Less Cost July ,316 Costs of acquisition , , , , ,305

Transcription

1 BACKGROUND NOTE In May 2005, Mr. Paul and Mrs. Jane Coughlan (hereinafter referred to as the Coughlans ) sold their four bedroom family home, located at 44 Lower Adelaide Road, Dublin 2 at auction for 787,500. It was their view that any gain arising on the disposal of the property was not liable to capital gains tax as they were the beneficiaries of a tax relief commonly referred to as principal private residence relief. The Revenue Commissioners (hereinafter referred to as the Revenue ) did not agree and, in November 2008, almost three and a half years later, they raised a capital gains tax assessment for 2005 where tax of 26,090 was sought. The basis of the assessment was as set out in a letter from the Revenue of 24 July 2008; Sales proceeds 787,500 Current use value 650,000 Less (Deemed sale costs) Solicitors fees 14,293 Auctioneers fees 11,529 25,822 25,822 x 650,000 = 21, , , ,687 Less Cost July ,316 Costs of acquisition , , , , ,305 Chargeable gain ( 634, ,305) = 132,991 Less personal exemption 2,540 Net chargeable gain 130,451 Liability 20% = 26, The issue between the parties is to what extent the Coughlans qualify for principal private residence relief where the Revenue are seeking to restrict it by 130,451, the impact of which is a request to pay tax of 26,090 due since 31 October 2005 (interest due at October 2010 = approximately 10,500). Section 604 TCA., 1997 provides for principal private residence relief. It states that where a gain accrues on the disposal of a house which for the purposes of the law is development land then the availability of principal private residence relief is curtailed by a formula designed around the concept of current use value. 1

2 For the purposes of tax law, development land is expressly defined in section 648 TCA., 1997 where it provides that development land means land in the State the consideration of which, or the market value of which at the time at which the disposal is made exceeds the current use value of that land. Current-use-value in relation to land at any particular time means the amount which would be the market value of the land at that time if the market value were calculated on the assumption that it was at that time and would remain unlawful to carry out any development of that land. It follows that the meaning of development land is not related to the use to which the property is subsequently put. It is defined only in terms of the proceeds received at the time of the disposal. If the market value is greater than the current-use-value then the sale is a sale of development land. It comes down to valuation where the primary objective is to determine whether or not the sale of the property at 44 Lower Adelaide Road is the sale of development land. To win the argument the Revenue have to be able to prove that the market value i.e. the worth at auction to a stranger exceeds the current-use-value of the house if no development were to take place that is if it were to remain a four bedroom family residence. The key question is what was the current-use-value of the family residence at 44 Lower Adelaide Road, Dublin 2 as at the date of sale (May 2005)? The Coughlan s valuer, Michael Beatty, says 800,000 (the reserve) whilst the Revenue s valuer, Desmond McDesmond, says 650,000. In reality it was sold for 787,500. All characters and events depicted in this mock appeal are fictional. Any similarity to actual persons, living or dead, is purely coincidental. 26 March

3 Taxpayer s Written Submission For circulation to: - The Appeal Commissioner - Offices of the Revenue Solicitor - Mr. Paul and Mrs. Jane Coughlan (the appellant taxpayers) Introduction The issue between the parties is to what extent the appellant taxpayers qualify for principal private residence relief, where the Revenue Commissioners (hereinafter referred to as the Revenue ) are seeking to restrict same. Background In May 2005, the appellant taxpayers sold their four bedroom family home, located at 44 Lower Adelaide Road, Dublin 2 at auction for 787,500. The two storey detached residence extended to approximately 280 square metres. The accommodation was made up of four bedrooms, a family bathroom a cloakroom at the living accommodation level and a magnificent living room cum dining room at first floor level with full length windows leading to a spectacular veranda giving a commanding view of the canal. These rooms had an oak junker timber floor and a feature fireplace. Two of the bedrooms enjoyed superb water views and the property also included a car port for two cars and a driveway which accommodated a further four cars. The surrounding gardens were lush and mature and were planted in such a way as to compliment the stunning water views whilst providing protection from the noise of any passing traffic on Lower Adelaide Road. The mature vegetation also protected the site from overlooking by any of the adjoining high rise buildings. The entrance gates further added to the property s privacy. To the rear was a raised private garden leading to a terrace capable of holding seating and a table for at least six people. It is the appellant taxpayers view that any gain arising on the disposal of the property is not liable to capital gains tax as they were the beneficiaries of a tax relief commonly referred to as principal private residence relief. Computation The Revenue Commissioners did not agree and, in November 2008, they raised a capital gains tax assessment for 2005 where tax of 26,090 was sought. The basis of the assessment was as set out in a letter from the Revenue of 24 July 2008, as follows: 1

