Kagerer v Chief Executive, Department of Lands
[1995] QLAC 9
•3 March 1995
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Re: Appeals against determinations of the Land Court
AV93-460/462.
Valuation of Land Act 1944.
Marlene J Kagerer and Anor
v.
Chief Executive, Department of Lands
J U D G M E N T
Delivered at Brisbane this third day of March 1995.
There are three appeals before the Court against determinations of the Land Court made in respect of unimproved values which should be applied to three parcels of land in the ownership of the appellants and situated in the local government area of Hervey Bay.
The valuations are required to be made under the provisions of the Valuation of Land Act 1944 (the Act) for the purposes of the annual valuation of the area as at 31 March 1992.
The matters were heard separately before the lower court and again before us. We find it convenient to deal with the three appeals in the one judgment.
Re AV93-460 - Marlene J Kagerer.
The land, the subject of this appeal, is described as Lot 3 on RP65144, parish Urangan, containing an area of 1249m2. The lot is situated in Main Street, Pialba. It is zoned "Business" and is improved with single storey brick shops which are fully tenanted. The Chief Executive (the respondent) determined the value in the sum of $160,000 which as stated in the report of Mr GE Short, registered valuer in the employ of the respondent, reflects a value of $128m2. The appellant in her notice of appeal to the Land Court stated a value of $137,000. However, in the hearing of the matter Mr J Kagerer who represented the appellants contended that the land should be valued at $103,000. The appeal was brought on grounds touching on town planning matters, sales evidence, relativity and topography of the land itself (requiring filling). The evidence given by Mr Kagerer was voluminous. Included in his workings were precise details of values applied to numerous lots along Main Street; the percentage increase of such values each to each; comparisons per square metre and comparisons on a per metre frontage basis. The conclusion he drew from all this material was that inconsistencies were apparent which he thought were of major concern. Similarly in the area running southerly along the western frontage of Main Street, he examined the applied values relative to area frontage and so on. The sales evidence used by Mr Short to establish the value of the subject land is found in this area - between the junction of Old Maryborough Road and Boat Harbour Road. The sale lands all of which are zoned "Business" in order of location to the subject land comprise -(a)Lot 3 on RP 35169 - 802m2 - sold 1.6.91 for $165,000 in a vacant cleared state. The sale analysed to reflect an unimproved land value of $164,000. The value applied to the site is $140,000.
(b)Lot 9 on RP 35169 - 946m2 - sold 17.5.91 for $150,000 with a dwelling which was demolished. The sale reflected an unimproved value of $149,000. The value applied to the site is $140,000.
(c)Lot 2 on RP 78325 - 1166m2 - sold 27.2.92 for $164,000 with clearing and hall which was removed. The sale analysed to a land value of $160,500. The applied value is $140,000.
These sale lots are situated amid a row of lots on the western frontage of Main Street. They are rectangular in shape, varying in area and varying in frontage but generally with a frontage of the order of 20 metres. Mr Short valued the lots as "Business" sites on generally a common value of $140,000. Were the values applied to the sales converted to values per square metre figures of $175, $148 and $120 would be derived. By comparison the subject land is nearer the focal point of the business area of Pialba. It is almost square in shape with an area of 1249m2. But for the topography of the land (requiring filling, etc.), Mr Short would value the land at $218,000 or about $175m2. After hearing Mr Kagerer and Mr Short on likely development costs the learned Member in the court below said at pp.7/8 of his decision:-
"Mr Kagerer has produced evidence of the cost of fill by quoting from a price list from Byrne Bros Pty Ltd which shows that the cost of filling sand is $20 per cubic metre. Mr Short, on the other hand, said that he considers that $10 per cubic metre is sufficient. However, even if I accepted Mr Kagerer's estimate of $20 per cubic metre this would increase the added value of filling to $40,000. Accepting Mr Short's added value of the retaining wall at $10,000, this would bring the total cost of these improvements to $50,000. Mr Short estimates the value of the subject land, if it was sound land, at $175 per sq. metre or $218,000 which appears to be consistent with his applied values to the lands to the north. Deducting $50,000 for fill and retaining wall, brings this to $168,000. Mr Short has also recognised the problem of the run-off flooding and has allowed 5 percent, which would result in a valuation of $159,600. Therefore, even if I adopt Mr Kagerer's cost for fill of $20 per cubic metre, I still arrive at approximately $160,000. "
Mr Kagerer takes exception to the valuations made of the sale lands for reasons including that the applied values do not distinguish between the lots in size, shape and frontage. He had also examined relativity within the area to the north in which Mr Short had applied values on a per linear metre of frontage basis. This area is accepted as a focal point of the business area of Pialba. Rents for the area are three times those obtained from business premises in the location of the subject land. Such is the confusion which may follow when a person not versed in valuation principles attempts to rationalise any and every valuation outside reasonable bounds of comparability with the subject land without having regard to basic principles including where applicable the provisions of ss.3.4 and 17 of the Act. Unimproved value in relation to improved land is defined in the Act (s.3) as meaning -
