Jeteld Pty Ltd v Chief Executive, Department of Natural Resources
[1999] QLC 14
•5 March 1999
|
BRISBANE
5 MARCH 1999
Re: AV98-359 –
An Appeal against a determination of Unimproved Value –
Valuation of Land Act 1944 -
City of Toowoomba
Jeteld Pty Ltd
v.
Chief Executive, Department of Natural Resources
(Hearing at Toowoomba)
D E C I S I O N
This is an appeal against the chief executive's determination of the unimproved value of land situated at Mackenzie, Harvey and Sherwood Streets, Kensington Heights, Toowoomba, described as follows:
Lot 42 on Registered Plan 220680 – 11.985 ha;
Lot 44 on Registered Plan 220681 – 1.464 ha;
Lot 182 on Registered Plan 17315 – 8.956 ha;
County of Aubigny, Parish of Drayton.
As at 1 October 1996, the unimproved value appealed against is in the amount of $710,000. The appellant company contends for a valuation of $330,000.
The difference between the parties is clear. The respondent chief executive has valued Lot 42 and Lot 182 in amalgamation, on the basis that the highest and best use of those lands is associated with its potential for rezoning to allow residential subdivision, while the highest and best use of Lot 44 was seen as a large single residential site. The appellant company contends, through its valuer, that at the date of valuation the costs of subdivision would not have permitted profitable development and as a consequence the highest and best use of the land was seen to be as individual rural residential sites.
Under the Town Plan for the City of Toowoomba, the land is zoned "Rural", but included in Development Control Plan (DCP) 3 under which part of the land is designated "Residential" and the balance "Special Escarpment". The evidence is that the "Special Escarpment" designation was intended to indicate areas which could be subject to instability, and where geotechnical drilling would be required to accurately delineate areas capable of subdivisional development.
There was no dispute that, in Lot 42, as shown on Toowoomba City Council mapping tendered by the respondent, there were two areas with "Residential" designation – one of about 3.2 ha adjoining existing subdivisional development and northerly of Sherwood Street, severed by a significant gully from another strip, the area of which had not been calculated, but adjacent to the northern section of the Mackenzie Street frontage. The latter strip extends into the extreme north-eastern corner of Lot 182 off Mackenzie Street. Lot 182 is an irregularly shaped, relatively narrow parcel which adjoins Lot 42 on its north-eastern and eastern boundaries, then the northern boundary of Lot 44. Lot 44 is of somewhat irregular shape at the eastern extremity and on the northern frontage of Harvey Street. Lot 42 is the dominant parcel of the aggregation. Apart from a small irregular excision in its extreme south-western corner, off Mackenzie Street, it is of rhomboid type shape with wide frontage to Mackenzie Street as its western boundary with an access point to Sherwood Street, off Harvey Street, towards the centre of its southern boundary. The evidence was that Sherwood Street has recently been surveyed and constructed by the appellant company (Jeteld) to allow the reconfiguration of several deep narrow lots which fronted Harvey Street, into seven residential lots of more conventional shape.
Jeteld acquired the subject land together with the several lots fronting Harvey Street, in 1990. According to Mr S. Davis, registered valuer, auctioneer and licensed real estate agent, who appeared on behalf of Jeteld, the aggregation was acquired with a view to future subdivision. An application for rezoning and subdivisional approval was made in 1992. The approval sought was to permit the development of 59 residential lots of various sizes, with a minimum of 1,000 m². The majority of the lots would have been within Lot 42. The proposal involved the extension of Sherwood Street into a road system designed to service 38 lots in the central southern section of Lot 42 with some minor encroachment into the south-western extremity of Lot 182. The periphery of the proposed development extended outside the DCP "Residential" designation, into the area designated as "Special Escarpment". The design provided another 18 lots generally within the second area of "Residential" designation along Mackenzie Street. Three of these lots at the northern extremity were within Lot 182. Also incorporated within the overall development were three relatively large lots in Lot 44.
