VIVA Flashcards

Question

Gross Lease Advantage for Tenant?

Answer 1

The most important benefit to a tenant is that they pay the same rentals regardless of the increase in operating expenses. Planning expenses is easier as the exact monthly rental cost is known.

Answer 2

-As the rent is based on estimated cost, the rent charged is high. -Tenants have less control over costs. May not win if the annual increases for outgoings are increasing higher than inflation.

Answer 3

-Easier to administer as only one payment needs to be collected and there is no requirement to complete a budget or reconciliation at the end of the financial year. -Potential surplus for the landlord after factoring in the overall cost

Answer 4

The landlord is exposed to any unexpected expenses or inflation in property expenses.

Answer 5

-Transparency of outgoings. -The tenant can control costs better by controlling the use of utilities

Answer 6

Unpredictable expenses and major costs occurring.

Answer 7

Avoids underquoting on expenses as it is paid separately.

Answer 8

Reconciliation at the end.

Answer 9

-Professional behavior - Members must not take any action which includes a failure to act that may or is likely to discredit themselves, the property professional, or API. -Conflict of Interest - Members have an individual obligation to disclose any conflict of interest, whether actual or perceived. -Integrity - Members must act ethically, honestly, and fairly when undertaking professional services and must base their professional advice on relevant, valid, and objective evidence. -Professional competence - Members must maintain and improve their professional knowledge and skill by undertaking CPD at the level required to meet the API CPD Policy. -Confidentiality - members must act in confidentiality and protect confidential client information. PPICC

Answer 10

The code of professional conduct ensures a high standard and individual behavior is adhered to. It lists the principles, values, and behaviors expected of members of the API. Rule 1 - Relations with clients - Maintain a good relationship with your clients, being honest and ethical, without personal bias, and acting in a manner that upholds the values and reputation of the property and valuation profession. Rule 2 - Conflict of interest - members shall consider and identify any actual or potential conflict of interest when carrying out their professional duties, and shall not act in a manner where such conflict or potential conflict has been identified by the member of any other interested party unless all interested parties have been made aware of the situation and have consented to the member continuing the task. Rule 3 - Impartiality - A member must maintain strict independence and impartiality when making a valuation and where the exercise of objective judgment is required. Rule 4 - Members and the Institute - A member must not act in any way that reflects adversely on the professional integrity of the API or its other members. Rule 5 - Copyright - a member must not, without appropriate acknowledgment, reproduce, paraphrase or summarize any work, ideas, or intellectual property of another person which creates the impression that it is their own, and all reports prepared by members must give appropriate acknowledgment of the ideas and intellectual property and other insofar as these have been used. Rule 6 - Property Valuations - When undertaking a valuation, a member must: -Personally inspect any property being valued -Gather sufficient relevant data to form an opinion of value or in the absence of deficiency of such date, explain within the report the basis for which the opinion was formed. -Verify the information is used. -Provides a statement of assumptions made within the report, including all conditions and limitations arising. -Retain on file a copy of the valuation report and all instructions from the client for a minimum of 6 years following the valuation. Rule 7 - Student and Provisional Members - A student and provisional member must not undertake a valuation on their own, however, they can assist, a provisional member who holds an RPV may undertake a residential property valuation, provided that it is co-signed by a supervising valuer. Rule 8 - Non-compliance - Where a member considers circumstances that warrant departure from a non-compliance with any rule within the Code of Professional Conduct, the member's report must include a statement that outlines the reasons for the departure or non-compliance and any impact of the content of the report. CRIMPS CN

Answer 11

20 CPD annually – lodged online with evidence Pay membership fee annually Abid by API Rules, Standards, and Regulations. Complete the valuer compulsory modules which are: -API Ethics and Rule Module annually -Risk Management Module -International valuation standards model whenever there is an update to the standard -Residential valuation standing instruction module must be completed by all API Members who undertake residential mortgage valuations.

Answer 12

Consideration must be given to the relevance of appropriate valuation approaches. One or more approaches may be used to arrive at the value. No one method is suitable for every situation, the selection process should consider: -The appropriate basis of value -The respective strengths and weaknesses of the valuation approach. -The appropriateness of each method in view of the nature of the asset. -The availability of reliable information is needed to apply the method.

Answer 13

Provides an indication of value by comparing the asset with identical or comparable assets for which price information is available. The market approach should be applied and afforded significant weight under the following circumstances. -The subject asset has recently been sold in a transaction appropriate for consideration under the basis of value. -The asset or substantially similar assets are actively publicly traded. -There are frequent and recent observable transactions in substantially similar assets. If few transactions have occurred, the valuer may consider the prices of identical or similar assets that are listed or offered for sale provided the relevance of this information is clearly established.

Answer 14

The heterogeneous nature of many assets means that it is often not possible to find market evidence or transactions involving identical or similar assets. When comparable market information does not relate to the exact or substantially the same asset, the valuer must perform a comparative analysis of the qualitative and quantitative similarities and differences between the comparable assets and the subject asset. It will often be necessary to make adjustments based on this comparative analysis. These adjustments must be reasonable, and valuers must document the reasons for the adjustments and how they were quantified. They may include but are not limited to material characteristics such as the age and size specifications of the asset, relevant restrictions on either the subject asset or the comparable asset, geographical location, profitability or profit-making capacity, unusual terms in the comparable transaction, marketability and control characteristics.

Answer 15

A valuer should choose comparable transactions within the following context. Evidence of several transactions is generally preferred to a single transaction or event Evidence from transactions of very similar assets that are ideally identical provides a better indication of value than assets where the transaction prices require significant adjustments. Transactions that happen closer to the valuation date are more representative of the market at that date than older-dated transactions, particularly in volatile markets. The transaction should be at arm's length between unrelated parties. Sufficient information on the transaction should be available to allow the valuer to develop a reasonable understanding of the comparable asset. Comparable information should be from a reliable source Actual transaction of evidence compared to the intended transaction.

Answer 16

To correctly identify the site. Measuring from the corner of the block to the closest street, shown on the title plan.

Answer 17

The income approach provides an indication of value by converting future cash flows to a single current value. Under the income approach, the value of an asset is determined with reference to the value of the income, cash flow, or cost savings generated by the asset. A fundamental basis for the income approach is that investors expect to receive a return on their investment and that such a return should reflect the perceived level of risk in the investment. In general, investors can only expect to be compensated for systematic risk. The income approach should be applied and afforded significant weight under the following circumstances: a. The income-producing ability of the asset is the critical element affecting value from a participant's perspective. b. Reasonable projections of the amount and timing of future income are available for the subject asset but there are few if any relevant market comparables. Methods under the income approach are effectively based on discounting future amounts of cash flow to present value.

Answer 18

The rate at which the forecast cash flow is discounted should reflect not only the time value of money but also the risks associated with the type of cash flow and the future operations of the asset.

Answer 19

Discounted cash flow is a valuation method used to estimate the value of an investment based on its future cash flow. It uses a discount rate to calculate the present value of expected future cash flows; a present value estimate is then used to evaluate a potential investment. It is a more complex approach as it takes into account all the cash flows in the holding period and accounts for changes in cash flow vacancy and operating expenses. Discounted cash flow may include a terminal value that represents the value of the asset at the end of the holding period. For real estate valuers, we must estimate the asset's value at the end of the holding period and then discount the terminal value back to the valuation date using the same discount rate as applied to the forecast cash flow.

Answer 20

Gordon Growth Model The constant growth model assumes that the asset grows or declines at a constant rate in perpetuity. Market Approach Can be performed in a number of ways, but the ultimate goal is to calculate the value of the asset at the end of the holding period. Common ways to calculate the terminal value under this method include the application of market evidence-based capitalization factors or market multiples. Valuers should comply with the requirements of the market approach and should also consider the expected market conditions at the end of the holding period and make adjustments accordingly. Salvage value The terminal value of some assets may have little or no relationship to the preceding cash flow. In such cases, the terminal value is typically calculated as salvage value less the cost of disposal.

Answer 21

The amount where they passing rent is greater than the market rent. Calculated using the present valuation formula. Taking the passing rent and subtracting the market rent to get the rental difference (PMT) and then adopting an appropriate discount rate over the remaining lease term.

Answer 22

Direct capitalisation is an income technique that converts an estimate of a single year's income expectancy into an indication of value by dividing the market rental by a capitalization rate. which are both derived from comparable market evidence. The capitalisation rate is the percentage rate used to convert net income into value or a price. The rate at which the annual net income from an investment is capitalized to ascertain its capital value at a given date Factors that influence the capitalisation rate is: -Size and condition of the property -Current market conditions -Tenant and lease terms and remaining lease -durations -Interest rates -Vacancies If valuing a vacant possession basis, an allowance for vacancy and a letting up period would need to be made.

Answer 23

Valuers may sometimes be asked to provide an opinion of value on a specified date in the past when market conditions will probably have been significantly different from those at the date of instruction. This situation can arise, for example, in valuations for taxation purposes or those used as evidence in court cases. If the valuation is an audit of another valuer’s work, the valuer will need to work with the evidence used in the valuation subject to the audit. In other cases, the valuer should consider the following. -Comparable evidence should only be used if it would have been available to a valuer on the date of valuation. -Viewed with the benefit of hindsight, comparable evidence can be much clearer than it would have appeared to a valuer at the date of valuation. The valuer valuing retrospectively needs to place themselves in the position of someone reviewing the available evidence on the valuation date, and then make a judgment on the extent and nature of the evidence that could reasonably be expected to have been available at the time. A projected valuation for a future date may sometimes be required, it is referred to, as bases of value, assumptions, and special assumptions. Current comparable evidence will not be available, and the valuer should ensure all assumptions made are realistic, credible, and clearly described in the report.

