Greenmount Units Pty Ltd v Department of Natural Resources, Mines and Energy
[2004] QLC 15
•2 March 2004
LAND COURT OF QUEENSLAND
CITATION: Greenmount Units Pty Ltd v Department of Natural Resources, Mines and Energy [2004] QLC 0015 PARTIES: Greenmount Units Pty Ltd
(applicant)v. Chief Executive, Department of Natural Resources, Mines and Energy
(respondent)FILE NO: AV2002/0252 and AV2003/0087 DIVISION: Land Court of Queensland PROCEEDING: Appeals against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 2 March 2004 DELIVERED AT: Brisbane HEARD AT: Brisbane and Coolangatta MEMBER Dr NG Divett ORDER: The appeals are dismissed, and the unimproved values of Lots 7 and 8 on C 28529 as determined by the Chief Executive in the sums of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) (1 October 2001) and Two Million Four Hundred Thousand Dollars ($2,400,000) (1 October 2002) are affirmed. CATCHWORDS: Valuation of land – Unimproved value – Method of valuation – Mass appraisal system – Errors in relativity – Correction of errors – S.28 Valuation of Land Act 1944.
Valuation of land – Unimproved value – Comparison of sales – Highest and best use – Like with like comparisons.APPEARANCES: Mr TS Bullock for the appellants
Mr G Smith for the respondent
Background:
These two matters deal with land at 140 Marine Parade, Coolangatta, and described as Lots 7 and 8 on C 28529, Parish of Tallebudgera. The subject land has an area of 875 m² and is located in the main esplanade area, and fronting Marine Parade to the north and Boundary Street to the south, both of which are bitumen sealed. All normal utility services are available. The subject land is about 500 metres east of the Coolangatta Post Office, and is zoned Resort Residential under the Town Plan for the City of Gold Coast of 24 February 1994, effective at the two relevant dates of valuation of 1 October 2001, AV2002/0252) and 1 October 2002 (AV2003/0087). The key issues are the method of valuations, changes in the valuation, impact of planning, relativity and comparison of sales.
On 25 February 2002 the Chief Executive issued a valuation of the subject land for 1 October 2001 at $1,250,000. Following an objection the Chief Executive confirmed that figure on 25 June 2002. The appellants have now appealed claiming the unimproved value should more properly be $943,000.
On 24 February 2003 the Chief Executive issued a valuation of the subject land at 1 October 2002 at $2,400,000. Following a further objection the Chief Executive confirmed that figure on 27 May 2003. The appellants have also appealed that decision claiming the unimproved value should also be $943,000.
Mr Terrence Samuel Bullock, Chairman of the Body Corporate, appeared and gave evidence for the appellants in both matters. Mr G Smith, Senior Legal Officer appeared for the respondent, calling evidence from Gregory Patrick Crowley, the departmental senior registered valuer responsible for determining both valuations.
An unsuccessful preliminary conference under the chair of the Judicial Registrar of the Court was held in February 2003 in respect of AV2002/0252 appeal. Both matters were then heard consecutively in Brisbane (AV2002/0252, and later in Coolangatta (AV2003/0087).
Nature of the Land –
The subject land is a level rectangular shaped parcel of width 29 metres and depth 30 metres. The land is currently used for multi unit residential purposes, and is occupied by a three storey brick building of some 40 years of age, comprising fifteen separately owned home units. The subject land is located towards the eastern end of the main esplanade area fronting Marine Parade at Coolangatta, and just to the west of Greenmount Hill, and across Marine Parade from the surf clubhouse near Hill Street. As a consequence of the impact of Greenmount Hill, views of the area from the subject land are partially restricted in exposure. Following previous negotiations between the parties several years ago, a $25,000 reduction in the then valuation of $825,000 was allowed for those restrictions to the views. That allowance has continued in the current valuation.
Mr Crowley advises that under the current zoning of the subject land as Resort Residential, the maximum permissible number of storeys for any new redevelopment would be 20 levels. However he explains that would be subject to certain other planning constraints related to the size of the parcel, any setback alignment requirements, and also the shape of the parcel. The “as of right” height limit is for 7 levels, and any further levels would depend upon the achievable plot ratio of the site. Mr Crowley has based his valuation upon a highest and best development of that site to 9 storeys, as it is only a relatively small site. Mr Crowley notes that there are existing 8 storey buildings upon either side of the subject land, which he argues are indicative of the highest and best use of the subject land.
Mr Bullock confirms that the adjoining development of the Bahamas Units at the corner of Main Parade and Hill Street, appeared to suffer development delays during construction, and in the end was completed to its current 8 storeys. He speculates that may have been as a consequence of foundation problems, but has no evidence to that end. Mr Crowley notes that height is consistent with his estimate of the highest and best use of those site areas in that locality. Mr Crowley supplies details of the town planning provisions of that locality. (Exhibit 3 – page 26).