4 Sales proceeds 787,500 Current use value 650,000 Less (Deemed sale costs) Solicitors fees 14,293 Auctioneers fees 11,529 25,822 25,822 x 650,000 = 21, , , ,687 Less Cost July ,316 Costs of acquisition , , , , ,305 Chargeable gain ( 634, ,305) = 132,991 Less personal exemption 2,540 Net chargeable gain 130,451 Liability 20% = 26, The Law Section 604 TCA., 1997 provides for principal private residence relief. It states that where a gain accrues on the disposal of a house, which for the purposes of the law is development land, then the availability of principal private residence relief is curtailed by a formula designed around the concept of current use value. For the purposes of tax law, development land is expressly defined in section 648 TCA., It provides that: - development land means land in the State the consideration for the disposal of which, or the market value of which at the time at which the disposal is made, exceeds the current use value of the land at the time at which the disposal is made (Underline added by author) Current use value is also defined in section 648 TCA., 1997 as: - current use value - (a) in relation to land at any particular time, means the amount which would be the market value of the land at that time if the market value were calculated on the assumption that it was at that time and would remain unlawful to carry out any development.in relation to the land held other than development of a minor nature 2

5 It follows that the meaning of development land is not related to the use to which the property is subsequently put. It is defined only in terms of the proceeds received/market value at the time of the disposal. If those proceeds or market value are greater than the current-use-value of the property as a residence, then the sale is a sale of development land. The Argument It comes down to valuation where the primary objective is to determine whether or not the sale of the property at 44 Lower Adelaide Road, Dublin 2 is the sale of development land. The key determinant is the identification of the the current use value of the family residence at 44 Lower Adelaide Road, Dublin 2 on the date of the disposal in May In 2005 the sale proceeds achieved at auction were 787,500. The appellant taxpayers professional valuation, as at 2005, was 750,000 to 800,000, where 800,000 was the reserve price on the advice of their valuers, whilst the Revenue valued the residence, retrospectively in 2008, at 650,000. The figure of 650,000 was arrived at by discounting the valuation of 800,000 by approximately 20%, thought to be the appropriate discount by the valuers for the Revenue Commissioners. It represented a discount for the noise of the road and a further discount for being a residence on what was essentially a street of high rise buildings. The valuation obtained by the appellant taxpayers was carried out just before and leading up to the sale of the property in May 2005, where the valuers had actual sight of the Coughlan family home. At all stages the marketing campaign was based on the family home being sold as a residence, as can be seen from the newspaper clippings of the time. The valuation obtained by the Revenue in August 2008 arose on foot of an inspection when the original family home had been demolished and replaced with a four-story modern apartment block. Enclosed please find a copy of the valuation report as at 16 April 2005 by Oxford & Johns, Auctioneers. The appellant taxpayers reserve the right to add to, or vary, this outline submission at the hearing of the appeal. SUZANNE KELLY BCL BL FITI Chartered Tax Adviser 21 March 2012 Encl. - Oxford and Johns valuation 3

