Falmar Pty Ltd as Trustee for the Finlayson Family Trust v Chief Executive, Department of Natural Resources and Mines

[2002] QLC 4

LAND COURT

BRISBANE

23 JANUARY 2002

Re:     Appeal against Annual Valuation
  Valuation of Land Act 1944
  City of Rockhampton

(AV2000/0235)          

Falmar Pty Ltd as Trustee for the Finlayson Family Trust

v.

Chief Executive, Department of Natural Resources and Mines

(Hearing at Rockhampton)

D E C I S I O N

This is an appeal by a landowner against the unimproved value applied to its land in the City of Rockhampton by the Chief Executive, Department of Natural Resources and Mines, under the provisions of s.45 of the Valuation of Land Act 1944.

Background
           Falmar Pty Ltd as Trustee for the Finlayson Family Trust, is the owner of land situated at 39 Albert Street, Rockhampton, described as Lot 1 on Registered Plan 619144, Parish of Rockhampton, County of Livingstone, containing an area of 2,023 m².  Situated on the land is the Archer Park Motel, a complex consisting of 26 motel units, a restaurant and a manager's residence.  The property was purchased in February 1992.
As at 1 October 1999, the Chief Executive, Department of Natural Resources and Mines (the respondent), fixed the unimproved value of that land under the provisions of s.37(1) of the Valuation of Land Act 1944 (the Act) at $370,000.  The landowner objected against that valuation and succeeded in having the valuation reduced to $260,000.
           The landowner then appealed to the Land Court against that reduced valuation, advising that its estimate of the unimproved value of the land is $212,500.
           The landowner's grounds of appeal related to:

1.relativity of the value of the subject land compared with the values applied to similar properties;

2.the location of major sewerage lines which restricted the design and layout of buildings;

3.the disadvantages caused by traffic lights at the Albert Street/Campbell Street intersection; and

4.the difficulty of access to the subject land by northbound traffic.

The Subject Land
The description of the subject land is summarised from the report of registered valuer, Mr AW White, who gave evidence on behalf of the respondent.
           The subject land is situated on the corner of Albert Street and Campbell Street, with a frontage of 50.3 metres to Albert Street which is part of the Bruce Highway and a frontage of 40.2 metres to Campbell Street.  The property also has a frontage of 40.2 metres to Campbell Lane which runs parallel to Campbell Street, giving it street frontage on three sides.
           The Bruce Highway heading north proceeds through that part of Rockhampton north-westerly along George Street until it turns north-easterly into Albert Street.  The intersection of George and Albert Streets is only approximately 56 metres south-west of the subject land.  The highway continues past the subject land towards the approaches to the Neville Hewitt Bridge which crosses the Fitzroy River to North Rockhampton.  As part of the Bruce Highway, Albert Street is therefore a major arterial route, with high volumes of both local and through traffic.  The carriageway is four lanes, providing double-lane traffic flow in either direction and is of sufficient width to allow parallel kerbside parking adjacent to the subject property.  The street is bitumen sealed, with concrete kerbing and channelling.  The two northbound lanes are divided from the two southbound lanes by a concrete median strip.
           Campbell Street is a major connector through street, intersecting the Bruce Highway at right angles, with traffic lights on each side of the highway.  It has a wide full-width bitumen carriageway, with concrete kerbing and channelling.  Campbell Lane is of similar construction but is narrow, being approximately 6 metres in width.  Like many other lanes in the Rockhampton Central Area, it is primarily a service lane rather than a traffic route.
           Physically the subject land is near level and regular in shape, however, there are no views or outlook worthy of mention.  The property is severed by two sewerage mains, one of 150 millimetres diameter and the other of 380 millimetres diameter, which Mr White conceded does cause design constraints to the overall use of the site.  However, he expressed the view that this disability is inherent in the majority of surrounding properties in the locality. 
           The property is adequately drained and is above the Q100 flood level.  Reticulated town water supply and sewerage, electricity and telephone services are connected.  There is a daily mail delivery service and a weekly garbage collection service.
           The subject land is zoned "Residential B" under the Town Planning Scheme for the City of Rockhampton gazetted 8 March 1986.  Further controls are exercised through the Council's Strategic Plan gazetted on 21 March 1997.  Mr White points out that the property's current use as a motel is not an "as of  right" use under the "Residential B" zoning.  However the subject land had been given approval for use as a motel in accordance with Column IV, the purposes for which Council could give its consent. 
           According to Mr White, the surrounding locality has been developed predominantly for commercial usage along Albert Street, following the construction of the Neville Hewitt Bridge.   This development has occurred in a ribbon strip fashion, with development favouring larger sites with good frontage to Albert Street.  Council planning restrictions have also influenced a market trend towards larger sites catering for motels and drive-in retail premises housing national tenants.  Many of the older residential dwellings which fronted Albert Street have been sold for removal.  There is less demand for smaller properties as standalone commercial sites, except when purchased for the purposes of site build-up.