Changes in the Valuation –
A major concern of the appellants is the apparently large percentage increase that has occurred in the unimproved value of the subject land in recent years. Mr Bullock agrees that the large increase in both local government rating charges, and also in State Government Land Tax charges, are of serious concern to the resident owners of the subject land. However he notes that those large increases are also symptomatic of the appellant’s concerns with the apparent lack of transparency of the current valuation process. Mr Bullock concedes that had the rates and taxes only increased by say the Consumer Price Index (CPI), then he would have little concern with the valuation process. But he argues that has not occurred, and the increases in the unimproved values do not appear to be consistent with the present market for single homes and units in that area. However, in explaining the appellants’ estimate of the unimproved value at $943,000, Mr Bullock concedes that he has no indepth understanding of what the subject land could be worth as a development site in the marketplace.
However in explaining his concerns with the process, Mr Bullock explains how recent beach erosion measures offshore of Greenmount Beach are having a very deleterious impact upon access to the waterfront. Mr Bullock advises that such broad accretion by sand pumping is impacting holiday rentals, as the subject land is now about 300 metres from the ocean waters. However Mr Bullock concedes that from property reports it would appear that much of South Eastern Queensland is experiencing a boom type situation, particularly in waterfront areas.
A concern of the appellants however is the quite sudden increase in values in the last few years. Mr Bullock advises that for several years the property market at Coolangatta had been stagnant. However over the last few years the property values had increased dramatically, mainly in Mr Bullock’s opinion, due to recent sales to major developer speculators. Mr Bullock’s advice is mainly from local real estate agents, and he concedes he has had little direct contact with departmental valuers over this issue. Mr Bullock has no objection to how Mr Crowley undertook his valuation, but challenges whether the sales evidence relied upon reflects accurately whether there was any “scarcity factor” built into those sales by developers. Mr Bullock notes that there were virtually no sales of vacant lands as most of the waterfront lands were all improved parcels.
In explaining his concerns Mr Bullock notes that the unimproved value of the subject land has increased from $825,000 to $1,250,000 (51%) in one year, and then increased from $1,250,000 to $2,400,000 (92%) the next year. Mr Crowley advises that the general level of increase in waterfront areas between Kirra and Greenmount varied from between 90% and 100% over the last year. He notes that is consistent with many waterfront areas on the Gold Coast. When questioned about likely increases in similar areas in the next valuation at 1 October 2003, Mr Crowley cautiously indicates that continuing rises are likely to occur while the property market remains very buoyant.
Comparison of Sales –
To support the appellant’s estimate of the unimproved value of the subject land, Mr Bullock relies mainly upon a general pattern of sales of developed homes or individual home unit sales. He argues that to rely upon the sales of a few sites purchased by developers for major unit construction, is to include unreasonable margins for profit or speculation by the large developers. Mr Bullock does not provide specific individual sales, but relies upon a general pattern of advice from a wide cross-section of real estate agents in the area. Mr Bullock argues that to rely only upon a few sales by developers is a selective use of the available sales, and would include a scarcity factor in the developer’s sales.
In seeking some idea of relativity between the sales evidence of home units in the area, Mr Bullock relies upon verbal advice from an agent at Rainbow Beach, who also was the seller of a unit in Kingston Court units, a similar development to the subject property. However Mr Bullock provides no specific details to support his argument, conceding that unit sale was about three years previously.
In arguing that the “developer sales” used by the respondent must include a “scarcity” factor, and should therefore be rejected, Mr Bullock relies upon a recent decision of the High Court of Australia in Maurici v Chief Commissioner of State Revenue [2003] HCA 8, 13 February 2003. Mr Bullock also agrees that high rise residential developments have been occurring for many years over a wide area of Queensland, particularly in coastal regions from Cairns to Gold Coast. He also concedes that he has not personally undertaken any market analysis to demonstrate whether a “scarcity” factor was involved in the respondent’s sales evidence. He also agrees that most of those high rise developments were undertaken by major developers because of the high construction costs involved, and the need for a single developer to undertake the building construction, prior to sale to separate unit owners. Mr Bullock also agrees that where subsequent demolition of old buildings are involved prior to construction of the new building, that would be an additional cost to the developer.
To support his valuations, Mr Crowley provides the following sales evidence of oceanfront lands for the 1 October 2001 appeal:
· Sale 1 – (128 Marine Parade, Coolangatta – Lot 1 on C 28529). This is a 422 m² improved corner parcel with an old dwelling subsequently demolished after sale. The sale is about 70 metres west of the subject land, and fronts Marine Parade, Boundary Street and Clarke Street. The sale has a superior location and ocean views, but is seen as inferior per square metre due to its smaller size and greater restrictions on height and plot approval potential. The old dwelling was removed at a cost of about $7,000. The sale had an approval for development of units to five levels, and sold in January 2002 for $1,100,000, was analysed at $1,107,000, and applied at $570,000 ($1,351 per square metre). The land last sold in October 1996 for $380,000 ($900 per square metre).