Answer 24

Provides an indication of value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchasing or by construction, unless inordinate time, inconvenience, risk, or other factors are involved. The cost approach provides an indication of value by calculating the current replacement or reproduction cost of an asset and making deductions for physical deterioration and all other relevant forms of obsolescence. The cost approach should be applied and afforded significant weight under the following conditions -Capable of recreating an asset with substantially the same utility as the subject without regulatory or legal restrictions, and the asset could be recreated quickly enough that a participant would not be willing to pay a significant premium for the ability to use the subject asset immediately. -The asset is not directly income-generating, and the unique nature of the asset makes using an income- or market-based approach unfeasible. -The fundamental basis of value used is replacement cost, such as replacement value for insurance purposes.

Answer 25

The estimated cost to construct a building with utility equivalent to the building being appraised using contemporary materials, standards, design, and layout. When this cost method is used some existing obsolescence in the property is assumed to be cured. Usually, replacement cost is adjusted for physical deterioration and all relevant forms of obsolescence. After such adjustments, this can be referred to as depreciated replacement cost. Steps 1. Calculate all the costs that would be incurred by a typical participant seeking to create or obtain an asset providing equivalent utility. 2. Determine whether there is any depreciation related to physical, functional, and external obsolescence. 3. Deduct total depreciation from the total costs to arrive at the depreciated replacement cost.

Answer 26

Physical deterioration is the result of wear and tear over time. Functional obsolescence occurs when the asset's design or specification no longer fulfills the function for which it was originally designed, such as a building designed with specific features to accommodate a process that is no longer carried out. Economic obsolescence is the impact of changing economic conditions or demand for the asset's goods or services. An example would be a change in legislation or an increase in raw material costs, which are external factors to the asset itself.

Answer 27

They are not two different approaches to valuation but rather different ways, mainly valuing the improvement value. Added value is used when there is sales evidence in the current market (land and Improved land) (not unique) and the building value is worked out by subtracting the improved land from the land value to arrive at the added value of the property. When there is no market evidence for the property e.g. rural or specialized properties then depreciated replacement cost method is used, it is obtaining the cost of the building as new and subtracting depreciation. Overall, the added value approach is more accurate and should be considered first before considering the depreciated replacement method.

Answer 28

The indexed method Assumes that the replacement/reproduction cost is simply the original construction cost times a cost index. E.g. Rawlinson handbook. Comparative unit method For a relatively standardized structure, the unit value of the building is estimated by that of a similar building. E.g. similar townhouses. $/sqm Unit in-place method The cost of the individual components in the building is used to estimate the overall replacement cost. E.g. Average construction cost of one bedroom is $50,000, the living room is $20,000... Quantity survey method Identifies the exact materials required to reproduce the structure to estimate the cost, it is the most comprehensive and accurate.

Answer 29

Estimated cost to construct an exact duplicate of the building being appraised, insofar as possible using the same materials, construction standards, design layouts, and quality of workmanship and embodying all the deficiencies Appropriate when: -The cost of creating a modern equivalent asset is greater than the cost of creating a replica. -The utility offered by the subject asset could only be provided by a replica rather than a modern equivalent. Insurance costs for a heritage building would be done on a reproduction basis. This amount would be substantially higher than normal construction to the uniqueness of the building.

Answer 30

Adding all values of the various components of the subject property to calculate its full value. Key steps involve: -Value each of the component assets that are part of the subject property using the appropriate valuation approach and method. -Add the value of the component assets together to reach the value of the subject asset.

Answer 31

The Hypothetical Development Analysis approach is a method of valuation that is used to assess the value of a parcel of land that is suitable for some form of development (or re-development). It is also referred to in some literature as Residual Land Value Analysis or Turner Approach. The methodology involves determining the value of a proposed development on completion (known as the gross realization) and then working backward by deducting selling costs, developers' profit, and development costs to derive a residual land value. Such costs may include design and construction, professional fees, holding, interest, and acquisition costs.

Answer 32

Tells investors the average annual return they have either realized or can expect to realize from a real estate investment over time, expressed as a percentage. The IRR for Project A is 12%. If I invest in Project A, I can expect an average annual return of 12%. A negative IRR implies a money-losing project. IRR calculates the actual return provided by the project’s cash flows, then compare the rate of return with your company’s hurdle rate (how much it mandates that investments return).

Answer 33

The minimum rate of return an investment must produce in order to induce an individual to invest. Also known as the Hurdle Rate of Return.

Answer 34

Lease term remaining to expire across a portfolio. Used in properties where there is more than one tenant with a different lease expires. Can be weighted by rental income or GLA.

Answer 35

The difference between the present value of cash inflows and the present value of cash outflows over the life of the investment, as money is worth more in the present than the future, the discounted rate of the net present value accounts for this. NPV is the result of calculations that find the current value of a future stream of payments, using the proper discount rate. In general, projects with a positive NPV are worth undertaking while those with a negative NPV are not.

Answer 36

It is prudent to use one valuation method to check the veracity of another when undertaking a valuation. As an example, when valuing a dwelling, the primary method of valuation may be the direct comparison approach, and a check method could be the summation approach. The valuer may find that the two methods result in different values. If the result of the secondary valuation is close to that of the primary method then the primary valuation is accepted. If the result of the secondary method is too dissimilar to that of the primary method then the valuation is analyzed to find the reason.

Answer 37

The purpose of an insurance valuation is to establish either the Reinstatement (old for a new replacement of an asset) or Indemnity (old for an old replacement of an asset) Value of the subject assets. However, in addition to either of these values, a client is often required to state the “Declared Value” of the property. This value is a worst-case situation loss for the site and as such, it should include not only the Reinstatement value of the assets, but also an allowance for the cost of removing debris from the site following a loss, and allowances for the loss occurring on the last day of the insurance policy period (often 12 months from the policy renewal date) and then allowance to take account of cost increases over the time necessary to get all planning approvals to rebuild on the site plus the length of time necessary to rebuild the assets on the site. As long as a client is registered for GST then the values declared in an insurance policy should exclude GST, and this is the case for the majority of non-residential policies. The presence of property in either a flood-prone or bushfire-prone area can increase the cost to rebuild the asset. For example, any residential building constructed in a designated bushfire-prone area now needs to comply with the requirements of Australian Standard 3959 – Construction of Buildings in Bushfire-Prone Areas. The cost of complying with this Standard increases as the risk of a bushfire occurring increases.

Answer 38

The major determinants of a building’s construction cost can be summarized as follows: Building size Materials used in construction - for example, a warehouse constructed with concrete tilt panel walls can cost 20% more than a comparable building constructed with prefinished metal deck-clad walls. Use of the building - for example, on a $/m2 basis an accommodation hotel can cost more than 700% more than a warehouse building. Quality of the improvements - $/m2 basis, a Premium Grade office building can cost 350% more than a D Grade office building. Services provided Nature of site - for example, more remote locations can often be more expensive to build on than sites in a metropolitan location Other assets - Fencing, Paving Site security, etc.

Answer 39

Reinstatement Value of an asset is its all-up cost to replace with an asset that is substantially the same as but not better or more extensive than when it was new. without deduction for depreciation. The pre-loss condition of the property is not relevant. Two ways to calculate:

Answer 40

The reinstatement value of an asset is established by breaking up a building into its respective components and then placing current costs on each separate part of the building. This method is very extensive and complex therefore is rarely used by valuers to calculate reinstatement values in Australia.

Answer 41

The most commonly used method to assess reinstatement values in Australia. Under this approach, each building on a site is measured, and then an estimated overall reinstatement value to replace that building is applied to the calculated area. There are numerous construction cost guides to provide indicative costs and these guides are updated on a regular basis. Whichever approach to calculating a Reinstatement Value is adopted, it is important to ensure that the stated value meets the definition of value — in particular, that the value should be for a like-for-like replacement of the building, and not just a modern equivalent replacement cost for the asset. For example, much older-style warehouse buildings were constructed with brick walls, whilst most modern-day warehouses are constructed with concrete tilt-panel walls. Concrete tilt-panel walls can be up to 25% cheaper to build than concrete brick walls and so if your Reinstatement Value is based on the cost of a concrete tilt-panel wall warehouse, you could end up understating your Reinstatement Value.

Answer 42

An asset's indemnity value is its market value at the date of assessment, its replacement cost less allowance for depreciation taking into account its age, condition, and remaining useful life. For many properties, the indemnity value of a building and any associated improvements will be its Market Value less the Market Value of the land upon which it is located (as land cannot be insured). Any calculations should be based on the total physical life of an asset rather than its economic life. For example, the economic life of a building is often considered to be in the order of 40 years, however, its total physical life (that is how long the building will stand assuming normal maintenance) could be more like 60 – 80 years.

Answer 43

Robert Torren was responsible for the creation and early implementation of the Torrens title system of land certification, still used in many parts of the world. For most land in Australia, ownership of land can normally be proved by the production of a document known as a certificate of title issued by the government and registered with the land title office. It is a system designed to provide a public register recording all material facts relative to the title, including the name of the registered proprietors, the nature of the interest or estate that is held, and all the registrable encumbrances.

Answer 44

Strata title allows individual ownership of part of a property called a lot and generally as an apartment or townhouse, combined with shared ownership in the remainder called common property also called tenants in common e.g. driveways, gardens, etc through a legal entity called owners corporation.

