Allan v Valuer General

[2008] NSWLEC 1490

Land and Environment Court

of New South Wales

CITATION:

Allan v Valuer General [2008] NSWLEC 1490

PARTIES:

APPLICANT
Edward Bruce Allan

RESPONDENT
Valuer General

FILE NUMBER(S):

31325 of 2007

CORAM:

Parker AC

KEY ISSUES:

Valuation of Land :- Land Value

LEGISLATION CITED:

Land and Environment Court Act 1979
Valuation of Land Act 1916
Warringah Local Environmental Plan 2000

DATES OF HEARING:

12/11/2008

 
DATE OF JUDGMENT: 

19 December 2008

LEGAL REPRESENTATIVES:

APPLICANT
Mr EB Allan, litigant in person

RESPONDENT
Ms A Pearman, Barrister
Instructed by Ms Anthoney, Solicitor
of Valuer General

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Parker AC

19 December 2008

31325 of 2007 Allan v Valuer General

JUDGMENT

1 This is an appeal by Mr Allan (the Applicant), under Section 37 of the Valuation of Land Act 1916 (the Act), against the land value assessed by the Valuer General (the Respondent) in respect of the property known as 111 Old Pittwater Road, Brookvale (the subject property).

Background

2 The land value of the subject property at 1st July 2006 (the base date), was assessed by the Valuer General at $2,030,000 and by Mr Allan at $1,850,000.

3 The matter was the subject of mediation under Section 34 of the Land and Environment Court Act 1979 but the parties were unable to reach agreement. The parties consented to my disposing of the proceedings with a further hearing under Section 34(3)(b)(ii) of the Land and Environment Court Act 1979. The parties consented to my having regard to all matters considered in the mediation conference.

4 The matter was the subject of an on site inspection on 12th November 2008, followed by an out of Court hearing.

5 The parties agreed to the proceedings not being recorded, the Applicant tendered no evidence and the Respondent tendered only one piece of evidence.

6 Mr Allan represented himself.

7 Ms Pearman, Barrister, represented the Valuer General, instructed by Ms Anthoney, Solicitor of the Valuer General.

8 Section 40(2) of the Act states:

“On an appeal, the appellant has the onus of proving the appellant’s case.”

The subject property

9 The subject property is located on Old Pittwater Road in Brookvale within an area of mixed commercial and light industrial/warehouse properties.

10 It is a regularly shaped, near level block, having an area of 2,131 sqm with frontage to Old Pittwater Road. Improvements comprise a brick and concrete commercial and light industrial/warehouse property over three levels with car parking.

11 The subject property is zoned Locality G10, Brookvale Industrial West in the Warringah Local Environmental Plan 2000, with the current use being the highest and best use of the site.

12 The subject property comprises Lot 1 in Deposited Plan 530050.

The evidence

13 Mr Minns, a Registered Valuer, gave expert evidence on behalf of Mr Allan. Mr Minns concluded that the value of the subject property was $1,850,000 as at the base date.

14 Mr Sheales, a Registered Valuer, tendered as evidence a “Cadastral Records Viewer Print” and gave expert evidence on behalf of the Valuer General. Mr Sheales concluded that the value of the subject property was $2,030,000 as at the base date.

15 Mr Minns submitted four comparable sale and Mr Sheales five comparable sales.

16 Both Mr Minns and Mr Sheales submitted comparable sales at 170 Harbord Road and 142 Old Pittwater Road, Brookvale which were inspected externally.

17 Mr Minns submitted further comparable sales at 49-51 Mitchell Road and 10 Clearview Place, Brookvale which were inspected externally.

18 Mr Sheales submitted further comparable sales at 65, 117 and 123 Old Pittwater Road, Brookvale which were inspected externally.

Consideration of the evidence

19 I note that the comparable sale at 117 Old Pittwater Road, Brookvale, submitted by Mr Sheales, is adjacent to the subject property but almost four times larger in site area. I further note that the sale was an off market transaction and so does not fulfill the generally accepted definition of market value. Accordingly, I consider the sale to be of limited relevance.

20 I note that the comparable sale at 123 Old Pittwater Road, Brookvale, submitted by Mr Sheales, is close to the subject property but less than half the site area. I further note that the sale was to an adjacent owner who may comprise a special purchaser and so does not fulfill the generally accepted definition of market value. Accordingly, I consider the sale to be of limited relevance.

21 I note that the comparable sale at 65 Old Pittwater Road, Brookvale, submitted by Mr Sheales, is within less than one kilometre of the subject property but approximately one third of the site area and occupying a corner location. Accordingly, I consider it to be an indirectly relevant comparable sale.

22 I note that the comparable sale at 49-51 Mitchell Road, Brookvale, submitted by Mr Minns, is approximately one kilometre from the subject property but almost four times larger in site area. Accordingly, I consider it to be an indirectly relevant comparable sale.

23 I note that the comparable sale at 170 Harbord Road, Brookvale, submitted by Mr Minns and Mr Sheales, comprises 2,507sqm land having sold for $2,000,000 in October 2005 equating to an average of $798psm land value. I note that Mr Minns has analysed this sale by assuming the improvements at the time of sale to be of value, deriving an adjusted land value of $718psm. Conversely, I note that Mr Sheales has analysed this sale by assuming the improvements at the time of sale added no value and represented an additional cost for demolition, deriving an adjusted land value of $858psm. Whilst the site area is around 18% larger than the subject property and the date of sale is around nine months prior to the date of valuation, I note that the prominence is broadly comparable to the subject property and that the site enjoys three street frontages. However, I consider that the disagreement between the expert witnesses as to the nature of the improvements on the property at the time of sale, but which were subsequently demolished, render this an indirectly relevant comparable sale.