[17]
· Sale 2 – (397 Golden Four Drive, Tugun – Lot 36 on C 33113). This is a 1,399 m² parcel located about 5.5 kilometres north of the subject land, and fronts both Golden Four Drive at the rear and Pacific Highway towards the ocean. The sale has an inferior shape, but is larger than the subject land, and at sale had an old style motel which was subsequently demolished at a cost of about $10,000. The sale had an existing development approval for a six storey building. Overall the sale is inferior per square metre due to its location and shape. The sale sold in October 2001 for $1,850,000, was analysed at $1,860,000, and applied at $1,750,000 ($1,248 per square metre). The land previously sold in March 2001 for $1,500,000 ($1,072 per square metre).
[18]
· Sale 3 – (224 Pacific Parade, Bilinga – Lot 11 on RP 222114), This is a 1,012 m² parcel located about 5.5 kilometres north of the subject land, with similar street and esplanade frontages. The sale has an inferior shape, but is larger than the subject land, and at sale was also developed as an old motel site. The motel building was subsequently demolished at a cost of about $50,000. The sale has an inferior zoning due to building height restrictions. A six unit three storey residential unit building has subsequently been constructed, and overall the sale is seen as inferior due to the height restriction and location. The sale sold in November 2001 for $1,373,334, was analysed at $1,423,334, and applied at $1,300,000 ($1,284 per square metre).
In respect of the 1 October 2002 appeal Mr Crowley provides two additional sales as well as Sale 1 (128 Marine Parade, Coolangatta), which was applied at $1,100,000 ($2,606 per square metre) for the later valuation period.
· Sale 2 – (111 to 127 Griffith Street, Coolangatta – Lots 13 to 17 on C 28529). This is a corner parcel located about 60 metres east of the Coolangatta Post Office and 100 metres west of the subject land. The sale fronts three streets, and has wide northerly ocean views. It has street frontages of 70 metres and 80 metres, and an area of 3,347 m². The sale is within Precinct 5 of the Coolangatta Local Area Plan, designated as Tourist Accommodation, with a 20 storey height limit. While the existing buildings at sale were showing an annual income of $500,000, subsequently most of the commercial buildings have become vacant. The added value of the improvements was therefore discounted by 50%, and offset by estimated demolition costs of $200,000. The sale sold in October 2002 for $14,825,000, was analysed at $14,775,000 ($4,414 per square metre). Because of the different zoning provisions, the sale was not applied as the site reflects multiple valuations due to the different multiple uses. However the sale is seen as a significantly superior site.
· Sale 3 – (351 Golden Four Drive, Tugun – Lot 27 on C 33114). This is a 1,123 m² parcel located 5 kilometres north of the subject land, with similar esplanade frontages. There is a need to provide certified external foreshore seawall protection due to the close proximity of the ocean front. The sale is zoned Resort Residential with a maximum building height of 7 storeys. The existing old brick and fibro motel was subsequently demolished at a cost of about $5,700. The sale is overall inferior to the subject land due to location and height restrictions. The sale sold in October 2002 for $2,550,000, was analysed at $2,555,700, and applied at $2,500,000 ($2,226 per square metre). The sale previously sold in 1997 for $880,000 ($783 per square metre).
In respect of whether the sales evidence might reflect any scarcity factor, Mr Crowley rejects that assumption, noting that his analysis of sales in the market provides no such evidence. On that basis he argues that the sales provided satisfy the Maurici test. Mr Crowley advises that it has always been a good valuation practice to seek comparisons with sales of improved lands where sales of vacant lands are scarce. However that was not needed in the current matter.
In respect of whether the use of sales to developers was a reasonable comparison, Mr Crowley explains that the real test is to ensure that the comparisons are made on a “like with like” basis, and that the sales meet the requirements of the Spencer test in respect of the prudent nature of the transactions. He argues further that by including any additional demolition costs in his analysis of the sales, he has followed guidance of the courts as espoused in the matter of Valuer-General v Fenton Nominees Pty Ltd.
In respect of Mr Bullock’s concerns that large profit and risk allowances are built into any developer’s sale prices, Mr Smith argues that the decision of the President of this Court in State Government Insurance Office v Valuer General (1980-81) 7 QLCR 171, provides guidance on that matter at 185. I accept that guidance, and reject any adjustment for profit and risk in the direct analysis of any sale prices. Mr Crowley also advises that the sales that he has used as truly comparable properties, really reflect most of the type of development sales in that area, and are therefore not selective by any reasonable test. He argues that there is no evidence of any premiums in those sales. He further advises that where there is an absence of vacant land sales, then he would analyse the improved sales. But that was not appropriate in the current matters.