Answer 45

It is the highest form of land ownership and gives the owner the most rights in regard to their land. Fee simply infers the right to destroy, neglect, develop, dispose of, lease, etc. If an owner of a fee simple estate fails to transfer his estate during his lifetime, the law ensures that it passes to the next of Kin or relatives.

Answer 46

There is two types of co-ownership joint ventures and tenants in common. Joint Tenants: parties own the entire property concurrently and co-exclusively with the others; if one of the owners dies, the survivor becomes the sole owner. Tenants in Common: Parties hold the whole concurrently as an undivided, defined share. The tenant can separate their interest from it by a will or transfer.

Answer 47

Is the right to use for a specified period of time under specified conditions. Under the lease, the landlord maintains ownership, with the right to use and occupancy being conveyed to the tenant. It is a contractual relationship, and the lessor receives a non-permanent right to use the leased property in return for rental.

Answer 48

A life estate is a freehold estate where ownership is limited to the duration of some person's lifetime.

Answer 49

Adverse possession occurs when the occupier of a piece of land can obtain ownership if uninterrupted and exclusive possession of the land for at least 15 years can be proven e.g. a fenceline. Can not be claimed against crown land, council-owned land and land owned by other authorities or bodies.

Answer 50

An easement is a section of land registered on your property title, which gives someone the right to use the land for a specific purpose even though they are not the landowner. Or to prevent the owner of other lands from utilizing his land in a particular manner, relating to neighboring properties. The principal of land with the benefit of the easement is called the benefited land The parcel of land burdened by the easement is called the burdened land. Positive easement: Right to entry to enable something to be done on land. Negative easement: Rights to prevent something from being done.

Answer 51

A caveat is a document that any person with a legal interest in a property (but for the registered owner of the property) can lodge at the Land Title Office. After recording, a note appears on the title giving anyone searching the title notice that a third party claims rights over the property.

Answer 52

A Covenant is essentially a rule or obligation imposed on the property title and are rules you need to abide by as the title owner. The obligations can include big things like how many dwellings can be built on a block. Or the permitted height of a dwelling through unusual things such as the property not being permitted to be used for the making of pottery or tiles.

Answer 53

Arises under section 173 of the Planning and Environment Act 1987 (the Act). The responsible authority can negotiate an agreement with an owner of land to set out conditions or restrictions on the use or development of the land or to achieve other planning objectives in relation to the land. Like other agreements, a section 173 agreement is a legal contract. However, the benefit of a section 173 agreement is that it can be recorded on the title to the land so that the owner’s obligations under the agreement bind future owners and occupiers of the land. A section 173 agreement can also be enforced in the same way as a permit condition or planning scheme. The purpose of an agreement is to make it easier to achieve planning objectives for an area or particular parcel of land than is possible when relying on other statutory mechanisms.

Answer 54

Heritage protection in Victoria is essentially delivered at two levels with clear separations of responsibilities between state and local government. State-level heritage: Protect and conserve places and objects of State-level heritage significance. The Heritage Register includes places and objects of State-level heritage significance. E.g The Flinders Street Railway Station. Heritage Victoria makes the final decision. Local-level heritage: The Planning and Environment Act 1987 obliges all of Victoria’s councils to use their Planning Schemes to conserve and enhance buildings, areas, or other places that are of significance within their municipalities through the use of Heritage Overlays. Minister for Planning makes the final decision.

Answer 55

All land is rateable with the following exemptions which are set out in section 154 of the Local Government Act 1989. -Unoccupied land owned by the Crown -Land used for public or municipal purposes -Land used for charitable purchase -Land used for religious purposes -Land used exclusively for mining purposes -Land held in trust and used exclusively for returned service League or airforce.

Answer 56

Rates are assessed on occupancy, not ownership, rates will be assessed separately for an office building or block of flats.

Answer 57

Previously valuations have been carried out by a valuation authority either a council or VGV on nomination by a council and revaluations were completed in each of victoria’s municipalities every two years. From 2019, valuations are conducted annually and the valuer general will be the sole valuation authority.

Answer 58

Capital improved value - The total market value of the land plus buildings and other improvements. Assuming it was held in estate fee simple, assuming unencumbered by a mortgage, lease, or charge. Assuming vacant possession basis. Estimate Annual Value - Gross rental which the land would be expected to let from year to year less all the usual tenant rates and taxes and expenses. Net Annual Value - The estimated annual value or 5% of the capital improved value which is greater for commercial property and exactly 5% of capital improved value for residential property and farmland. Site Value - The market value of the land only. Site value must be assessed as the highest and best use of the land taking into consideration all planning constraints for the property under the planning scheme.

Answer 59

The date which determines the level of value or the valuation date, normally from the 1st of January, carried out annually since 2019.

Answer 60

The date on which the valuation comes into effect is normally the 1st of July of every financial year.

Answer 61

Act says must take heritage into account when assessing SV. Calculated on the basis that the building cannot be pulled down or removed. When assessing CIV, the current user must be considered the highest and best use. Valuation based on comparison with similar restrictions. It was established in the Pratt Case that SV should be assessed by deducting the cost of improvements from the CIV. Tuus SV can quickly reduce to $1 GPO case.

Answer 62

An updated valuation for rating purposes outside the previous relevant date. Needed when An arithmetic error The land is subdivided or consolidated Change in value due to amendment to planning scheme e.g. rezoning Change in value from addition or demolition of improvements. When a property has undergone a supplementary valuation, the owner will receive a supplementary rate and valuation notice, which shows the new and adjusted figures.

Answer 63

Value is too high or low. Apportionment of interests or valuation is incorrect. The land that should have been included within one valuation has been valued separately. Land that should have been valued separately has been included in one valuation. The wrong person in the name on the notice. The area, dimensions, or description is incorrect.

Answer 64

An objection to a valuation must be lodged within two months of receiving the first notice of assessment.

Answer 65

The objection process is set out in the valuation of land act 1960. Any person who is aggrieved by the valuation of the land can lodge a written objection to that valuation with the authority that gave the notice of valuation - Section 16 of the Valuation of Land Act 1960. 1. The objector, within two months of first receiving the rates notices, must lodge a notice of objection in the prescribed form. There is generally an opportunity for a municipal valuer and the objector to discuss the valuation. 2. The municipal valuer then has four months to either agree that an adjustment is justified and recommend to the VG the adjustment and return notice to the objector advising of the adjustment or Disagree with the objection and send a written notice to the objector advising of the decision. If adjustment is recommended to the VG, the VG then, within two months, shall serve notice on all parties, advising of his or her decision, if he/she either agrees or disagrees with the adjustment. If the VG disagrees, the objector can within one month serve written notice to the council requesting that the matter be taken to VCAT or the supreme court.

Answer 66

State tax is collected by the State Revenue Office. It is the assessment of the site value owned at the end of the year 31 December.

Answer 67

-Aggregated site value below $300,000 whether alone or together with other taxable land owned by the same owner or grouped with related corporations. -An owner's principal place of residence. -The land is used for charitable purposes, primary production, religious purpose, mining purpose, and retirement village. - Municipal and public land - Public statutory authority - Armed service personnel - Crown Land - Sporting, outdoor recreation or outdoor cultural activities land owned by not for profit organisations - Land leased for outdoor sporting, recreational or cultural activities - Health centres and services eg. ambulance service - Residential care facilities and supported residential services - Residential services for people with disabilities - Retirement village - Caravan parks - Mines Build-to-rent (BTR) developments are eligible for a 50% concession on the taxable value of the land used solely for the BTR development for up to 30 years

Answer 68

Single holding basis - Land tax payable for one property Multiple holding basis - Land tax payable over the total SV of multiple properties - aggregation.

Answer 69

Land tax is not recoverable by a landlord if a lease is covered by provisions of the Retail Leases Act 2003 (effective date 1 July 2003). If a lease has been entered into before 1 July 2003 then it can be recovered by a landlord.

Answer 70

Objections should be lodged with the Commissioner within 60 days of receiving your assessment. After 60 days, you must provide reasons and supporting evidence for why your objection is late.

Answer 71

Gover's role of local government, rates, and charges on rateable land. Defined the purpose and power of local government, including who pays rates, what is rateable, and how rates are assessed. Shell case established that value should be assessed held an estate in fee simple and unencumbered.

Answer 72

Outlines definition, valuers general's role, determining the value of land, supplementary valuations, and appeals process.

Answer 73

Oversees valuations for Victorian Government property transactions and rating valuations. This includes Council Rates and Land Tax valuations. The valuer general has a range of responsibilities set out in the Valuation of Land Act 1960 and these include: Reviewing and making recommendations and providing ministerial advice. Overseeing standards, quality, and compliance. Making and managing valuations Managing data for audit and research purposes. Developing the profession.

Answer 74

The method of measurement used by the property industry is set out by the Property Council of Australia and is known as the Property Council of Australia Method of Measurement.

Answer 75

The total sum of the area of each floor level of a building measured between the normal outside face of any enclosing walls or the centerline of common walls between different properties. Inclusive of - Columns, basements, and covered voids only at the lowest level. Exclusive of - External staircase, temporary mezzanine. Measurements included but to be assessed separately include balconies and verandahs.

