Advanced Valuation Essay Example | Topics and Well Written Essays - 1250 words

Advanced Valuation - Essay Example When the tenant doesn't have the right to initiate the process there are other provisions governing the situation. Similarly under the market rent review clauses, a time limit would have been prescribed for activating the rent review process. Though the determining valuer has wide discretionary powers, certain criteria like current market rent, assumption of vacant possession of the property, lease incentives and the willingness of the landlord and tenant should be taken into account by the valuer in the rent review process.At times of falling markets, incentives are granted by the landlords to the tenants including a rent free period or a contribution to the cost of the tenant for making the premises fit. In many commercial leases, the agreements contain clauses to disregard the incentives. However it would be disadvantageous for the tenant to allow the disregard as it will result in review of 'face rent'. Face rent is usually an inflated one because of the incentives being included in there. If incentives are disregarded the review would be based on a "comparison of other 'face rents', again ignoring that they are inflated because of the incentives provided under the other leases used as comparisons." (Mark Sheridan 2006)However, the valuer would be compelled to take into account the initiatives, had the lease deed been drafted efficiently. Such a process would result in a meaningful review of the 'effective rent' as against the unrealistic 'face rentals'. "If incentives originally granted at the commencement of the lease are to be taken into account or disregarded then the lease on such a material issue would include a provision that would express the intentions of the parties" (Peter Dempsey)3 In any case, it must be noted that the rent review provisions have to be interpreted by the determining valuer within the context of the whole lease. In general if the determining the valuer is unable to come to a definite conclusion, the determining valuer should seek independent legal advice or the advice from independent experts on the subject. valuer should take care not to exceed his area of expertise and arrive at decisions against the meaning of the rent review clauses. Wherever there supporting legal opinions the valuer should follow such legal opinions only. Under circumstances where He is not expected to decide on issues that are outside the scope of his core competency. Case Law: Citation: Orti-Tullo& Anor v Sadek & anor 2001 ATC 4688 Judge Bryson J Key Issues: The plaintiffs challenge the determination by a valuer of the current market rental value of commercial premises on the exercise of an option to renew a lease. Facts of the Case: The defendants were carrying on the business of a service station on the land leased to them as lessees for a lease period of five years with an option to renew for a further period of five years. The plaintiffs were the lessors. The lease deed provided for the lease rent under one of the clauses of the deed but with no provision for any annual market review. Though there was no dispute about the extension of the lease period, there was a dispute on the rental value determined by the valuer and the petition was to set aside the valuation thus carried out by the valuer as the valuation did not