"The capital sum which the fee simple of 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, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist. "
In Tooheys Ltd v. The Valuer-General [1925] AC 439 (PC), their Lordships
in discussing unimproved value said at p.443 -
"... What the Act requires is really quite simple. Here is a plot of land; assume that there is nothing on it in the way of improvements, what would it fetch in the market? It will be observed that the value is not what has been sometimes designated by the expression 'prairie value'. The land must be taken as it exists at the date of valuation. "
The Land Appeal Court in Clough v. The Valuer-General (1981/82) 8 QLCR 70, after quoting from Toohey's case said at p.76 -
"It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements. "
It follows in applying these principles that the basic evidence advanced by Mr Short is sound evidence of value. Not only do the sales reflect a value for vacant or lightly improved land but include all the elements (including what may be done with the land under the town plan) which have an influence on value for the purposes for which the land may be used - in this case for business purposes. Mr Short was criticised for valuing the sites at a common sum as "business" sites. This has come about through the fact that Mr Short sees one to the other as having a common value and through the principle of achieving relativity in value when there is little to distinguish lots.
This takes us back once more to the rather simple and uncomplicated question - is the applied value reasonable having regard to the best evidence (sales of vacant or lightly improved comparable land) available at the date of valuation? The learned Member in the court below went into considerable detail of the evidence and came to the conclusion stated herein. We are unable to come to any different conclusion on the evidence put before this Court. In the circumstances this appeal will be dismissed.
AV93-461 - Marlene J Kagerer and Anthony J Kagerer.
This appeal is against an unimproved value of $175,000 applied by the respondent to a parcel of land situated in Islander Road, Pialba, containing an area of 7856m2 and described as Lots 31/32 on RP 35258, parish Urangan. Islander Road is a bitumen road with no kerbing and channelling. Water, electricity and telephone services are available.
The subject land was purchased in a vacant cleared state by the appellants in June 1992 for $190,000. The land is zoned "Residential A". It is the opinion of the respondent through Mr Short who wrote the valuation that the land has a potential for "light industry" use. It would also appear that the purchasers were of similar opinion when they paid $190,000 for the site. The analysis of the sale made by Mr Short reflected a land value of $188,000. He applied the sum of $175,000 or $22.50m2 as a reflection of the fact that to achieve a "light industrial" use a rezoning would be required. He finds support for the sale of the subject land in two sales of "light industry" zoned land in Islander Road just to the east of the subject land. On the corner of Nissen Road and Islander Road a parcel of 4072m2 described as Lot 59 on RP 35258 sold in a vacant cleared state in October 1991 for $155,000. The applied value is $145,000 or $35m2. Opposite the sale on the northern frontage and one removed from the corner, a parcel of 7434m2 sold in the same month for $260,000 improved with clearing and a workshop which Mr Short valued at $10,000. The applied value is $230,000 or $30m2. The appellants are contending for an unimproved value of $70,000 which was derived by applying a residential value of $45,000 to each lot and allowing a discount for bulk. The matter was heard by the lower court in November 1993. It was then contended that the land should be valued at $70,000 and there does not seem to have been any doubt in the evidence before the Court that at the date the land was purchased the attitude which the purchasers took to the likelihood of a rezoning was more optimistic than is submitted before this Court.
Basically the appeal was taken on grounds similar to those taken in respect of the previous case. Some further evidence was however put before this Court by Mr Kagerer. The substance of this evidence goes to the question not only of foreseeability in obtaining a rezoning of the land to "light industry" but more importantly to the costs of obtaining such rezoning. The position in the lower court may be found in this extract of the decision of the learned Member -
"The Departmental report tendered on behalf of the Chief Executive describes the land as being above road level with a cross-fall from south-west to north-east. Water, electricity and telephone services are available. The land is zoned "Residential" and is vacant. However, the parties agreed that the highest and best use of the land is for light industrial purposes.
Evidence on behalf of the appellants was given by Mr Josef Kagerer who tendered a written statement, schedules and photographs. Mr Kagerer said that his wife and son purchased the property in June 1992 for $190,000. Although it is zoned "Residential", its highest and best use is for light industrial purposes. He said that an application for rezoning by the present owners' predecessors in title had been refused and confirmed this by producing a letter dated 28th August, 1989, from the former Valuer-General indicating that as the Development Control Plan would not permit rezoning to industrial, the Valuer-General reduced the valuation of the land to a residential value. However, the position seems to have changed and Mr Kagerer expects that approval for rezoning to industrial will be forthcoming in the foreseeable future."
