Kelly v Minister for Lands
[1995] QLC 75
•30 August 1995
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BRISBANE
30 AUGUST 1995
Re: Determination of unimproved value -
Application for conversion of tenure -
Special Lease No.: 26/41377, Innisfail.
Lessee: B.A. Kelly
(Hearing at Innisfail)
D E C I S I O N
Pursuant to the Land Act, the Minister has referred to the Court the matter of determination of the unimproved value of the land contained in the above lease, being Lot 327 on Plan NR6778, Parish of Mourilyan, containing 3.053 hectares.
The land is situated fronting Eden Road about 23.5 kilometres south of Innisfail. It is zoned "Rural B", in Johnstone Shire, where the minimum new subdivision permitted within that zone is 12 hectares. Eden Road is of formed gravel construction and access to the site is fair. Electricity and telephone are available to the site.
Application for the conversion of the lease was received by the Department of Lands on 30th August, 1993 and it is at that date which the value is to be determined. The assessment by the Department of Lands is in the amount of $32,000. Mr Kelly, the lessee, has contested that assessment. In his opinion, the unimproved value should be calculated on the basis of its worth as cane land. Based on the valuation for rating purposes, the pro-rata value of the land is calculated by Mr Kelly to be $2,981.38.
Mr Kelly gave evidence in support of his contention and explained the history of Crown land in the area being made available as special leases to a number of small canegrowers, for farm build-up. An area of about 8.5 hectares was made available to be shared between Mr Kelly and two of his neighbours, resulting in the subject land becoming part of his farm. For rating purposes, the land is valued as one aggregation although in fact the subject land is not contiguous to the main farm. It is on the opposite side of the road and a short distance removed. It is Mr Kelly's contention that the best use of the land is for cane growing and for that purpose it has practical shape affording long rows with no headland loss for harvesting needs. Mr Kelly pointed out that the land is located in an agricultural district where no rural-residential subdivision has been effected even during the period when the sugar industry was in a state of crisis through low prices and when farmers were desperate for capital.
In his opinion, the land is unsuitable for use as a separate rural-residential site, the basis on which it is valued as a separate entity, by the Department. He says that because the land is relatively flat in contour there are no views available and there are no desirable residential orientated features such as creeks or rainforest which might create a rural-residential environment. Instead, because of its dimensions (54 metres width by depth of 563 metres) any building site would be close to the side boundaries and hemmed in by a wall of sugarcane on the adjoining lands. He saw any separate residential use of the site which was not ancillary to the local cane-growing activity as being non-complementary and potentially the cause of neighbour disharmony. He drew attention to the fact that the land in its unimproved state was poorly drained and has been improved by a joint drainage arrangement between the neighbouring cane farms. Mr Kelly said that if external drainage arrangements were to be denied then the subject land would revert to a "water sodden area".
Mr Kelly wished to retain the land as part of a cane-farming aggregation and could not contemplate its sale as a separate entity except to one of the neighbours as cane-farming land. That was the purpose of the lease having been granted in the first place. He sees it as grossly unfair that he should be asked to pay an inflated freeholding price based on some other hypothetical use. He says that over the years, other farm build-up leases have been freeholded on the basis of their agricultural worth and he seeks nothing more. If there was a way for the land to be amalgamated by survey with the main farm, he would request that such approach to the conversion be taken.
As assigned improved cane land, Mr Kelly said that he would hope to get about $7,500 per hectare (approximately $3,000 per acre) but the best price he had ever had suggested to him by a neighbour and at about the relevant date was $6,250 per hectare. He was not in a position or qualified to try to relate improved value to unimproved value and as a consequence had adopted the unimproved capital value for rating purposes as the basis for his estimate.
The Department's valuation had been carried out by Mr S.A. Cross, a registered valuer and one well experienced in the valuation of lands in sugarcane- growing localities, including Johnstone Shire. His task was to value the land for its highest and best use, as required under the relevant Land Act and not necessarily the valuation procedure required under the Valuation of Land Act. Under the latter legislation, in making a valuation of the unimproved value of land which is exclusively used for the purposes of farming "any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded .....". It was the valuation under that legislation on which Mr Kelly's calculation had been made.
While Mr Cross does not disagree with Mr Kelly's opinion as to the suitability of the land for agricultural use and specifically the growing of sugarcane, he held the opinion that an enhanced market value existed through its ability for sale as a small site which was capable of use for both rural-orientated and residential purposes. He provided evidence of three sales of small "Rural B" zoned sites in the district, brief details of which are as follows:(1)A 4 hectare site at Formosa Road, Silkwood, which sold in December 1992 for $55,000 with an analysed unimproved value of $41,500 or $10,400 per hectare (clearing $10,000). The site is about 10 kilometres from the subject land, with access, location and services being considered inferior to those of the subject. The site "formed part of a large cane farm aggregation that was purchased primarily to grow tropical fruits and small crops". It comprised "better arable land" than the subject property.
