Jan W and Thomas K Dooley as Trustee for Cawbourne Practice Directors Superannuation Fund v Chief Executive, Department of Natural Resources
[1999] QLC 63
•4 June 1999
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BRISBANE
4 June 1999
Re: Appeal against Annual Valuation –
Valuation of Land Act 1944 –
Valuation Roll No: 5576 –
Local Government: BCC-Brisbane.
(AV98-177).
Jan W and Thomas K Dooley as Trustee for Cawbourne Practice Directors Superannuation Fund
v.
Chief Executive, Department of Natural Resources
D E C I S I O N
Background:
This matter deals with a parcel at 119 Commercial Road, Newstead, and described as Lots 7-10 on RP 9336, Parish of North Brisbane. The subject land is located about 2.4kms north-east of the Brisbane GPO, has an area of 1497 square metres, and is described as located in “Precinct 2 – Teneriffe Wool Store” in the Newstead and Teneriffe Waterfront Development Control Plan zone of the Town Planning Scheme of the City of Brisbane (the Council) effective at the date of valuation of 1 October 1996. The key issues are the impact of planning controls, the method of valuation, and the comparison of sales.
The subject land has good access to Commercial Road, which is bitumen sealed with concrete kerbing and channelling. All urban services are available, and the site is relatively level, although low in elevation.
On 17 March 1997, the Chief Executive, Department of Natural Resources, issued a valuation of the subject at $670,000. Following an objection the Chief Executive confirmed that figure on 19 May 1998. The appellants have now appealed claiming the unimproved value should more properly be $350,000.
Mr G Trivett appeared and gave evidence for the appellants. Mr M Green, instructed by Crown Law, appeared for the respondent, calling evidence from Mr GW Lindberg, the Departmental Registered Valuer responsible for determining the valuation.
The Evidence:
(1)Planning Matters –
There was an initial difference between the parties in respect of the impact of planning controls on the subject land. The land was initially determined by Mr Trivett to be within the area of Precinct 3 of the Newstead and Teneriffe Waterfront Control Plan of the Brisbane City Council. Initial copies of those plans were very indistinct, and it was difficult to ascertain the actual location of the precinct boundaries from the small scale map.
Mr Trivett had concluded that the precinct boundaries ran down the centre of Chermside Street, which is to the south-east of the subject land. However following the later submission of a larger-scale copy of the precinct map, it was clarified that the indistinct line adopted by Mr Trivett was in fact the external boundary of the precinct area, rather than the internal boundary between Precincts 2 and 3. In the end it was clarified that the common boundary of Precincts 2 and 3 lies along the centre line of Commercial Road, and the subject land is entirely within Precinct 2.
Another matter of initial difference between the parties was the use by Mr Trivett of the previous development control plan “Special Developments (Teneriffe) Zone” gazetted 13 June 1987. Mr Lindberg submitted that the former development control plan had subsequently been replaced by the “Newstead and Teneriffe Waterfront Development Control Plan” of 29 March 1996, which Mr Trivett conceded was the appropriate planning regime at the date of valuation.
However, having conceded that he had adopted the wrong planning control precinct in his estimate of the unimproved value, Mr Trivett argues that both Precincts 2 and 3 provide for the same maximum development plot ratio of 1.25 times the area of the site. This, he argues, provides a comparable development potential in either Precinct 2 or Precinct 3. The plot ratios are a performance objective for a precinct, and make allowance for building setbacks, and possible building sites. The plot ratio (or floor space ratio) provide a mechanism by which potential developers can assess the development potential of a site.
However, Mr Lindberg also argues that the plot ratio is only one part of the performance objectives of the Development Control Plan, which also establishes the character and intent of the precinct in which the development is proposed. Mr Lindberg notes that the intent of Precinct 2 under section 3.2.1 is to develop a preferred residential character with some mixed use developments associated with the refurbishment of the Wool Store buildings and the waterfront location. He notes by comparison that the prime intent of Precinct 3 is to impose employment and business nodes which represent commercial and business development opportunities to the surrounding residential areas, and which would be considered incompatible with those mixed use developments in Precinct 2. As a consequence of those differing objectives, Mr Lindberg argues that the type of development in Precinct 2 will be basically different to those encouraged in Precinct 3.
In support of his analysis of the subject land, Mr Trivett argues that residential developments are in fact a “permissible development” under Column 3 of the Development Control Plan, subject to approval by Council. Mr Lindberg agrees that residential developments are not prohibited under Column 4 of that plan, but argues that it is not the preferred form of development under the plan.
