Hoeg v Department of Natural Resources and Water
[2009] QLC 26
•20 February 2009
LAND COURT OF QUEENSLAND
CITATION: Hoeg v Department of Natural Resources and Water [2009] QLC 0026 PARTIES: Flemming CB Hoeg
(applicant)v. Chief Executive, Department of Natural Resources and Water
(respondent)FILE NO: AV2008/0045 DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation of land under the Valuation of Land Act 1944 – General Division DELIVERED ON: 20 February 2009 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: Mr RS Jones ORDERS: 1. The appeal is allowed.
2. The unimproved value of Lot 1 of Registered Plan 53659, in the Parish of South Brisbane, as at 1 October 2007 is determined at Five Hundred and Forty-three Thousand Dollars ($543,000).
CATCHWORDS: Valuation of Land Act 1944 – s.33 VLA – presumption of correctness of statutory valuation – onus of proof – relevance of significant increase in level of unimproved value from previous years - use of appropriate comparable sales evidence – effect on unimproved value because of "character residential" designation under Brisbane City Council Town Planning Scheme APPEARANCES: Mr Hoeg in person for the applicant
Ms T Johnson, principal lawyer of the Department of Natural Resources and Water, for the respondent
Background
Mr Hoeg, the applicant, has appealed against the assessment of unimproved value assigned to his land by the respondent, the Chief Executive, Department of Natural Resources and Water. The applicant is the registered proprietor of a parcel of land located at 382 Montague Road, West End, more properly described as Lot 1 on Registered Plan 53659, Parish of South Brisbane.
The unimproved value determined by the respondent as at 1 October 2007 is $630,000. The applicant's original estimate of the unimproved value was $450,000, however, this was changed to $480,140 to reflect a more "equitable valuation".[1]
[1] Statement of Mr Hoeg, Ex 1, p.4-5.
The subject land is 814 m² in area and is located in the suburb of West End approximately 2.5 km from the Brisbane Central Business District. The land is a "hatchet" shaped block which has a long narrow access to Montague Road. Access to Montague Road is approximately 3 metres in width, 51 metres long and about 156 m² in area. Apart from the boundary to Montague Road, the land is surrounded on all sides by numerous neighbouring properties. Under the Town Planning Scheme for the City of Brisbane, the larger area of the subject land (approximately 658 m²) is designated "Character Residential". For reasons which were not fully explained the long narrow access "handle" is designated low-medium density residential. The development immediately surrounding the land is made up of a mixture of single residential dwellings and multi-unit developments.
Consistent with its use as at the date of valuation, the land was valued on the basis of its highest and best use being for single unit dwelling house purposes. All of the usual urban services and amenities are available to the land.
At the hearing of this appeal, the applicant appeared in person. The respondent was legally represented by Ms T Johnson, a principal lawyer employed by the respondent and relied on the evidence of Mr AB Van Hees, a registered real estate valuer also employed by the respondent.
Issues in the appeal
In the attachment to his Notice of Appeal, the appellant identified a number of issues upon which he relied to say that the valuation appealed against was wrong. The annexure combines a mixture of fact, assertions and argument. A reading of this document, together with the evidence led by Mr Hoeg identified the real issues in the appeal to be:
(i) that the increase in the unimproved value assigned to the subject land, when compared to the average increase for the suburb of West End, is manifestly excessive and cannot otherwise be justified (the relativity issue);
(ii) the valuation appealed against fails to take into account or adequately take into account the limitations imposed on any development on the land because of its character housing designation under the relevant town planning instruments;
(iii) the valuation appealed against fails to take into account or adequately take into account the traffic and industrial noise which the land is subjected to and the general "streetscape" of Montague Road;
(iv) the respondent has failed to take into account or to adequately take into account the fact that the subject land does not enjoy any meaningful views when compared to some of the comparable sales evidence relied on by the respondent;
(v) the valuation appealed against fails to take into account or adequately take into account the shape and usable area of the land;
Pursuant to s.45(4) of the Valuation of Land Act 1944 (VLA) the applicant is limited to the grounds stated in his Notice of Appeal and bears the burden of proving each and every ground relied on. Further, pursuant to s.33 of the Act the valuation appealed against is deemed to be correct until proven otherwise. In Brisbane City Council v The Valuer-General[2], the High Court considered that the statutory presumption in favour of the correctness of the valuation appealed against may be rebutted where it can be shown that it was based on a wrong principle and/or involved a significant area of fact and/or was made by a fundamentally erroneous method.
