Clarke and Department of Family and Community Services
[2001] AATA 214
•21 March 2001
DECISION AND REASONS FOR DECISION [2001] AATA 214
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2000/881
GENERAL ADMINISTRATIVE DIVISION )
Re ANTHONY JOHN CLARKE
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Senior Member M D Allen
Date21 March 2001
PlaceSydney
Decision The decision under review is set aside and this matter remitted to the Respondent with the DIRECTION THAT: the Applicant's land, being more particularly described as Lot 1 in Deposited Plan 861194, Parish of Kullatine, County of Dudley situated at Willi Willi Road, Turners Flat in the State of New South Wales, is to be valued in the sum of $125,000.
(Sgd) M D ALLEN
..............................................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Valuation of land. Acceptance of Applicant's valuer's valuation as that valuation checked by a hypothetical development calculation.
Social Security Act 1991
Spencer v The Commonwealth of Australia [1907] 5 CLR 418
Re White and Secretary, Department of Family and Community Services 59 ALD 596
Rost and Collins Land Valuation and Compensation Australia at p153
REASONS FOR DECISION
21 March 2001 Senior Member M D Allen
By application made 9 June 2000 the Applicant sought review of the decision made by a Social Security Appeals Tribunal on 3 May 2000 affirming a prior determination which valued certain property owned by the Applicant in the sum of $170,000. The effect of this decision was that the rate of Disability Support Pension paid to him was reduced.
The matter came on for hearing before me at Kempsey on 8 March 2001. At that hearing the following documents were taken in as exhibits and marked as follows, namely:
T1 – T32: The documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
Exhibit A1: Photographs of the subject land
Exhibit A2: Valuation by Jeffrey & Reid dated 30 June 2000
Exhibit A3: Copy letter from Applicant to Centrelink dated 7 January 2001 plus enclosures
Exhibit A4: Copy letter from Applicant to Centrelink dated 19 January 2001 plus annexures
Exhibit R1: Respondent's Statement of Facts and Contentions dated 13 October 2000
Exhibit R2: Respondent's Supplementary Facts and Contentions dated 1 November 2000
Exhibit R3: Respondent's Additional Supplementary Facts and Contentions dated 1 March 2001 plus Annexures A, B and C
Exhibit R4: Copy Australian Valuation Office valuation dated 19 February 2001.
This matter is in essence a valuation of land case. The Applicant relied upon reports by a valuer engaged by him (see Exhibits A2 and A3) valuing the subject land at $120,000 to $125,000, whereas the Respondent relied upon reports by a valuer from the Australian Valuation Office who valued the land at $170,000 (see Exhibits R3, R4 and T18). Unfortunately neither valuer was called to give evidence so the bases upon which their respective reports were formulated was unable to be explored.
The subject land is more particularly described as Lot 1 in Deposited Plan 861194, Parish of Kullatine, County of Dudley containing an area of 124.07 hectares.
The said land is situated approximately 18 kilometres by road west of Kempsey in New South Wales. Access is by 15 kilometres of bitumen sealed road and 3 kilometres of good gravel road being Willi Willi Road. Exhibit A1 is three photographs of parts of the subject land. The land consists of 50 hectares of cleared, open grazing country with 74 hectares of low to steep, timbered hill slopes. The land is zoned rural under the Kempsey Shire Council Local Environmental Planning Scheme.
Document T18 is a valuation carried out by the Australian Valuation Office as at 6 July 1999. That valuation, as with the first valuation, namely that of 30 June 2000 carried out by the Applicant's valuer, is incomplete as neither valuer was informed that the Applicant had obtained consent from the Kempsey Shire Council to subdivide the said land.
The said land now consists of four blocks, namely:
Lot 1091 of 8 hectares
Lot 1092 of 40 hectares
Lot 1093 of 40 hectares
Lot 1094 of 36 hectares.