The Case for the Appellant
           Mrs CG Finlayson and Mr RE Finlayson, directors of the appellant company, gave evidence in this matter.  In summary, their case is that the appellant company is disadvantaged by the valuation applied to its property compared with the valuations applied to similar properties in that area of Rockhampton.  They had analysed the valuations applied to other commercial properties in the surrounding area, with areas both above and below 2,000 m², arriving at the conclusion that the average valuation applied to those properties was approximately $104 per m², while properties with areas of around 2,000 m² in the proximity of the Archer Park Motel had been valued at approximately $108 per m².
           Of particular concern were the valuations applied to five motel properties fronting the Bruce Highway in the vicinity of the subject land, compared with the valuation applied to the subject land.  I have listed those motel properties and the values applied in order of location on the Bruce Highway, south of the Neville Hewitt Bridge.

Bridge Motel, area 3,144 m², unimproved value $247,500, or $78.72 per m².

Cosmopolitan Motel, area 1,991 m², unimproved value $207,500, or $104.22 per m².

Club Crocodile Motel, area 3,541 m², unimproved value $420,000, or $118.61 per m².

Regency Motel, area 3,027 m², unimproved value $335,000, or $110.67 per m².

Archer Park Motel, area 2,023 m², unimproved value $260,000, or $128.52 per m².

Palms Motel, area 2,192 m², unimproved value $240,000, or $109.49 per m².

Of the six motels, only the Bridge Motel and the Regency Motel are directly accessible to north-bound traffic, while the other four are directly accessible to south-bound traffic.  Five of the motels are situated in Albert Street, only the Palms Motel is in George Street.
           As a result of this analysis, the directors of the appellant company could not understand why the subject land had been valued at a higher rate per m² than any of the other similar properties, particularly the motel properties.  They felt that the following disadvantages attaching to the subject land had not been fully taken into account by the valuer:

• The restrictions from the sewerage lines.  Building is prohibited within 3 metres of the centre line of the 380 millimetre sewerage main and within 2 metres of the 150 millimetre sewerage main.  This represents an area of 324 m², or 16% of the site, and reduced the number of motel rooms that could be built on the property.  Mr Finlayson gave evidence that the original owner of the property, from whom they purchased the property in 1992, had told him that but for the sewerage mains, two further units could have been constructed on the land.  Mr Finlayson went on to say that a motel enterprise would need 30 to 35 rooms, for a restaurant attached to the motel to be commercially viable.

• The traffic lights at the intersection of Campbell and Albert Streets.  Mrs Finlayson gave evidence that prior to the installation of those traffic lights, there had been no complaints by patrons of the motel regarding road noise from the highway traffic.  Since the installation of the traffic lights, there is continual noise from braking and accelerating, particularly from heavy vehicles.  The traffic lights have interrupted the flow-through traffic on Albert Street, as previously there were stop signs on both sides of Campbell Street.  With the installation of traffic lights, the traffic along Campbell Street has increased substantially, as local traffic make much greater use of that street and this has compounded the noise problem.

• No advantage from three street frontage.  Mrs Finlayson claimed that there is no advantage to the motel in having frontage to Campbell Street.  That street is used principally by locals who do not stay at motels.  In her opinion, the access to Campbell Street is actually a disadvantage as it makes it easier for, what she termed "skippers", people who leave the motel without paying, as they depart without having to pass the office at the Albert Street frontage.  In short, she considered that three-street frontage posed security problems rather than being any advantage, but she admitted it would be advantageous to other types of business.  She asserted that the ideal shape and location for a motel is a deep inside block rather than a corner block, but with sufficient highway frontage of 40 metres or more, with no side street, no lane access, away from traffic lights and nestled among private houses, so as to have a minimum of noise and a minimum of unwanted public entry.  The Palms Motel most closely fitted her description and yet, she pointed out, it was valued at $109.49 per m² compared with the subject land at $128 per m².