The Issues in the Appeal
[2] (1977-78) 140 CLR 41 at 56 - 57.
The applicant complains that there is no justification for the increase in the unimproved value assigned to his land of approximately 20% when compared to the average increase for the suburb of West End which was approximately only 2%. In support of his argument on this topic the applicant went to considerable trouble to set out a 5-step analysis of what was, in his opinion, the relevant valuation evidence, practice and procedures to support his conclusions on this topic.
It is not necessary to descend into the detail of the applicant's analysis of this issue for two reasons. First, the evidence of Mr Van Hees, the valuer called by the respondent, was to the effect that the applicant's land, together with other parcels of land predominantly along the Montague Road, was the subject of a re-valuation while other areas within the West End district were not. This fact alone would tend to explain why there is an apparent anomaly in the relationship of unimproved values throughout the suburb. Second, it has been judicially recognised that there could be a number of factors justifying a significant increase in the unimproved value of certain parcels of land when compared to others within the same general location. That is why it has been said on a number of occasions that usually the best evidence for the assessment of the unimproved value of a parcel of land is that of sales of vacant or lightly improved comparable lands which have occurred at or about the relevant date of valuation.[3] In this context the Land Appeal Court in Tow v Valuer-General[4] said:
"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…"
[3]For example, Fischer v Valuer-General (1983) 9 QLCR 44 at 46 (LAC) and Grahn v Valuer General (1992-93) 14 QLCR 327 at 328-329 (LAC).
[4] 1978 5 QLCR 378 at 381.
Having regard to the totality of the evidence I have concluded that the evidence concerning "relativity" does not warrant interfering with the valuation appealed against and, subject to the matters specifically referred to below, that the sales evidence relied on by Mr Van Hees is sufficiently reliable to provide a satisfactory guide to the unimproved value of the subject land.
The character housing designation
As I understand the evidence on this issue, the character housing designation under the Town Plan of the Brisbane City Council which affects the subject land means that any development on it has to fit in with the dominant residential character of West End. This would prevent, by way of example, a multi storey tuscan villa being erected on the subject land. However, that is not to say that modern and attractive residential development would not be carried out on the land. This is evidenced by the photographs of the residential development that has occurred on Mr Van Hees' Sale 1 located at 44 Victoria Street, West End.[5]
[5] Exhibit 8.
During the evidence of Mr Hoeg, it emerged that his real concern was that the pitch of the roof which would be required to be constructed on any development to satisfy the "character housing" designation would effectively cause the ceiling and floor heights of any such development to be of a lower elevation than that which might occur if more modern and flatter roofing was permitted.
While I am prepared to accept that the character housing designation might tend to deter some purchasers, I have reached the conclusion that any discount to take account of this issue would be minor and, not of itself, sufficient to disturb the valuation appealed against.
Noise and traffic
I accept that the commercial development that has occurred along Montague Road in the general vicinity of the subject land tends to make it a less attractive residential street when compared to Mr Van Hees' Sales 1, 2 and 3. I also accept that in the vicinity of the subject land, Montague Road is the source of traffic noise including that caused by the operation of commercial vehicles. However, in this context, it is likely that Mr Van Hees' Sale 3 would be more exposed to traffic noise than the bulk of the subject land. The evidence of Mr Hoeg was essentially to the effect that the traffic noise from Montague Road reduces dramatically as one moves away from the road towards the house site at the rear of the block.