In explaining his comparisons, Mr Crowley advises that while he has not applied an unimproved value to his Sale 2 (111 to 127 Griffith Street), its analysed value of $4,414 per square metre reflects a superior property in a rising market. The residential component of that sale would be comparable to the subject land, while the commercial component of Sale 2 provides for the much higher rate per square metre of the overall site. Mr Crowley also explains that in comparing his Sale 1, he has allowed for the greater plot ratio and height achievable upon the larger subject land compared to the smaller size of Sale 1. On that basis he sees the subject land as superior on a rate per square metre basis to Sale 1.
In respect of the use of sales by developers, Mr Crowley explains that his experience of that marketplace is that experienced developers demonstrate a very prudent knowledge of the market levels. He also advises that he has restricted his sales evidence to esplanade fronting lots in that locality, as land prices tend to decline as one moves away from the ocean frontage. Mr Crowley advises that by virtue of the limited number of esplanade parcels near the subject land, the amount of sales evidence would not be large in number. He also advises that the same type of major developers are active from Labrador to Tweed Heads, even though the market levels vary across different localities.
Relativity –
As a measure of checking the reliability of their estimate of the valuation, Mr Bullock draws reference to several other comparable properties in the general locality of the subject land. He notes that each of those properties would appear to reflect unimproved values considerably less than the subject land as follows:
PropertyArea Unimproved Value
1. Kirra Hotel 5,258 m² $6,000,000
101 Musgrave Street
2. Kingston Court Units 989 m² $1,500,000
172 – 178 Marine Parade
3. Caltex Service Station 1,000 m² $1,050,000
26 Musgrave Street
4. Maybury Community Titles 814 m² $920,000
6 Ward Street
5. Subject Land 875m² $2,400,000
In drawing comparisons in particular with the Kingston Court units, Mr Bullock notes that is an existing building of similar age to the subject building, and is a corner location at the western end of adjoining Rainbow Beach, only 350 metres east of the subject land. Historically, Mr Bullock argues that units in Kingston Court are similar in sleeping facility, and generally have sold for slightly higher prices than units at the subject property. He argues those properties are similar in building constraints and historically have had similar unimproved values until the recent large increase for the subject land.
Following an adjournment to allow Mr Crowley time to obtain details of those properties, Mr Crowley advised the Court of apparent errors now found in several of those property valuations, not previously disclosed to the Chief Executive. Mr Smith argues that this current appeal against the 1 October 2002 valuation at Coolangatta is the first matter addressed by this Court for that valuation period, and Mr Crowley had been unaware of any discrepancies until it was brought to his attention by Mr Bullock at the hearing.
Following a review of departmental records, Mr Crowley advises that incorrect valuations were processed for the Kingston Court units, Caltex Service Station site, and the Maybury Community Units site. He advises further that the Kirra Hotel site valuation was correct and needed no adjustment, as the site has a narrow frontage, and irregular shape, and a height restriction to only seven storeys. Mr Crowley has already put in train amendments to several properties now found to be in error. The valuations are now being amended under s.28(1)(h) of the Act, in order to maintain previous relativities. He advises that a total of 11 properties are now found to need reassessing.
In explaining the process of amending the 11 incorrect valuations, Mr Crowley advises that it is not uncommon for some arithmetic errors to occur in the overall revaluation process, which is what has occurred in this matter. To explain how that has occurred, Mr Crowley explains the method of valuation adopted by the Chief Executive. Mr Crowley advises that relativity between parcels and the subject land have been retained, and are consistent.
The Method of Valuation –
Mr Crowley advises that the process of revaluation involves an overall assessment of market changes for selected agreed sub-market areas, where consistent valuation patterns have historically been found to occur. The revaluation process has been computerised as a mass appraisal system, thus assisting each departmental valuer to undertake about 25,000 to 30,000 separate valuations on an annual process. In assessing the market changes in the sub-market areas along Marine Parade, he has assessed that the properties along that area should have been increased at the relevant date by a factor of between 1.9 and 2.0. In the end it was agreed to adopt an increase factor of 1.92 (192% of the previous valuation).
The subject land was factorised correctly, but due to an arithmetic error in coding the computer records, the other 11 sites had been inadvertently increased by a lesser factor. He advises that had the correct factors been applied then the correct valuation for Kingston Court Units would be about $2,200,000. The previous relativity between Kingston Court Units and the subject land had been consistent with that level of value relative to the subject land at $2,400,000.
