Value of the undivided share can be varied in a commercial building

Value of Undivided Share in a Commercial Building

Overview

The value of an undivided share in a commercial building can vary based on several factors, including the nature of the property, the rights associated with the undivided share, and the market conditions. The following points summarize the relevant legal principles and findings from the provided legal documents.

Key Legal Principles

1. Nature of Undivided Shares

Fractional Ownership: An undivided share in a property does not equate to a proportional value of the entire property. For instance, the Calcutta High Court noted that an undivided half share does not represent half the market value of the entire property when sold in the open market, as the purchaser cannot enjoy the property in the same manner as a full owner Commissioner Of Wealth Tax VS K. N. Nagabhushana Setty - Karnataka (1984).
Impairment of Enjoyment: The courts have held that undivided shares in properties, especially when they are part of a larger commercial building, cannot be the basis for determining the market value of the entire property due to the limitations on enjoyment Hindustan Petroleum Corporation Ltd. VS Tayarammal & Others - Madras (2006).

2. Market Value Determination

Commercial vs. Residential Use: The classification of a building as commercial or residential significantly impacts its market value. For example, a building used for commercial purposes can be valued differently than one designated for residential use GURJEET SINGH CHADDHA VS STATE OF U. P. - Allahabad (2013).
Regulatory Framework: The valuation of commercial properties is governed by specific rules, such as the 1997 Rules, which outline how to compute the market value based on rental income and other factors FRIENDS BUILDERS VS STATE OF U. P. - Allahabad (2017). The amendment in 2005 clarified that the minimum value of a commercial building should be computed solely on a rental basis, excluding the cost of land FRIENDS BUILDERS VS STATE OF U. P. - Allahabad (2017).

3. Sale Deeds and Market Value

Sale Deeds as Evidence: Sale deeds reflecting undivided shares must be scrutinized carefully. For instance, the trial court rejected certain sale deeds as they did not accurately represent the market value of the larger property due to their fractional nature Hindustan Petroleum Corporation Ltd. VS Tayarammal & Others - Madras (2006).
Construction and Completion: The condition of the property (e.g., unfinished structures) also affects its valuation. A sale deed for an unfinished commercial structure may not reflect the true market value until the property is completed RAJESH PANDEY VS STATE OF U. P. - Allahabad (2011).

Exceptions and Limitations

Potential for Partition: Co-owners of undivided shares may seek partition to realize their interests, but this process can be lengthy and contentious, impacting the immediate marketability of their shares Commissioner Of Wealth Tax VS K. N. Nagabhushana Setty - Karnataka (1984).
Legal Rights of Co-owners: Co-owners have rights to demand partition or sale of the property, which can influence the perceived value of their undivided shares Prime Time India Ltd. VS Somnath Vij - Delhi (2017).

Conclusion

The value of an undivided share in a commercial building is influenced by its fractional nature, the classification of the property, and the specific circumstances surrounding its use and condition. Legal precedents emphasize that undivided shares cannot be equated to proportional market values of the entire property. Therefore, careful consideration of these factors is essential when determining the value of such shares.

Recommendations

Conduct a Detailed Valuation: Engage a property valuation expert to assess the market value based on current conditions and the specific characteristics of the property.
Consider Legal Rights: Ensure that all co-owners are aware of their rights regarding partition and sale, which may affect the valuation and marketability of their shares.
Review Sale Deeds: Analyze any existing sale deeds for their implications on market value and ownership rights, particularly in the context of undivided shares.

References: Commissioner Of Wealth Tax VS K. N. Nagabhushana Setty - Karnataka (1984)Hindustan Petroleum Corporation Ltd. VS Tayarammal & Others - Madras (2006)GURJEET SINGH CHADDHA VS STATE OF U. P. - Allahabad (2013)FRIENDS BUILDERS VS STATE OF U. P. - Allahabad (2017)Prime Time India Ltd. VS Somnath Vij - Delhi (2017)]