Forest Rise Living v Valuer General

[2007] NSWLEC 305

Land and Environment Court

of New South Wales

CITATION:	Forest Rise Living v Valuer General [2007] NSWLEC 305
PARTIES:	APPLICANT Forest Rise Living Pty Limited RESPONDENT Valuer General
FILE NUMBER(S):	30849; 30850; 30851 of 2006
CORAM:	Brown C - Sheehan AC
KEY ISSUES:	Appeal - Valuation of Land :- appropriatenees of valuation of unimproved land value
LEGISLATION CITED:	Valuation of Land Act 1916
DATES OF HEARING:	15/05/07
DATE OF JUDGMENT:	1 June 2007
LEGAL REPRESENTATIVES:	APPLICANT Mr A Abbott, Director of Applicant Company RESPONDENT Ms A Pearman, barrister SOLICITORS Valuer General

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Brown C with Sheehan AC

1 June 2007


30849 of 2006, 30850 of 2006 and 30851 of 2006 Forest Rise Living Pty Limitedv Valuer General

JUDGMENT

1 COMMISSIONERS: These are three separate but related appeals against the unimproved land value assessed by the Valuer General at Base Date 1 July 2005 for:

• 226 Wells Street, Springfield (Appeal No. 30850 of 2006)
• 232 Wells Street, Springfield (Appeal No. 30849 of 2006)
• 238 Wells Street, Springfield (Appeal No. 30851 of 2006)

2 The appeals were heard concurrently.

The sites

3 The sites are:

• 226 Wells Street – Lot 2 DP 258026 - the site has a frontage of 61.19 m to Wells Street and other boundaries of 91.22 m, 60.0 m and 80 m giving a total site area of 5,136 sq m.
• 232 Wells Street – Lot 3 DP 258026 - the site has a frontage of 56.09 m to Wells Street and other boundaries of 101.5 m, 55.0 m and 91.22 m giving a total site area of 5,299sq m.
• 238 Wells Street – Lot 40 DP 1062987 - the site has a frontage of 82.79 m to Wells Street and a frontage of 101.5 m to Noorumba Road and other boundaries of 134.65 m and 70.345 m giving a total site area of 8,475 sq m.

4 The sites are adjoining and are located approximately 5 km east of Gosford CBD. The undulating topography of the area provides for a largely consistent fall from 226 Wells Street (located at the top of a rise) to 238 Wells Street and Noorumba Road. Each site contains a dwelling and ancillary buildings and appeared to be used for rural/residential purposes. No significant trees are located on any of the sites.

Relevant planning controls

5 The sites are zoned 2(a) Residential under Gosford Planning Scheme Ordinance. Zone objective (a) states:

(a) to make provision for the orderly and economic development of suitable land for a variety of low density housing forms which are essentially domestic in scale and which have private gardens

6 Development that needs consent includes cluster development, dual occupancies-attached, dual occupancies-detached and dwelling houses.

The land values

7 The land value of the sites, as assessed by the Valuer General for rating purposes as at Base Date 1 July 2005, after appeal to the Valuer General are:

• 226 Wells Street - $854,000.
• 232 Wells Street - $854,000.
• 238 Wells Street - $1,410,000.

8 The land value of the sites as assessed for the Valuer General, by Mr Glenn Williams a practicing valuer, in accordance with s 6A of the Valuation of Land Act 1916, are:

• 226 Wells Street - $740,000.
• 232 Wells Street - $765,000.
• 238 Wells Street - $1,310,000.

9 The values are based on $145/sq m for 226 and 228 Wells Street and $155/sq m for 238 Wells Street. If the appeal is dismissed, the Valuer General sought the Court to impose the unimproved values of Mr Williams rather than original values sought by the Valuer General.

10 The land value of the sites as assessed for the applicant, by Mr Christopher Keats a practicing valuer, in accordance with s 6A of the Valuation of Land Act 1916, are:

• 226 Wells Street - $565,000.
• 232 Wells Street - $580,000.
• 238 Wells Street - $930,000.