Answer 76

Measurements are taken from the dominant portion of the external wall, ignoring windows and doors. In the case of inter-tenancy walls or partitions or common areas, measuring to the centerline of the walls. Included in the lettable area calculation are areas occupied by window mullions, window frames, structural columns, etc. Multi-tenanted buildings Excluded from the lettable area of each tenancy in a multiple-tenanted building are Stairs, accessways, fire stairs, toilets, escalators, smoke lobbies, tearooms, and other service areas. Where all are provided as standard facilities in the building. Lift lobbies where lifts face other lifts, blank walls, or exclusions listed prior. Areas are dedicated as public spaces or thoroughfares that are not for the exclusive use of the occupier of the floor or building.

Answer 77

The GBA should be determined by including everything within the external building walls.

Answer 78

Used for calculating retail tenancy areas in shopping centers, commercial buildings, and strip shops, free-standing shops, semi-detached or terrace-type shops in suburban streets. Measurements are taken from the internal surface of the dominant portion of the wall. In the case of inter-tenancy walls, measuring from the centreline of those walls. In the case of shop fronts on or inside the mall line. Includes -Amenities that are exclusively used by the tenant -Window mullions -Window frame -Structural column Excludes: -Standard facilities, stairs, bathrooms, escalators, -plant, and tea rooms. -Areas less than 1.5 meters in height clearance and stair voids -Balconies, verandas, and terraces, may be measured and separately assessed for the purpose of rental negotiations. Where all are provided as standard facilities in the building.

Answer 79

Used to calculate tenancy areas for office tenants and business parks. Measured from the internal finished surface of permanent internal walls, and the internal finished surface of dominant external walls. The dominant portion is the largest solid or glass area making up the inside finished surface. Includes -Window frame -Structural and engaged perimeter columns -Additional facilities specially constructed for the tenant. Excludes -Standard amenities (toilets, cupboards, escalators, tearooms, plant rooms. -Lift lobbies where lifts face other lifts or blank walls. -Balcony, terraces, and covered areas, but may be separately identified for rental negotiations. -Areas set aside for the provision of services electrical, telephone, etc. -Areas set aside for car parking. -Areas that are less than 1.5 metres in height clearance above the floor. Sub-divided Floors: Measured to the centreline of inter-tenancy walls.

Answer 80

Is the acquisition of land or an interest in land which can be a registered or unregistered interest and permitted by legislation. The purpose is to establish a procedure for the acquisition of land for public purposes and to provide for the determination of compensation payable in respect of land being acquired. Valuations for compensation and compulsory acquisition purposes are commonly prepared for either the acquiring authority or claimant-disposed owner.

Answer 81

Under the provisions of the land acquisition and compensation act 1986, land required for a public purpose can be acquired/resumed by government departments and agencies. This can be done either compulsorily or by negotiation and the legislation sets out the process to be followed and how compensation is to be determined. Where land is actually acquired by the government. Notice of intention to acquire and notice of acquisition. Where the land acquired is for sale or less than 10% of the total property, a PAO does not have to be in place - called the prescribed land - commonly used for the acquisition of easements by power and gas companies.

Answer 82

Compensation can also be paid under the provisions of the Planning and Environmental Act 1987. This occurs where loss is assessed following the sale of a property (encumbered by an acquisition overlay PAO) or where a planning application is refused on the grounds that the property is required for a public purpose. -Where financial loss has occurred loss on sales or refusal of a permit. -Compensation payable when land is reserved but not acquired by the government PAO. -Main eligibility to make a claim under this act must be the original owner of the land when the reservation was placed.

Answer 83

A public acquisition overlay (PAO) is the way land is reserved for a public purpose and indicates that this land could be compulsorily acquired in the future. The purpose of a PAO is to: -Identify land which is proposed to be acquired by a minister, public authority, or council -Reserve land for a public purpose and ensure that changes to the use or development of the land do not affect this.

Answer 84

The principal objective of a Technical Information Paper (TIP) is to clarify professional and industry processes, best practices, and procedures and to discuss their use and implementation. They give you direction. TIPs should be read in conjunction with any other relevant TIPs, Practice Standards, Guidance Notes, and any other relevant publication from the Institute(s). TIPs are published on the API website. The Member is responsible for choosing the most appropriate approach in a matter based upon the ask and instruction. Whilst TIPs are not mandatory, they serve as a guide and measure of acceptable professional practice.

Answer 85

Where the whole of the property is acquired, and the disposed owner has no residual interest in the land. Compensation consists of market value and disturbance. Claims for disturbance will vary dependent on whether the property is owner-occupied or held as an investment.

Answer 86

Where only a portion of the property is acquired. The disposed owner is entitled to compensation for the market value of the land taken in addition to any loss in value to the retained land. Severance and/or injurious affection, plus disturbance items.

Answer 87

Where a partial interest to utilise land in a particular manner is granted to different ownership. Whilst the granting of an easement does not result in the loss of freehold ownership of the land, the interest is nonetheless diminished. With partial acquisitions, claimants are entitled to all the heads of compensation (as applicable).

Answer 88

Market Value Approach -Used in total acquisition -The market value of the land acquired + disturbance costs + professional fees + special value Before and After Method -Used extensively in situations where compensation is to be assessed following the acquisition of part of a site by a Statutory Authority. -Using this approach, compensation is the difference in values assessed ‘before and after’ acquisition together with separately assessed consequential losses (disturbance). Piecemeal Method -The piecemeal method of assessing compensation requires the valuer to separately consider the heads of compensation as prescribed in the relevant Act. In aggregate, the sum of these values forms the assessment of compensation. -Whilst each of the individual heads of compensation must be considered in the context of each acquisition, it is perfectly reasonable to disallow a claim under certain headings where the Valuer believes no claim arises (e.g., severance, injurious affection, special value, and solatium).

Answer 89

<> The authority must serve a NOIA (valid for 6 months) The NOIA does not constitute an offer of a binding agreement, it is an invitation to the land owner to commence negotiations A valuation as of the date of inspection is undertaken Authority must not acquire any land until two months after NOIA has been served. A valuation is caught at this time (relevant date = date of inspection). Under section 17 Extension by notice of the agreement. The period may be extended for a period of up to 3 months at a time any agreement in writing between the authority and owner. The NOIA prevents the carrying out of any improvements on the land without the consent of the authority and also provides the opportunity for the authority to extract information from the land owners and other interested parties. Authority may acquire the interest by agreement after serving NOIA before it has expired and before publication in Government Gazette. <> The resuming authority formally acquires the land by publishing a notice in the government gazette. From the date that it is published in the government gazette, the resuming authority owns the land, regardless of whether compensation has been paid yet. This date becomes the relevant date for valuation purposes Unless agreed in writing or varied via section 106 of the land acquisition and compensation act 1986, the resuming authority must not acquire the land until after 2 months from the date of service of the Notice of Intention to Acquire (This expires after 6 months so they must acquire between month 2 and month 6. A prescribed form and statement must also be served to the responsible authority under the planning scheme and council. A notice will be lodged with the registrar of titles in accordance with the prescribed form. <> If the property is a primary place of residence or business then the resuming authority cannot take possession until 3 months after the date of acquisition. If not a principal place of residence, the authority only needs to give seven days written notice. <> The initial offer of compensation must be made within 14 days of the publication of the notice in the government gazette, This offer must be fair and reasonable and include the following Certificate of valuation A statement explaining the difference between valuation and the offer. Statement of rights and obligations. If the offer exceeds $250,000 then it must first be approved by the government land monitor. <> The claimant must respond by notice of acceptance in the prescribed form within 3 months. <> If there is a dispute in the level of compensation then the matter will usually be deferred to VCAT or if this fails it will move to the supreme court.

Answer 90

<> The Spencer Principle of market value is contained in statutory provisions. Market Value is ‘Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’ (IVS) In determining market value, disregard any increase or decrease in the value of the land caused by the carrying out of the public purpose for which the land was acquired (Point Gourde Principle). <> Special value occurs when there is a unique value to a landowner that is not reflected in the assessment of compensation payable for market value. For example, a disabled person who has wheelchair ramps and handrails on their property may be entitled to special value as this feature of the property has a unique value to them that may not be of value to other purchasers in the general market. Hard to justify – very rarely paid. <> Any loss sustained by the disposed of the owner which flows from a compulsory acquisition, may be regarded as disturbance, provided that it is the natural and reasonable consequence of the dispossession of the owner. This is an element of personal loss and not related to the market value of the land. Includes costs and expenses responsibility incurred in moving from the land being acquired to another comparable property. Business compensation is considered under this principle and assessment is undertaken by specialist business valuers. Includes: - Inability to gain permit/subdivide land; - Costs incurred in purchasing comparable property; - Increased rents - Increased building costs - Removal expenses - Diminution in value of the fixtures, - Loss of Goodwill - Loss of profit reinstatement - Repair and alteration to building and repairs to fences - Disturbance can be included in Special Value. - Not applicable if the Highest and Best Use is not the current use. <> Severance is considered where part of the land is taken, and the owner retains the remainder of their land. By only taking part of the land damage may be caused to the retained land as a result of the acquisition. It may result in the depreciation in the value of retained land resulting from its division into parts due to reduced utility or uneconomic holding. E.g. freeway through the middle of the land. <> Injurious Affection is where in a partial acquisition the value of the land retained by the owner is depreciated as a result of the act of severance. It is the compensation for the effect on the value of the retained land due to the acquired land’s use. E.g. increased noise levels, or impact on the sewerage farm next door. <> Enhancement/Betterment is where in a partial acquisition the value of the remainder of the owner’s land is enhanced as a result of the resumption. The compensation amount is adjusted accordingly. An example of enhancement can be when land is rezoned from Farm Zone to Urban Growth. <> Solatium is compensation for emotional attachment to a property.