• Difficult access to North-bound Traffic.  According to Mrs Finlayson, the major source of motel business in Rockhampton comes from traffic travelling from the south.  She contends that motorists travelling north in a strange town find it much easier to pull into a motel on the left-hand side of the road, rather than make a right-hand turn across traffic to a motel on the right-hand side of the road.  As there is a median strip outside the subject land, it is necessary for a vehicle travelling north when turning from George Street into Albert Street, to ensure that it is in the right-hand lane, proceed to the traffic lights at the intersection of Campbell Street, then turn right into Campbell Street, do a U-turn in that street and access the subject land in that manner.  This, she said, is a difficult manoeuvre and unlikely to be undertaken by north-bound travellers.  Mrs Finlayson went on to say that when returning south, people who had stayed at a motel in Rockhampton and enjoyed the experience, tended to make for that motel, rather than stay at an unfamiliar motel.  She regarded repeat clientele as very important in the motel industry.  In her view,  the Regency Motel on the opposite side of the street was in a far better position than the subject land to attract both new and repeat clientele.  However, the respondent's valuations did not reflect that advantage.

The Case for the Respondent
           Mr White, the valuer for the respondent, explained that for the valuation of the area as at 1 October 1999, he valued the land in the vicinity of the subject land by mass appraisal, increasing the previous valuation by 50%.  However, following the objection by the appellant company, he had reassessed the valuation of the subject land and had reduced the valuation to $260,000.  He was of the opinion that the present valuation was in conformity with the sales and with the valuations applied to other properties.
           Mr White said that the sales of land in the area had indicated that there had been a general increase in unimproved values of at least 50%.  To support the reduced valuation applied to the subject land, he referred to six sales in the locality, three of which were of much smaller parcels (Sales 4, 5 and 6 having areas of 673 m², 405 m² and 443 m² respectively) which I do not consider to be relevant.  Of the other sales, Sales 2 and 3 are situated in George Street, with areas of 1,763 m² and 1,039 m².  While these sales indicate levels of value which would generally support the valuation applied to the subject land, I do not consider them to be as relevant as Sale 1, which is the site of the Palms Motel.  It is  situated in George Street, in close proximity to the intersection of Albert Street. 

This property is an inside property, containing an area of 2,192 m², which sold in August 1998 for $355,000.  The sale analysed to show an unimproved value of $323,000, or $144 per m², plus 2.5% rear access.  As at the relevant date, 1 October 1999, the respondent had applied an unimproved value of $255,000 to that property.  That, according to Mr White, represents $115 per m², plus 2.5% rear access.

Mr White's Sale 2, with an area of 1,763 m² is situated further along George Street than the Palms Motel site.  It has a frontage of 33.3 metres to George Street (Bruce Highway) and sold in March 1999 for $325,000.  That sale analysed to show an unimproved value of $323,000, or $175 per m².  As at the relevant date, 1 October 1999, the respondent had applied an unimproved value of $260,000 to that property, which Mr White explained consisted of $140 per m², plus 5% rear access.  Mr White said the Council has since given approval for the construction of a six-storey hotel complex on that site.
           Sale 3 has an area of 1,039 m² and is situated on the corner of George Street (Bruce Highway) and Archer Street.  It sold in June 1996 for $180,000 and analysed to show $179,000 or $157 per m², plus 10% corner influence.  As at 1 October 1999, the respondent had applied an unimproved value of $148,000 to that property, which was said to comprise $130/m², plus 10% corner influence.  Since the sale the property has been developed with a drive-in retail complex, let to national tenants.
           Apart from generally supporting the level of values applied, in my view, Sales 2 and 3 are not particularly relevant.  They are smaller and closer to the business district.
           Mr White explained that the present valuation of $260,000 applied to the subject land was calculated as follows:

2,023 m² @ $115 per m²  $232,500
           Plus 10% corner influence and 2.5% side access  $29,000
           Total  $261,500