In adopting such a factorisation approach, Mr Crowley advises that a sampling technique is used to check whether the adopted unimproved values reflect consistent patterns. In the case of Kingston Court Units he advises that due to an odd numbering sequence in the computer printout, the part relating to Rainbow Beach, and that relating to Marine Parade at Coolangatta, are not closely sequential, which appears to have led to the errors having been missed in the sample checking process. While unfortunate, Mr Crowley advises that processing errors can occur in the very large number of valuations processed in such a relatively short time period before the final issuing of the new valuations.
However he explains that where errors are found to occur, such as through objections or appeals, then s.28(1)(h) allows for those to be quickly corrected. Mr Crowley advises that there are about 130,000 computer records for the Gold Coast area. The error for the Caltex Service Station site at 26 Musgrave Street was further complicated by an incorrect zoning being applied to that parcel, and also a contamination factor of $25,000 to assess whether decontamination is required. It should now be valued at $1,800,000.
Mr Bullock accepts that such amendments may have been necessary, but argues that the fact that they have found to occur supports his concerns with the overall reliability of the valuation process, and its relative lack of transparency to property owners.
Decision:
Revenue Implications –
Before exploring the evidence, I note that the appellants are concerned that the rapid increases in the valuation will lead to major implications for increases in rating and land tax accountabilities. This is a matter which has been raised many times in this Court, and I will reiterate previous findings in this regard. While the appellants may be concerned by the apparent connection between escalating rises in land values, and increases in revenue liability, it is not a matter for consideration in this matter. The power for the Gold Coast City Council to determine the appropriate rates for rating purposes is entirely within that Council’s discretion under s.963 of the Local Government Act 1993.
In exercising that discretion the Council levies rates for a property under s.1008 of the Local Government Act 1993. The basis upon which the rate is levied is covered by s.1025, which directs that the basis of rating shall be “relevant information” notified to the Council; and maintained in a “record of every parcel of rateable land in its area” under s.994(1), which must also comply with the regulations under s.994(2).
The Local Government Regulation 1994 establishes under r,37(1)(c) the “unimproved value of the land”. Section 72(1) of the Valuation of Land Act 1944 establishes that the valuation of any land made under that Act shall be –
“72.(1)(b) the unimproved value of the land for the Local Government Act 1993;”
By those directions of the legislation it is clear that the local government is empowered to determine rating recoveries, based upon unimproved values established under the Valuation of Land Act 1944. Those two responsibilities are linked, but entirely separate public authority functions. How the local authority recovers its rating revenue is entirely at its discretion.
The Method of Valuation –
While the discovery and rectification of apparent errors in relativity disclosed by the appellants is unfortunate, the fact that the Chief Executive acknowledges their existence, and has sought to rectify those inconsistencies, demonstrates that the legislation adequately provides for such occurrences. The mass appraisal valuations is an approach by Government to provide a regular monitoring of market forces, and their impacts upon the unimproved value of land. When errors in the valuations are discovered, then s.28(1) relevantly provides:
“28.(1) No alteration shall be made in the valuation of any parcel of land during the period during which any valuation relating to the area in question is in force, or in the case of an annual valuation which has not come into force, during the period between the issuing of an annual valuation notice under part 4, and the date of valuation coming into force –
(h) unless the valuation is affected by error or omission which the chief executive considers it necessary to correct, other than as an error of law or mistake of fact that may be corrected under s.28(A);”
The discretion to make such corrections when errors are found, lies entirely with the Chief Executive under s.29(1) which states:
“29.(1) The chief executive may alter at any time after the valuation of any land the valuation of which may be altered under section 28, 28A or 30(3).”
In exercising that discretion the Chief Executive is always conscious of the purpose of the Valuation of Land Act 1944 to provide a fair and equitable valuation system for the purposes of Governments.
The need for consistency in establishing unimproved values is to be found in Barton and Elliott Pastoral Co v Valuer General (1957) 15 The Valuer 176. In that matter Sheehy J, at the invitation of the parties, laid down principles to serve as a guide for future appeals. While that decision was taken to appeal before the Full Court of Queensland, in The Valuer General and Elliott 15 The Valuer 188, the principles outlined by Sheehy J were not disturbed. The facts of that matter were not relevant to the current matter, however, the need for an open and frank dialogue between the parties, and the benefits of an exchange of information remain as important today as they were in 1955.
Sheehy J noted at 186:
“It is the requirement of the Acts, that the real value should be ascertained and this entails the necessary and equitable consequences that all values in Queensland should bear the correct relationship one to another in view of the objects of the Act i.e to discover the basis of taxation for rates, land tax and the like.”
While the directions of Sheehy J in respect of the correct relationship of each parcel in Queensland is fundamentally correct, how the Chief Executive affects that objective is now made more complex by the requirement to achieve that purpose for each parcel in the State on an annual basis. As part of his methodology, the Chief Executive has determined administrative boundaries which reflect common market differentiation, or sub-market areas (SMA).