Answer 91

If compensation has been previously paid under the Planning and Environment Act 1987. Compensation payable must be reduced by the ‘prescribed amount’ “Prescribed amount” = A/B x C A = The amount of compensation previously paid B = The Market value of land in respect of which the compensation was paid. C = Compensation otherwise payable (now)

Answer 92

Pointe Gourde Quarrying and Transport Company V. Sub Intendent of Crown Lands (Trinidad) 1947. The principle that arose from this case has the effect of ensuring that a resuming authority does not employ the purpose of the acquisition and its resulting impacts to destroy the development potential of the land and then assess compensation for its resumption (acquisition) on the basis that the destroyed potential has never existed. Must ignore the purpose for which the land is being acquired It has been written into section 43 of the LACA S43(1)(a) is a codification of the Pointe Gourde Principle: In assessing compensation, the following matters must be disregarded… Any increase or decrease in the market value of the interest in land which is acquired arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired. One of the most important cases to be aware of in Land Acquisition and Compensation.

Answer 93

The main eligibility to make a claim under the Act - Must be the original owner of the land when the reservation was placed. Relevant Sections under the P&E Act. <

> - Owner/occupier of land can claim compensation for financial loss suffered as a result of: a. Land is reserved for a public purpose or land being rezoned b. The proposed amendment within the planning scheme is published on the government gazette. c. Declaration of proposed reservation by the minister d. Access to land is restricted by the closure of roads by a planning scheme. Owner/occupier can claim compensation for financial loss suffered as a consequence of refusal to grant planning permission to use or develop land, on grounds the land is/will be needed for public purpose. <

> -Planning authority/VCAT refused to grant a permit for the use/development of land required for public purposes. -Loss on sale <

> The compensation payable for the financial loss under section 98 must not exceed the difference between. a. The value of land, at the date on which the liability to compensation first arose, and b. The value of land that would have been realized at the date if the land had not been affected by land being reserved or refusal of a permit. <

> The owner can claim under section 98 after the sale of land if a. The land sold at a lower price than the owner might reasonably have expected to achieve if the land or part of the land had not been reserved/proposed to be reserved. b. Before selling the land, the owner gave the relevant authority not less than 60 days notice in writing of the owner's intention to sell. <

> The minister administering the LACA may declare land to be proposed to be reserved for public purposes if the minister: a. Is satisfied that the value of the land may be substantially affected by a proposal to reserve which could lead to the reservation for public purposes and b. Consider that it is appropriate that the land should be so declared. <> Compensation at this stage is limited to the Planning and Environment Act 1987 under the following Loss on Sale -Must give 2 months' notice of intention to sell -Property must be properly marketed -Compensation is unaffected value minus the sale price Refusal of Permit -Compensation is unaffected value minus the affected value -Once compensation has been paid, the amount is lodged on the title.

Answer 94

The occupancy costs exceed $1,000,000 per annum including rent outgoings that the tenant is liable to contribute. Leased by a company listed on a major stock exchange or is a subsidiary. Leased for a term of less than one year. The tenant carries out business as the landlord's agent. Premises is excluded by Ministerial Determination: a. Premises used for retail provisions of services and not wholly located on the first 3 floors or part of a shopping centre. Excluding any basement levels. Accordingly, the first three stories in a building are the ground floor, first floor, and second floor. b. Premises leased - Greater than 15 years not including options or under a renewal of lease where the initial term was at least 15 years - Under a lease that imposes an obligation to carry out substantial works/ pay for substantial works/ or disentitled a person from removing substantial works upon expiry. c. Premises excluded by Ministerial Determination - Barristers chambers - Located within Melbourne Markets - Council leases for sporting/communication/recreational and religious uses.

Answer 95

A “ratchet” clause is one that states the rental shall not be decreased when a market review or CPI review occurs. These clauses are excluded under the Retail Leases Act, however, some landlords still attempt to include them in leases.

Answer 96

A retail premises lease that provides for a rent review is to be made on the basis of the current market rent of the premises. The current market rent is taken to be the rent obtainable at the time of the review in a free and open market between a willing landlord and willing tenant in an arm's length transaction having regard to these matters— - the provisions of the lease; - the rent that would reasonably be expected to be paid for the premises if they were unoccupied and offered for lease for the same, or a substantially similar, use to which the premises may be put under the lease; - the landlord's outgoings to the extent to which the tenant is liable to contribute to those outgoings; - rent concessions and other benefits offered to prospective tenants of unoccupied retail premises— but the current market rent is not taken into account the value of goodwill created by the tenant's occupation or the value of the tenant's fixtures and fittings. If the landlord and tenant do not agree on what the amount of that rent is to be, it is to be determined by a valuation carried out by a specialist retail valuer appointed by a. agreement between the landlord and tenant; or b. if there is no agreement, the Small Business Commission and the landlord and tenant are to pay the costs of the valuation in equal shares. c. The landlord must, within 14 days after a request by the specialist retail valuer, supply the valuer with relevant information about leases for retail premises located in the same building or retail shopping center to assist the valuer to determine the current market retail lease rent. The valuer must carry out the valuation within 45 days after accepting the appointment, or within such a long period as may be agreed between the landlord and tenant.

Answer 97

The term of a retail premises lease (including any further term) must be at least 5 years and no longer than 15 years. This does not apply if the tenant or prospective tenant obtains a certificate from the Small Business Commission that certifies in writing that the effect of the section and the certificate have been explained to the tenant or prospective tenant and the tenant or prospective tenant provides to the landlord a copy of the certificate of the SBC. The SBC must consider a request made within 90 days after entry into the lease and has the discretion to consider a request made outside that time. Tenants whose lease terms add up to at least five years do not need to apply for a waiver certificate. A three-year lease with an option of a further two-year term, for example, will not require a waiver certificate.

Answer 98

Five methods; CPI, Market Review, fixed increases, a fixed percentage, and prescribed formula by regulation.

Answer 99

A commercial lease is often used for business, such as an office space or warehouse, where the use of the premises is not engaged in retail activity. Commercial leases vary as they are not governed by one specific piece of legislation, therefore, can be very one-sided. It is however important to note that commercially used premises that are located in a shopping center may be considered a retail lease.

Answer 100

Outgoings are the landlord's reasonable expenses associated with the premises, and they can be passed on to the tenant according to the lease. Examples of outgoings include water rates, council rates, and owner’s corporation fees. Under a retail lease, a tenant can not be required to pay land tax. The landlord must give the tenant a written estimate of the outgoings for which the tenant is expected to pay under the lease. (section 46 of the Act) A tenant under a retail premises lease is not liable to pay an amount to the landlord in respect of outgoings except in accordance with provisions of the lease that specify (Section 39 of the Act)

Answer 101

As a retail tenant, you pay a set amount of base rent every year under your retail lease. However, you may also be required to pay turnover rent in addition to base rent. Also known as percentage rent, is the percentage of business turnover that a tenant pays to the landlord on top of their base rent.

Answer 102

Grants the tenant the ability to secure premises for an extended period. But also the flexibility to decline the Option and end the tenancy if required. Whether the Option can be exercised and how it can be exercised will depend on the terms of that tenant’s Lease. Some common terms of a Lease Option include: - The tenant must give written notice to the landlord of their intention to exercise the Option. - That notice must be given during a particular period - usually 3 to 6 months prior to the end of the initial lease term. - At the time of exercising the opinion, the tenant must have paid all rent and other monies up to date.

Answer 103

A disclosure statement is a document that a landlord must give the tenant when entering into or renewing a lease. It outlines essential lease information so the tenant can understand, at a glance, the key elements of the lease. Outlines things like rent, reviews, outgoings, etc. A landlord must give the tenant a disclosure statement and copy of the proposed lease no later than 14 days before the lease is entered into. If the landlord gives a disclosure statement and/or proposed lease to a tenant less than 14 days before the lease is entered into, the term of the lease will not commence until 14 days after those documents are provided. If the tenant is not given the DS before entering into the lease, the tenant may give the landlord, no earlier than 7 days and no later than 90 days after entering into the lease, a notice that he has not received the DS. If such notice is given, the tenant may withhold payment of rent until the day on which the landlord gives the tenant the DS and the tenant may give the landlord written notice of termination at any time within 7 days of the landlord giving the DS to the tenant.

Answer 104

Generally states that the tenant must at the end of the lease term and at their own cost make sure the site and improvements are what they were when the original lease began.

Answer 105

Often called a land lease, is the lease of the land only, usually, the land is leased for a relatively long period of time to a tenant that constructs a building on the land. The ground lease has separate ownership of the land from ownership of the building and improvements constructed on the land.

Answer 106

The net rent paid for the right of use and occupancy of a parcel of unimproved land, or that portion of the total rental paid is considered to represent return upon the land only.

Answer 107

Provides access to well-located land that otherwise could not be purchased. The tenant does not have to meet the upfront cash requirements to purchase the land in a deal. Purpose-built.

Answer 108

Provide the landlord with a stable income stream typically for a well-established tenant. The reversionary clause at the end of the Lease.

Answer 109

A clause in a lease that gives the owner the right to serve notice and terminate a lease for the purpose of demolition or renovation.