Mr Lindberg also agrees that Precinct 2 does not prohibit any form of business or commercial development, as evidenced by a recent office building immediately adjoining the subject land to the east. However Mr Lindberg argues that business or commercial developments upon a large scale were unlikely to be approved in Precinct 2. Mr Trivett also argues that warehouse premises may be permitted in Precinct 2 under Column 2, as long as it does not include the erection of a new building, other than by way of minor building works within an existing Wool Store building.
(2)The Method of Valuation –
There is some difference between the parties in respect of their approach to comparing the subject land with comparable sales. Mr Trivett has compared the sales on a site area basis, arguing that provides the most direct comparison for potential purchasers. Mr Lindberg by comparison has used a gross floor area (GFA) basis, arguing that such a method is most applicable where multi-unit and mixed use developments are involved, and where differing plot ratios may apply to properties.
Mr Lindberg concedes that in the current matter either method would be appropriate, because the sales existed generally in the same Development Control Precinct 2, or because there was the same plot ratio in Precinct 3 of the New Farm and Teneriffe Hill Development Control Plan (1.25 to 1 for Sale 2). Mr Trivett argues that if a GFA approach was to be adopted, then it would be prudent to undertake a hypothetical development appraisal of the site, which is a normal requirement for developers to ascertain the viability of the purchase of a property.
Mr Lindberg argues that a hypothetical development approach is relevant in assisting a developer to decide on how much to pay for a site, but argues that as he compared the subject land on the basis of vacant land sales, he saw no need to undertake a hypothetical development. In any case he raised concerns with the reliability of such an approach, in view of the very wide variations in the price of the land which could ensure from a very small variation in the capitalisation rates adopted. Mr Lindberg also notes that the figure of 1,871 square metres (GFA) for the subject land is comparable to the site area of 1,497 square metres, allowing for the plot ratio of 1.25.
(3)Comparison of Sales –
Mr Trivett has based his comparisons upon sales in Precinct 3 for the reasons outlined previously. Mr Trivett only provided comparisons of unimproved valuations at 1 October 1997, due to difficulties in obtaining figures for 1 October 1996.
· Sale 1 – (110 Commercial Road, Newstead – Lot 1 on RP 145139).
This is a 1,708 square metre improved property in Precinct 3, with a high concrete block building. The sale also has access to Helen Street.
The sale sold in September 1994 for $875,000, and resold in August 1995 for $860,000. The added value of improvements was analysed at $500,000, and the land content at $360,000 ($210 per square metre).
· Sale 2 – (98 Commercial Road, Newstead – Lot 1 on RP 9319).
This is a 455 square metre improved property in Precinct 3, with a two-storey office/warehouse building.
The sale sold in June 1993 for $420,000, and resold in June 1996, for $440,000, which after allowing for improvements, the land was analysed at $100,100 ($220 per square metre), and applied in 1 October 1997 at $119,000 ($261.53 per square metre).
· Sale 3 – (3 Helen Street, Newstead – Lot 1 on RP 9322 and Lot 70 on RP 9317).
This is a 1,275 square metre parcel with dual frontage also to Commercial Road located in Precinct 3, and occupied with an older-style single level warehouse, with offices along the street frontage (Paddy’s Markets). The property sold in March 1996 for $640,000, which after allowing for improvements, an unimproved value was applied at 1 October 1997 at $318,000 ($249.40 per square metre).
· Sale 4 – (37 Wyandra Street, Newstead – Lots 1-3 on RP 49932).
This is a 1,229 square metre property with a modernised workshop warehouse, with ten carparking spaces in front, and located in Precinct 3.
The sale sold in August 1997 for $500,000, which after allowing for improvements was analysed and applied at $305,000 on 1 October 1997 ($248.10 per square metre).
· Sale 5 – (11 Florence Street, Newstead – Lot 35 on RP 9232).
This is a 425 square metre property with an older-style two storey brick building which was assessed at an added value of $230,000. The sale is in Precinct 2.
The sale sold in August 1996 for $330,000, which after allowing for improvements was analysed at $100,000 ($235.20 per square metre). The sale was applied by the respondent at 1 October 1997 at $103,000 ($242.35 per square metre).
Mr Trivett advises that he had assessed the added value of the building by the use of Rawlinson’s Building Guide. He also supplies the relative rates of unimproved values assessed by the respondent for surrounding parcels in Commercial Road, and in Precinct 2, to demonstrate the relative inconsistency of the unimproved value of the subject land.
Mr Trivett argues in his grounds of appeal that such evidence existing at the date of the valuation supports his conclusion that the respondent has made an error in the valuation.