11 The values are based on $110/sq m for each of the sites.

12 The applicant was represented by Mr Adrian Abbott, the Director of the applicant company. Notwithstanding the evidence of Mr Keats, Mr Abbott proposed that the land value of the sites be:

• 226 Wells Street - $565,000. (Mr Abbott originally proposed a value of $620,000 but adopted the lower figure of Mr Keats)
• 232 Wells Street - $560,000.
• 238 Wells Street - $710,000.
The evidence

13 The parties identified 7 comparable sales. Mr Williams relied on Sales 1,5,6 and 7 and Mr Keats relied on Sales 2, 3 and 4. These sites were inspected on the morning of the hearing. The main details of these sales are:

Sale 1 – (Williams) – 16 Victor Close, Green Point
Sale price: $600,000
Sale Date: 4 August 2004
Area: 3609 sq m
Improvements: Yes but considered by Mr Williams to be of temporary value only.
Adjustments: -12.5% or $145/sq m for 226 and 232 and -7.5% or $154/sq m for 238

Sale 2 – (Keats) - 63 Deane Street Narara
Sale price: $745,000
Contract Month: April 2004
Area: 8,094 sq m
Improvements:– existing dwelling included in development
No individual adjustments undertaken by Mr Keats
Adjusted land value: $92/sq m

Sale 3 – (Keats) – 67 Carrington Street Narara
Sale price: $450,000
Contract Month: March 2004
Area: 3,478 sq m
Improvements:– $60,000
No individual adjustments undertaken by Mr Keats
Adjusted land value: $129/sq m

Sale 4 – (Keats) - 79 Griffiths Street
Sale price: $504,500
Contract Month: September 2004
Area: 3,294 sq m
Improvements:– $150,000
No individual adjustments undertaken by Mr Keats
Adjusted land value: $108/sq m

Sale 5 – (Williams) – 830 Pacific Highway Niagara Park
Sale price: $4,000,000
Contract Date: 21 November 2005
Area: 24,336 sq m
Improvements: Old buildings no value
Adjustments: 0%
Adjusted land value: $164/sq m
Sale 6 – (Williams) – 64 Chittaway Road Chittaway Bay
Sale price: $1,980,000
Contract Date: 16 June 2004
Area: 9,303 sq m
Improvements: Nil
Adjusted land value: -17.5% or $159/sq m for 226 and 232 and -7.5% or $178/sq m for 238
Sale 7 – (Williams) – 89 Railway Parade Warnervale
Sale price: $1,800,000
Contract Date: 12 January 2006
Area: 12,560 sq m
Improvements: Nil
Adjusted land value: -0% or $143/sq m for 226 and 232 and 7.5% or $154/sq m for 238

14 Mr Williams and Mr Keats agree that the market segment for the subject properties was at its highest value around December 2003. Since that time demand has softened resulting in softening values for englobo sites.

Findings

15 Clause 40(2) of the Valuation of Land Act 1916 states that “on an appeal, the appellant has the onus of proving the appellant’s case”. In considering cl 40(2) we are not satisfied that the Applicant has discharged this onus.

16 Both Mr Williams and Mr Keats adopted the approach of adjusting land values where considered necessary in the various sales selected as evidence. This approach accords with accepted valuation practice, and enables valuers to have evidentiary comparable values, which with adjustment account for varying levels of development, location and inherent site qualities.

17 Because properties are rarely totally similar, this approach is obviously necessary, and yet caution requires that adjustments should be as few as possible to ensure the reliability of the sale when compared to the property being valued. Additional caution needs to be taken where large adjustments are required. We are satisfied that the adjustment process adopted by Mr Williams and Mr Keats has been undertaken with this necessary level of caution, notwithstanding that there was disagreement between the two valuers as to the relevance of the nominated seven comparable sales.

18 Both valuers referred to development approval for a 12-lot subdivision of 238 Wells Street that had been obtained by the applicant in 1999 from Gosford City Council. There was also general discussion both on site and in evidence from Mr Williams and Mr Keats regarding the suitability of the site for residential subdivision, and also aged housing. Mr Keats stated that “subdivision at the base date was not the highest and best use”. He advocated rural residential type development because of the market at the time. Mr Williams stressed that at the time of the Base Date the applicant had gained “approval for a 12 lot subdivision”. He nominated the highest and best use as residential subdivision consistent with the zoning of the site.

19 As regards the other two sites Nos. 226 and 232 Wells Street, Mr Keats indicated that this land was not suitable at the Base Date for subdivision due to the “poorly performing market”, while Mr Williams observed that the “market would have considered the fire regulations” in determining potentiality.

