Clarification on a number of issues surrounding the valuation of private houses for the new Local Property Tax (LPV) has been sought from the Revenue Commissioners by the Institute of Professional Auctioneers and Valuers (IPAV).
Pat Davitt, Chairman of IPAV’s Valuation Committee, said there is confusion surrounding some issues especially on what is being valued and how the valuation is arrived at.
Mr Davitt said it is his understanding from Revenue that the meaning of “unencumbered fee simple of the property” does not only mean mortgages and rights of way but also extends to valuers’ assumptions of what can seriously affect the value of any private residence.
He said the Revenue Commissioners’ description of “market value” seems at variance with the internationally recognised market value definition which is defined as: “the estimated amount for which the asset should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”. Any assumptions or special assumptions made in arriving at the market value should be agreed between the client and valuer prior to the valuation report being prepared.
The rule used by the Revenue when accepting property valuations for Stamp Duty and Capital Gain taxes is to limit the private property to one acre. However, he said while it is referred to in the LPV (Amendment) Bill under explanation of “residential property” , from discussions with Revenue it appears they will look to value whatever amount of land the private residence stands on even if it in excess of one acre and including any outbuildings used for the personal enjoyment of the residents of the property.
“If this scenario is to be implemented, it would distort the market valuers of many private houses and cause them to be overvalued as opposed to the actual price they would fetch on the open market,” he said.
IPAV’s instructions to valuers as per the “Blue Book” European Valuation Standard 2012 are that all market valuations should be carried out in accordance with the above mentioned internationally recognised definition and are date specific.
“This new legislation places a great level of responsibility on valuers and clear working guidelines should and need to be provided by the Revenue Commissioners and agreed with all stakeholders if proper and accurate valuations are to be carried out,” said Mr Davitt. “This Local Property Tax is too important to have any ambiguity on how the actual market value of a private residence is arrived at as this will decide on the level of tax to be paid. The penalties are severe if a mistake is made, so valuers need to be sure of what they are actually valuing,” added Mr Davitt.