35% 70% $3,000 $900,000 Plus Indoor sports

centre 1500 $4,000 10% 0% 10% $3,600 $5,400,000 Plus Outdoor recreation

facilities $ 1,500,000 Plus Landscaping $ 750,000 Equals Capital Improved

Value (CIV) $ 50,320,000

CIV (rounded) $ 50,000,000

Another example of contractors method is provided in Guidelines on Valuation Methodology for Plant and Equipment.




CIV apportionment If the site value or capital improved value for individual occupancies is required to be apportioned then this should be undertaken in accordance with section 2(3) of the Valuation of Land Act.

AVPCC codes need to be applied to each separate occupancy.

Surplus land Surplus undeveloped land not required for the existing use is considered a separate occupancy and can be valued as a separate assessment, even when a separate title does not exist. Each parcel must be assessed assuming unencumbered freehold and not part of a larger property. The valuer is required to determine what is surplus land by having regard to whether: the land is not required to be occupied under the existing use and/or is set aside for future redevelopment.

Estimated annual value and Net annual value In the valuation of a non-rateable leviable property, the calculation of the estimated annual value and net annual value is required to be determined in accordance with the definitions in Section (2)(1) of the Valuation of Land Act. Refer also to General Provisions for Specialist Guidelines.



Industry information

Victorian Heritage Register

Heritage places can include buildings, trees, parks and gardens, streetscapes, archaeological sites, shipwrecks and structures such as bandstands.

A heritage object can include furniture, shipwreck relics, archaeological artifacts, equipment, transport vehicles, and articles of everyday use that contribute to an understanding of Victoria’s history.25

What does inclusion in the Victorian Heritage Register mean?

Places or objects registered by the Heritage Council of Victoria are of special cultural heritage significance to the State of Victoria and are legally protected to help conserve them for appreciation by future generations.

Registration by the Heritage Council of Victoria does not prevent places or objects from being sold, altered or employed for different uses. 26

What are the criteria for registration?

For a place or object to be included in the Victorian Heritage Register it must meet at least one of the Heritage Council of Victoria criteria for assessing cultural heritage significance27.

Heritage Council of Victoria criteria For a place or object to be included in the Victorian Heritage Register it must meet at least one of the criteria.

Criterion A – importance to the course or pattern of Victoria’s cultural history.

Criterion B – possession of uncommon, rare or endangered aspects of Victoria’s cultural history.

Criterion C – potential to yield information that will contribute to an understanding of Victoria’s cultural history.

Criterion D – importance in demonstrating the principal characteristics of a class of cultural places or objects.

Criterion E – importance in exhibiting particular aesthetic characteristics.

Criterion F – importance in demonstrating a high degree of creative or technical achievement at a particular period.

Criterion G – strong or special association with a particular community or cultural group for social, cultural or spiritual reasons. This includes the significance of a place to Indigenous peoples as part of their continuing and developing cultural traditions.

Criterion H – special association with the life or works of a person, or group of persons, of importance in Victoria’s history. 28

25 Department of Planning and Community Development 2012, Department of Planning and Community Development,

Victoria, viewed 28 September 2012, www.dpcd.vic.gov.au/heritage/victorian-heritage-register 26 Department of Planning and Community Development 2012, Department of Planning and Community Development, Victoria, viewed 28 September 2012, www.dpcd.vic.gov.au/heritage/victorian-heritage-register/registration/how-to-nominate-to-the-victorian-heritage-register 27 Ibid 28 Ibid

http://www.dpcd.vic.gov.au/heritage/victorian-heritage-register

http://www.dpcd.vic.gov.au/heritage/victorian-heritage-register/registration/how-to-nominate-to-the-victorian-heritage-register

http://www.dpcd.vic.gov.au/heritage/victorian-heritage-register/registration/how-to-nominate-to-the-victorian-heritage-register



Victorian Heritage Act 1995

The Victorian Heritage Act 1995 is administered by Heritage Victoria and is the Victorian Government's key piece of cultural heritage legislation.

The Victorian Heritage Act identifies and protects heritage places and objects that are of significance to the State of Victoria including:

historic archaeological sites and artefacts historic buildings, structures and precincts gardens, trees and cemeteries cultural landscapes shipwrecks and relics significant objects.

The Heritage Act establishes the Victorian Heritage Register, the Heritage Inventory and the Heritage Council of Victoria.29

Burra Charter

The Burra Charter provides guidance for the conservation and management of places of cultural significance (cultural heritage places), and is based on the knowledge and experience of Australia’s International Council on Monuments and Sites (Australia ICOMOS) members.

