The primary definition of GRV under the Valuation of Land Act 1978 is as follows:
GRV means the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year upon condition that the landlord were liable for all rates, taxes and other charges thereon and the insurance and other outgoings necessary to maintain the value of the land.
A GRV is determined on the basis that the rental includes outgoings such as rates and other property expenses.
As most commercial rentals are negotiated net of outgoings these need to be added to the net rental to equate to the statutory definition.
The introduction of the Goods and Services Tax (GST) has impacted on the determination of GRV. Where property rental payments are subject to GST, they represent a tax payable by the property owner and are included in the GRV.
Where an annual rental cannot reasonably be determined, the GRV becomes the assessed value. Assessed value is defined in the VLA as a percentage applying to the capital value of land within a particular class.
Residential land for which no rental value can be determined is valued on the basis of 3% of its total capital value from 1 July 2011. Assessed value for land designated for other uses is assessed on the basis of 5% of its total capital value.
Land used for residential purposes only must be valued on the basis of rental value. Any other land with a relatively low rental value in comparison to its capital value may be valued as if it were vacant land.