How does planning zoning affect LVT valuation?

Friday, 04 December 2009 10:42
Print

When valuation is made for LVT assessments, it is assumed that each plot of land is in optimum use in accordance with the planning system. A criticism often made is that there can be uncertainty about what the planning authorities would allow. Such a criticism is valid only if valuations are based on selling prices, since market values take account of the possibility of planning consent in the future.

But if LVT assessments are based on annual rental values, the assessment is the value now, not at some time in the future after development had taken place. There is never a doubt about what the permitted use actually is. This is either the existing use value of the land, or the value of the land if developed in accordance with a planning consent that has already been granted. There is no room for argument.

Does this mean that people would hold on to undeveloped land in areas of high demand and pay the low rate of LVT based on that existing use?
Yes - but anyone can make a planning application on land they do not own. All that is necessary is to serve a notice on the owner, informing them that the planning application has been made. Thus, it is open to anyone - for example, the local authority - to take the initiative. If LVT were in operation, once full planning consent had been granted, the owner would be liable for the LVT based on an assessment at the higher value use. The landowner would then either develop or sell the land to another who would.

At present, it is common for people to purchase land, demolish and apply for planning consent, after which they sell the site at its enhanced value; it is not unusual for sites to be sold several times over without any development taking place despite the existence of the consent. Under an LVT regime, this would not happen as the undeveloped site would be a tax liability.

What of sites that are already developed but which owners wish to redevelop?
Again, the situation is straightforward if assessments are annual site rental values. If the buildings are demolished, existing use value must continue to be paid. The effect will be to discourage owners from emptying buildings or demolishing prematurely. They are unlikely to do so until consent has been granted and will then proceed promptly with demolition and redevelopment. There will be a strong disincentive against demolishing and leaving sites vacant.
 

We use cookies to improve our website and your experience when using it. Cookies used for the essential operation of the site have already been set. To find out more about the cookies we use and how to delete them, see our Privacy Policy.

I accept cookies from this site

EU Cookie Directive Plugin Information