This application had not received approval and had been withdrawn in 1995. The letter of withdrawal had however sought "the withdrawal of this application for a new application at a time to be determined …"
Mr Davis called Mr J.E. Hazzard, a consulting engineer with wide subdivisional development experience over a long period in Toowoomba. It was Mr Hazzard's opinion that the subdivision proposal for which approval had been sought, represented the maximum physical potential of the aggregation. Through him was produced an estimate of development costs as at the date of valuation. That estimate amounted to a total $1,900,327, the equivalent of $32,209 per lot overall. Mr Hazzard explained that the development costs were high because the development would have presented geotechnical problems associated with the stability of the land, requiring the provision of retaining walls where the side slope of roads was so steep as to create significant batter on one or both sides. Stabilisation was needed along all roads and earthworks. Significant drainage, additional to normal requirements, was required as well as creek protection work to maintain stability. It was put to Mr Hazzard by counsel for the respondent that a 31-lot subdivisional development in the Kensington Heights area (the "Holborn" land), a short distance southerly of the subject land, had been estimated to cost $26,659 per lot. As it happened, Mr Hazzard had been involved in the engineering design for that development. He felt that the estimate of development costs as suggested was reasonable.
It was also put to Mr Hazzard that if the southern section of the residential land in Lot 42, off Sherwood Street, was developed as an individual project, then the development costs on a per lot basis would have been less than the overall 59-lot proposal. Mr Hazzard was unable to agree in the absence of the opportunity to analyse the suggested smaller development. It was his opinion however, that the average cost per lot would more than likely increase for a smaller development. He believed that some costs associated with the 59-lot proposal, such as certain sewerage infrastructure and the creek stabilisation would remain constant and relatively more expensive per lot in the suggested smaller development.Mr Davis had approached the valuation on the basis that the "costs of subdivision, together with the likely prolonged selling period and resultant values that would be achieved" would make rezoning and subdivision unviable. It had been his opinion that the highest and best use of the land was as two rural residential sites, suggesting that Lot 182 did not have surveyed access and would need to be combined with Lot 44. During his verbal evidence he agreed that Lot 182 did have surveyed access but access which was unformed and difficult and as a consequence, the land carried only nominal value as an individual site. His report contained a schedule of three sales to which he had given consideration in assessing the following individual values:
Lot 42 - $180,000
Lot 44 - $120,000
Lot 182 - $30,000
Total - $330,000
Mr B.L. Taylor, a valuer employed by the Department of Natural Resources gave evidence in support of the Department's valuation. He had not been responsible for carrying out the valuation in the first instance. However he had investigated the evidence and accepted that the valuation of $710,000 was correct. In his report he described the Mackenzie Street frontage (north of the existing bitumen which terminates near the south-western extremity of Lot 42) as being of "formed gravel and earth construction" but with vehicular access "presently restricted by a combination of guide posts and gates by Toowoomba City Council".
Lots 42 and 182 had been valued "on the basis that the land is well suited, in part, for subdivision into residential allotments". Lot 44 had been valued "as a single residential site".
It had been Mr Taylor (or a colleague) who had calculated the area of 3.2 ha along the central southern boundary of Lot 42 as being designated "Residential" in DCP 3. He saw this area as having rezoning and subdivisional potential as at the date of valuation. Based on his interpretation of direct comparison with the land previously referred to as the "Holborn" land, which had been sold in February 1994, Mr Taylor's valuation of Lots 42 and 182 was as follows:3.2 ha @ $150,000/ha $480,000
17.74 ha @ $10,000/ha $177,400
Total $657,400
Lot 44 was valued as a single site in the amount of $90,000. From the total assessment of $747,400 was then deducted a "multiple holding allowance" of 5%, the calculation rounded to $710,000.
In his verbal evidence, Mr Taylor suggested that if he had found that the highest and best use of the three surveyed sites was as individual homesites, his valuation would have been calculated as follows:Lot 42 $225,000
Lot 44 $90,000
Lot 182 $85,000
$400,000
Less multiple holding allowance 7½% $30,000
Total $370,000
Mr Taylor was however convinced that the 3.2 ha in Lot 42 was suited to "risk free" rezoning to allow residential subdivision at the relevant date. He had perused the file on the rezoning application which related to the total aggregation. He accepted that peripheral areas within the "Special Escarpment" DCP3 designation, might be proved, after further geotechnical investigation, to have subdivisional potential. Indeed he was aware from his perusal of the rezoning application file that an Environmental Impact Statement (EIS) had been requested by the Council. That study, a copy of the summary of which was tendered, had found that the proposed layout, as submitted by Jeteld, would be significantly improved "with minor changes to optimise the usefulness of the land, "However, it had recommended "that the applicant withdraw the current application which reflects the changes as shown on Figure 16".