On balance, I consider that Mr Van Hees has sufficiently taken these matters into account.
Views
It is clear that in reaching his conclusion that the unimproved value of the subject land was $630,000, Mr Van Hees considered that that figure sat comfortably with his analyses of his Sales 2 and 3. Sales 2 and 3 are the most relevant sales in this case. Mr Van Hees analysed Sale 2 to an unimproved capital value of $700,000 and Sale 3 to $730,000. However, it is tolerably clear to me that his valuation of the subject land was reached on the basis that Sales 2 and 3 did not have any meaningful views and/or there was not any material difference in the views available from each of the blocks.[6]
[6]In his report (Ex 2) Mr Van Hees in his analysis of Sale 2 states "the vacant sale is considered to be comparable overall to the subject property. This is due to the location and similar inferior access" and, in respect of Sale 3, "the vacant land sale is considered to be comparable to the subject property in size and location. The vacant sale property is located on Hardgrave Road where traffic noise is higher than the secluded subject property".
I disagree with Mr Van Hees on this issue. It is clear to me that Sales 2 and 3, particularly Sale 3, has views superior to that of the subject. During the course of his evidence Mr Hoeg tendered a series of photographs showing the outlook from the subject land in a south-west, westerly and north to north-west direction.[7] These photographs show the land being essentially hemmed in by various forms of development. That in itself is not particularly surprising given the shape and location of the land where it is surrounded on all sides (save for access to Montague Road) by numerous neighbours. This is also the case to an extent with the Sale 3 land. However, on the evidence before me it seems quite clear that this land has a superior outlook when compared to the subject.[8]
[7] Ex 6.
[8] See for example Ex 1, Appendix M.
There is simply no comparison between the outlook or views associated with the subject land when compared to those associated with Mr Van Hees' Sale 3. The evidence of the applicant, which I accept, is that the views from the Sale 3 land are quite extensive and include an expansive view of the Brisbane Central Business District.[9]
[9] See Ex 4.
During the course of his evidence Mr Van Hees expressed a view that he had some suspicions about where the photograph showing the views from Sale 3 were taken. His evidence in this regard was no more than speculative. The evidence of Mr Hoeg concerning the extent of the views from Sales 2 and 3 was not seriously challenged in cross-examination and I prefer his evidence on this topic to that of Mr Van Hees.
On the evidence before me I have reached the conclusion that Mr Van Hees has materially underestimated or understated the extent of the views associated with Sales 2 and 3 when compared to the subject land. Once this is recognized there must necessarily be a significant adjustment to his valuation to bring this error into account.
The shape of the land
All of Mr Van Hees' sales are of a regular shape. Sale 2 has many characteristics similar to the subject land. Sale 2, like the subject, has only very narrow immediate access and is surrounded by numerous neighbours. I accept Mr Van Hees' evidence that access to Sale 2 is circuitous and difficult. However, Sale 2 is comprised of a regular rectangular shaped parcel of land of 1,194 m². The unchallenged evidence of Mr Hoeg is that after allowance is made for the long narrow access to the subject land there is only approximately 658 m² of land which could be described as forming a suitable building site.
The evidence is that Sale 2 is (or is about to be) subdivided into two residential lots. Assuming the subdivision to be into two lots of roughly equal size, this would mean that it would be capable of yielding separate lots of in the order of 550 m² in area. Mr Van Hees gave evidence that a similar subdivision could occur on the subject land. I accept his evidence. However, any subdivision of the subject land would yield, again assuming generally equal sized lots, two residential lots of less than 330 m² in area.
The evidence is that Mr Van Hees' Sale 3 also had potential for subdivision into two lots as at its date of sale. The land has in fact now been subdivided into two lots. Lot 1 contains an area of 407 m² and Lot 2 an area of 402 m². Sale 3 also has the considerable advantage, at least insofar as subdivision is concerned, of being a corner block. Lot 1 has roughly 20 metre frontages to Hardgrave Road and Archibald Street, and Lot 2 a 20 metre to Archibald Street.
