Haitzer v Valuer General

[2009] NSWLEC 1125

Land and Environment Court

of New South Wales

CITATION:

Haitzer v Valuer General [2009] NSWLEC 1125

PARTIES:

APPLICANT
Haitzer, John and Carole Frances

RESPONDENT
Valuer General

FILE NUMBER(S):

30991 of 2008

CORAM:

Parker AC

KEY ISSUES:

VALUATION OF LAND :- Land value

LEGISLATION CITED:

Land and Environment Court Act 1979
Valuation of Land Act 1916
Blue Mountains Local Environmental Plan 1991

CASES CITED:

Borg-Warner (Australia) Limited v. The Valuer General (1978) 35 LGRA 348

DATES OF HEARING:

2 March 2009

 
DATE OF JUDGMENT: 

29 April 2009

LEGAL REPRESENTATIVES:

APPLICANT
Mr J Haitzler, Litigant in person

RESPONDENT
Mr J Maston, Barrister
Instructed by Mr P Rankins, Solicitor
of Valuer General

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Parker AC

29 April 2009

30991 of 2008 Haitzler v Valuer General

JUDGMENT

1 This is an appeal by Mr and Mrs Haitzler (the Applicant), under Section 37 of the Valuation of Land Act 1916 (the Act), against the Land Value assessed by the Valuer General (the Respondent) in respect of the property known as 2-8 Shadforth Road, Mount Wilson (the subject property).

Background

2 The Applicant was represented by Mr Haitzler.

3 The Respondent was represented by Mr Maston, Barrister, instructed by Mr Rankins, Solicitor of the Valuer General.

4 The Land Value of the subject property at 1 July 2007 (the base date), was assessed by Mr Haitzler at $377,000 and by the Valuer General at $626,000.

5 Mr Haitzler claimed an allowance for profitable expenditure of $42,055, which the Valuer General denied.

6 The matter was the subject of mediation under Section 34 of the Land and Environment Court Act 1979 but the parties were unable to reach agreement.

7 The matter was the subject of an on site inspection on 2nd March 2009, followed by a hearing at Lithgow Court House.

8 Section 40(2) of the Act states:

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

The subject property

9 The subject property is located close to the centre of the Mount Wilson village, comprising a rural residential allotment of 4.6 hectares improved by a single storey residence.

10 The allotment is cleared, with the exception of approximately 5% which is covered by environmentally significant rainforest vegetation, being moderately sloping and enjoying uninterrupted views of the mountain panorama.

11 Access to the allotment is provided by both Shadforth Road and Stephen Lane which are unsealed roads.

12 The subject property is zoned Rural Conservation (Mount Wilson) in the Blue Mountains Local Environmental Plan 1991.

13 The highest and best use of the subject property was agreed to be as a single rural residential home site.

14 The subject property comprises Lot 43 in Deposited Plan 751645.

The evidence

15 Mr Haitzler tendered as evidence a summary of his calculations referred to as “Value Comparison to 2-8 Shadforth Road, Mount Wilson” dated 19th February 2009 proposing the Land Value to be $377,000 as at the base date.

16 Mr Haitzler did not tender any expert valuation evidence.

17 Mr Lunney, Registered Valuer, tendered as evidence a valuation of the subject property dated 19th February 2009 and gave expert evidence on behalf of the Valuer General. He concluded that the Land Value of $626,000 as at the base date could be supported.

18 Mr Haitzler and Mr Lunney submitted two common comparable sales and each submitted two further comparable sales.

19 Both parties submitted comparable sales at 1 Hillcrest Avenue, Mount Wilson and 26-28 Smiths Road, Mount Wilson which were inspected externally.

20 Mr Haitzler further submitted comparable sales at 2 Mill Road, Mount Wilson and 1 Mount Wilson Road, Mount Wilson, which were inspected externally.

21 Mr Lunney further submitted comparable sales at 9 Smiths Road, Mount Wilson and 30-32 Smiths Road, Mount Wilson, which were inspected externally.

Consideration of the evidence

22 Having regard to location, area, extent of cleared land and nature of vegetation, topography of the site, quality and extent of views, nature of road access and date of sale, the six comparable sales may be compared with the subject property as follows.

23 1 Hillcrest Avenue, Mount Wilson, submitted by both parties, is located close to the subject property with comparable road access and being sold on 1st June 2007 which is close to the base date. The site is superior to the subject property having less severe topography and being considerably smaller at 2.0586 hectares. The site is inferior to the subject property having limited views and being substantially uncleared. Having regard to the considerable comparability of this sale to the subject property, I consider the sale to be a directly relevant comparable sale.