Later in the decision the learned Member said -
"Mr Kagerer said the owners paid $190,000 for the land as they saw its potential for rezoning for industrial purposes in the future. The Hervey Bay City Council under the new strategic plan has indicated that eventually the land will be rezoned to light industrial, but he said that the owners have the option of putting a house on the land and living in it. However, since the properties to the east, to the rear and to the south of the subject land are zoned "Light Industry", it is unlikely that the owners would pay $190,000 for land in an industrial area to use it for residential purposes. "
In perusing the reasons for dismissing the appeal, it is evident that the purchase of the subject land weighed heavily in the mind of the learned Member. This is understandable. A sale of the subject property, in the absence of evidence to the contrary, constitutes the best evidence of its value. In this case it was accepted by the Court below that the purchasers were astute and would pay a price relative to the potential in the land for light industrial use. We are satisfied that the potential remains but subject to the evidence put before this Court covering foreseeability of fruition and possible costs of obtaining a rezoning. Following a meeting with Council's Director Corporate Services, Mr Kagerer received a letter dated 26 May 1994, containing the following advice -
"Council cannot legally approve of a rezoning of Lots 31/32 RP 35258 to light industry at this time, but may be able to do so if Council resolves to amend DCP1 in respect of the area in question and if that amendment is gazetted. This process is not likely to be completed within eight (8) months. "
There is no direct evidence from the local authority as to what was thought to be the case as at the date of purchase. Mr Short was of the opinion that a change of the plan which would permit rezoning would occur during 1994.
Mr Kagerer said that the subject land on DCP1 is shown as residential under which the intent of Council is to not approve rezoning to a "multiple unit or Business Zone or Industrial Zone". DCP1 was published in 1987. Thus an amendment of the plan would be required in order to allow for a rezoning of the subject land to a light industrial use. The response to the enquiry made by Mr Kagerer would suggest that the Council is thinking in that direction. In addition to the time frame evidenced by the response from the Council, Mr Kagerer has learned that approval for rezoning would more than likely incorporate conditions requiring contributions towards water, sewerage and drainage headworks and external road works. He has estimated that such contributions for water and sewerage could be of the order of $40,000 and about $12,000 for external roadworks. He has estimated that a contribution would be required for storm water of about $15,700. By adding costs of application fees, etc., he arrives at the sum of $77,837 exclusive of loss of interest on purchase money over the period. Were it assumed that the land was rezoned Mr Short said that a value of $30-$35 per m2 would be applied. A value of $30 per m2 would bring up a value overall of $235,000. From that, a prudent purchaser knowing the position at the relevant date would make allowances for the matters just discussed. In retrospect the evidence would suggest that a prudent purchaser would not pay the price paid for the land in 1992 and probably not the applied value of $175,000. A further consideration in the opinion of Mr Kagerer is evidence he put before this Court of the likely competition which can be expected from a substantial industrial estate being developed on the corner of Boat Harbour Drive and Beach Road which lies one street to the east of Nissen Road. We note that the subdivisional plan for this estate was drawn in late 1993. It is a matter of conjecture as to whether it was in the pipeline during the valuation period.
The problem with this valuation as we see it is that the position at date of purchase of the subject land and no doubt at the date of valuation seems to have been more optimistic with respect to the ripening of the potential in the subject land than at the date of hearing and we have doubts as to whether the purchasers were aware of the extent of contributions which may be required on rezoning. Evidence from the town planning section of local government addressing the subject land on these matters would have been useful. Nevertheless the evidence before the Court is sufficient to conclude that the weight which should be given to the purchase price is questionable. We are inclined to the view that on making proper enquiry some, if not all, of these matters could have been ascertained before purchase (particularly matters such as local government contributions) and hence although the persuasive elements of the evidence have surfaced after the relevant date for valuation purposes we are unable to say that it is fresh evidence of the class which would on normal principles be excluded from consideration.
The proposed development in Boat Harbour Drive and Beach Road is evidence of demand within the locality for light industrial lands. Demand usually brings with it pressure on price levels. Were that to occur loss of interest on purchase money during the ripening period can be offset by increased value. In these circumstances caution is required in applying evidence which allegedly was beyond the scope of foreseeability at the date of valuation. In our opinion a greater degree of caution than applied by Mr Short is warranted on general principles but not the degree of caution a person might apply were the land required to be valued at the date of this hearing which is a matter that will fall for consideration in subsequent valuations. The appeal will be allowed and the valuation of the subject land determined in the sum of $120,000.