20 When the sites were purchased by the Applicant in 2000, the relevant market was buoyant. We have formed the view that the applicant has subsequently sought to maintain the value of his investment through seeking a higher utility than residential subdivision, even proposing medium density development. Such attempts have clearly failed and the stark reality the applicant faces is that the land at the Base Date was worth more than it currently is. This is consistent with the general trends in market movement around this time. The changing market between the purchase of the sites and the Base Date was seen by Mr Abbott as a particular concern and a basis for challenging the unimproved land values of the sites.

21 We accept the evidence of Mr Williams that the highest and best use of the sites are as residential subdivision consistent with the zoning of the site.

22 Of the comparable sales, Sale 7 is located at Warnervale approximately 19 kilometres north by road from the sites. Contrary to the evidence of Mr Williams who states that it is a comparable sale we do not accept his evidence that it is comparable, even after adjustment, as it is too distant from the subject sites. However, the sale importantly indicates that there are indeed purchasers of englobo residential land active in the Central Coast. If the applicant’s land had been available for purchase by such developers at the Base Date, it would have likely been eagerly sought after as it is located much closer to Gosford, and hence more readily saleable due to its location. This was not the case, because the Applicant appeared to be unwilling to sell the sites because the 2000 market price had also been inflated by holding charges at the Base Date and subsequently. Nevertheless, the sale does indicate that purchasers of englobo residential land would have been active at the Base Date, and for this purpose we give weight to the sale as evidence of market activity only.

23 In considering the comparable sales of the Mr Keats, we do not accept Sale 2 (63 Dean Street Narara), Sale 3 (67 Carrington Street Narara), or Sale 4 (79 Griffiths Street Narara) as being comparable evidence, and give no weight to these sales. We are satisfied that these sales are not comparable as Sale 2 is constrained by approximately 1/3 of the site being flood affected, Sale 3 has limitations on the future development because of its narrow frontage and Sale 4 has difficulties with access that would severely limit its potential notwithstanding the same zoning as the subject sites.

24 In considering the comparable sales of Mr Williams, we have disregarded Sale 7 (89 Railway Parade Warnervale) as a comparable sale for the purposes of land value for reasons mentioned in previous paragraphs. We also do not accept Sale 5 (830 Pacific Highway Niagara Park) as overly comparable although it displays some similar characteristics to the subject sites. While not relying on this site as a direct comparable sale, in our opinion, the sale at best supports the conclusions of Mr Williams. Sale 6 (64 Chittaway Road, Chittaway Bay) is not comparable given their distance from the subject sites and the flooding affectation. Consequently we give this sale no weight.

25 The remaining Sale No. 1 (6 Victor Close Green Point), in our view, is the primary comparable sale in determining the value of the sites at the Base Date. We agree with Mr William’s adjustments of the sale, noting that he elucidates a resultant analysed rate of 166/sq m. We note that the land has been subsequently developed for multiple lot residential purposes and that only one lot remains in an undeveloped state. The sale is nevertheless for a much smaller parcel of land (3609 sq m) but in close proximity to the subject sites, within 12 months of the Base Date and purchased for residential subdivision.

26 Mr Abbott on behalf of the applicant referred to the holding charges such as land taxes that the applicant was incurring in retaining the sites including GST, and whilst sympathetic to such cost burdens, we are not satisfied that they are relevant matters to take into consideration when determining unimproved land value at the Base Date.

Orders

27 The Orders of the Court for Appeal No. 30849 of 2006 are:

1. The appeal is dismissed.
2. The land value of 232 Wells Street, Springfield as at Base Date 1 July 2005 in accordance with s 6A of the Valuation of Land Act 1916, is $765,000.
3. The exhibits are returned.

28 The Orders of the Court for Appeal No. 30850 of 2006 are:

1. The appeal is dismissed.
2. The land value of 226 Wells Street, Springfield as at Base Date 1 July 2005 in accordance with s 6A of the Valuation of Land Act 1916, is $740,000.
3. The exhibits are returned.

29 The Orders of the Court for Appeal No. 30851 of 2006 are:

1. The appeal is dismissed.
2. The land value of 238 Wells Street, Springfield as at Base Date 1 July 2005 in accordance with s 6A of the Valuation of Land Act 1916, is $1,310,000.
3. The exhibits are returned.
G T Brown
Commissioner of the Court


J Sheehan
Acting Commissioner of the Court