24 26-28 Smiths Road, Mount Wilson, submitted by both parties, is a larger site of 7.247 hectares of which approximately 2.4 hectares is cleared and approximately 50% comprises environmentally significant bushland, being sold on 25th May 2007 which is close to the base date. The site is superior to the subject property having less severe topography and superior road access. The site is inferior to the subject property having limited views and being some distance from a village, despite proximity to Lindfield Park gardens. Having regard to the limited comparability of this sale to the subject property, I consider it to be an indirectly relevant comparable sale.

25 2 Mills Road, Mount Wilson, submitted by the Applicant, sold on 3rd May 2007 which is close to the base date. The site is superior to the subject property being smaller at 2.817 hectares and having superior road access. The site is inferior to the subject property having limited views, being substantially uncleared, having more severe topography and being some distance from a village. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance.

26 1 Mount Wilson Road, Mount Wilson, submitted by the Applicant, has superior road access to the subject property. The site is inferior to the subject property having considerably poorer views, being substantially uncleared, having more severe topography, being some distance from a village, being very considerably larger at 14.54 hectares and being sold on 17th May 2006 which is over one year before the base date. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance.

27 9 Smiths Road, Mount Wilson, submitted by the Respondent, has superior road access to the subject property. The site is inferior to the subject property having considerably poorer views, being substantially uncleared, having more severe topography, being some distance from a village, being considerably larger at 9.331 hectares and being sold on 3rd March 2006 which is over one year before the base date. Having regard to the very limited comparability of this sale to the subject property, I consider the sale to be of limited relevance.

28 30-32 Smiths Road, Mount Wilson, submitted by the Respondent, is a larger site of 7.101 hectares of which approximately 2.4 hectares is cleared and approximately 50% comprises environmentally significant bushland. The site is superior to the subject property having less severe topography and superior road access. The site is inferior to the subject property having limited views and being some distance from a village, being sold on 11th September 2007 which is after the base date. Having regard to the limited comparability of this sale to the subject property, I consider it to be an indirectly relevant comparable sale.

29 I consider the comparable sale at 1 Hillcrest Avenue, Mount Wilson to be a directly relevant comparable sale.

30 I consider the comparable sales at 26-28 Smiths Road and 30-32 Smiths Road, Mount Wilson to be indirectly relevant comparable sales.

31 I consider the comparable sales at 2 Mills Road, 1 Mount Wilson Road and 9 Smiths Road, Mount Wilson to be of limited relevance.

32 I note that Mr Haitzler did not analyse the directly relevant comparable sale at 1 Hillcrest Avenue, Mount Wilson.

33 I note that Mr Lunney analysed the directly relevant comparable sale at 1 Hillcrest Avenue, Mount Wilson to deduce an amount of $450,000 which he then adjusted by the addition of 30% to reflect cleared land, 10% to reflect size and 10% to reflect views equating to an adjustment of 50% to give $675,000 for application to the subject property.

34 I note that Mr Haitzler analysed the indirectly relevant comparable sale at 26-28 Smiths Road, Mount Wilson to deduce an amount of $460,000 which he then adjusted by the addition of 5% to reflect cleared land and 5% to reflect Farrer Road access, with the deduction of 17% to reflect size and 5% to reflect Smiths Road access equating to a deduction of 12% to give $405,000 for application to the subject property. I note that Mr Haitzer did not make an adjustment to reflect the location of the comparable sale relative to the subject property.

35 I note that Mr Lunney analysed the indirectly relevant comparable sale at 26-28 Smiths Road, Mount Wilson to deduce an amount of $460,000 which he then adjusted by the addition of 25% to reflect location, 10% to reflect cleared land and 5% to reflect views, with the deduction of 5% to reflect size equating to an adjustment of 35% to give $621,000 for application to the subject property.

36 I note that Mr Haitzler did not analyse the indirectly relevant comparable sale at 30-32 Smiths Road, Mount Wilson.

37 I note that Mr Lunney analysed the indirectly relevant comparable sale at 30-32 Smiths Road, Mount Wilson to deduce an amount of $470,000 which he then adjusted by the addition of 25% to reflect location, 10% to reflect cleared land and 5% to reflect views, with the deduction of 5% to reflect size equating to an adjustment of 35% to give $634,500 for application to the subject property.

38 Having derived the amount of $405,000 from the analysis of 26-28 Smiths Road, Mount Wilson, Mr Haitzler attached a weighting of 50% to this amount and 25% to each of the amounts derived from his analysis of 1 Mount Wilson Road and 2 Mills Road, Mount Wilson (being sales which I consider to be of limited relevance) to derive the amount of $377,000 for the subject property.

39 Having derived the amounts of $675,000, $621,000 and $634,500 from the analysis of comparable sales, Mr Lunney considered the Land Value of $626,000 for the subject property could be supported.