6 Oxford & Johns Auctioneers 15 Fitzwilliam Square Dublin 2 Mr. P Coughlan & Mrs. J Coughlan 44 Lower Adelaide Road Dublin 2 16 April 2005 Re: Proposed sale of 44 Lower Adelaide Road, Dublin 2 Dear Paul and Jane, Thank you for giving me the opportunity to view your property and to advise you in relation to the potential sale of your property and I hope you found my visit beneficial. I think it is important that if there is a clear objective of selling a property one should devise a well thought out strategy to ensure not only does the property sell at the highest possible price, but in the shortest possible time and with the least amount of stress. We believe when selling your property, you deserve and expect the very best in terms of service to support you in achieving your objectives. Before outlining what our service involves, I think it appropriate that I first outline our views on your property with which we were very impressed during our visit. As this is a substantial family home in a central location with canal views in a mature leafy setting it is likely to generate good interest if offered for sale and may have potential from a development point of view. Following careful consideration, we are of the opinion that a house of this quality, given its location and style should be offered for sale by auction and that an auction campaign should generate strong interest. The most obvious advantages of auction are as follows: 1. The marketing campaign is limited to a 5/6 week period which has the effect of concentrating the minds of prospective purchasers into as short a time span as possible. 2. All financial arrangements must be made by prospective purchasers prior to the auction date in order to put them in a position to bid on the day. 4

7 3. The competitive atmosphere of a good auction can result in a bonus price being achieved and often the eventual purchaser pays more than they may have anticipated paying before entering the auction room. With, regard to the value of the property, we are of the view that this lies in the region of 750, ,000 but obviously valuation is, by its nature, a subjective exercise and a lot can depend on market trends and fluctuations prior to the auction date. We would envisage that a promotional budget in the region of 1,500-2,000 (plus VAT 21%) which is normally payable in advance, should ensure maximum exposure to the market. This figure will cover a significant marketing campaign, to include, brochures, boards, inclusion on MyHome.ie and oxfordandjohn.ie as well as substantial advertising in the national papers. I am of the view that the property deserves this sort of exposure and that money spent wisely in this area should reap a dividend. Once a decision has been taken to embark upon the course that I have outlined, it is important you have confidence in your estate agent s ability to correctly portray all the attributes your property offers to as wide a market as possible. Our strong local presence in Dublin and Ireland s two leading property websites will ensure your property gets maximum exposure. Our office is staffed with a professional well trained team whose job it is to maximise your potential for a sale at the strongest possible price. In making your decision, we ask that you appoint us to sell your property, as our team in Fitzwilliam Square in Dublin 2 can maximise the price and minimise the stress that is involved in selling a property, which is what the exercise is all about. In relation to our professional fee, our view is to provide value for money but to also receive money for value. In this regard our fee will be 1.25% of the sale price (plus 21%). Once again thank you for inviting us to advise you on this occasion and needless to say we would be delighted to work on your behalf, in the meantime please feel free to telephone me directly on (01) , equally 1 can be contacted by at michael@oxfordjohns.ie Yours sincerely, Michael Beatty Director Oxford & Johns Auctioneers michael@oxfordjohns.ie 5

8 Revenue Commissioner s Written Submission For circulation to: - The Appeal Commissioner - Mr. Paul & Mrs. Jane Coughlan - Office of the Revenue Solicitor Background Paul & Jane Coughlan (Appellants) -and- The Revenue Commissioners (Respondent) 1. This case concerns the sale of a private residence 44 Lower Adelaide Road, Dublin 2, pursuant to a contract dated 28/5/2005 for a consideration of 787, The residence was owned by Paul & Jane Coughlan (Appellants) and was sold to Tom Smyth and Jack White. 3. On 26/10/2005 Tom Smyth applied to Dublin City Council for planning permission [planning reference PL05] and planning permission was granted on 20/2/ The Development description and Location were as follows:- Permission for demolition of existing house and construction of 4 no. apartments (3 no. 2 bed, 1 no.1 bed) in a four storey block with semi-basement carpark (accommodating 4 no. car spaces), bin storage area and associated site development works at 44 Adelaide Road, Dublin There were subsequent amendments to the planning permission but the apartment development was completed in 2007/2008. Appellant s Position 6. The appellants are of the view that no Capital Gains Tax [CGT] was due on the disposal as the sale proceeds represented the current use value [CUV] of the property as a residence at date of sale, that principal private residence [PPR] relief applied and there was no development value. 7. Revenue did not accept this and obtained an independent valuation of the CUV of the property as a residence at date of sale. This valuation was 650,000. Revenue raised a CGT assessment for 26, and this assessment was appealed by Paul & Jane Coughlan. 1

