Valuation of Rural Property in Matrimonial Breakdowns
On 12 January 2018 a Decision was handed down by the Family Court which related in part to a valuation of rural property owned by the parties.
The background to this matter was as follows:
- The parties had been in a forty year marriage. There was conflicting valuation evidence relating to a rural lifestyle home. It was the principal asset of the parties. One valuer valued the property at $595,000.00 and another valued it at $800,000.00.
- The two valuers conferred but neither was prepared to change their opinion. The valuers did agree that the property was a rural lifestyle property and not a commercially viable property, that there were a limited number of sales which could be used as comparable sales and there were no sales of properties which closely resembled the property in question.
- The first valuer initially considered the comparable sales and formed a view based on those sales. As a cross check, he then considered components of the property (the land and buildings on it) and what the information in the comparable sales suggested were reasonable figures to place on the components and then formed his final opinion as to value.
- The second valuer was of the opinion that the sales data did not provide sufficient information to allow him to form an opinion. He valued the property from two separate different angles, namely he valued the component parts, including land and buildings and value of the business, and came to an opinion by adding up the components. He also valued the property on its carrying capacity.
- The Judge found that there were problems with both valuers’ approaches. The Judge found that he should follow an old court authority from 1953 which stated that he must, by common sense, endeavour after consideration of all the material before the Court, to fix a sum satisfactory to the mind of the Court as representing the value contained in the land.
Ultimately the Judge preferred the first valuer’s approach because he found the second valuer committed a number of errors which included, by accepting the wife’s assertion about a cleared area of the property and using the capitalised value of the business as one of his components, he failed to step back and consider the likely sale price of the property as opposed to the value of its components.