In Figure 16 (attached to the tendered summary of the EIS) there was no significant change to Jeteld's proposal for that part of Lot 42 off Shepherd Street but which appeared to include significantly more land than the 3.2 ha shown as "Residential" in DCP3. In fact the main recommended changes to the Jeteld proposal were reconfiguration of the small areas in Lot 44 and Lot 182 sought to be rezoned to "Residential", together with deletion of an area extending into Lot 182 sought to be rezoned as "Bushland Residential" as included in one proposed, large lot.
Mr Taylor had discussed the probable cost of developing the subject land with the Toowoomba City Council's chief engineer, who, he said had considered "that the blocks on the subject parcel would be marginally more expensive to develop than the sale lot" ("Holborn") "on a per lot basis having regard to the application that the owner Jeteld put to the Council in 1992". Mr Taylor had estimated, based mainly on information extracted from the relevant Council file, that the development cost of the "Holborn" land had been as put to Mr Hazzard, $26,659 per lot. Mr Taylor did not see Mr Hazzard's estimate of $32,209 for the 59-lot development proposal on the subject aggregation, as being significantly in conflict with the "marginally more expensive" suggestion made by the Council's chief engineer.
It should be said here that Mr Hazzard was found to be a forthright witness with professional knowledge relating to the "Holborn" development and also the proposal for the subject land. Although Mr Taylor was of the opinion that existing sewerage infrastructure may have been capable of use in the smaller 3.2 ha development area selected by him on the subject land, there is no precision in his evidence as to the design or estimated cost of developing that smaller area. The evidence of Mr Hazzard suggests to me that a prudent person considering the development potential of the 3.2 ha parcel within Lot 42, would conclude that development costs would have been, at the relevant date, at least 20% more expensive than had been the case with the "Holborn" land.
The "Holborn" land containing 8.094 ha had been sold on 6 February 1994 for $610,000 showing, on Mr Taylor's analysis, an unimproved value of $570,000. The purchaser had been interviewed by a colleague of Mr Taylor. There had been an area of 1.6 ha designated as "Residential" in DCP 3 and the purchaser had, according to Mr Taylor, seen little risk in achieving rezoning and subdivisional development of that "Residential" designated land. The balance area had, however, been designated "Special Escarpment" and the potential of that land had been considered uncertain at the date of purchase. Subsequent investigations and negotiations had achieved an overall development of 31 residential lots of varying size. The unimproved value applied to the "Holborn" land adopting the sale as a basis was as follows:
1.6 ha "Residential" @ $170,000/ha
6.494 ha "Special Escarpment" @ $45,000 per ha
Adopt overall $565,000.
Mr Davis had in his valuation report, carried out a "feasibility analysis" adopting as the land value component the valuation determined by the chief executive (for the overall aggregation); development costs as estimated by Mr Hazzard; a gross realisation based on his estimate of individual lot values in the proposed 59-lot subdivision. He valued 37 of those lots in the range from $50,000 to $95,000 and the balance at $45,000 per lot. Although cross-examined at some length on the values placed on the individual proposed lots, Mr Davis remained firm in his opinion that his selected values were realistic, particularly as he had adopted a selling period of only three years or about 20 lots per year. Competing estates in the immediate locality had, on the evidence, achieved sales of less than 10 lots per year. On Mr Davis' broad analysis, after deducting total land and development costs of $2,973,886 from his estimate of net realisation, after selling costs, a profit of only $118,464 would result.
Mr Taylor had not attempted to check his assessment by a hypothetical development exercise. He had not given particular consideration to individual lot values in the 59-lot development proposal for which approval had been sought. Although he disagreed with the $45,000 level of value placed by Mr Davis on a large proportion of the 59-lot proposal, Mr Taylor would not be drawn into placing estimates of value on the worst of those lots. It was his opinion that those type of lots were not found in the 3.2 ha of generally better quality land which he had accepted as having residential development potential as at the relevant date. It was his opinion that developed lots within the 3.2 ha would command values in the $70,000 to $90,000 range. In his opinion, that land as developed would be inferior to the best of the "Holborn" development. However, he felt the application of $150,000 per ha to the subject residential designated land provided correct relativity with the $170,000 per ha applied in the analysis of the sale of the "Holborn" land.
Mr Taylor had been aware that the appellant company had sold three of the reconfigured lots in Sherwood Street for $71,000, $77,500 and $80,000 in March and April 1998. There was, in his opinion, evidence available to show that there had been no change in the level of value for this type of residential lot from 1996 to 1998.
Mr Taylor had provided two further sales of in globo residential land purchased in the period preceding the date of valuation. That evidence, as I understood it, was intended to provide an appreciation of the overall market in the area but was not relied upon as being comparable to the subject land. Clearly, the sale of the "Holborn" land was basic to the chief executive's valuation.
