Valuers often place a 'nil' cost for remediation of contamination on a site despite evidence and site history strongly suggesting that the site may have been contaminated. Some valuers contend that valuation standards mandate that in the absence of any quantified evidence they must assume nil contamination and assign nil value to this, with a proviso that should this assumption be shown to be incorrect that they reserve the right to revalue the property.
Assumptions of nil contamination are unreasonable where evidence indicates a probability the property interest being valued is likely to be contaminated. In these circumstances, contamination impacts should be addressed because this would be of material importance to a 'willing but prudent purchaser'. The failure to reference this is likely to result in an inflated value. It is a requirement in a market valuation engagement to reflect the value of the subject property on an 'as is' basis as at the valuation date. If a property has been valued on the basis of 'nil contamination' when evidence suggests the site may be contaminated is correct, a valuer can only provide a qualified assessment unless all relevant environmental and remediation documentation is provided.
A valuer may provide a qualified valuation excluding the impact of contamination and revise their valuation once the full extent of contamination is known. With GST margin scheme valuations, it is assumed that the application of the valuation for assessing the margin scheme does not occur until the supply of the end product. Prior to the commencement of the development, there would be a requirement to remediate a contaminated site to make it fit for the end development. At this point, full contamination reports and costs would be available – these should be provided to the valuer, who could reflect the full impact of contamination in their revised valuation and provide an approved valuation for GST margin scheme purposes.