Subject property is a two$-$storey semi$-$detached house that has been approved for use as a childcare centre. It was leased to a childcare operator at a monthly gross rent of $$5,000$ four years ago under a $3+3$ year Lease Agreement. The childcare operator had spent $$92,500$ in renovating and retrofitting the property four years ago. The owner is now objecting to the Annual Value of $$120,000$ proposed by the Chief Assessor who took into account the prevailing market rentals of childcare centres of similar size and condition in similar locations. The owner has stated three grounds of objection below.

Owner$$s Grounds of Objection

$1)$ The Annual Values of other comparable semi$-$detached houses in the same neighbourhood range from $$48,000$ to $$60,000.$ The Chief Assessor$$s proposed Annual Value of $$120,000$ for my property is way above those Annual Values and is hence grossly unfair if not erroneous.

$2)$ The actual agreed rents is only $$5,000$ per month since four years ago. As this is an arm$$s length letting, the actual rent is the best evidence of its market rent and hence its Annual Value should be $$60,000.$

$3)$ My tenant has on several occasions defaulted on his rent payments due to the operating losses that he has incurred in the last two years. The total rents that I have received for the whole of last year was only $$45,000.$

Question $1($A$)$

Assume that you are acting for the Chief Assessor and you have been tasked to review the owner$$s grounds of objection. Explain if there is merit in the above grounds of objection, citing relevant assessment principles and case laws if any to support your explanation. $(10$ marks$)$

Question $1($B$)$

Discuss if the above property would be more appropriately assessed based on the annual equivalent sum under section $2(4)$ of the Property Tax Act

$(5$ marks$)$

Question $1($C$)$

Discuss if you would recommend the use of Profits Method to assess this childcare centre.

$(5$ marks$)$