Parcel Site Area Unimproved value per m²
(1 October 1997)
113 Commercial Road 374m² $299 125 Commercial Road 374m² $213.90 Subject 1497m² $447.50 (113 Commercial Road is currently partly occupied by a large microwave tower).
Mr Trivett also argues that, in his opinion, the unimproved values of the above parcels at 1 October 1996 would not have been more than the 1 October 1997 assessment by the Chief Executive.
To support his valuation, Mr Lindberg supplied the following sales on a GFA basis:
· Sale 1 - (29-43 Florence Street, Newstead – Lots 12-15 on RP 9172, Lots 93-96 on RP 9328, Lot 2 on RP 9337 and Lots 4-6 on RP 69105).
This is a 4,041 square metre parcel located in Precinct 2, which is seen as superior in size, elevation, access and location, but inferior in shape. Overall it is superior, and has a maximum approved GFA of 5,051 square metres.
The sale sold in May 1996 for $1,600,000, which after allowing for improvements was analysed at $1,500,000, and applied at $1,350,000 ($270 per square metre) GFA.
· Sale 2 – (106 Sydney Street, New Farm – Lot 480 on RP 850426).
This is a 2,046 square metre parcel located in Precinct 3 about 1.6 kms south-east, in the Newstead and Teneriffe Hill Development Control Plan. The sale is superior in size, shape, location and similar in elevation and access. Overall it is superior, and has an approved maximum GFA of 2393 square metres.
The sale sold in January 1996 for $1,100,000, which after allowing for improvements was analysed at $1,098,000, and applied at $1,000,000 ($420 per square metre GFA).
· Sale 3 – (8 Dath Street, Newstead – Lot 18 on RP 9232, Lot 1 on RP 92779, Lots 76 and 77 on RP 9328 and Lot 1 on RP 115040.
This is a 10,000 square metre parcel located in Precinct 2, and across the narrow lane to the rear of the subject land. The sale is superior in size and access, with three street frontages, and is similar in elevation, shape and location. Overall the sale is superior and the maximum GFA is 14,975 square metres.
The sale sold in January 1997 for $2,825,000, which after allowing for demolition and decontamination was analysed at $3,285,000, and applied at $3,000,000 ($200 per square metre GFA).
· Sale 4 – (52 Beeston Street, Newstead – Lot 1 on RP 66838).
This is a 2,474 square metre parcel located in Precinct 2, about 600 metres south-east of the subject. The sale is superior in size, and inferior in location, shape and access, and similar in elevation. Overall the sale is superior, and the maximum GFA is 3092 square metres.
The sale sold in July 1997 for $950,000, which after allowing for demolition of the structures was analysed at $1,000,000, and applied at $990,000 (at 1 October 1997 - $320 per square metre GFA). The sale was further resold in February 1998 for $1,200,000.
In making his assessment Mr Lindberg applied a value to the subject land at $360 per square metre GFA, for 1,871 square metres, giving a value of $673,560, and applying that at $670,000. Mr Lindberg also sought support for his valuation from Sale 2 in New Farm on the basis that it was a similar type of mixed use development as that permitted in Precinct 2 near the subject land. However, it is in a much more pleasant environment, looking over New Farm Park. Mr Trivett contests that opinion arguing that the markets in New Farm and Newstead are entirely different markets, with New Farm sales development proceeding at a faster rate. Mr Lindberg argues that while the current plot ratio in Precinct 3 containing Sale 2 is currently only 1.0, at the date of the valuation the former plot ratio under the then area R6 was 1.25, similar to the subject land.
There was a major difference between the parties in respect of Mr Lindberg’s Sale 3 (the Cannery site). While Mr Trivett had not analysed that sale he was aware of certain difficulties being experienced by the developer in subsequently marketing only 21% of the developed units to this time. He also argues that Sale 3 provides no reasonable comparison to the subject land, as Sale 3 has three street frontages, and is of a much larger site area. Mr Lindberg concedes that Sale 3 was not a vacant site, but is partly occupied with an older-style building which is registered on the Brisbane City Council Register of Heritage Places. As part of the negotiation trade-off between the developer and the Council for the preservation of that building, the developer has received a concessional increase in the plot ratio for the whole site from 1.25 to 1.50.
In comparing Sale 3 with the subject land, Mr Lindberg concedes the difficulty of making such comparison in view of the large difference in area between the parcels and notes that he only drew reference to Sale 3 because it was virtually adjoining the subject land. However he felt that the relative analysed rate of $200 per square metre GFA for Sale 3, and $360 per square metre GFA for the subject, made due allowance for the size factor. He also notes that such a GFA rate was obtained after allowing for both the additional costs of demolition of buildings, and the decontamination of the site. Mr Trivett does not contest the analysis of Sale 3 on a site area of $300 per square metre, but contests the direct comparability suggesting that Sale 3 is a vastly superior site to the subject land.