Findings

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

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

42 I note that Mr Haitzler made a deduction of 12% to the indirectly relevant comparable sale at 26-28 Smiths Road, Mount Wilson for application to the subject property but made no adjustment to reflect the location of the comparable sale relative to the subject property. By making such a deduction from the comparable sale for application to the subject property, Mr Haitzler implies that the comparable sale is considered to be superior to the subject property.

43 I consider that 26-28 Smiths Road, Mount Wilson, though having less severe topography and superior road access than the subject property, has limited views and is some distance from a village which render it inferior to the subject property overall warranting an upward adjustment of the comparable sale evidence of value for application to the subject property.

44 I note that Mr Haitzler adopted explicit adjustments comprising the addition of 5% to reflect cleared land and 5% to reflect Farrer Road access, with the deduction of 17% to reflect size and 5% to reflect Smiths Road access with no adjustment to reflect the location of the comparable sale relative to the subject property.

45 I consider the adjustment of 5% to reflect cleared land to be inadequate given that approximately 67% of the comparable sale is uncleared and approximately 50% is environmentally significant bushland compared to only 5% of the subject property being uncleared and of environmental significance. I note that the Mr Haitzler’s adjustments to reflect road access cancel each other out. I further note that the deduction of 17% to reflect size appears to be based on an equation assuming a linear relationship between price and area which I do not consider to be supported by valuation theory and practice. I also do not accept that there should be no adjustment for location given that the subject property is close to the village of Mount Wilson whereas the comparable sale is some distance from a village.

46 I note that Mr Lunney adopted total explicit adjustments of 50% and 35% in his analysis of the comparable sales. I consider an explicit adjustment of 50% to be beyond the upper bounds of reasonableness of adjustment in this case and the adjustments of 35% to be at the upper bounds of reasonableness of adjustment in this case.

47 I note that the adjustments of 35% produced a range of $621,000 to $634,500 which support the valuation of $626,000.

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

49 Having regard to the evidence tendered, the cross examination and the summation presented, I consider that Mr Haitzler did not present an approach to the valuation of the subject property sufficient to prove the Applicant’s case as required by section 40(2) of the Act.

50 The Act provides, at section 14(L):

“(1) For the purpose of ascertaining the land value of any land, the Valuer-General is to ascertain a reasonable allowance for profitable expenditure by the owner, occupier or lessee in respect of:
(a) any effective land improvements on or appertaining to the land;”

51 The term “land improvements” is defined at section 4 of the Act to mean:

(a) the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths,
(b) the picking up and removal of stones,
(c) the improvement of soil fertility or the structure of soil,
(d) the restoration or improvement of land surface by excavation, filling, grading or leveling, not being works of irrigation or conservation,
(d1) without limiting paragraph (d), any excavation, filling, grading or leveling of land (otherwise than for the purpose of irrigation or conservation) that is associated with:
(i) the erection of any building or structure, or
(ii) the carrying out of any work, or
(iii) the operations of any mine or extractive industry ,
(e) the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and
(f) underground drains.

52 Mr Haitzler claimed, in evidence submitted in Court, an allowance for profitable expenditure of $42,055, being the cost of a range of works apparently based on contractor’s invoices ($24,605) and allowance for time at $15 per hour ($17,450).

53 I note that the amounts claimed by Mr Haitzler, in evidence submitted in Court, actually sum to $41,935 comprising amounts apparently based on contractor’s invoices of $24,985 and allowances for time of $16,950.

54 The Valuer General denied the claim for profitable expenditure.

55 Having regard to the definition of “land improvements” in section 4 of the Act, $11,055 may be related to the clearing of land by the removal of timber, $2,700 may be related to the picking up and removal of stones and $1,800 may be related to the improvement of soil fertility or the structure of soil, totaling $15,555.

56 The balance of the claim does not appear to fall within the definition of “land improvements” in section 4 of the Act, being $14,620 for the provision of power, $7,460 for road works and $4,300 for planting, totaling $26,380.

57 The term “effective” in section 14(L)(1)(a) was considered in the context of predecessor statutory instruments in Borg-Warner (Australia) Limited v. The Valuer General (1978) 35 LGRA 348 at 356. In principle, the Court held that an allowance for profitable expenditure should be determined by reference to the enhancement in value of the land, being the difference between the value of the land with land improvements and the value on the assumption of no land improvements, as distinguished from the cost of the works.

58 Mr Haitzler did not provide evidence of the enhancement in value of the subject property, as a result of the land improvements costing $15,555, to substantiate a claim for profitable expenditure.

59 The orders of the Court:

(i) The Appeal is dismissed.
(ii) The Land Value of $626,000 as at the base date of 1st July 2007 for the property at 2-8 Shadforth Road, Mount Wilson is confirmed.
(iii) No allowance is made for profitable expenditure.
(iv) No Order is made as to costs.
(v) The exhibits are returned.

___________________

Dr David Parker
Acting Commissioner of the Court