From cb302f13d027ea052881d9d9b09df961ebf80e3f Mon Sep 17 00:00:00 2001 From: Alexandra Cimitiere Date: Sun, 9 Nov 2025 13:24:50 +0330 Subject: [PATCH] Update 'Fair Market Value-What does it Mean?' --- Fair-Market-Value-What-does-it-Mean%3F.md | 13 +++++++++++++ 1 file changed, 13 insertions(+) create mode 100644 Fair-Market-Value-What-does-it-Mean%3F.md diff --git a/Fair-Market-Value-What-does-it-Mean%3F.md b/Fair-Market-Value-What-does-it-Mean%3F.md new file mode 100644 index 0000000..f18592f --- /dev/null +++ b/Fair-Market-Value-What-does-it-Mean%3F.md @@ -0,0 +1,13 @@ +
Worldwide of property, it prevails to use reasonable market price (FMV) as a method of explaining the worth of realty or leas payable. However, maybe seldom thought about is the problem that the term FMV can indicate different things to various [individuals](https://haphicraft.com). For some, FMV might be the cost that someone would be prepared to spend for the land under its existing use. For others, FMV may be the cost that somebody would be prepared to spend for that very same land under its greatest and best use, such as for redevelopment purposes. Alternatively, for particular distinct possessions, FMV might have other significances, such as replacement worth. For instance, if land is to be offered to a neighbour as part of a land assembly and that neighbour might want to pay a premium to get the land, is that premium then part of the determination of the FMV and should that be calculated with a risk premium or since the date where the development worth is secured?
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This all pleads the question-which technique is proper?
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By default, an appraiser would seek to the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP). Under CUSPAP, FMV indicates: "the most likely price, since a specified date, in money, or in terms comparable to cash, or in other specifically exposed terms, for which the defined residential or commercial property rights should offer after reasonable direct exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and the seller each acting prudently, knowledgeably, and for self-interest, and presuming that neither is under unnecessary duress."1
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In other words, an appraisal of FMV should, as a beginning point, be based upon the assumption of highest and best use of the residential or commercial property. From this starting point, the appraisal would then take into account the time and threat that goes along with the entitlements procedure needed to attain the highest and best usage (consisting of that it may not be accomplished). This is frequently performed in [conjunction](https://thecapetownpropertygroup.com) with an organizer who will evaluate the site in the context of provincial policy and local official plans.
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While the CUSPAP meaning appears clear enough, it is not the universal technique as was explained in the current Ontario Court of Appeal (ONCA) case of 1785192 Ontario Inc. v. Ontario H Limited Partnership (1785192 Ontario).2
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1785192 Ontario Inc. and 1043303 Ontario Ltd. (collectively referred to as the Landlord) were the property owner corporations of 2 industrial residential or commercial properties in Whitby, Ontario, which were rented to Ontario H Limited Partnership (the Tenant). The leases each consisted of an option for the Tenant to acquire the residential or commercial properties from the Landlord and included a system for setting the price at which the Landlord would be needed to offer. The provision specified that the purchase rate would be a "purchase cost equivalent to the average of the evaluated reasonable market value of the Leased Premises as determined by 2 appraisers, one chosen by the Landlord and one picked by the Tenant."
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The Tenant eventually exercised both options to acquire and the celebrations engaged appraisers as required. The Landlord obtained an appraisal from Colliers International Group Inc., valuing the residential or commercial properties at a collective $31,200,000 based on a greatest and finest usage assumption, while the Tenant acquired an [appraisal](https://hoolioapartments.com) from Equitable Value Inc., valuing the residential or commercial properties at a cumulative $11,746,000 based on an existing zoning assumption. While the parties at first disputed each other's appraisals, the Landlord eventually accepted the Tenant's appraisal, setting the purchase rate at the [midpoint](https://avcorrealty.com) of the two. However, the Tenant continued to contest the Landlord's appraisal, circuitry only $11,746,000 to the Landlord's solicitor on closing, resulting in the Landlord declining to close on the basis that the purchase price had not been paid.
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At trial, the Tenant argued that the [Landlord's appraisal](https://civilworld.co) was overpriced as it was predicated on speculative and inappropriate presumptions about how the residential or commercial property could be established if rezoned. However, the application judge, [relying](https://findcheapland.com) on the CUSPAP requirements, found that the leases set out a system that was meant to take into consideration that each party might look for an appraisal utilizing reasonable assumptions that were most favorable to that celebration. As such, each celebration was certified with the FMV mechanism set out in the leases and each party had a legitimate appraisal, suggesting that the purchase cost for the residential or commercial properties was the midpoint of the 2 appraisals and the Landlord had actually truly declined to close on the deal. On appeal, the ONCA concurred with the application judge finding that what constitutes a legitimate appraisal is a concern of truth and absent a palpable and overriding error, there was no basis on which the ONCA might set that discovering aside.
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Takeaways
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When dealing with a decision of FMV, genuine estate [experts](https://fabrealtygroupnc.com) should be intentional in their drafting. The meaning of FMV and the mechanism utilized for [figuring](https://online-caribbean.com) out the FMV needs to be clear. If the intent is for FMV to reflect the "as is" usage of the residential or commercial property and the "where is" state of it, it should be drafted as such. If the objective is for FMV to show the greatest and best usage of the residential or commercial property, then the [CUSPAP meaning](https://leaphighproperties.com) ought to be utilized, possibly with any special modification suitable to the specific transaction. In addition to a clear meaning, it would be sensible for specialists to include a disagreement resolution system to [determine](https://venue.cadetlearning.com) FMV so as to develop a tidy and efficient process to address a scenario where the FMV meaning fails to supply a clear response and appraisals are significantly various. Taking these actions would enable the celebrations to avoid a failed deal and possibly pricey lawsuits as held true in 1785192 Ontario.
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1 [Appraisal Institute](https://lagosproperty.net) of Canada, Canadian Uniform Standards of Professional Appraisal Practice (Ottawa: AIC, 2024) online: chrome-extension:// efaidnbmnnnibpcajpcglclefindmkaj/https:// www.aicanada.ca/wp-content/uploads/CUSPAP-2024.pdf
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2 1785192 Ontario Inc. v. Ontario H Limited Partnership, 2024 ONCA 775.
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Please note that this publication provides a summary of notable legal patterns and associated updates. It is intended for informational purposes and not as a replacement for [comprehensive legal](https://www.harbourhorizonrealty.com) recommendations. If you require assistance tailored to your particular circumstances, please contact among the authors to check out how we can help you navigate your legal needs.
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