By analysis of relevant sales to those SMA, and assuming that relativities between parcels in those SMA have been established reliably, the Chief Executive now uses a computerised mass appraisal technique to generate likely unimproved values within initially each SMA, and then within the wider administrative areas, or districts of the City area. However, the computer process is merely a highly sophisticated tool for each valuer to undertake the increasingly demanding task of assessing the ever growing number of parcels. Should the Chief Executive become aware that certain unimproved values may be inaccurate, he is empowered by the Act (s.28(1)(g) and (h) and s.29) to seek to correct any error in the valuation.
The process of mass appraisal of valuations using a large computer system has been the subject of considerable concern since it was first introduced in Queensland in 1985. However, while there has been various appeals against the reliability of such a system, perhaps the clearest direction in that regard is to be found in the decision of the Land Appeal Court in BG and AK Wilson v Chief Executive, Department of Lands (1994-95) 15 QLCR 63. In that matter the Land Appeal Court considered similar evidence to that currently provided by Mr Crowley, as to how he goes about his task of an annual valuation. The Land Appeal Court determined at 70:
“‘Charts’ are prepared and values fed into a computer. From there comes a printout of predicted valuations which is then checked as best it may be done for correctness. The results of such an exercise are reflected on the relativity maps tendered in evidence. We see no merit in the inferences sought to be drawn by Mr Wilson that if an error is found in relativity the whole of the valuation process is put in doubt. It has been said on many occasions that valuation is not an exact science. It rests upon the opinion of those in the market place who will prefer one aspect to another, one suburb to another and so forth. It is the duty of the valuer to interpret and apply that market on principles which require comparisons to be made of “like with like” wherever possible. The process of annual valuations which was introduced by legislation in 1985 was designed to avoid the penalty of an owner being cemented to a value for rating purposes for up to five years and possibly eight years. The scheme of annual valuation enables values to follow the market on an annual basis. The scheme would not work without the aid of computers. …
… In the context of an annual valuation, the process involves the activity described previously including the “charts” and the collation of that material from the charts by the computer processors through to the public display of the printouts containing the respective valuations and relevant dates. The process is our opinion does not offend the statute.”
In the end the effectiveness of the “mass appraisal” system is likely to be seen in the relative public understanding of the process. I believe that Mr Bullock may have a fair argument that the general public does not fully understand the process, or their rights of objection and appeal under the Act. While that may be true, it does not necessarily indicate that the professional valuers such as Mr Crowley are not correctly undertaking their valuations under the Act. The presence of a public “website” on the Internet demonstrates that the Chief Executive’s desire is to make relevant information available to the public. But as with many heads of legislation, the public’s understanding of the relevant law is often found to be less than well informed.
Now while the current data errors may be a concern to the appellants, or even to Mr Crowley himself who is a very experienced valuer, the reason for those errors is not a matter for resolution by this Court. Indeed the role of this Court was clearly defined in the matter of JL and I Qualischefski & Ors v Valuer-General (1979) 6 QLCR 167, where the Land Appeal Court said at 172:
“The reasonableness of the allowances that have been made is always open to challenge on objection or appeal. However upon appeal a statutory onus of proof is cast upon the appellant and he has to accept, within the confines of the grounds set out in his Notice of Appeal to the Land Court, the burden of proving the Valuer-General incorrect. Neither this court nor the Land Court in the subject jurisdiction may assume the role of an investigating tribunal requiring the Valuer-General to substantiate his case. This is in contradiction to jurisdiction conferred under the Land Act.
In appeals of the nature of the subject, the onus which the appellant must assume is not an easy one to discharge without the assistance of a registered valuer who can lead evidence as to sales analyses and/or comparison with valuations made by the Valuer-General in respect of comparable properties.”
That direction was later followed in BT Dillon v Valuer-General (1986-87) 11 QLCR 231, where the Land Appeal Court found at 233:
“The Legislature has not given this Court any investigatory powers under the Valuation of Land Act. If the Appellant’s case is not strong enough in its own right to establish the values contended for or to disprove the Valuer-General’s values, the Court is not empowered of its own volition to probe the fairness or correctness of the Valuer-General’s values and by this means arrive at its own estimate of value.”
Highest and Best Use of the Subject -
In providing his valuation of the subject land as having a highest and best use to 9 storeys, Mr Crowley has sought guidance from the town planning schedules for Resort Residential 1 for that area. The permitted development height would be influenced by the area and dimensions of the site, which is larger than the minimum area of 600 m², and the boundary clearance requirements, and is consistent with the two adjoining parcels east and west of the subject land, both of which are currently developed to 8 storeys. In the absence of the Residential Density and Building Height Maps, I accept Mr Crowley’s advice that the maximum residential density for the Density CategoryD2 area is 33 m² for each unit; and that the allowable plot ratio for the subject development would be about 1.13. Those figures support his estimate of a likely approved building height of 9 storeys. On that basis there is nothing to discredit his estimate of the highest potential of the subject land.