Both Lots 1092 and 1093 are traversed by an electricity easement. All lots have some frontage to Willi Willi Road.
At present the plan of subdivision has not been lodged at the Land Titles Office. The reports state that it was the intention of the Applicant to lodge the plan of subdivision and obtain separate titles for the said blocks upon receipt of funds from the sale of Lot 1091.
Lot 1091 is the superior block. Although only of 8 hectares, it has frontage to the Macleay River although the banks at Lot 1091 are too high and steep to allow cattle access. Cattle do, however, have access to the river by way of a stock reserve adjacent to Lot 1091.
Given the subdivision it would seem that the highest and best use of the subject land is as hobby farms. Although Lot 1091 is small for such a use, it would be attractive as a rural home site, overlooking the river.
Currently Lot 1091 is for sale with an asking price of $65,000. It has, as at the date of hearing, been on the market for 12 months and no interest has been expressed by any prospective buyer.
Exhibit A4 contains letters from local Real Estate Agents regarding the subject land. A letter from "The Professionals" Kempsey dated 6 January 2001 reads:
"Please be advised that I have today inspected the above properties with regard to providing market advice.
With regard to the river frontage block of approximately 20 acres, I believe that a current realistic selling price would be in the vicinity of $55,000 to $58,000. The proposed 100 acre blocks on the western side of Willi Willi Rod (sic), and without river frontage, would be much more difficult to sell in the current market as there is little demand for this type of property."
A letter of the same date from another firm of Real Estate Agents, namely L J Hooker of Kempsey, reads inter alia:
"We currently are the selling agent for Mr & Mrs A Clarke in respect of their land holdings known as Lot 109, Willi Willi Road.
It is our belief that the Riverfront Block should sell in the near future for a price between $55,000 and $60,000. This block has many attributes that the others don't have. Obviously the main difference is the river and the other difference is the size. In our current market the only vacant blocks that are selling are lifestyle blocks. People are simply not interested in farming 100 acres for next to no return when they can get the same out of 20 acres with less than half of the work load.
It is because of these factors we have not seen many large blocks sell in the last five years.
Whilst we do not have a crystal ball we believe it could take another 3-5 years to sell the remaining blocks as we have had other similar blocks on the market for that period."
In his revised valuation report of 28 November 2000 the Applicant's valuer, Mr Jeffrey, states (Exhibit A3):
"Lot 1091 is currently for sale at $65,000 and agent reports little interest. The real estate market for hobby farm lots remains slow and has been for 2 to 3 years."
The Respondent, in its Additional Supplementary Facts and Contentions, referred to a policy by the Respondent that (Exhibit R3, Annexure 'A'):
"An expression of opinion by someone other than a registered valuer is not to be accepted".
Like all policy this bald ascertain cannot be applied blindly. In some cases there will be no other evidence, but in any event it is not the law that an opinion by a Real Estate Agent familiar with the particular market can be ignored. Such evidence of value is both real evidence and important evidence. Of course, like any opinion, it is better if tested by cross-examination. For a further discussion of this point, I refer to Re White and Secretary, Department of Family and Community Services 59 ALD 596. It is high time that the Respondent corrected its policy to conform with the law.
In this matter I have no hesitation in accepting the opinion of Real Estate Agents active in the area in which the subject land is located, to the effect that the market for hobby farms such as Lots 1092 to 1094 is slow, and the blocks will take some years to sell.
The Respondent's valuer supported his valuation by reference to comparable sales. As he pointed out in Document T18:
"The rural property market is considered to be slow with some properties taking several years to sell."
The valuer engaged by the Respondent then added:
"The two sales used for comparison purposes occurred in 1996 and 1997 and although the sale dates appear fairly old they are considered to be relevant to the current property market."
These statements are exactly what the Real Estate Agents were also saying.
Of the comparable sales used in the Australian Valuation Office's later report of 26 September 2000, the valuer quite properly points out that Sales 5 and 6 are superior to the Applicant's land. Sale 1, however, is inferior.