AV93-462 Marlene J Kagerer
This appeal is in relation to an unimproved value of $200,000 applied to Lots 76 and 83 on RP 35351, parish Urangan, containing an area of 2256m2. Lot 76 is situated at 549 the Esplanade whilst Lot 83 (which sits behind Lot 76) is situated at 228 Cypress Street, Urangan. Lot 76 is zoned "Residential A". Lot 83 is zoned "Residential B". Lot 83 is improved with a residence/flat/office building whilst Lot 76 is improved with two storey brick flats. The valuation applied by the Chief Executive of $200,000 or $90m2 overall is expressed in the alternative in the report and valuation written by Mr Short as follows:
"Front Lot 76
1128m2 at $105/m2 = $120 000
Rear Lot 83
1128 m2 at $70/m2 = $ 80 000
$200 000 "
Mr Short based the valuation on sales and compared the lots directly with three sales, one of which fronts the Esplanade (corner Hockey Lane) and reflected on analysis an unimproved land value of $280,000 (Sale 1) and with the remainder situated in Cypress Street (Sale 2) and Hibiscus Street (Sale 3). The latter sales reflected values on analysis of $89,000 (Sale 2) and $82,000 (Sale 3). The respective sale lands are zoned "Residential B". The values applied to the sites are as follows:
S1 - Esplanade - $250,000 or $130m2 - actual.
S2 - Cypress Street - $85,000 or $75m2 - actual.
S3 - Hibiscus Street - $75,000 or $74m2 - if valued as Res "B" land.
These values per square metre may be compared with the values applied to the subject land in the alternative of $105m2 (the Esplanade) and $70m2 (Cypress Street). Mr Short held the opinion, and one which appears logical, that there was enhancing effect created by the individual lots being held in amalgamation, identifying with the Esplanade, as well as having street access at the rear.
The appellant in her notice of appeal stated a value of $160,000. The grounds of appeal were extensive and similar in scope to those in respect of the appeals dealt with previously herein, save that in respect of the subject land there is evidence that the lots suffer flooding from king tides and tidal surges during cyclonic conditions. There would also appear to be some flooding effects from storm water runoff. The learned Member, after considering the evidence in detail and by applying correct valuation principles, made an additional allowance for flooding from periodic tidal surge and determined the unimproved value at $190,000. Mr Kagerer said in evidence before this Court that he would accept a valuation of $180,000. Whether that be correct is a matter of evidence. Having perused the record of the lower court and the evidence before this Court we agree with the finding of the learned Member in the court below that the substance of the matter is whether due allowance has been made for flooding. When asked if he had any sales evidence which would support a finding of $180,000 for the subject land in lieu of $190,000, Mr Kagerer pointed to a sale on the corner of the Esplanade and Elizabeth Street situated at 552 the Esplanade. This lot has an area of 763m2 and is said to have sold for $72,000 which would reflect a value of about $95m2. The lot allegedly does not suffer from flooding and is zoned "Residential B". However, as stated by Counsel for the respondent the lot is below the minimum permissible area (800m2) for unit development under the town plan and as such has no greater potential than as a single unit residential site. Further he submits, and we agree, that as such the sale lot is not comparable with the subject land which has been developed with units/flats. Of the three sales used by Mr Short for purposes of direct comparison, Sale 3 in Hibiscus Street is the only sale which suffers from flooding. In the evidence given by Mr Short he says that this sale land rises gently above road level and is subject to storm/tidal inundation at the front. The sale reflected a land value of $74m2. However, when comparing the sale land with other sites (including S2) and the subject land, he pointed out that the price paid included an enhancement factor in that the sale land is closer to shops than is S2. It is the balancing of these sorts of things which requires some expertise when making comparisons. In similar vein, S1 relied upon by Mr Short which is an Esplanade lot is not flooded and possesses corner influence. That sale reflected on analysis a land value of $280,000 or about $147m2. The applied value is equivalent to a value of $130m2. It is evident that Mr Short has again balanced advantages and disadvantages in applying a value of $105m2 to the Esplanade area of the subject land - which would be something less again if the determination of the lower court stands.
On our consideration of the matter we prefer the evidence of Mr Short dealing with the comparative sales. In all other respects we agree with the findings of the learned Member. Accordingly, this appeal will be dismissed.
In the circumstances we make the following determinations -AV93-460 -The appeal is dismissed and the decision of the Land Court is affirmed;
AV93-461 -The appeal is allowed, the decision of the Land Court is set aside and the unimproved value of the subject land as at 31 March 1992, is determined at One hundred and twenty thousand dollars ($120,000);
AV93-462 -The appeal is dismissed and the decision of the Land Court is affirmed.
J.
Justice of the Supreme Court
President of the Land Court
Member of the Land Court
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