Conclusions
Although Mr Davis placed some weight on the fact that the application for rezoning and subdivisional approval had not been successful and had been withdrawn after a long delay, that withdrawal was consistent with the EIS recommendation that the application be resubmitted with relatively minor alteration.
There is no dispute that the highest and best use of Lot 44 was as a single homesite as surveyed. Mr Taylor took a more conservative view as to the value of that individual site than did Mr Davis. In these matters, the benefit of doubt should be decided in favour of the appellant and accordingly I will adopt Mr Taylor's assessment of the value of Lot 44 being in the amount of $90,000.
There seems little likelihood that the exclusion of Lot 44 would have any deleterious effect on the prospects of success of a rezoning and development application which conformed to the otherwise general recommendations in the EIS.
At the request of the parties the Court, at its own convenience, inspected the general Kensington Heights area. The inspection assisted in understanding the evidence generally.
I am persuaded that highest and best use of Lots 42 and 182 is for future rezoning to allow residential subdivisional development, most of the potentially developable area being contained within Lot 42 but not limited to the 3.2 ha identified by Mr Taylor. While I did not find Mr Davis' feasibility analysis convincing, particularly with regard to the gross realisation which he adopted, I am persuaded that the subdivisional development potential was, and is not, immediate but that the aggregation of Lots 42 and 182 would realistically be regarded as providing natural extension of existing development to the south. Any development proposal would be seen to be one of staged development commencing at Sherwood Street. I am unable to accept that an area of about 3.2 ha would be developed in a discrete project or that such area had proved immediate subdivisional potential.
I accept that Mr Taylor identified the area of 3.2 ha primarily for the purpose of like-with-like comparison with the 1.6 ha of "Residential" designated land identified within the "Holborn" property. However those identified areas of "risk-free" rezoning potential are unrelated to the reality of the full rezoning potential of either the subject or the "Holborn" land. The fact is that the sale of the "Holborn" land showed, on Mr Taylor's analysis of unimproved value, about $70,000 per ha overall. It seems that the proved developable area would be generally comparable on a pro-rata basis to that available in Lot 42 as an individual site. However, the evidence indicates to me that the overall development potential of the "Holborn" land at the date of sale was much less futuristic than was the overall potential of the subject land. Although in close proximity, the "Holborn" land enjoyed superior location, elevation, views and physical qualities relative to development costs. Considering Lot 42 alone, an extrapolation of Mr Taylor's valuation indicates that he had, in effect, apportioned $47,380 per ha overall to that land. I think that valuation, in direct comparison with the "Holborn" land, is a significant over valuation. Limited to consideration of the evidence of the "Holborn" sale, I have decided to adopt an apportioned value of $35,000 per ha for Lot 42. In my opinion, the value of Lot 182 should be considered as enhancing the rezoning prospects of Lot 42 by providing relatively large areas of "Public Open Space". This was identified in the EIS as a desirable feature as such areas would be subject to public, rather than private, control. That public control would not be available if Lot 182 was to be considered as a separate entity. There are however, relatively small sections of Lot 182 which are capable of extending the overall developable area outside of Lot 42 alone. It was Mr Taylor's contention that, as an individual site Lot 182 would have value of $85,000 or alternatively $10,000 per ha (approximately $90,000), in amalgamation with Lot 42. Mr Davis suggested that Lot 182 had a value on either basis of $30,000 because of what he saw as very limited use potential. I have decided that Lot 182 should be valued as enhancing the development potential of Lot 42 and I will add a nominal 10% to the value apportioned to Lot 42 (ie 10% of $419,500) say $42,000.
Mr Taylor had accepted that by assessing Lot 44 as a separate site two sales would be required to achieve the full market value of the aggregation. He discounted the full market value by 5% to recognise the multiple holding status of the land. I will follow his approach.
Summary of Finding
I find that the unimproved value of the land as at 1 October 1996 should be determined as follows:Lots 42 and 182 in amalgamation:
Lot 42 $419,500
Lot 182 $42,000 $461,500
Lot 44 as a separate site $90,000
$551,500
Less 5% allowance for multiple holding $27,575
Total $523,925
Adopt $525,000
The appeal is allowed, the determination of the chief executive set aside and the unimproved value of the land determined in the amount of Five Hundred and Twenty-five Thousand Dollars ($525,000).
RE WENCK
MEMBER OF THE LAND COURT
0
0
0