9 Revenue Commissioners Position 8. The CUV of the property as at date of sale is the only issue between the parties. 9. The determination in relation to the CUV will govern the amount of PPR relief available under Section 604 TCA 1997 in respect of what is otherwise a sale of development land for the purposes of Section 648 TCA Section 648 defines some of the terms that are relevant to this appeal, viz- current use value is defined as (a) in relation to land at any particular time, means the amount which would be the market value of the land at the time if the market value were calculated on the assumption that it was at that time and would remain unlawful to carry out any development [(within the meaning of section 3 of the Act of 1963, or, on or after 21 January 2002, within the meaning of section 3 of the Act of 2000)] in relation to the land other than development of a minor nature Development land is defined as land in the State the consideration for the disposal of which, or the market value of which at the time at which the disposal is made, exceeds the current use value of that land at the time at which the disposal is made... Development of a minor nature is defined as development (not being development by a statutory authority or a statutory undertaker ) which, under or by virtue of section 4 of the Act of 1963, or, on or after 11 March 2002, under or by virtue of section 4 of the Act of 2000, is exempted development for the purposes of [the Planning Acts] Relevant disposal means a disposal of development land made on or after the 28 th day of January, Section 604(2) sets out the definition of principal private residence This section shall apply to a gain accruing to an individual on the disposal of or of an interest in (a) a dwelling house or part of a dwelling house which is or has been occupied by the individual as his or her only or main residence, or (b) land which the individual has for his or her own occupation and enjoyment with that residence as its garden or grounds up to an area (exclusive of the site of the dwelling house) not exceeding one acre; but, where part of the land occupied with a residence is and part is not within this subsection, then, that part shall be taken to be within this subsection which, if the 2

10 remainder were separately occupied would be the most suitable for occupation and enjoyment with the residence. 604(12)(b) principal private residence relief does not apply to that portion of the gain that reflects development value. 12. Section 604(3) provides relief from CGT for a principal private residence as follows The gain shall not be a chargeable gain if the dwelling house or the part of a dwelling house has been occupied by the individual as his or her only or main residence throughout the period of ownership or throughout the period of ownership except for all or any part of the last 12 months of that period. 13. Section 604 (12)(a) states that current use value and development land have the same meanings respectively as in section Section 604(12)(b) states Where - (i) a gain accrues to an individual on the disposal of or of an interest in an asset which is development land and (ii) apart from this subsection relief would be given under this section in respect of the disposal of that asset (being an asset within subsection (2) or (11)), then, subject to paragraph (c), that relief shall be given in respect of the gain (or where appropriate in respect of a portion of the gain) only to the extent (if any) to which such relief would be given if, in computing the chargeable gain accruing on the disposal (notwithstanding that the disposal was a disposal of development land), there were excluded from the computation - (I) (II) the amount (if any) by which the base value of the asset exceeds the current use value of the asset on the base date, the amount by which the consideration for the disposal of the asset exceeds the current use value of the asset on the date of disposal, (III) if the asset was not held by the individual on the 6 th day of April, 1974, such proportion (if any) of the incidental costs to the individual of the acquisition of the asset as would be referable to the amount (if any) referred to in subparagraph (I), and (IV) such proportion of the incidental costs to the individual of the disposal of the asset as would he referable to the amount referred to in subparagraph (II) 3