The Applicant's evidence was that the land, the subject of Sale 1, was inferior. Of Sale 2, the land was "as good as if not better" than his, but the property had as improvements a drover's hut plus good stock yards and a weaning paddock. In addition, that property can be reached by an all weather road. I therefore consider that this sale was of a property superior to that of the Applicant's.
Of Sale 3, the Applicant had no knowledge. Sale 4, he assessed as similar to his block except that it ran down to the river and had on it a hut and a set of cattle yards. Power was available to the block and it had been purchased as a hobby farm. It seems on the evidence available to me that Sale 4 is similar to the Applicant's Lot 1091 but superior to the other blocks.
The Applicant's valuer, in his report of 28 November 2000, carried out a hypothetical development calculating what a purchaser might be prepared to pay in order to carry out a subdivision and sale himself. This method forms a valuable check on values determined by direct comparison (see Rost and Collins at p153). By this method the valuer calculated the value of the land at $125,000.
Although the hypothetical development method forms a check, in this case where the subdivision is in place I prefer to consider primarily the direct comparison method of valuation.
The Australian Valuation Office assessed the value of Lot 1091, with its river frontage, at $60,000. This valuation is confirmed by the Real Estate Agent's current asking price of $65,000 which is probably high as an offer has not been received.
Of the other sales in the Australian Valuation Office Report of 26 September 2000, Sale 2 was acknowledged by the Applicant as being of land "as good as if not better" than his. Unfortunately the improvements upon the said land have not been valued and they would have distorted the price if a simple price per hectare was calculated by a division of total sale price by area.
Allowing for the improvements at $15,000 the price per hectare in Sale 2 is $1,500. This then gives a figure for the blocks other than Lot 1091 as:
Lot 1092 at 40 hectares = $ 60,000
Lot 1093 at 40 hectares = $ 60,000
Lot 1094 at 36 hectares = $ 54,000
$174,000Adding Lot 1091 at $60,000 = $234,000 TOTAL for Lot 1 on Deposited Plan 861194.
This figure is comparable with the Applicant's valuer's statement that (Exhibit A3):
"Lot 1091 does have river frontage which enhances its appeal. The other 3 lots are rural grazing hobby farm lots which would have values in the range of $55,000 to $60,000."
The classic statement of the fundamental of valuation law is by Griffith CJ in Spencer v The Commonwealth of Australia [1907] 5 CLR 418 at 432, namely:
"In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?'"
Here, with lands already in subdivision, a prospective purchaser of the land would still have to adjust his purchase price to allow for the cost of subdivision and issuing of new titles, advertising, the holding costs and an allowance for profit and risk. In other words, the total sum of $234,000 does not represent what a purchaser would prudently pay to obtain the said land.
The Applicant's valuer has attempted this calculation (see Exhibit A3). Indeed, given the figures in Exhibit R4, it would seem his allowance for subdivision costs may be low. Doing the best I can on the material before me I find that the value of the blocks at present is as assessed by the Applicant's valuer, but I take the higher figure to make allowance for the ability to sell the 8 hectare block, ie Lot 1091. The Applicant's valuer's highest figure is $125,000 and I am satisfied that this more closely approximates what a prudent purchaser would pay to obtain the said land.
The decision under review will therefore be set aside and this matter remitted to the Respondent with the direction that the Applicant's land, being more particularly described as Lot 1 in Deposited Plan 861194, Parish of Kullatine, County of Dudley situated at Willi Willi Road, Turners Flat in the State of New South Wales, is to be valued in the sum of $125,000.
I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of:
Senior Member M D Allen
Signed: Kwai-Ling Wong
............................................................................
Associate
Date of Hearing 8 March 2001
Date of Decision 21 March 2001
Solicitor for the Applicant Applicant was self-representedAdvocate for the Respondent Ms C Collis,
Department of Family and Community Services
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