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Unimproved Values of Contaminated Land Unimproved Values – Urban Valuation Policy 4.108 Legislative Authority • Valuation of Land Act 1978 • Contaminated Sites Act 2003 Background Contamination of land can result from either short or long term use of land for a range of industrial, commercial and other activities. Contamination resulting from long term use of land can pre-date current environmental and health legislation. It can also occur naturally. The Valuer-General regards contaminated land as being land identified, recorded or described by a state or local government authority as being contaminated or land which is commonly known to be contaminated, where ‘contaminated’ has the same meaning as given in the Contaminated Sites Act 2003. The Contaminated Sites Act 2003 at Section 4(1) & (2) defines contaminated land as: (1) In this Act — contaminated, in relation to land, water or a site, means having a substance present in or on that land, water or site at above background concentrations that presents, or has the potential to present, a risk of harm to human health, the environment or any environmental value. (2) However, land, water or a site, or land, water or a site of a prescribed class or description, is not contaminated where the regulations so provide. Land which is contaminated may be at source (the source site) or instead may be an affected site caused by migration, both terms defined in the Contaminated Sites Act 2003: source site means a site — (a) on which contamination; or (b) on which a substance, has originated and from which it has migrated to another site (the affected site) causing, or contributing to, contamination on that other site. landgate.wa.gov.au affected site means a site on which contamination is caused, or contributed to — (a) by contamination; or (b) by a substance, which has migrated to that site from another site (the source site); Further information can be found at the Department of Environmental Regulation (DER) website and in its publication “Assessment and management of contaminated sites – Contaminated sites guidelines December 2014”. Unimproved Value Defined The Valuation of Land Act 1978 treats the determination of unimproved value differently depending on whether land is inside or outside the Perth Metropolitan Region, a city or a town. For land within the Perth Metropolitan Region, a city or any town it defines site value as follows: site value of land means the capital amount that an estate of fee simple in the land might reasonably be expected to realize upon sale assuming that any improvements to the land, other than merged improvements, had not been made and, in the case of land that is reserved for a public purpose, assuming that the land may continue to be used for any purpose for which it is being used or could be used at the date of valuation; For land located outside these districts and where the unimproved value is the capital amount of an estate in fee simple and not based on a formula contained within the definition, it is defined as follows: the capital amount that an estate in fee simple in the land not including improvements might reasonably be expected to realize upon sale. Both definitions are similar with the major difference being the inclusion of merged improvements in the determination of site value and their exclusion in assessing unimproved value for land situated outside the Perth Metropolitan Region, a city or town. Aside from this difference, all other improvements to land are required to be ignored under both definitions. Where land is contaminated it must be considered to form part of the land regardless as to whether it was a direct consequence of the use of the improvements on the land. So while the assessment of site value requires an assumption that the improvements had not been made, it does not follow that the contamination caused by them is also ignored. Identification of Contaminated Land Valuers making rating valuations are required to monitor the Contaminated Sites Database which can be accessed via the DER website and should be aware of the 7 classifications and criterion applying to land. The Contaminated Sites Database records information on sites classified: • contaminated - remediation required • contaminated - restricted use • remediated for restricted use All other reported sites, including those awaiting classification, are recorded on the Reported Sites Register which is not available online. landgate.wa.gov.au Valuing Contaminated Land Land valued for rating and taxing uses mass valuation techniques. Typically groups of ‘like’ properties having similar zoning and use are valued using standardised procedures at the same time. Caution is needed when valuing land known to contain contamination and mass valuation techniques are not preferred. While the basic principles and methodologies applying to the valuation of contaminated land are no different to those applying to mainstream non-contaminated land, greater care and more investigation is required. The decision as to how to treat land subject to contamination is of primary concern. When valuing land subject to contamination, a first step is to establish whether it requires remediation now or in the future and what the reasonable cost would be. Some contaminates, depending on their location on or in the land, or if left undisturbed, may not require remediation. It may be possible to develop the land without additional cost being incurred. Others may be a direct and anticipated result of the current and continuing use of the land and in these cases where there is a continuing use for an indefinite period, this may be considered the highest and best use. Land upon which contaminated and disused buildings, structures, hard stand, ponds and tailing dams exist are to be valued on the basis that these items are not improvements to the land and must be accounted for in the valuation. Similarly, when valuing vacant land to its highest and best use, the full impact of the contamination, whether it is the removal, on site containment or in situ treatment of the contaminates must be reflected in the valuation. Policy It is policy that when valuing land subject to contamination that: 1. Where land is in continued use for an indefinite period and the current permitted use can coexist with the contamination as it does not pose an unacceptable risk, such use can be taken to be the highest and best use of the land which should be valued on such basis. 2. Vacant land shall be valued to its highest and best use and the full impact of the contamination, whether it is remediation by way of the removal, on site containment or in situ treatment must be acknowledged and reflected in the valuation. 3. Land upon which disused contaminated buildings, structures, hard stand, ponds and tailing dams exist are to be valued on the basis that these items are not improvements to the land and must be accounted for in the valuation by reflecting the cost of removal and remediation of the land. 4. Allowance may be made for stigma or market resistance attached to the site. This should be considered on a case by case basis and not universally applied. Generally such allowance would be expected to be modest. 5. The value may be adjusted where applicable for any additional administrative and reporting burden associated with a ‘classified’ site compared to unaffected land. The allowance should be realistic and not in excess of the real cost. landgate.wa.gov.au Date of Most Recent Review 17 November 2016 Authorising Officer Graham Jeffery Valuer-General LANDGATE landgate.wa.gov.au ADDENDUM Contaminated Sites Act – Schedule 1: Classification of Sites* (*Contaminated Sites Act - Schedule 1, numbering in ‘classification’ added for reference). Classification Criterion (1) Report not substantiated A report under section 11 or 12 provides no ground to indicate possible contamination of the site (2) Possibly contaminated — investigation required There are grounds to indicate possible contamination of the site (3) Not contaminated — unrestricted use After investigation, the site is found not to be contaminated (4) Contaminated — restricted use The site is contaminated but suitable for restricted use (5) Remediated for restricted use The site is contaminated but has been remediated so that it is suitable for restricted use (6) Contaminated — remediation required The site is contaminated and remediation is required (7) Decontaminated The site has been remediated and is suitable for all uses Contaminated Sites Act – Section 3: Definition of “remediation” “remediation” in respect of a site that is contaminated includes— (a) the attempted restoration of the site to the state it was before the contamination occurred; (b) the restriction, or prohibition, of access to, or use of, the site; (c) the removal, destruction, reduction, containment or dispersal of the substance, causing the contamination, or the reduction or mitigation of the effect of the substance; (d) the protection of human health, the environment or any environmental value from the contamination. Potentially Contaminating industries, activities and land uses Reference should be made to Appendix B of the “Assessment and management of contaminated sites - Contaminated sites guidelines December 2014” which provides a comprehensive however not exhaustive list of industries, activities or land uses with potential contaminates. landgate.wa.gov.au