In seeking to determine the highest and best use for valuation purposes, Mr Crowley must ensure that use is to be a legal use under planning and building regulations; and to be for a use likely for that area. Both of those criteria are consistent with Mr Crowley’s opinion for the subject land. Under those circumstances the highest and best use of the subject land would equate to its market value. That matter was clarified in Cieslinski v Minister of Works (1978) 39 LGRA 332, where in rejecting a claim for a special compensation for reinstatement following the resumption of a claimant’s land, Jacobs J said at 337:
“More especially is this so when the market value of the land, as an element in compensation, is assessed not necessarily upon the use to which the claimant is putting the land, but upon its highest and best use.”
The matter of highest and best use was also clarified in Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410, where Jacobs J said at 415:
“Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says – the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential.”
Changes in the Valuation –
Before considering the evidence of sales, I turn to the concern of the appellants with the very rapid increase in the unimproved value of the subject land. While I am aware that such percentage rises in value are often of concern to appellants in seeking to have confidence that their personal property has been fairly treated in any valuation, they in fact do not prove conclusively that any error has been made in the valuation process. Such rises may, at best, be an indicator to owners that they should further investigate the valuation, but there may be many reasons why a valuation is changed at what would appear to be a rate out of line with some overall statistical percentage.
That matter has been considered many times by the courts, and I note from precedent that a large increase in itself is not evidence of some error in the valuation. I note, for example, in the decision of NR and PG Tow v Valuer-General (1978) 5 QLCR 378, where the Land Appeal Court said at 381:
“It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation.”
That matter was also considered by the Full Court of Queensland in CH and BD Henricks v The Valuer-General (1983) 9 QLCR 59, per Macrossan J (later CJ) at 63. The Full Court said that there could be many reasons why parcels of land can increase at different percentage rates over a period of time. The real test is not the percentage increase in the unimproved values, but a comparison of the subject land with sales of comparable sites in the vicinity of the subject land at the time of the valuation.
Comparison of Sales –
I consider then whether the pattern of selected sales for major development purposes is representative of the highest and best use of the subject land. I note Mr Bullock’s concern that the adoption of such sales to major developers for high rise unit development purposes may be a selective use of sales evidence where scarcity of comparable properties is apparent. In that regard I am referred to the recent decision of the High Court in Maurici v Chief Commissioner of State Revenue and Anor (supra).
The matter of scarcity of comparable sales is an issue well known to experienced valuers. The circumstances of Maurici were different to the current matter in that in Maurici it was agreed by the parties that a scarcity factor did exist in respect of the three sales of vacant land that had been adopted by the valuer for the Chief Commissioner. Under those circumstances there had been also a representative group of comparable improved sales which were not considered by the Government valuer. The High Court directed that under those circumstances the valuer should have considered the other sales of improved land.
That issue was also recently clarified by the Land Appeal Court in Department of Natural Resources and Mines v GE and JEJ Spender [2003] QLAC 0086, 19 December 2003, to be reported. That decision was the first interpretation by the Land Appeal Court in Queensland on the implementation of Maurici on that issue, and provides a comprehensive explanation on the matter of scarcity of sales. The following statement by the Land Appeal Court at para [55] has some relevance to the current matter:
“[55] It is seen as an observation of reality that a buyer of a scarce vacant parcel of land at a desirable location could be categorised as a special and different class of buyer to one not wishing to build and seeking an established dwelling. It might be a popular conception, particularly among those challenging a statutory land valuation, that a buyer of scarce land would be prepared to pay a premium over and above ‘fair market value’ because of that scarcity factor. However for that to be proved, or disproved, for the purposes of the statutory valuation process, analysis of the overall relevant market evidence is necessary. For example, just as a sale to an adjoining owner might be shown not to have included a premium, by reference to the overall market, a sale of a scarce vacant parcel needs to be considered in light of the overall market which includes sales of improved parcels.”
However in the current matter Maurici can be distinguished as it is the evidence of Mr Crowley that there is no evidence of “scarcity” at Coolangatta for lands for major unit development purposes. Mr Bullock does not contest that fact, but only claims that sales to developers for major unit development purposes is not a fair comparison. The Spender decision also notes at para [57]:
“[57] Consequently, while purchasers of either improved or vacant land may be categorised as belonging to different segments of the market place, it does not necessarily follow that those segments are not strongly interlinked. The Maurici judgment recognises the error in a valuation basis being established from an overly selective segment of the market.”