11 15. The valuation report (copy attached), prepared by the expert valuer engaged by Revenue, states that the market value of the property at time of disposal was 650,000 this represents the current use value of the property. 16. The consideration for the disposal was 787,500 and exceeds the current use value by 137,500. Therefore the disposal of 44 Adelaide Road is a disposal of development land as defined, and, in accordance with Section 604(12)(b) principal private residence relief does not apply to that portion of the gain that reflects development value. 17. Based on the valuation report provided by the expert valuer, Revenue has computed the Capital Gains Tax arising on the disposal to be 26, and has raised an assessment for this amount. Valuation Evidence 18. Revenue engaged the services of a valuation expert who will give evidence at the appeal in relation to the market value/current use value of the property. The appellants have also engaged a valuation expert. Summary 19. It is agreed that the issue of the current use value is the matter to be determined at the appeal. 20. Revenue respectfully submits that, as the property was purchased for development purposes as evidenced by its subsequent demolition and the development of an apartment complex; the property is in an area where there have been a number of similar developments; the consideration for the disposal exceeded the market value, and therefore the disposal was a disposal of development land with a consequent restriction on PPR relief; the Capital Gains Tax assessment raised is reasonable and is due and payable. Office of the Revenue Solicitors 21/3/2012 Encl. Chartered Valuation Surveyors - Valuation 4

12 INSTRUCTIONS Desmond McDesmond Chartered Valuation Surveyors 16 South Mall Cork To carry out an inspection of the above property, examine documents supplied to us and make such other enquiries as we consider appropriate in order to advise you as to our opinion of the Market Value of the Freehold Interest in the above property with Vacant Possession therein on the basis of Current Use Value only as at July Your attention is drawn to the section of this Report entitled Valuation Procedure and Assumptions, which describes the basis on which the instructions have been carried out. In accordance with the Appraisal & Valuation Manual issued by the Society of Chartered Surveyors, Market Value is defined as: The estimated amount for which a property should exchange on the date of valuation, between a willing buyer and a willing seller In an arm s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Concerning the Current Use Value, for the purpose of providing our opinion we have proceeded on the basis of the market value of the residence assuming that no development other than development of a minor nature could be carried out. We can report as follows:- LOCATION The subject property is situated on the south side of Lower Adelaide Road, approximately 200 metres west of its intersection with Lesson Street Lower and Fitzwilliam Place. The GPO is approximately 0.75 kilometres to the northwest, whilst the Aurora Hotel, the main luas line serving south side Dublin are situated about 0.75 kilometres to the east. Approximately 0.75 kilometres to the north is the South Circular Road. The immediate surrounding area is predominantly residential in character with neighboring premises comprising modern apartment blocks (including a two storey apartment block at Adelaide Court, a four storey over ground level apartment block at Waterview, a four storey over ground level apartment block at Waters Point and the high quality 4 storey over ground level apartments at Fontus View. At the eastern end of Lower Adelaide Road there are a number of one and two storey private residences. The Local Authority for the area is Dublin City Council. SITE The subject site, is rectangular in shape, undulating topographically and extends to an area of approximately 365 sq. m. 5

13 The site frontage extends to approximately 11 metres and average site depth is approximately 33 metres. DESCRIPTION As at the date of our inspection the original residence had been demolished and replaced by a four storey over ground level modern apartment development. This new development extends to approximately 321 sq. m. and comprises 4 covered car spaces and laundry/service areas at garden level, a 3-bedroom duplex apartment over ground & first floor levels, a 2-bedroom apartment at second floor level and a 1-bedroom apartment at third floor level. We understand from our enquiries at Dublin City Council Planning department that the original residence comprised a two storey detached residence with additional accommodation at mansard roof level, constructed circa 1970 s. We further understand that the accommodation included 4 bedrooms, family bathroom, living room cum dining room, kitchen and laundry room. Based on the relevant ordnance survey plans and information obtained at Dublin City Council Planning Department we estimate that the residence extended to approximately 280 sq. m. Walls were generally of masonry construction with either cement rendered or red brick external elevations whilst the roof was of pitched type with tile roof covering. We have assumed that internally floors were generally of concrete slab at ground floor level and suspended timber on the upper levels whilst walls and ceilings were smooth plastered and either painted or papered. REPAIR & CONDITION We have assumed for the purposes of this report and valuation that the property was generally in a good state of repair and decorative condition. SERVICES All mains services including mains water, sewerage, electricity and telephones were available and connected to the property. We have assumed that artificial lighting was by means of electric light bulbs and that a central heating system was installed. TOWN PLANNING The subject property was situated in an area zoned Objective R To provide for residential development and for associated support development, which will ensure the protection of existing residential amenity and will contribute to sustainable neighbourhoods in the Dublin City Development Plan The development plan was adopted on 31 st January Potential developments compatible with the zoning objective included residential, residential institution, local shops, offices, licensed premises, education, childcare and health, whilst open for consideration were guesthouse, hotel, B&B, studio, office, surgery and workshop. 6