Adopt  $260,000
           In Mr White's view, the subject land is an ideal site for a motel.  The location on Albert Street with the corner position, allows excellent site identification and exposure to high volumes of passing vehicle traffic.  The site is also in close proximity to Rockhampton City's traditional central business, retail and entertainment precinct, which he also considered an attractive feature.
           He went on to say that the south-western end of Albert Street is the perceived better located part of the road, as traffic becomes bottlenecked at the north-east end, approaching the Neville Hewitt Bridge.  Despite Mrs Finlayson's views, he considered the three-street frontage to be a very attractive feature of the site.  He also thought that the traffic lights at the intersection of Albert and Campbell Streets were advantageous to the subject property in aiding access to and from the site for north-bound traffic, as the majority of sites on the southern end of Albert Street were disadvantaged by the median strip.  He considered that any detrimental effects due to noise associated with vehicle traffic braking and accelerating at the traffic lights, were outweighed by these benefits.
           Mr White was aware of the sewerage mains and he conceded that they cause design constraints.  However, he said this disability is inherent in the majority of the surrounding properties in the locality and that buildings were designed around them.
           In answer to the appellant's challenge to the relativity of values in the area, Mr White explained that larger properties are keenly sought after by developers, but they tend not to pay the same rate per m² for properties with areas exceeding approximately 2,000 m².  He put it this way:

"On the analysis of the available sales and historically, there has generally been a buyer perception or a developer's perception that the optimum site for a motel or a number of other sort of developments is around the 2,000 m².  Once you start getting bigger than that there's a grading off of value.  The perception is that it's more important to have good highway frontage and roughly around the 2,000 m² covers most developments."  (Transcript p.28)

For that reason, he had valued the larger sites in two components.  He explained that he valued the Regency Motel site of 3,027 m² in that manner, valuing 2,023 m² at $115 per m², applying 10% corner influence and 2.5% side access to that part of the valuation, and then valuing the remaining 1,004 m² at a lower rate of $70 per m², to arrive at a (rounded) unimproved value of $335,000, or $111 per m² overall.
           Similarly, he had valued the Club Crocodile site of 3,541 m² in two components, 2,530 m² being valued at $115 per m², with 10% corner influence and 2.5% rear access, with the remaining 1,011 m² of rear land being valued at $90 per m², for a total valuation of $420,000, or $119 per m² overall.  As the Club Crocodile site was closer to the Central Business District, he considered it to be a better commercial site than the Regency Motel site, which accounted for the higher overall value.
           As compared with those valuations, his approach to valuing the subject land had simply been to value the whole area of 2,023 m² at $115 per m², plus 10% corner influence, plus 2.5% side access over the whole site.  That resulted in a total valuation of $260,000, or approximately $129 per m² overall.
           In answer to the appellant's argument relating to relativity with the values applied to smaller sites, Mr White contended that developers were not prepared to pay the same rate per m² for sites of 1,600 m² or less.  In his view, while there was buyer interest for larger sites for larger-scale developments, anything under 1,500 m² attracted prices which were less per m².  This was illustrated by the Sales 3, 4 and 5, the smaller allotments on his schedule of sales.
           Despite the appellant's contention that motels on the left side of the highway were more accessible for north-bound traffic, Mr White made the point that the majority of motels in the vicinity of the subject land are situated on the right-hand side of the highway, being directly accessible to southbound rather than northbound traffic.  He appeared to make no distinction between the valuations of property situated on either side of the highway.

The Issues     
           Mr and Mrs Finlayson were not unnaturally concerned that the valuation of the subject land at $128 per m² is considerably higher than the valuation applied to the most comparable property, the Regency Motel site, which had been valued overall at approximately $111 per m².  They saw this as being out of relativity, as they consider the Regency Motel site to be significantly superior to the subject land; it is larger, enabling more motel units to be built upon it and it is on what they consider to be the more favoured side of the highway, giving direct access to north-bound traffic.