Answer 110

A nonconforming structure is a structure that complied with zoning and development regulations at the time it was built but which, because of subsequent changes to the zoning and/or development regulations, no longer fully complies with those regulations. Non-conforming rights will be lost if vacant for more than 2 years or if the property is destroyed (50%+)

Answer 111

The sum of all fully enclosed covered areas at all building levels, including basements. (surrounded by 4 walls). Cover trade area includes any trade area undercover (including bagged good canopy)

Answer 112

Generally considered to be land that has the appropriate characteristics to facilitate its subdivision into smaller parcels.

Answer 113

The urban growth zone is applied to areas that are designated for future growth and aim to manage the transition of non-urban to urban areas. Urban subdivision and development can only occur once a precinct structure plan (PSP) has been approved for the area

Answer 114

A long-term strategic plan that describes how a precinct or a series of sites will be developed.

Answer 115

Open landscapes were set aside over 30 years ago to conserve rural activity and significant natural features and resources between the growth area of metropolitan Melbourne. They are distributed outside the urban growth boundary. - Opportunities for agricultural uses. - Rural and scenic landscapes.

Answer 116

The proportion of a site that is covered by buildings and structures. Site Coverage (%) = Total Building Area x 100 / Total Site Area

Answer 117

Firstly it should be noted that valuers aren’t experts in GST and should recommend an accountant get involved to provide GST advice. We also cannot make assumptions about whether the parties are registered for GST or not. - GST is a broad-based tax of 10% on the supply of most goods and services consumed in Australia. - Businesses with an annual turnover of $75,000 or more and non-profit organisations with an annual turnover of $150,000 or more must register for GST. - GST is included in the price of things acquired or imported for the business. If you are registered for GST, you can claim a credit from the ATO for any GST included in the price you pay for things for your business. This is called an ‘Input Tax Credit’. a. Only available for the GST included in the price paid for a creditable acquisition, that is something acquired for a creditable purpose for use in a business, not private use. b. Can claim input tax credits for business expenses such as rent, utilities, advertising, etc. c. Must have a tax invoice to claim an input tax credit.

Answer 118

10% federal tax on goods and services. Business turnover is $75,000 +/ Non-profit turnover $150,000; must register for GST to allow them to claim input tax credits. Failure to register means that both the supplier and the end purchaser cannot claim input tax credits. GST applies to most types of property transactions. The treatment of property for GST purposes depends on whether it is a private residential, commercial residential, commercial, or rural property. GST is Applicable too: - Newly Developed Residential Site (Developer Liable) - Commercial Sales - Commercial Leases - Repairs and Renovations to an existing property GST is not applicable too: - Existing Residential Sales (i.e. been previously sold) - Residential Leases - Farmland Sales - Going Concern Sales

Answer 119

You can claim a credit for any GST included in the price of any goods and services you buy for your business. The developer can claim input credits for GST paid by the developer in developing the lots, to offset the GST they have to pay.

Answer 120

If you sell commercial property, such as shops and factories, and you're registered or required to be registered for GST, you are generally liable for GST because you are classified as an enterprise.

Answer 121

Going concern value is a value that assumes the company will remain in business indefinitely and continue to be profitable. The going concern value is also known as the total value. Freehold going concern means the buyer is buying both the business and underlying property therefore the valuation of a freehold business would be that of a leasehold business and land. Leasehold going concern involved a lease for the buildings and land for a fixed period of time on which the business operates, and does not include the value of the property as part of their valuation.

Answer 122

It is a way of working out the GST payable when you sell the property as part of your business. The margin scheme allows the vendor to pay not 1/11th of the sale price in GST but 1/11th of the difference between the vendor’s purchase price and the sale price as GST to the tax office. Example. Bob (developer) purchase the property for $500,000. After development, Bob sells the property for $1,050,000 (including GST) Normal GST = 1/11th of $1,050,000 = $95,454 Margin scheme = 1/11th of ($1,050,000 - $500,000) = 1/11th of $550,000 = $50,000

Answer 123

The sale of the property must be subject to GST, therefore not applicable to existing residential property. Both the Vendor and Purchaser agree to apply the margin scheme. Stated in the sales contract and signed. The vendor's original purchase of the property can not be on a plus GST basis.

Answer 124

A liquor license is a governmentally issued permit to sell, manufacture, store, or otherwise use alcoholic beverages.

Answer 125

Instructions: Before undertaking a valuation a Valuer must receive the Valuation Instructions which will detail the following pieces of information which are critical to undertaking the valuation. These include. Address of the property Name of the Instructing parties Address of the valuation should be addressed to Purpose of the valuation Interest being valued The agreed fee that the client will pay for you to undertake the job Contact details to arrange an inspection of the property Supporting documentation required to undertake the job - Leases, planning permits, outgoings, council rates, etc.

Answer 126

Upon receiving the valuation instructions the first step in the valuation process is the pre-inspection, which includes obtaining a copy of the supporting documents, checking for a conflict of interest, and arranging an inspection time. It is also during this time that the valuer should obtain information regarding: Title details Planning details (any approved planning permit, zoning, overlays) Heritage check ( State: if on the heritage register.) Statutory details Environmental checks Historical checks to ascertain if the property has any historical significance And finally search for comparable rental and property sales within the surrounding area of similar nature to the subject property (realetate.com RP data, REIV, Agents).

Answer 127

The second step in the valuation process is inspection. When undertaking the inspection it is important to note down surrounding developments within the locality that could impact the valuation of the subject property, and services that are connected and be connected. Check that the property shown on the title is the property you are looking at and that there is no encroachment on the title. Field notes should be taken during the inspection, these include External construction conditions Internal particulars and assess conditions General accommodation components Fixtures, and fittings Measure up the building area Not down any secondary improvements Note down the condition of the improvements and any defects. The valuer should take plenty of photos and walk the strip or road noting pedestrian flow, vacancy rates, tenant mix, surrounding developments, and properties for sale, lease, sold or leased.

Answer 128

Upon the compilation of the above steps, the valuer will need to prepare the report. When repairing the report the following steps need to be included: Always state the basis of the valuation and or any special conditions and assumptions within the report. Comments on market rental levels Potential future vacancies The likelihood of the leaseability and the letting up allowance and costs Impending and other rental reviews A general market overview, including the demand for the asset type

Answer 129

Describes the fundamental terms of a valuation assignment such as the asset being valued, the purpose, and the responsibilities of parties involved in the valuation. The valuer must communicate the scope of work to the client prior to the completion of the assignment. Any changes to the scope of work must be communicated.

Answer 130

When a valuation assignment involves reliance on information supplied by a party other than the valuer, considerations should be given as to whether the information is credible or that the information may otherwise be relied upon without adversely affecting the credibility of the valuation opinion.

Answer 131

The use of an asset that maximizes its potential and that is Physically possible Legally permissible, Financially feasible.

Answer 132

It is often necessary to make an assumption or multiple assumptions to clarify either the state of the asset in a hypothetical exchange or the circumstances under which the asset is assumed to be exchanged. Such assumptions can have a significant impact on value. Where assumed facts differ from those existing at the date of valuation, it is referred to as a special assumption.

Answer 133

Rural: the value of agricultural land will be strongly influenced by its ability to produce income. Its quality in terms of soil fertility, accessibility, and ease of cultivation will therefore be important. Development potential can also affect values. Residential: location is vital in terms of residential value: the property’s position in the country and factors such as aspect, outlook, and the immediate environment are important. The physical condition of the structure and services, facilities provided, and energy efficiency will also affect value. Retail: retail locations are usually divided into prime, secondary, and tertiary pitches so the precise location of a unit will be a key factor. Important factors usually include size, location, accessibility, parking ratio, tenant quality, and mix and building quality. Offices: location, building quality, layout, facilities, service costs, building efficiency, and sustainability credentials are among the significant factors. With advances in technology and the aging of costly building plants, the obsolescence of older premises is an important consideration. Industrial, warehouse, and distribution: accessibility to transport links has a major impact on value, as do aspects of building design, size, age, and condition. Real estate with development potential: the value of a development site is particularly sensitive to small changes in valuation inputs such as the amount and density of the permitted development, the assumed value of the completed development, ground conditions, development costs, and risk allowance. A straightforward comparison of a price per unit area of the site is therefore often not valid. Comparison on a price per buildable area basis may be possible but a more detailed analysis is often required, usually involving residual valuation or cash flow techniques. These need a wide range of data inputs, including the estimated value on the special assumption that the development is completed at the date of valuation i.e values are not projected forward to the date and completion), construction costs (again at the date of valuation), finance costs, fee and an allowance for profit.

Answer 134

Internal: - Note the layout of accommodation, number of bedrooms, bathrooms, living areas, and lighting. - Fixtures and fittings such as kitchen, bathroom, air conditioning, carpet, etc. External: -Detached building, swinging pool, garden, fencing, construction style, roof and window condition, and material/style. Defects: - Stains and cracks on internal and external walls, uneven floorboards, heating, and air conditions, and concrete cracks. Conversation with the occupier to find deeper defects that may not be easily seen. Location: - The property has adverse location features which due to their exposure or proximity, are considered to significantly reduce its appeal to the market. Such as railways, cemeteries, waste management centres, mobile phone towers, etc. Interest valuing normally fee simple (freehold - most complete form of ownership) with vacant possession. Measured on a GBA basis- measurement of the outside walls of the building, including all parts of the building enclosed within the outside walls. Paired comparison - Equivalent Area - Sales, where there is only one difference in characteristic e.g. two properties, sell - the difference in the sale price is the value of the item not included e.g. garage has a value of $10,000. Therefore apply DC and summation to include additional items.

