Valuation List amendment and calculation of Annual Value Q1

Q.
Upon the implementation of Local Government Act 1976, City Hall of Kuala Lumpur has several times prepared new valuation list. As per the said Act, the new valuation list produced will be inforced for a minimum period of 5 years.

a) Discuss five (5) reasons which allow a valuation list to be amended. (15 marks)

b) Elaborate two (2) approaches in determining Annual Value for a valuation list. (10 marks)

(25 marks, 2017 Q1)

A.
a) 5 reasons which allow a valuation list to be amended

Read Objection, Appeal and New Valuation List here.

Section 144 (1) of Local Government Act, 1976 has the below reasons:

Mistake of name or any particulars omitted in the List
Increase in the value due to modification, changes to the rateable building
Decrease in the value due to modification, changes to the rateable building
Rateable holding which was jointly rated, but should have been separately rated
Issue of new titles of the holding
Changes of value due to law relating to planning

The Valuation Officer will carry out the new valuation, and provide notice to the same. Those who has objection will have to make objection in writing not less than 10 days before the time fixed in Notice for a confirmed 'new valuation list'.

This objection will be heard by the valuation officer of JPPH, and alteration be made accordingly.

Then, a new assessment rate will be adopted. And, if still the Annual Value or Improved Value is viewed way excessive, the aggrieved person can appeal to High Court.

b) 2 approaches in determining Annual Value for a valuation list

The issue of this question is how to come out with Annual Value, not how Rating is calculated from the Annual Value.

The Annual Value is an Annual Rentable Value. If there is a building, this is quite easily measured. However, if there is no building, eg. when it is a barren land, how to rent this land? So, there is another way to look at it - the market value calculated backwards.

So, the 2 approaches are:

1. Annual Rent Value, which is the gross annual rental of the holding.

2. Open Market Value calculated backwards. Take 10%, which can be reduced to minimum 5% by SA approval if vacant land.

And, from the Act itself, in its interpretation of Annual Value, Section 2 has the below explanation.

Interpretation

2. In this Act, unless the context otherwise requires—

“annual value” means the estimated gross annual rent at which the holding might reasonably be expected to let from year to year the landlord paying the expenses of repair, insurance, maintenance or upkeep and all public rates and taxes:

Provided that—

(a) in estimating the annual value no account shall be taken of any restrictions or control on rent in so far as it limits the rent which may be required by a landlord or recovered from a tenant of a holding;

(b) in estimating the annual value of any holding in or upon which there is any machinery used for any or all of the following purposes:

(i) the making of any article or part of an article;
(ii) the altering, repairing, ornamenting or finishing of any article;
(iii) the adapting for sale of any article,the enhanced value given to the holding from the presence of such machinery shall not be taken into consideration, and for the purposes of this paragraph “machinery” includes steam engines, boilers or other motive power belonging to such machinery;

(i) which is partially occupied or partially built upon;
(ii) which is vacant, unoccupied or not built upon;
(iii) with an incomplete building; or
(iv) with a building which has been certified by the local authority to be abandoned or dilapidated or unfit for human habitation,

the annual value shall be, in the case of subparagraph (i), either the annual value as hereinbefore defined or ten per centum of the open market value thereof at the absolute discretion of the Valuation Officer, and in the case of subparagraphs (ii), (iii) and (iv) the annual value shall be ten per centum of the open market value thereof as if, in relation to subparagraphs (iii) and (iv), it were vacant land with no buildings thereon and in all cases the local authority may, with the approval of the State Authority, reduce such percentages to a minimum of five per centum;

(d) where in respect of any particular holding, in the opinion of the Valuation Officer, there is insufficient evidence to base a valuation of annual value upon, the Valuation Officer may apply such methods of valuation as in his opinion appears appropriate to arrive at the annual value;

Ref:
Earlier posts.
S.2 Local Government Act, 1976.