For the purposes of assessing capital value under s 5(1) of the Valuation of Land Act 1971 (SA), the hypothetical purchaser is taken to purchase land subject to all existing leases and tenancy agreements. Commercial leases at market rates do not constitute 'encumbrances' that must be ignored. Only leases that have a depreciatory effect on the value of the estate of fee simple are to be disregarded. Non-arm's length lease terms (whether unduly burdensome or generous) should be ignored or given little weight, as the Act requires valuation of 'an' estate of fee simple, not the particular owner's estate. No letting up allowance or vacancy assumption is required.
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