Answer 135

Direct Comparison - Using sales to find an appropriate unit of comparison to arrive at a market value - Finding sales of comparable properties which require the least amount of adjustments to arrive at a rate. Summation - Deriving each component of value: land, improvements, secondary improvements, and accounting for the depreciation of these improvements.

Answer 136

A Two tier market is where there is two levels of prices being achieved in the market, one being level achieved by a local who is knowledgeable in the local market and one potentially being an interstate or overseas purchaser who has limited knowledge of the market.

Answer 137

Over capitalisation is when the market value of properties in a particular location have a ‘ceiling’ where expenditure on developing a dwelling will not necessary be reflected in the market value if that ceiling is reached. Eg. No point in building the Taj Majal in Kyneton, you will spend more building it then your value will be upon completion.

Answer 138

The sunset clause is a statement in the contract of sale that effectively puts a time limit on the contract’s validity. If settlement has not taken place by the end date included in the clause, both parties are legally entitled to walk away from the contract. In such a scenario, the buyer would receive their deposit back in full. A sunset clause is usually dated six (6) to twelve (12) months post the scheduled completion of a development. This is done so that a builder provides themselves with protection for any construction hold ups. A sunset clause in established residential property is often used when a buyer makes a property purchase conditional on the sale of their current home. When a buyer makes such an offer, a seller often chooses to insert a sunset clause into the contract of sale so that they can pull out from the deal should the buyer fail to sell their current home within the timeframe outlined in the sunset clause.

Answer 139

Market: - The industrial market has withstood the effects of COVID-19 - Underpinned by limited land supply within proximity of CBD, ports, and airports - Sharp increases in e-commerce activity have driven demand for warehousing & logistics space - Evidence suggests that strong inquiry for industrial investment assets has led to a tightening of yields over the past 12 months.

Answer 140

- Clearance levels – Spring Line height (7-9.5m), Centre Apex (10-12m), - - Clearspan - Design efficiency – access points, turning circles for large vehicles - Site coverage – generally 50-60% urban areas, 30-40% outer areas, further away site coverage increases where land is cheaper. - Office / Warehouse ratio – generally 10-30% - Higher coverage for hi-tech (more office), - Low site coverage – older style warehouses. - Contamination / Man holes – older style industrial

Answer 141

In assessing site value, non-conforming use rights must be disregarded e.g. industrial factory in a residential zone, the site is assessed as residential land. By comparing to similar non-conforming use properties and adopting a higher capitalisation rate to account for the uncertainty.

Answer 142

Industrial premises may fall under the RLA 2003 – if satisfies the ‘Ultimate Consumer Test’ Industrial premises may fall under the RLA 2003 – if satisfies the ‘Ultimate Consumer Test’ The CB Cold Storage Case came about following the Victorian Court of Appeal case between IMCC Group vs CB Cold Storage in 2017. The decision related to the classification of a cold storage facility as retail premises for the purpose of the Retail Leases Act (2003). The ‘Ultimate Consumer Test’ was a key determining factor in the classification of whether a premises falls under the RLA. The UCT is whether the goods or services are used by the person to whom they are sold or whether the goods or services are passed on by the purchaser, in an unaltered state to a third party, with no distraction between commercial and non-commercial sales of goods or services. The Court of Appeal also noted that it is likely that all premises that provide service from leased premises will be classified as retail premises under the Retail Leases Act.

Answer 143

Industrial 1: Least restrictive (Heavy Industrial) Industrial 2: Lighter uses Industrial 3: Highly restrictive. Most stringent of the three industrial zones and is usually implemented as a buffer zone between industrial and more sensitive uses such as residential. Mixed-use: Generally applies to the inner-city location where the industrial use is not historic. This is prevalent in suburbs such as Richmond, Collingwood, and Fitzroys where land-use patterns are moving towards residential, but still have industrial activities adjoining, which allows for more flexibility and allows for basic low-key industrial uses with retail or office uses

Answer 144

Drivers - frontage / exposure, demographic, size, location, car parking / access, quality of tenant / lease, market conditions, etc.

Answer 145

Capitalisation Approach Discounted Cash Flow Approach (DCF) Direct Comparison Approach

Answer 146

Retail Premises: premises used wholly of predominately for the sale or hire of goods or retail provision of services. Effect of RLA - certain costs and responsibilities may shift from tenant to landlord. This applies to all retail leases entered into after 1 May 2003, unless an exemption applies. Leases commenced before 1 May 2003 become subject to RLA when they are renewed on or after 1 May 2003. Section 37: Rental Determinations – rent reviews based on current market rent. Market rent is not taken into account goodwill created by the tenant’s occupation. Section 37 (3) – rent is to be determined by a specialist retail valuer (5+ years experience).

Answer 147

Provide a draft copy of the lease (at least 7 days prior to commencement) Provide prescribed retail leases information brochure from the office of the Small Business Commissioner Provide disclosure statement (at least 7 days prior to commencement). The tenant may withhold rent until received. Provide disclosure statement (at least 7 days prior to commencement). The tenant may withhold rent until received.

Answer 148

- Lease term of a minimum of five years (including options). - Rent reviews are based on one method. If you come across e.g. 3% or CPI whichever is higher, adopt the market review method. - No ratchet clauses. - Landlords cannot recover land tax, loss of rent insurance, sinking fund contributions, depreciation, etc. - Limitation of recovery of management fees. - Landlords must bear costs for preparation of the lease – e.g. legal costs. - Landlord must make disclosures of cost and other matters (disclosure statement, rent, outgoings, insurance, taxes, and rates). - Cannot terminate the lease if certain turnover targets are not met. - Landlord must give 6 months' written notice if the lease is not to be renewed. - Repair / maintain structure, fixtures, services (electricity, gas, water, drainage) plant, and equipment in the leased premises consistent with to start of the lease. - If the lessee is in constant default, an option can be non-exercisable if supplied in writing.

Answer 149

- Wholesaling/manufacturing - Leases with occupancy costs (rent plus outgoings) exceeding $1 million per year. - If the lease is for the provision of services and is located in the basement or above the third storey of a building (goods can be any level). - If the tenant is a publically listed corporation. - Leases for terms of less than one year. - A lease of 15+ years where the lease imposes obligations on the tenant to carry out substantial work, or the tenant is prevented from removing improvements. - If the tenant is an agent or employee of the landlord.

Answer 150

Locational characteristics, proximity to amenities, services, and transport. Size, quality of improvements, and accommodation condition. Provision of car parking. Underlying zoning and land value – HBU (potential redevelopment) Exposure to the main road. Proximity to public transport. Accessibility – exclusive access for separate tenancies. Potential market rent expected to let. Views, natural light, and lift in the building. Any capital expenditure requirements.

Answer 151

Considerations - Size, location, quality of building/accommodation, quality of tenant (international/well-known company vs local), income, etc. External. - Location – transport, traffic, amenities. - Car parking – sufficient for tenants or do they need to park elsewhere? Retailers – local retailers to accommodate lunch/shopping needs. Internal - Air-con – whole or part floors, zoned, fresh air intake, etc. - Electrical system, security system, fire services (sprinklers, smoke detectors, hydrants, etc.). - Lifts – do they operate efficiently - Operating costs – low/high?

Answer 152

Capitalisation Approach (Primary method on smaller properties) Discounted Cash Flow Approach (Primary method on larger properties) Direct Comparison Approach (best used as a check method only)

Answer 153

When valuing a strata office property you would start by searching the Certificate of Title and Strata Plan, the unit entitlements, and body corporate fees for the property. You would then move on to looking at the lease particulars, and collecting rental and sales evidence, reviewing the tenancy schedule, and outgoings provided. It is important to note that properties of this nature purchased under a Body Corporate must have the appropriate insurance in place. If this is not in place then under the Sale of Land Act the sale can be voided.

Answer 154

Yield compression is the changing perception of risk in an investment. I wrote a couple of weeks ago about Risk vs Reward and how that pushes investment values one way or the other on property investment. Well, yield compression is the market’s decision that the growth and security of an income stream have become stronger. A stronger investment means a lower risk profile and therefore purchasing at a lower yield/return.

Answer 155

Would not value any of these properties. Prior to accepting instructions, a valuer must be confident that he or she has the necessary experience and sufficient information to undertake the valuation. If not, the instructions should be declined or undertaken in conjunction with another valuer who has expertise in the area. - Specialized assets have a specialised nature or utility that limits them to a specific use. - e.g., churches, hotels, movie theatres, car washes, petrol stations, golf courses, etc. - Value property based on its highest and best use; it may only have land value if it is obsolete. The most common method of valuation could be an income cap by deriving market rent, as the direct comparison is usually not possible due to differences in buildings and limited evidence. - Find a rate of comparison ($/sqm), per bed, per child, etc.

Answer 156

When valuing rural property, the value depends on the productivity and earning capacity of the land. Buildings will only typically add 20%-25% of the total market value. Properties in many cases are typically sold as a Going Concern (i.e. including stock and equipment), hence they are not subject to GST.

Answer 157

Farm Land is defined as any land that is greater than 2 hectares in area and is used primarily for grazing (including agistment), dairying, pig farming, poultry-farming, fish-farming, tree-farming, bee-keeping, viticulture, horticulture, fruit-growing or the growing of crops of any kind or for any combination of those activities.