In considering then whether sales to developers are a fair test of the comparison with the subject land, rather than to seek comparisons with sales of single units, I turn to the principle of “like with like” comparisons. It is agreed that the highest and best use of the subject land would be for a multiple unit residential development, probably to 9 storeys. In seeking then the value of such a parcel, I am reminded of the longstanding decision of the High Court in Spencer v The Commonwealth of Australia (1907) 5 CLR 418, where Isaacs J (later CJ) said at 441:
“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”
A test of the use of comparable sales to determine the market value of the land can be found in the case of Brewarrana Pty Ltd v Commissioner of Highways (SA) (1973) 32 LGRA 170, where Wells J said at 179:
“It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to be sold, or the same thing as its true value. Before using any allegedly comparable sales, therefore, the valuer must consider whether, having regarding to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v The Commonwealth of Australia and in later cases to warrant a court’s reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope view, land use (actual and potential) scope for and difficulties of, development, services and amenities; and in relation to the transaction of sale, the valuer must weight such things as the character, business and relationships of the parties, their motives, the terms and conditions of their contract of sale and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale of transfer were concluded or effected. … there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert valuer to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill.”
On the evidence Mr Crowley confirms that his sales provide no evidence of any lack of skill or prudence by the developers in acquiring those properties for major development purposes. Certainly comparisons with sales of single units themselves could not be accepted as truly “like with like” comparisons, for the highest and best use of the subject land. That is supported by Mr Crowley’s evidence where he said:
“Consider this: the basic set-up of a unit structure, a body corporate type structure and freehold title to a unit essentially fragments the capacity to sell that land. So the relationship between the value of the land and the value of the unit isn’t related, and you will quite often find that is the case. Whenever a set of units is actually bought out to be redeveloped a considerable higher price must be paid to make sure that you can buy out all the unit owners, because otherwise the unit owners really don’t own the land, all it owns is the unit.” (transcript 66).
I would agree with Mr Crowley.
I turn then to the actual sales evidence, and find that in his analysis of his sales Mr Crowley has made allowance for the demolition costs in accordance with guidance in Valuer-General v Fenton Nominees Pty Ltd (1981-82) 47 LGRA 95, where the High Court said at 99:
“The principle enunciated in Tooheys Ltd v Valuer-General does not speak for the situation. It tells us that it is the subject land in its unimproved state that is to be valued. It does not deny that sales of improved property in the vicinity may be relevant material for the purpose of valuing the subject land in its unimproved state when the improved property has been acquired so that its higher potential as vacant land may be realised, the costs of demolition of improvements being an additional element in what the purchaser is prepared to pay in order to acquire vacant land.”
I accept Mr Crowley’s analysis on that basis.
In summarising Mr Crowley’s comparisons I find the following for the 1 October 2001 appeal:
SaleArea Applied Rate Comparison
per square metre
1.128 Marine Parade 422 m² $1,351 Inferior/Smaller/less
height
2.397 Golden Four 1,399 m² $1,248 Inferior/Location/Shape
Drive
3.224 Pacific Drive 1,012 m² $1,284 Inferior/Location/Less
height
Subject land 875 m² $1,428 -
Mr Crowley’s comparisons for the 1 October 2002 appeal are:
SaleArea Applied Rate Comparison
per square metre
1.128 Marine Parade 422 m² $2,606 Inferior
2.113 Griffith Street 3,347 m² (analysed at $4,414) Superior
3.351 Golden Four 1,123 m² $2,226 Inferior/Location/Less
Driveheight
Subject land 875 m² $2,743 -
On those comparisons there is nothing to indicate that Mr Crowley has made a serious error of fact or followed a wrong principle. (Brisbane City Council v The Valuer-General (1977-78) 140 CLR 41, per Gibbs J at 56).
In seeking reasons why Mr Crowley has analysed the one sale at 128 Marine Parade at $2,623 per square metre for the 1 October 2001 valuation, but applied that sale at only $1,351 per square (51%), while he applied the same sale at $2,606 per square metre (95%) for the 1 October 2001, I note that was to reflect the date of that sale in a rising market at January 2002. The previous sale of 128 Marine Parade was in October 1996 for $900 per square metre. Those applications do not appear inconsistent. I understand those rates support consistent relativities with the adjoining parcels. It does not support the values estimated by the appellants at $1,078 per square metre.
Summary:
In summarising these matters I am reminded that in exercising their appeals, the onus to prove their case rests upon the appellants under s.45(4) of the Act. I also note that under s.33 of the Act the valuations by the Chief Executive are deemed to be correct, unless proved to the contrary. In the absence of evidence to the contrary, that onus has not been satisfied, and the appeals fail in these matters.
Conclusion:
Having considered the whole of the evidence I am not persuaded that the appellants have proved their cases. The appeals are dismissed, and the unimproved values of Lots 7 and 8 on C 28529 as determined by the Chief Executive in the sums of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) (1 October 2001), and Two Million Four Hundred Thousand Dollars ($2,400,000) (1 October 2002) are affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
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