Conservation is an integral part of the management of places of cultural significance and is an ongoing responsibility.30

Who is the charter for?

The charter sets a standard of practice for those who provide advice, make decisions about, or undertake works to places of cultural significance, including owners, managers and custodians.31

29 Department of Planning and Community Development 2012, Department of Planning and Community Development, Victoria, viewed 28 September 2012, http://www.dpcd.vic.gov.au/heritage/about/heritage-policy-and-legislation 30 Ibid 31 Ibid

http://www.dpcd.vic.gov.au/heritage/about/heritage-policy-and-legislation



The following are extracts from the Heritage Act 1995 Definitions – Section 3

cultural heritage means places and objects of cultural heritage significance; cultural heritage significance means aesthetic, archaeological, architectural, cultural,

historical, scientific or social significance; heritage object means an object included in the Heritage Register as a heritage object; heritage place means a place included in the Heritage Register as a heritage place;

place includes:

o a building o a garden o a tree o the remains of a ship or part of a ship o an archaeological site o a precinct o a site o land associated with anything specified in paragraphs (a) to (g).

protected zone means an area included in the Heritage Register as a protected zone;

Categories of registration – Section 20 20. Categories of registration

(1) A place or object must be recorded in the Heritage Register in one or more of the following categories-

(a) heritage places; (b) heritage objects; (ba) places included in the World Heritage List; (c) archaeological places; (d) archaeological relics; (e) historic shipwrecks; (f) historic shipwreck relics; (g) protected zones.

(2) The Executive Director must specify the category or categories of the Heritage Register in which a place or object is to be registered.



The following definitions are from the Heritage Overlay Guidelines32 Heritage Overlay A Heritage Overlay (HO) is applied to a Heritage Place to conserve its cultural heritage values. The Heritage Overlay provisions are found at Clause 43.01 of planning schemes. The Guidelines assume that a Statement of Significance for a Heritage Place (or another assessment such as a Heritage Study) has defined or identified the relevant Contributory Elements. Heritage Place Under the Victoria Planning Provisions, (refer to VPP Practice Note – Applying the Heritage Overlay) a Heritage Place can be a: building (e.g. house, shop, factory etc.), structure (e.g. memorial, bridge or tram poles), features (e.g. mine shafts and mullock heaps, street gutters and paving), private garden or public park, single tree or group of trees such as an avenue, group of buildings or sites, landscape, geological formation, fossil site, or habitat or other place of natural or Cultural Heritage Significance and its associated land. In planning scheme terms, a Heritage Overlay includes the land associated with the Heritage Place. The term ‘Heritage Place’ does not include movable objects, such as machinery within a factory or furniture within a house. Area HO An Area HO is a collection of sites that contribute to the Cultural Heritage Significance of an area. The Statement of Significance or other heritage assessment should identify its Contributory Elements. Cultural Heritage Significance Cultural Heritage Significance means aesthetic, historic, scientific, spiritual or social value or other special value for the present community and future generations of Australians. Heritage Area A Heritage Area is all the land covered by an Area HO. It may sometimes be called a precinct. Individual HO An Individual HO is a single Heritage Place that has Cultural Heritage Significance independent of its context. Some places covered by an Individual HO also make a contribution to the significance of an Area HO. There should be a Statement of Significance for every Individual HO. Maintenance Maintenance is the continuous protective care of the Building Fabric and Setting of a Heritage Place, and is to be distinguished from repair. Repair involves Restoration or Reconstruction. Reconstruction Reconstruction means returning the Fabric of a place to a known earlier state including the introduction of new material into the Fabric. Restoration Restoration means returning the existing Fabric of a place to a known earlier state by removing accretions or by reassembling existing components without the introduction of new material. (Burra Charter). Statement of Significance A guide to understanding the Cultural Heritage Significance of a place. These are often divided into three parts: what, how and why.

32 Department of Planning and Community Development 2012, Department of Planning and Community Development, Victoria, viewed 28 September 2012, http://www.dpcd.vic.gov.au/heritage/Forms-and-Guidelines/heritage-overlay-guidelines ‘Glossary of Terms’

http://www.dpcd.vic.gov.au/heritage/Forms-and-Guidelines/heritage-overlay-guidelines

http://www.dpcd.vic.gov.au/heritage/Forms-and-Guidelines/heritage-overlay-guidelines