14 Whilst the development plan indicates a general plot ratio of 0.46:1 the plan also states that for established suburbs higher densities could apply and for inner city areas the maximum plot ratio is 2:1. The fact that there are a number of higher density apartment developments in the vicinity and the fact that the plot ratio achieved on the subject is approximately 0.88:1 is evidence of the development potential that existed for this site. We were unable to carry out an archive search of the planning records but we have assumed for the purposes of this report and valuation that the original property and use were in accordance with full grants of planning permission, building bye-law approval and/or the Building Regulations and in compliance with Fire Certificates. However, we would recommend that this matter be confirmed by your legal and/or Town Planning Advisors. Regarding subsequent planning applications we understand from our enquiries to Dublin City Council Planning Department that the following planning applications are noted in respect of this property. Register Reference Planning Application 05/78549 Application for planning permission to demolish existing residence and construct four apartments (three number 2 bed apartments and one number 1 bed apartment) in a four storey block with semi basement including 4 parking spaces. Planning permission was granted subject to 11 conditions on 20 th February /52732 Planning application for alterations to approved development to include the provision of a 3 bedroom duplex unit in place of two number 2 bedroom apartments on ground and first floor levels, and minor alterations to eastern elevation. The application was granted subject to 3 conditions on 26 th September / Planning application for alterations to approved development to include terrace area to third floor and changes to roof profile. Permission was granted subject to 2 conditions on 28 th TITLE June We have not had sight of any Documents of Title but we have assumed for the purposes of this Report and Valuation that the subject property was held Freehold with vacant possession. 7

15 We have further assumed that there were no easements, disputes, restrictions or encumbrances nor any outgoings of an unusual nature which would affect our opinion of value. GENERAL COMMENTS In 2005 the Irish economy was continuing to show strong growth having grown by 5% in 2004 and ESRI forecasts that similar growth would be achieved in General inflation was just over 2% and ECB interest rates ranged from a low of 1.85% in November 2005 to a high of 2.48% in December As at June 2005 ECB rates were holding steady at approximately 2%. Overall economic indicators were strong and this was reflected in the residential sector where new house completions were projected at approximately 80,000 units whilst in Dublin house price growth was reportedly running at 14% per annum. The subject property comprised a two storey detached private residence where accommodation extended to approximately 280 sq. m. in total. The residence was situated within walking distance of Dublin City centre, which is approximately 0.75 kilometres to the northwest, and within a mature residential suburb of the city. In addition, the residence enjoyed views over the Grand Canal. As regards market, primary activity was to the south of the city in locations such as the adjacent Dublin 8 with prices ranging from 525,000 up to 900,000 although the latter included 4 and 5 bedroom detached residences which were superior by comparison to the subject property. However, the subject property s potential for further development (subject to obtaining planning permission) was also evident having regard to the fact that a number of other properties in the immediate vicinity had been redeveloped for apartment blocks. The development potential was proved following the grant of planning permission for 4 apartments on the subject site in February It is also noted that two adjacent 0.6 Ha sites at Lower Adelaide Road were sold during 2006 for apartment developments at 2.5 million each. In accordance with your instructions we have provided our opinion of the current use value as at July 2005 and we have proceeded on the basis of the market value of the residence assuming that no development other than development of a minor nature could be carried out. 8