(2)A 4.031 hectare site at Banfield Road, Hull, which sold in February 1993 for $42,250 with an analysed unimproved value of $33,250 (clearing $4,000). It is about 20 kilometres from the subject land in an isolated locality but with similar access and services. The land is not arable. It was seen as having comparable market value to the subject land.
(3)A 4.206 hectare site at Cowley Beach Road, Inarlinga, which sold in May 1993 for $70,000 with an analysed unimproved value of $58,500 or $14,600 per hectare (clearing $10,000). It is about 3 kilometres from the subject land with superior access, location and better quality arable land. It has frontage to Liverpool Creek but with a negative aspect of a cane tramline across the street frontage. The purchaser was a local cane farmer who, according to Mr Cross, had purchased the land to expand his farming operations.
Mr Cross described the subject land as being fully cleared to a cultivation standard and with a channel drain traversing the rear boundary. The added value of the improvements was assessed as clearing $7,625 and drain $750. The land comprises level to gently sloping low-lying ex-tropical scrub country, with primarily brown-grey clay loams and sections of low wet sandy clays. Mr Cross considered the soil quality to be "fair" for arable use.
His valuation of the land unimproved was as follows:3.053 hectares at $10,500 per hectare = $32,056
Adopt $32,000
It may be seen that Mr Cross's valuation of the land as cleared and drained is slightly in excess of $40,000 while the sale properties similarly improved had sold for $51,500, $37,250 and $68,500.
In Mr Kelly's opinion, the best price he could expect to receive as cleared and drained, would be from an adjoining owner and that would be in the range of $14,000 to a maximum of $21,000 for farm build-up purposes. Mr Kelly does not accept that the sale properties could be in any way comparable, because, in his opinion, the subject land is not suitable for separate residential use. He did not know the first sale land specifically but as with the second sale, he drew attention to the far superior shape which would allow separation of a house site from adjoining land usage. He agreed that the second sale was in an isolated area, which he knew well, but he saw that as the very attraction of the locality which was favoured by those seeking an alternative lifestyle. He did not agree that the third sale land would have genuinely been purchased for its cane-growing potential, but for its short-term residential site potential with its well located position in an area of rural-residential subdivision and with an attractive creek frontage. He said that the poor shape of the land was not ideally suited for arable use and the creek-related pest disabilities affected its potential for cane growing.
It is not difficult to understand Mr Kelly's views in this matter. The history of the survey of the land, its past and probable future use is dominated by its suitability for the growing of sugarcane as part of a farm aggregation. Mr Kelly does not seek to acquire the land for its use as a separate entity. The facts are however, that it is and must be regarded as a separate entity and there is a demonstrated district demand for small rural-residential sites.
Mr Kelly has however, raised several logical arguments as to the lack of real demand which the particular site might experience if offered for sale in the open marketplace. Its shape is a distinct disability for rural residential use, being cramped within fields of sugarcane. It is obvious, as Mr Cross argues, that residential sites are not uncommon in close proximity to sugarcane fields in Johnstone Shire, and in some cases hemmed in by sugarcane. It should also be obvious that the shape of the subject land is not ideal in terms of a rural-residential site and that shape disability would detract from the saleability of the land. Its physical qualities are seen to be less than attractive for residential use and potential exists for necessary external drainage outlets to be denied. It is located in an immediate area where residential use is, as I understand it, exclusively ancillary to sugarcane farming activities.
I accept Mr Kelly's opinion, that, in reality, even if the land was held in separate freehold tenure, it is more than likely that its use would continue to be dominated by its suitability for cane growing. Nevertheless, it seems to me that a prudent owner of the land would not destroy its potential for separate use, by having its title lost through amalgamation with other land.
Mr Kelly's approach excludes that market reality. On the other hand, I am not convinced that Mr Cross has given adequate consideration to those matters which would clearly detract from the desirability of use of the land for residential-dominated activities. Except for the access and service difficulties associated with the land in the first sale, it seems clear that the sale properties could readily provide keener residential-dominated demand. In terms of rural homesites, the single element of direct comparability between the sales and the subject land is size.
I have been left with real doubts as to the extent of genuine demand and subsequent market competition which the probable cane-farmer buyer of this land, might experience from those seeking the normal requirements of a rural-residential lifestyle. Any competition is seen as more than likely existing only in the very lower end of the rural homesite market.
Doing the best I can with the evidence as it has been presented, it seems to me that the site should be saleable for $32,500 improved with clearing and the existing drainage. Adopting Mr Cross's estimate of the added value of the improvements I will determine the unimproved site value in the rounded amount of $24,000.
MEMBER OF THE LAND COURT
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