Mr Lindberg agrees that Sale 3 is superior because of the increased views and potential developments that can be built upon Sale 3. However he argues that Sale 3, while being superior, can have a lesser rate per square metre because of the nature of the market for larger parcels. He argues that it is a very different type of purchaser who would seek to develop a major development upon the larger sites. For this reason, and the relatively smaller number of potential buyers in the field for larger lots, the rate per square metre tends to be less for larger parcels.
Mr Trivett argues that the principle of buyers paying a lesser rate per square metre for larger sites, should relate to developments which are staged over a period of time, and not where a single site is purchased and developed as a single development, as for the Cannery site. Because of the superior features of Sale 3 he argues that that sale should reflect a rate in excess of the smaller inside lot of the subject land. Mr Trivett argues that it is the development that is controlled by the plot ratio, and any use of the GFA factor in any comparison should be accompanied by some appreciation of the hypothetical development of the sites. Mr Lindberg does not accept that view.
In analysing Mr Lindberg’s Sale 4, he sees the repeated sale of that property in May 1988 for $350,000, November 1994 for $600,000, July 1997 for $950,000 (Sale 4) and again resold in February 1998 for $1,200,000, as demonstrating a rising market in that area. While Mr Lindberg sees Sale 4 as superior overall due to its larger area and price, he argues that it is located in an inferior locality, in a not pleasant area within the Development Control Plan Area. Its current use for warehousing and industry is planned to eventually be replaced by future residential development in line with the planned conversion of Precinct 2 into a high quality urban residential environment.
Decision:
(1)Planning Matters –
I turn first to the intentions of Precincts 2 and 3 as outlined in the Development Control Plans. It is agreed that the subject land falls within Precinct 2, and that there is the same development plot ratio of 1.25 times the site area in either Precincts 2 or 3. As such there is therefore a comparable planning constraint upon each of Mr Lindberg’s and Mr Trivett’s sales, and the subject land, with the exception of Mr Lindberg’s Sale 3, which has an approved plot ratio of 1.5.
However it is also clear that there is a difference in the proposed form of development in Precinct 2 from that proposed in Precinct 3. In Precinct 2 the building height and bulk is seen to be subservient to views of the Wool Stores from the river, to the extent of not exceeding the upper sill level of the Wool Stores. In Precinct 3 the development heights are to be linked to floor space ratios in such a way as to reflect local employment demands, and not to provide major office developments of city-wide significance.
The result of each separate long-term objective is that Precinct 2 will develop as areas of residential development controlled by a maximum height restriction, while Precinct 3 will become areas of working places for local residents, generally of heights consistent with the other building forms. Because of those different objectives the potential for development in either precinct is likely to be different, and sales in each precinct are most likely to be in a different market. The erection of the new office building adjoining the subject land to the east demonstrates that there could be some intrusion of other building forms between the precincts, but that would tend to be of a minor nature. On that basis sales within the same precinct would tend to provide the most comparable comparisons.
(2)The Method of Valuation –
Because of the consistency of the maximum allowable plot ratios in the various sales analysed, I agree with Mr Lindberg that it is not really relevant whether the GFA is used or the site areas are used. I will deal with Sale 3 (8 Dath Street) separately.
In considering the relevance of adopting a GFA approach, I note that the general criteria for application of plot ratios is to ensure that the character, density and size of any development, is commensurate with the intension of the precinct. In noting the desired size of any development I note that section 4.1.2.1 of the Development Control Plan establishes that each development site will be adequate to provide on-site privacy, landscaping and open space. In the context therefore of assessing the viability of a proposed development, the use of the maximum GFA does give some indication of the level of development that might be achieved. How viable such a development might be then is usually assessed by some type of hypothetical development assessment.