24 I note that the comparable sale at 10 Clearview Place, Brookvale, submitted by Mr Minns, comprises 2,676sqm land having sold for $2,650,000 in January 2007 equating to an average of $990psm land value. I note that Mr Minns has analysed this sale assuming a value of the improvements of $750psm to derive an adjusted land value of $642psm. I note that Mr Sheales has analysed this sale assuming a value of the improvements of $500psm to derive an adjusted land value of $731psm. Although the site area is around 25% larger than the subject property, the date of sale is around seven months after the date of valuation and the location of the site is of lesser prominence than the subject property (being at the end of a cul de sac with relatively constrained access for larger vehicles), I consider it to be a directly relevant comparable sale but inferior to the subject property.

25 I note that the comparable sale at 142 Old Pittwater Road, Brookvale, submitted by Mr Minns and Mr Sheales, comprises 1,644sqm land having sold for $2,050,000 in September 2007 equating to an average of $1247psm land value. I note that Mr Minns has analysed this sale assuming a value of the improvements of $750psm (being approximately half of the cost if new) to derive an adjusted land value of $851psm. I note that Mr Sheales has analysed this sale assuming a value of the improvements of $350psm to derive an adjusted land value of $1084psm. Whilst the site area is around 25% smaller than the subject property and the date of sale is around fifteen months after the date of valuation, I note that the location and prominence are comparable. Accordingly, I consider it to be a directly relevant comparable sale.

Findings

26 I consider that the comparable sales of 10 Clearview Place and 142 Old Pittwater Road, Brookvale to be highly informative for the valuation of the subject property.

27 I note that Mr Minns made explicit adjustments to derive adjusted land values in the range of $642-$851psm from which, through implicit adjustments, a rate of $868psm was determined for the subject site.

28 I note that Mr Sheales has made explicit adjustments to derive adjusted land values in the range of $731-$1084psm from which, through implicit adjustments, a rate of $953psm was determined for the subject site.

29 I note that both Mr Minns and Mr Sheales have made explicit adjustment to the comparable sales evidence, based on their professional judgment, for the impact of the improvements. I further note that both Mr Minns and Mr Sheales have not made explicit adjustment for the differences in location, area or time, but have made implicit adjustment for the cumulative impact of each.

30 I further note that Mr Minns has applied a value to the improvements of $750psm to both 10 Clearview Place and 142 Old Pittwater Road, Brookvale despite each being of significantly different styles of construction and age, which I do not find to be persuasive.

31 I note that Mr Sheales has applied a value to the improvements of $500psm to10 Clearview Place and $350psm to 142 Old Pittwater Road, Brookvale, reflecting the significantly different styles of construction and age, which I find to be more persuasive.

32 Accepted valuation practice permits both explicit and implicit adjustment for differences, such as in location, area and time, to enable valuers to have evidentiary comparable values which, following adjustment, account for the various differences with the subject property. Such adjustment is generally based on a reasoning process drawing on the skill and experience of the valuer and undertaken to derive an opinion of value through a process of working forwards rather than to justify an opinion of value through a process of working backwards.

33 Because properties are rarely identical, explicit and/or implicit adjustment for differences is obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property, with too much adjustment potentially rendering the comparable sale unsafe. Caution is, therefore, required where large explicit and/or implicit adjustments are required, with particular caution required for large implicit adjustments.

34 Mr Minns and Mr Sheales concurred that value levels were relatively flat in 2007, rendering adjustment to comparable sales evidence for time of limited, if any, relevance.

35 Concerning adjustment for location and area, I note that:

a. 142 Old Pittwater Road is in a comparable location to the subject property so requiring no adjustment, but is around 25% smaller indicating a downward adjustment to the derived adjusted land value may be appropriate for application to the subject property; and
b. 10 Clearview Place, Brookvale is in an inferior location with lesser prominence than the subject property and around 25% larger, both indicating that upward adjustments to the derived adjusted land value may be appropriate for application to the subject property.

36 Accordingly, the value of the subject property should be something less than the rate of $1084psm derived by Mr Sheales from the analysis of the comparable sale at 142 Old Pittwater Road, Brookvale but something considerably more than the rate of $731psm derived by Mr Sheales from the analysis of the comparable sale at 10 Clearview Place, Brookvale.

37 I note that the rate of $953psm applied by Mr Sheales to the subject property is something less than the rate of $1084psm derived from the analysis of the comparable sale at 142 Old Pittwater Road, Brookvale and is something considerably more than the rate of $731psm derived from the analysis of the comparable sale at 10 Clearview Place, Brookvale. I note the range of implicit adjustment adopted by Mr Sheales to be in the order of 12%-30% which I consider to be towards the upper bounds of reasonableness of adjustment in this case.

38 Having regard to the evidence tendered, the cross examination and the summation presented, I consider that Mr Sheales presented a consistent approach to the valuation of the subject property through the application of comparable sales evidence.

39 Having regard to the evidence tendered, the cross examination and the summation presented, I consider that Mr Minns did not present a consistent approach to the valuation of the subject property through the application of comparable sales evidence sufficient to prove Mr Allan’s case as required by Section 40(2) of the Act.

40 The orders of the Court:

1. The appeal is dismissed.
2. The land value of $2,030,000 as at the base date of 1st July 2006 for the property at 111 Old Pittwater Road, Brookvale is confirmed.
3. No order is made as to costs.
4. The exhibit is returned.

___________________

Dr David Parker
Acting Commissioner of the Court
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