Environmental contamination is a problem that has been addressed by the "Standard on the Valuation of Property
Affected by Environmental Contamination" issued by the International Association of Assessing Officers. This standard is
recognized as being advisory in nature, but certain provisions are indispensable when dealing with problems of contamination.
It is recommended that you review this standard when you are confronted with specific valuation problems associated with
contamination.
The presence of contamination is a problem that may have an adverse impact on property value. Numerous ways for recognizing
this loss of value are discussed within the context of the IAAO standard. Generally, these approaches vary with regard to the
nature and extent of the contamination. The dollar cost and time frame associated with the clean-up requirements are also
concerns that will help quantify any loss in value.
When dealing with a specific contamination issue, it is necessary to develop documentation that shows the nature of the problem.
The following information must be provided by the property owner.
- The specific problem must be identified. The extent of this problem should be substantiated by the records of the Maryland
Department of Environment. It may be helpful for the assessor to contact the Department of Environment in this regard but
it should be viewed as the property owner's responsibility to provide this documentation.
- Estimates regarding the cost to cure the problem must also be provided. Such estimates are most reliable when they are
supported by a consulting report or work estimate submitted by a competent Environmental Engineering Firm.
- Estimates as to the time frame necessary to accomplish the clean-up may also be considered.
- Monitoring or stabilization cost should also be quantified.
With this information it is possible to quantify the loss in value that results from the contamination. In most instances the
cost to cure the problem will serve as a basis for measuring the value that is lost due to the problem. Such cost can be discounted
where there is a prolonged clean-up period or where clean-up can be delayed.
In some cases the cost to correct the problem, even after adjusted for time, will exceed the market value of the property. It may
be appropriate in such cases to assign a minimal or zero value to the property. Documentation must be retained with the
property record file when this occurs.
When the property continues to be used, despite the contamination problem, there may be value-in-use that should be recognized in
the assessment of the property. Whenever a value-in-use approach is adopted, it should be clearly defined as such throughout the
appeal process.
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