It is noted that the use of a hypothetical development approach to establishing unimproved value for the purposes of the Valuation of Land Act has been criticised by the courts. I note for instance in the matter of GE Cominos & Co Pty Ltd v. Chief Executive, Department of Lands [1996-97] 16 QLCR 311, the Land Appeal Court in noting the use of a hypothetical development approach said at page 321:
“While we would encourage valuers to adopt every reasonable check to ensure that their valuations are correct, the use of the hypothetical development method is fraught with difficulty, as pointed out by this Court on a number of occasions. (See for example Merivale Motel Investments Pty Ltd v. The Brisbane Exposition and South Bank Redevelopment Authority (1984-85) 10 QLCR 268 at 281). ”
The Land Appeal Court also endorsed the findings of the learned President in Thomas Nominees Pty Ltd v. Valuer-General (1986-87) 11 QLCR 283, at 287:
“Where there are no sales available for comparable purposes, the method of hypothetical development may assume greater importance as a guide to unimproved value but I strongly doubt, as a general rule, that it should be preferred to evidence of comparable sales in matters arising under the Valuation of Land Act. ”
In the current matter there was no use of the hypothetical development approach, although Mr Trivett argued that a lack of such an approach diminished the relevance of a GFA method of comparison. As noted earlier, I find that not to be an essential requirement of a GFA method, particularly in view of the potential difficulties associated with hypothetical development assessments. Certainly the comparison of sales in Precinct 2 overrides any benefit from any hypothetical method.
(3)Comparison of Sales –
If I then consider the relevant sales on a site value method of comparison I find the following:
| Sale | Precinct | Site Area | Applied site rate per m² |
| Mr Trivett’s Sale 1 | 3 | 1,708m² | $ 210 |
| Mr Trivett’s Sale 2 | 3 | 455m² | $ 261.53 |
| Mr Trivett’s Sale 3 | 3 | 1,275m² | $ 249.40 |
| Mr Trivett’s Sale 4 | 3 | 1,229m² | $ 248.10 |
| Mr Trivett’s Sale 5 | 2 | 425m² | $ 242.35 |
| Mr Lindberg’s Sale 1 | 2 | 4,041m² | $ 334.00 |
| Mr Lindberg’s Sale 2 | 3 | 2,046m² | $ 488.75 |
| Mr Lindberg’s Sale 3 | 2 | 10,000m² | $ 300 |
| Mr Lindberg’s Sale 4 | 2 | 2,474m² | $ 400 |
| Subject | 2 | 1,497m² | $ 447.56 |
Each of Mr Lindberg’s sales are seen as overall superior to the subject land, mainly because each sale is clearly much larger in area than the subject land. Mr Trivett’s Sales 1, 3 and 4 are more comparable in size to the subject, but his Sales 2 and 5 are only about one-third the size of the subject. Mr Trivett’s Sale 5 is in Precinct 2, and may be compared with Mr Lindberg’s Sale 1 which is also in Florence Street, but which is of a much larger area.
In seeking comparisons I find that the apparent lesser rate per square metre for sales located in Precinct 3 would seem to reflect the different development objectives of that precinct. On that basis I find they provide little assistance. Likewise any comparison between Mr Lindberg’s Sale 2 in New Farm, while it has a comparable plot ratio to the other sales, would appear to reflect a different market segment, and does not provide much assistance.
While I accept that Mr Lindberg’s Sale 3 is almost adjoining the subject land, I note the much larger area of that sale, which is more than six times the area of the subject land. Because such large parcels are likely to attract a different market than the smaller parcels, I will draw little support from that sale.
That then leaves the most helpful sales as Mr Trivett’s Sale 5, and Mr Lindberg’s Sales 1 and 4. If I consider the two sales in Florence Street (Sales 1 and 5), I note that the much smaller area has a rate per square metre less than the larger area. This tends to conflict with the general principle that, if all else is comparable, then larger areas tend to be purchased at a lesser rate per square metre than for smaller areas. That would suggest that other forces are bearing upon the land for the selected development purposes planned in that precinct. The higher per square metre rate for Sale 4, which is also larger than Sale 5, would also support that principle.
Clearly the larger lots, while having a comparable development plot ratio, attract greater development potential, providing increased scope for developers. On that basis, in that precinct, I believe the larger areas will attract a higher rate per square metre for lots in the range about 400 square metres to 4,000 square metres, and the applied rate of $446.56 per square metre for the subject land would appear to be out of line with the sales.
In seeking further guidance I note that the adjacent parcels at 113 and 125 Commercial Road are both much smaller than the subject lands, and would have, by the above conclusions, a rate per square metre less than the subject land. The subject land would then appear to have a rate per square metre between $299 per square metre (113 Commercial Road) and $400 per square metre (Sale 4). In the absence of further evidence to the contrary, I will adopt a rate of $360 per square metre, based upon the area of the subject land being nearer to Sale 4 than to 113 Commercial Road. On that basis, the unimproved value of the subject land would be $538,920 (say, $540,000).
Conclusion:
Having considered the whole of the evidence I am persuaded that the appellants have partly proved their case. The appeal is upheld, the valuation of the Chief Executive is set aside, and the unimproved value of Lots 7-10 on RP 9336 is determined at Five hundred and forty-thousand dollars ($540,000).
(NG Divett)
Member of the Land Court
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