           Similarly, the relativity of the valuation of the subject land compared with the valuations of other motels and other commercial lands in the area, appears to them to be quite incorrect.  It seemed to them that when the disabilities of the subject land were taken into account, the valuation should be less per m² than many of the other properties, particularly those of the other motels.
           On the other hand, Mr White has explained how the valuation of $260,000 for the subject land was arrived at.  His contention that development sites exceeding 2,000 m² in area were sought after, but that developers paid less per m² over and above approximately 2,000 m² was not conclusively proven, as none of the sales demonstrated this.  However, it seems that, with variations, he has applied that methodology to the valuation of larger sites.  Mrs Finlayson challenged that method of valuation, contending that the larger sites were more valuable for motels as a larger number of units could be built on them making an enterprise more viable than that on the subject land.  It was asserted that there was no rear land and no justification for valuing the rear part of the land at a lesser rate per m².  Indeed, the contention seemed to be that the larger sites should be valued at a higher rate per m² because of their size.
           The sales were not attacked by the Finlaysons.  Mrs Finlayson said on a number of occasions that she had no argument with the comparison of the subject land with comparable sales, provided that all other lands were similarly compared.  There was no real challenge to the level of values applied, rather to the relativity.
           The issues raised by the Finlaysons concerning the sewerage mains, the noise generated at the intersection because of the traffic lights and the disadvantage rather than the advantage of being on a corner and having a side-lane access, were disabilities which were suffered by many of the commercial properties in the area, particularly the most comparable property, the site of the Regency Motel.  Whether Mr White was correct in not making specific allowances for these problems on the subject land, he has at least been consistent in the manner in which he has applied his valuations to all of the properties in the area.  Similarly, he has been consistent in the manner in which he has applied corner access and side access allowances.

Conclusions
           Despite the Finlaysons having what appeared to be well-founded concerns about the valuation of the subject land per m² being considerably higher than similar properties, in my view, Mr White has given a reasonable explanation for the manner in which he has valued those properties.  He was aware of the problems concerning the subject land which were raised by the Finlaysons, but he considered that they were similar to the problems suffered by many other properties in the area.  Although they may be disadvantages to a motel business, some of those problems would be advantages to other enterprises which could be established on the land if it was vacant.  However, I remain concerned about the relativity of the valuation of the subject land with those of the Club Crocodile Motel site and the Regency Motel site, particularly the latter.  This concern stems from the fact that those properties, which are obviously superior, have been valued in a manner which attributes less value per m² to the balance land than to the front 2,000 m² to 2,500 m².  However, if Mr White is incorrect in valuing those properties in that manner, it is those valuations which are incorrect and not the valuation of the subject land.
           If anything, what the Finlaysons' attack on his valuation has demonstrated is that perhaps those other valuations are incorrect.  They have not demonstrated to my satisfaction that the valuation applied to the subject land is wrong.  There may be a problem with relativity, but it would not be correct to adjust the valuation of the subject land in conformity with what may perhaps be incorrect valuations of other properties.
           This was well demonstrated in the case of Grahn v. The Valuer-General (1992) 14 QLCR 327. In that case the Land Appeal Court was considering an argument by the appellant based upon relativity of the valuation with other valuations. In that case, the Land Appeal Court said at p.328:

"It is desirable that valuations made for the purposes of the Valuation of Land Act1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based.  It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis."

The Land Appeal Court then made the following observations:

"Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence. …
If possible, the Valuer-General should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error. …" (pp.328-329)

Bearing in mind those principles, it would not be correct to adjust the valuation of the subject land because I have suspicions that the valuations of other properties may be too low.  The correct approach would be for the Chief Executive to examine those other valuations to ensure that they are correctly valued.  On the evidence before me, it does appear that those valuations are somewhat low.  However, that does not assist the present appellant.
           Under the provisions of the Valuation of Land Act 1944, the respondent is required to determine the unimproved value of each property in an area as at the date of valuation.  Unimproved value has been defined as the market value of the land as if improvements thereon or appertaining thereto had not been made.  It is settled law that the best method of determining unimproved value is by reference to sales of unimproved or lightly improved land.
           After considering the evidence and the submissions by the parties, I am unable to find sufficient reason to disturb the valuation applied to the subject land by Mr White.  Accordingly, the appeal must fail.

Order
           The appeal is dismissed and the unimproved value of the subject land determined by the respondent as at 1 October 1999, is affirmed at the sum of Two Hundred and Sixty Thousand Dollars ($260,000).

JJ TRICKETT
PRESIDENT OF THE LAND COURT