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Editors --- "Assets test: value of moiety (half share) in land" [2006] SocSecRpr 52; (2006) 8(4) Social Security Reporter, Article 9


Assets test: value of moiety (half share) in land

ANDERSON and SECRETARY TO THE DFaCS

Decided: 17th July 2006 by M. D. Allen

Background

The Jim Anderson Family Trust owned land (‘the land’) as a tenant in common in equal shares with Mr and Mrs Hooper. It was accepted in the proceedings that Anderson had effective control of the Trust and that the asset was correctly attributed to him.

In 1998 an offer of $100,000 had been made on the land, but it had been passed in at that price. The property had then been placed on the market, but as at the date of hearing, no offers had been received. Anderson had attempted to place the property with other real estate agents but none were interested. The other owners, the Hoopers, did not wish to sell their interest.

The whole property was valued by the Australian Valuation Office at $250,000 and this figure was not in dispute. However, the Department had attributed half of the whole value of the asset to Anderson, ie $125,000. Anderson contended that simply halving the assessed value of the whole property failed to take into account the restricted nature of his interest in the land.

The valuer conceded that he had no market evidence for the sale of a moiety (half share) in land and had not been asked to value what a half interest in the land would be.

The issue

The issue before the Tribunal was whether the value of the moiety could be ascertained by dividing the value of the whole property by half.

Discussion

The Tribunal had regard to Messrs Rost and Collins’ text ‘Land Valuation and Compensation in Australia’, 3rd edition which notes generally that ‘A single parcel of land can be the subject of several valuations at the same date, each valuation being different from the others because of various interests in the land’. (Reasons, para. 10)

Specifically in relation to tenancy in common they wrote that: ‘In this form of ownership no one of the owners is entitled to any particular part of the property and is thus said to hold an undivided share therein. The undivided shares of the various co-owners are not necessarily evenly divided...it is generally accepted by valuers that a fractional interest, if offered for sale, could not be expected to realise as much in the market as its proportionate part of the amount the property would bring if sold as an entirety.’ (Reasons, para. 10)

The Tribunal also cited Sugerman J in Bingham v Cumberland County Council (1954) 20 LGR (NSW) who considered that where there is a lack of comparable sales to guide the valuer, he or she may have to draw upon general knowledge and experience that, although not entirely comparable, may be of use in forming a general approach and determining which considerations may become relevant.

Finally, the Tribunal relied on Robert Ralph and Repatriation Commission (2006)AATA 258 which considered that realising the sale of that particular moiety would incur significant legal and other costs that would decrease its market value. The Tribunal held that

‘simply adopting the proportionate approach appears to me to be an erroneous approach since it does not consider the proper measure of value, market value’. (Reasons, para. 13)

Formal decision

The decision under review was set aside in favour of the applicant and remitted to the respondent for reconsideration.

[A.M.]


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