Hartwig v Chief Executive, Department of Lands
[1995] QLC 57
•21 July 1995
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BRISBANE
21 July 1995
Re: Appeal against Rental Valuation.
Valuation of Land Act 1944 -
Shire of Banana (RV94-89).
Charles Nevil Hartwig and Dorothy June Hartwig
v.
Chief Executive, Department of Lands
(Hearing at Biloela)
DECISION
Mr and Mrs Hartwig are the lessees of Special Lease No 40/31404 described as Lot 13 on Plan DW119, Parish of Dresden, containing an area of 61.766 hectares. As at 31 March 1992 the Chief Executive valued this land for rental purposes at $9,500. This rental valuation was to take effect from 1 July 1993.
The lessees appealed against this valuation, advising that their estimate of the unimproved value is $3,000.
The subject land is situated approximately 5 kilometres east of the town of Cracow and approximately 54 kilometres south-east of Theodore. Access to the land is by means of the formed gravel Cracow/Eidsvold Road.
Special Lease 40/31404 was granted for the purpose of manufacturing, industrial, residential or business. For the purposes of rental it has been assessed as Category 2, Closer in Farming, and attracts a rental of 3 per cent of the unimproved value.
The land consists of easy sloping low ridges with stony, red-brown soil, mainly timbered with narrow leaf ironbark with some box and broadleaf ironbark. It is used for the purpose of cattle grazing in conjunction with other lands.
Mr CN Hartwig appeared and gave evidence on behalf of the lessees. Mr Hartwig expressed concern that the property was valued at $9,500, or approximately $154 per hectare. It was used as part of an aggregation, which included a property known as "Pinedale", for the grazing of beef cattle. "Pinedale", Mr Hartwig said, has an area of 1,336 hectares and was valued under the provisions of the Valuation of Land Act at $60,484 or approximately $45 per hectare. Mr Hartwig considers that "Pinedale" has a better class of country.
Although the property is situated on the outskirts of the town of Cracow, Mr Hartwig said that Cracow is virtually a ghost town since the closure of the mine. There is no business activity in the town, the hotel has closed and most of the houses have been removed. Those people continuing to live in the town are there only because they have nowhere else to go. Mr Hartwig considers that their houses are now valueless.
In addition, Mr Hartwig said that the town is no longer supplied with water. When the mine was operating water was pumped from the Dawson River, but now that the mine has closed there are no staff to maintain the pump. He sees no advantage in a property of this size being located adjacent to a ghost town.
Mr Hartwig said that he bought the subject land approximately 20 years ago together with other small properties around Cracow. He explained that the reason for buying them was to eliminate the nuisance of having small landowners on the boundary of his larger property. He said that in addition to "Pinedale" he had a couple of hundred hectares made up of smaller blocks close to Cracow. They all adjoin one another and are run as one paddock.
Mr Hartwig said that he has run cattle on this land for the last 20 years and could not see why it would have any value in addition to its value as grazing land. He said it can only run eight to 10 head of cattle which makes it very expensive grazing land. He thought that the purpose of the lease for manufacturing, industrial, residential or business, was quite inappropriate.
Mr Hartwig considered that "Pinedale" overall was better country hectare for hectare than the subject land. He said that "Pinedale" had two creeks running into it and that there was good feed along the creek flats. In contrast, he said that the subject land was the top of a hill between those two creeks and consequently much harder country.
Mr Hartwig did not know of any sales in the area but he said that he did know that there were some "crazy" prices being paid for land in the Cracow area. He said that one particular speculator had come in there buying land on the basis that the mine would be a success. In Mr Hartwig's words, "He thought that Cracow was going to be another BHP".
Mr Hartwig did not know Mr Kelsey's Sales Nos 1 and 2 and commented that he did not think that areas of 1,540 hectares and 6,000 hectares were in any way comparable with an area of only 61 hectares. In addition, they were much further away, Sale No 1 being situated near Theodore while Sale No 2 was situated north-west of Biloela.
However, Mr Hartwig thought he knew Sale No 3, Bradshaw to Walsh. He commented that Walsh had an aggregation of small blocks in that vicinity and that he thought there would be an adjoining owner influence in this sale. In addition, he said that the block was far better country than the subject land, being originally scrub country with bottle trees, etc., developed with buffel grass. He thought that the sale price of $23,000 was a reflection of a "silly price" paid by an adjoining owner.
Evidence for the respondent was given by Mr Gordon Graham Kelsey, senior valuer employed by the Department of Lands. Mr Kelsey was not the valuer responsible for the valuation, but he had inspected the property and was aware of the sales in the locality. Mr Kelsey had regard to three sales which were set out on a schedule attached to his valuation.
Mr Kelsey's Sale No 1 had an area of 1,540 hectares and was sold in October 1990 for $800,000. This sale was analysed to show an unimproved value of $226,470 and a valuation of $207,500 was applied in the 1992 valuation. Mr Kelsey described this land as comprising 35 hectares of forest irrigation, 215 hectares of scrub and forest cultivation and 1,290 hectares of scrub and forest grazing. He said that the country and location were superior to those of the subject land, while access was similar. However, the sale was significantly larger.