In the case of any subdivision of Sale 2, the lots would be superior in size and, at least in respect of one of the lots, likely to have views superior to that of any lot subdivided from the subject land. In the case of the subdivision on the Sale 3 land, the lots would be superior not only in respect of area but also access and views.
As was the case concerning the views associated with Sales 2 and 3, I have reached the conclusion that Mr Van Hees has failed to adequately take into account the shape and area of the subject land in comparison to those sales.
Conclusions
When the evidence is taken as a whole, particularly that evidence concerning views and the shape and area of the subject land, it is reasonably clear that Mr Van Hees erred in his application of the sales evidence to the subject land. In my opinion it is materially inferior to both of these sales and, in particular, to Sale 3.
Based on his assessment of the relative characteristics of the subject land and the sales, Mr Van Hees adopted a discount of about 10% between the unimproved capital value of Sale 2 and the subject land and of about 14% between it and Sale 3. For the reasons expressed above, Sales 2 and 3 are considerably more superior to the subject land than considered and applied by Mr Van Hees. Accordingly the discount to be applied to the subject when compared to these sales needs to be increased. While I acknowledge that there is an element of guesswork associated with this exercise, on the evidence before me I have decided that the level of discount between the subject and Sale 2 should be increased by a further 12.5 % to 22.5%. This results in a valuation of the subject land of $542,500 which I will round up to $543,000. This figure represents a reduction in value between 25% and 26% when compared to the unimproved capital value assigned to Sale 3. A reduction of this magnitude is justified on the evidence and the resultant figure of $543,000, in my opinion, not only sits comfortably with my findings concerning Sales 2 and 3, but also with Mr Van Hees' analyses of Sales 1 and 4 which were not seriously challenged by the applicant.
The improved sales evidence
Before making the orders disposing of this appeal, I should say something about Mr Van Hees' analysis of his Sales 2 and 3. In his report (Exhibit 2), Mr Van Hees when analysing Sales 2 and 3 described them as being vacant.[10] During the evidence of Mr Hoeg, he challenged this evidence asserting that when the sales occurred houses were located on both blocks. In response to that evidence, Mr Van Hees acknowledged that Mr Hoeg was correct and that when he carried out his valuation he in fact allowed a figure of $230,000 for the improvements on Sale 2 (predominantly a dwelling house) and $95,000 for the improvements on Sale 3 (predominantly a dwelling house). This evidence is consistent with his assessment of the unimproved capital value of each of those sales. However, on its face, it appears to be inconsistent with the analysis of these sales as set out in the "Schedule of Sales" contained in Exhibit 2. In these analyses, under the heading of "Improvements", $5,000 was allowed for the demolition cost of the house on the land and, in the case of Sale 3, the only improvement referred to is clearing, having a value of $2,000. When this matter was raised with Mr Van Hees his explanation was that the descriptions given under the heading of improvements in the sales schedule was the result of error and misdescription of the analysis and application of these sales. This evidence was not challenged by Mr Hoeg.
[10] Ex 2, p 4 re Sale 2; Ex 2, p 5 re Sale 3.
While this Court has recognized that in some cases it will be necessary for a valuer to resort to improved sales when determining the unimproved value of land[11], for the Court to be confident in applying that evidence it must be able to have confidence in the valuer's treatment of those sales. Misdescriptions of important elements of a sales analysis will almost inevitably lead to confusion and must be avoided.
[11] See for example the Valuer-General v Marano (1978) 5 QLCR 194 at 200-201 (LAC).
For the reasons expressed above, the orders of the Court are:
1. The appeal is allowed.
2. The unimproved value of Lot 1 of Registered Plan 53659, in the Parish of South Brisbane, as at 1 October 2007 is determined at Five Hundred and Forty-three Thousand Dollars ($543,000).
RS JONES
MEMBER OF THE LAND COURT