Answer 158

$ per hectare – cropping, crazing, dairy $ per DSE – grazing (highlights the carrying capacity of a property) $ per tonne – cropping $ per case – orchards $ per 100 birds – poultry $ per planted hectare – vineyard. $ per sow - piggery

Answer 159

Location Topography Rainfall Soil Type and potential productivity (crop rotation) Water Supply and irrigation Drainage Size (is it big enough to be viable?) Over capitalisation

Answer 160

Direct Comparison Approach The primary valuation approach for a rural property is the direct comparison approach. This is usually done on a $/per hectare or a $/per DSE for grazing properties or a $/per tree is valuing an orchard.

Answer 161

Must determine the purpose of the valuation and interest being valued – going concern/leasehold/freehold, etc. A lot are ground leases. Contamination – amount for clean up from suitably qualified professional or subject to not contamination, obtain contamination and remediation report when available. Have regard to fuel volume sales, site details, access, location, business type (convenience store), surrounding development, H&BU, rents, etc. Direct Comparison & Capitalisation of net income less amounts for contamination/site clean up (below line adjustments).

Answer 162

Wine prices drive grape prices, which drive vineyard values. Characteristics include location, climate, soils, water distribution systems, reputation. The value of the land for other uses must be considered e.g. subdivision or resorts. Three methods are used to appraise vineyards: sales, cost and income. Price of comparable vineyards per acre. Income the property is capable of producing, A discounted cash-flow analysis more accurately judges returns. That must take into account the time value of money, projected cash flows, industry cycles, consumer preferences and general economic trends, which can be impacted by global factors. The cost approach is evaluating the cost of the land as a capital cost, which is based on the return possible on its use or the opportunity cost of the land. Added to this are area and specific costs; entitlements such as water; the cost of capital; entrepreneurial profit; depreciation of both living and nonliving improvements, and whether it’s mature or developed.

Answer 163

Key Considerations Key Risks and Drivers of Value for Aged Care facilities and Retirement Villages. - Location, in proximity to hospitals, shopping centres, medical and recreational facilities, and public transport; - Design and layout of facility/village; - Level of surrounding competition; - Provision of services; - Area demographics; - Size and design of units; - Bed Licences (Optimum size is between 60-90 beds); - Site topography; - Resident profile; - Weekly service fees; - Quality and affordability of accommodation.

Answer 164

- Hospital is of sufficient size, e.g. minimum of 100 beds - Diversity of Income Stream (emergency, long-term care, types of surgeries offered) - The size, growth, and age profile of the population - Understanding of costs - Quality of hospital facilities and procedural expertise - Relationship/ability to negotiate with health care funds - Ability to attract and retain quality medical staff - Ability to attract major doctors – ‘these are the people who bring the business in’ - Geographical position (e.g. proximity to public hospital) - Accreditation with the Australian Council of Healthcare Standards (SCHS)

Answer 165

Going Concern (Freehold + Business) - Capitalisation of Net Income – EBITDA (primary) - Direct Comparison – Value per bed (check method) - Summation Approach (check) Freehold Value - Capitalisation of market rental (primary) - Direct Comparison – Value per bed (check method) - DCF Approach Business Value - Capitalisation of market rental (Primary)

Answer 166

- In practice, there are several approaches for valuing a school according to the circumstances. - Market approach. Evidence of freehold and leasehold transactions of other schools and similar properties is analysed, adjusted, and applied to the subject property, usually on a per-square-metre basis. - DRC. This is more commonly used for state schools, but may occasionally be adopted in financial reporting for a few independents if the valuer considers that the property is of a scale and/or nature which has rarely, if ever, been traded in the open market. The approach is based on the current cost of building a modern equivalent replacement school, including acquiring a suitable site less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.

Answer 167

Value Drivers - Number of licensed places - Surrounding competition - Age and standard of improvements - Lease covenant - Remaining Lease Term - National Quality Standards (NQS) rating

Answer 168

The primary valuation method used to value a childcare centre is the Capitalisation Approach. When using the Capitalisation Approach you are capitalising the Net Market Income derived from the centre. The secondary method (or check method) used for valuing a childcare centre is the Direct Comparison Approach. When using this approach you are looking at a rate per licenced place. For example if you have 100 places and the market evidence shows that a place can go for between $25,000/place and $50,000/place then the centre will be between $2,500,000 and $5,000,000.

Answer 169

Government support for childcare funding continues to increase, with the Child Care Subsidy (CCS) coming into effect in mid-2018, which saw the former Child Car Benefit replaced with the means-tested CCS being paid directly to the service provider and then passed onto the families. To be eligible to receive CCS, criteria must be met including - The age of the child (must be 13 or under and not attending secondary school) - The child must meet immunisation requirements - The individual, or their partner, must meet residency requirements.

Answer 170

Combined Family Income (sliding scale starting at 85% subsidy rate for combined income up to $67,000, through to 0% for $350,000 or more) Activity Test (the number of hours of subsidised child care that families have access to per fortnight is determined by the activity test) Service Type (The maximum hourly rate the government will subsidise is based on the type of child care service).

Answer 171

The relevant legislation for Child Care is the Education and Care Services National Law Act 2010. This legislation underpins the National Quality Framework which applies to long day care centres, family day care, outside school-hours care, and preschools (kindergartens). The major drivers of value to take into account when valuing a childcare centre include the number of licensed places, Surrounding competition, Age and standard of improvements, Lease covenant, Remaining Lease Term, and National Quality Standards (NQS) rating. The Capitalisation of Net Income is the primary method of valuation and is performed by assessing a net achievable income (based on the childcare centre’s performance) and capitalising that into perpetuity at an appropriate capitalisation rate (yield). The capitalisation rate is derived by analysing recent childcare centre sales that are considered comparable. Direct Comparison On A Rate Per Licensed Childcare Place. The appropriate rate per licensed childcare place will vary depending on the centre’s performance, location, quality of the improvements, and a variety of other factors. For example, if you have 100 places and the market evidence shows that a place can go for between $25,000/place and $50,000/place then the centre will be between $2,500,000 and $5,000,000.

Answer 172

Englobe land refers to land that has the potential to be further subdivided into smaller allotments. Assessing an underlying land value is problematic in the absence of a clear understanding of what may be permitted to be developed on the land. Depending on the type of development and even a developer's investment position, different purchasing positions are available, providing differing levels of value that can be prescribed to a site. The primary method in assessing the value of the development land is the hypothetical development and residual land approach. The resultant analysis can then be compared to sales of the land of similarly size or potential for future development.

Answer 173

Residual Valuation: Turner Approach Known as the Turner Approach as method was spoken about at length in the case of Turner & Anor vs. The Minister for Public Instruction (1956). The primary method in assessing the value of development land is the hypothetical development and residual land value approach. The resultant residual analysis can then be compared to sales of the land of similar size and potential for future development. Essentially the process used in the Turner Method is in effect a residual analysis whereby the gross revenue (Gross Realisation which is determined by multiplying your number of lots by the market value per lot which is determined by using comparable sales) is eroded by various costs and allowances to arrive at a residual amount providing an indication of the value of a site. In regards to the treatment of GST within the Turner Model, GST is generally deducted from the projected Gross Realisation

Answer 174

Information required to undertake a valuation of an englobo land site would include: - Planning Permits - Building Permits - Costs from a Quantity Surveyor (cannot rely on the developer's own costings) - Site testings - Title - Undertake a check for caveats, covenants, easements, or any other restrictions.

Answer 175

Factors affecting profit and risk generally include: - The time frame of the development - Number of lots - Sales History - Competition - Selling period

Answer 176

Compare turnover and profitability, not sqm rate- reflects specialised nature of improvements and business. Major considerations. - Accommodation, quality, design, and structure - Location, competition, parking - Quality of management - assume average management -> capitalise market rent, don't add PV of profit rent as celebrity tenant may lease next week and rental achieved would not be the same for the standard tenant. - Profitability - Profit and loss over the last three years should be obtained. - Freehold -> don't take into account business goodwill - assume average management. - EBITDA = Earnings before interest, taxes, depreciation, and amortisation. - Using EBITDAR allows you to compare the performance of the properties based on their core income activities, giving you a clearer picture of which one is more profitable. - EBITDA can be used in the process of business valuation, by comparing businesses within the same industry that are similar in size and scope. By dividing a company’s enterprise value (its equity value plus its debt) by its annual EBITDA, the resulting ratio, called the EBITDA multiple, compares a business’s value to its raw earnings, which investors can use in acquisitions

Answer 177

Percentage of Net Profit Method This is the most common method of valuing and analysing sales of hotels. In order to undertake a valuation using the percentage of Net Profit Method, determining the Net Operating Profit from the Profit and Loss statements from the last 2-3 years. In some cases it is necessary to add back expenses such as depreciation, interest on loans, proprietor’s salary and superannuation and usual levels of repair and maintenance (EBITDAR – Earnings Before Interest, Tax, Depreciation, Abnormals and Rent) The adjusted net profit is the basis of the rental value assessment which is usually around 40%-45% of the adjusted net operation profit before rent.

Answer 178

The marriage value is essentially the combined value of the Freehold Investment and the Leasehold Interest (being the lessor’s interest and the lessee’s interest) and approximately equates to the value of the going concern. Any valuation of a going concern should be checked or supported by a marriage value assessment of the freehold investment and leasehold going concern valuation.

Answer 179

Accommodation component should be GBA basis and specialised uses such as retail attached to hotel should be measured via GLAR.

Answer 180

Freehold going concern Freehold property (including buildings) and the business operating on that property. The same party would own the land and buildings and also operate the business. Leasehold going concern: “buying the business”, without the land and buildings, for which you have a lease from a landlord to occupy those land and buildings. Freehold investment: Own land and building not business.

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