Mr Kelsey explained that he did not use this sale as a direct comparison with the subject land. It was included in the basis of valuation as it was one of the sales upon which the Department relied to rewrite the existing valuations at the time of the 1992 valuation.
Mr Kelsey's Sale No. 2 is in the same category. While it is not directly comparable with the subject land it is another sale upon which the Department relied to rewrite the existing valuations. This sale has an area of 5,930 hectares and sold in July 1990 for $145,000. This sale analysed to show an unimproved value of $67,635 and an unimproved value of $66,000 was applied in the 1992 valuation. Mr Kelsey described this land as comprising poor forest grazing with no development potential. He said that country and access are inferior to the subject land and it is significantly larger.
Mr Kelsey's Sale No 3 is situated close to Cracow. It has an area of 46 hectares and sold in October 1990 for $23,550. This sale analysed to show an unimproved value of $15,250 and an unimproved value of $10,600 was applied in the 1992 valuation. Mr Kelsey described this land as comprising broken scrub and forest grazing. He comments that it is similar but slightly superior to the subject land and he considers it to be a high sale supporting the subject valuation.
Mr Kelsey went on to say that because the purpose of the lease of the subject land is for manufacturing, industrial, residential or business purposes, it had been included in Category 2, which attracted a rent of 3 per cent of the unimproved value. Mr Hartwig was concerned with the classification as Category 2, "Closer in Farming", because he said the land was used as part of a large grazing enterprise and had no potential for closer in farming. He said that if Cracow was a thriving town the situation might be somewhat different.
Mr Kelsey said that the land had originally been valued as a rural homesite at $12,500. Subsequent to an objection by Mr and Mrs Hartwig, it had been reduced to $9,500 which Mr Kelsey said represents its value either as a small grazing property or as a rural homesite.
Mr Kelsey admitted that there was some difficulty in valuing the small areas around Cracow because of the volatile market in the area. He did not disagree with anything that Mr Hartwig said about the town and its environs. However, he said that sales had indicated that there had been no change in the existing relativity of valuations in the shire particularly in the values applied to larger properties. Although the two larger sales that he had referred to were in no way directly comparable to the subject land, they had been included to show that they support the present relativity. Mr Kelsey admitted that the Department had not applied a level of value that approached the sales evidence in Cracow. What sales had occurred were considered to be unreliable as most were bought by people who were speculating on the future of the town and the mine. Subsequent events have proved that these sales were high and that the market in the area was volatile and unstable. Therefore, with what limited evidence he had, Mr Kelsey said that the relativity between the values in the town and those of the small blocks surrounding it was maintained.
It emerged that this was the first rental valuation of the subject land. Previously the land had been valued with other land held by the Hartwigs in the area. However, under the recent legislation it was necessary to value each of the leasehold parcels as a separate entity.
The only sale in any way comparable is Sale No 3. Although Mr Kelsey felt that it was higher than the market level he included it because it was the closest sale to the subject land both in terms of area and situation. However, he readily conceded that it is superior as far as country is concerned. The analysis of this sale showed $15,250. The Department applied $10,600 as the unimproved value of the sale property, indicating that it was considered to be a high sale.
Mr Kelsey also included a schedule of sales which had taken place on the outskirts of Cracow between November 1992 and April 1994. These sales ranged in area from 6.16 hectares to 774.2 hectares with sale prices ranging from $8,000 to $80,000. Mr Kelsey admitted that he had not inspected any of these sales but had included them simply to indicate what people were paying in the environs of Cracow.
It is clear from this sales schedule that the vendor in the majority of cases was a company which Mr Kelsey knew was a developer from Bundaberg which tends to advertise in the southern States. Mr Kelsey had the feeling that none of the purchasers had seen the properties before purchasing them. In these circumstances, although I find that Mr Kelsey was correct to include them in his valuation for the sake of completeness, no reliance can be placed on them whatsoever.
The situation is that none of the sales used by Mr Kelsey are appropriate for the valuation of the subject land. This is the first time that the land has to be valued as a separate parcel and not as part of an aggregation. Even though it is a lease which can be used for manufacturing, industrial, residential or commercial purposes, the fact is that the land is used for the purposes of grazing and I find that such is its highest and best use.
The provisions of the Valuation of Land Act 1944, require that the land be valued as if it was held in fee simple, at such price as the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements did not exist. It is clear that this land cannot be valued in amalgamation with other land. The difficult question is: how much would a prudent purchaser pay for this small area of land, if it was vacant and unimproved, situated outside a ghost town?
There is nothing which would bring people to Cracow. Its attraction therefore is very limited if not non-existent. I can sympathise with the difficult situation in which Mr Kelsey found himself in endeavouring to support the valuation applied to the subject land. However, in the circumstances I feel that the values in the Cracow area for such small parcels would certainly have moved downwards as the town withered away and it would be wrong to maintain a relativity which existed previously. Therefore, without any sales to guide me, I have come to the conclusion that a prudent purchaser would pay no more than $6,000 for the subject land.
Accordingly, the appeal is allowed, the valuation of the Chief Executive set aside and the unimproved value of the subject land for rental purposes is determined at $6,000.
(JJ Trickett)
Member of the Land Court
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