16 VALUATION Subject to the contents of this report, in our opinion, the Market Value of the Freehold Interest with Vacant Possession in the property described on the basis of its Current Use Value as a residence in July 2005 was in the region of:- 650,000 (Six Hundred and Fifty Thousand Euro) Neither the whole nor any part of this valuation nor any reference thereto may be included in any published document, circular or statement nor published in any way without our written approval of the form and context in which it may appear. Finally, and in accordance with our standard practice, we must state that this report is for the use solely of the party to whom it is addressed and no responsibility can be accepted to any third party for the whole or any part of its contents. DESMOND MCDESMOND CHARTERED VALUATION SURVEYORS DATE TO: Ms. M Bloggs, Office of the Revenue Commissioners Revenue HQ Dublin 2. 9

17 VALUATION PROCEDURE & ASSUMPTIONS 1. All measurements are in accordance with the Measuring Practice Guidance Notes issued jointly by the Society of Chartered Surveyors, the Irish Auctioneers and Valuers Institute and the Incorporated Society of Valuers and Auctioneers. 2. We have not carried out a structural survey nor have we examined timbers or parts of the structure which are covered, unexposed or inaccessible and are unable, therefore, to report whether such pelt of the property are free of rot, beetle or any other defects. 3. We did not arrange for any investigation to be carried out to determine whether or not deleterious or hazardous material had been used in the construction of the property, or has since been incorporated and we are, therefore, unable to report that the property is free from risk in this respect. For the purpose of this valuation we have assumed that such investigation would not disclose the presence of any such material to a significant extent. 4. We are not aware of any Environmental Audits or other environmental investigations or soil surveys which may have been carried out on the property and which may draw attention to any contamination or the possibility of any such contamination. 5. We have assumed that no contaminative or potentially contaminative uses have ever been carried out in the property. We have not carried out any investigation into past or present uses, either of the subject property or any neighbouring properties, to establish whether there is any potential for contamination to the subject property from these uses and have, therefore, assumed that none exists. However, should it be established subsequently that contamination, seepage, or pollution exists at the property or on any neighbouring property, or that the property has been, or is being, put to a contaminative use this might reduce the value now reported. 6. Unless otherwise stated, we have assumed that tenancies are on full repairing and insuring terms with upward only rent reviews, that all tenants have complied with the provisions of their respective tenancies and that there are no side letters, supplemental agreements or provisions which would alter or vary the leases from standard commercial terms. 7. The land and buildings are valued as if free from encumbrances, debenture, mortgage or other legal charges. We have assumed that there are no onerous or restrictive covenants affecting the property. It is assumed that the title to the property is good and marketable. All information as to tenure, lease, site boundaries and similar matters is generally as supplied by the client or relevant third parties. Any interpretations we have been obliged to make of any relevant documents are informal. 8. Our valuation includes those items of plant and machinery normally considered to be part of the building service installations, which would pass with the property on a sale or letting. We have not tested any of the plant or services relating to the 10

18 property but have assumed for the purposes of this report and valuation that same are in satisfactory condition and fully operational. 9. Where appropriate above, reference to the singular shall Include the plural. 10. We have assumed for the purposes of our Report and Valuation that each property either predates or has been constructed wholly in compliance with Fire Regulations and is fully certified. 11. We have relied on the information supplied to us and have not carried out planning searches but have assumed that the properties are constructed and used in accordance with valid grants of planning permission, bye law approval and the building regulations. We have further assumed that there are no outstanding statutory notices. 12. The Valuation takes no account of any contingent liability for taxation or balancing charges and is exclusive of any fees, costs or other expenses which may arise in respect of the actual or notional acquisition or disposal of any assets included In the Valuation. No allowance has been made in our valuation for any value added tax liability that might be incurred in respect of any transaction affecting the property. 11