Knapton v Chief Executive, Department of Natural Resources
[1999] QLC 47
•30 April 1999
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BRISBANE
30 APRIL 1999
Re: AV98-337 –
An Appeal against a determination of Unimproved Value –
Valuation of Land Act 1944 –
Inglewood Shire
Edward B and Dorothy M Knapton
v.
Chief Executive, Department of Natural Resources
(Hearing at Inglewood)
D E C I S I O N
Mr and Mrs Knapton own land described as Lots 6 and 7 on Registered Plan 164418 containing a total area of 117.6 ha in the Parish of Silverspur, County of Clive. The land is situated in Spooners Road, about 15 km east of the Town of Texas by way of bitumen and gravel roads. Electricity and telephone are connected to the land on which Mr and Mrs Knapton reside.
As at 1 October 1997, the unimproved value of the land, valued as a single rural homesite by the Department of Natural Resources, was $19,000. An objection to the valuation was unsuccessful and a Notice of Appeal, on the grounds that not all relevant factors were taken into account, was lodged. The appellants contend for a valuation of $10,600 which was the previously existing valuation.
Mr Knapton appeared at the hearing and gave evidence in support of the appeal. In a tendered statement was the suggestion that the valuation methodology employed by the Department, in making "a blanket valuation of the area" was "neither fair nor a true assessment". It was calculated that the valuation increase of 80%, was, in real terms, an increase of 94.3%, after the devaluation in the Australian dollar during the period, was taken into account. The appellants believed that the valuation had been based on the sale of a block of land with improvements, superior access and with soil quality so superior that it was incapable of comparison with the subject land. Mr Knapton described the subject land as having "major erosion problems due to its geographical make-up. It is practically covered with impenetrable regrowth, and is only accessible by a dirt road in very ordinary condition. This block has been on the market for ten (10) years and has attracted absolutely no interest at all."
Mr Knapton pointed out that while electricity had been connected it had been "after a battle" and at a cost to the appellants of $7,000. He was concerned with the susceptibility of the land to erosion and agreed that no viable farming activity was capable of being conducted thereon. Mr Knapton knew of no sales of comparable land and believed that there was no basis for the continual increases in valuations for rating purposes, and in particular the increased valuation appealed against.
The Department's valuation had been carried out by Mr M.W. Malone, registered valuer. Mr Malone had specifically inspected the property to observe the erosion and regrowth disabilities to which reference had been made by the appellants, but had found no reason to alter the valuation. He described the nature of the land as being "easy to moderate undulating traprock country".
It was Mr Malone's evidence that the valuation had been made "having regard to all the sales in the Inglewood Shire but in particular two sales" as listed in a schedule included in his report. Mr Knapton had been provided with a copy of that report.
Mr Malone confirmed that one of those sales was, as had been suggested by Mr Knapton, of a block on the bitumen Inglewood-Texas Road. The sale land was considerably smaller in area than the subject, containing 50.17 ha, situated to the east of the subject land and with better access, and better soil types, but, in Mr Malone's opinion, suited only to grazing use with some opportunity type cultivation of parts. The land had sold in August 1996 for $45,000. The sale had been analysed to show an unimproved value of $24,100 and an unimproved valuation of $21,000 had been applied as at the relevant date. Mr Malone was comfortable with the relativity between the valuations applied to both the sale and subject lands.
The second sale to which Mr Malone had particular regard was situated in Sweedman's Road, north-westerly of Texas in the vicinity of the Wyalla feedlot complex. This sale land was much larger than the subject having area of 207.3 ha. The land had sold in November 1995 for $100,000, the sale having been analysed by Mr Malone to show an unimproved value of $31,000. An unimproved value of $29,000 had been applied at the relevant date. Mr Malone's opinion was that the sale block had better soil types than the subject and slightly better access, but suffered some disabilities such as smell and fine dust from the feedlot. Mr Malone stated that the unimproved value of the sale land had also been reduced due to a proposed major electricity transmission line corridor along the western boundary of the site.
In response to Mr Knapton's evidence that the subject land had been on the market for 10 years with no buyer interest, Mr Malone gave details of the sale of a small 21.7 ha site situated a short distance to the north of the subject land. That site had sold in 1992 for $25,000. Although the sale had not been specifically analysed, Mr Malone had spoken to the purchaser and inspected the site. In his opinion, that sale would have shown at that time an unimproved value of about $10,000. An unimproved value of $7,000 had been applied at the date relevant to this matter. Mr Malone believed that the relativity between that applied valuation and the valuation of the subject land was reasonable.
Although it had not formed a basis for the relevant date valuation, Mr Malone was aware of the sale of a 35 ha block about 25 km north of Texas but with poor access, which had sold in February 1998 for $15,000. That sale in his opinion well supported the valuation of $11,000 which had been applied to that land, in general relativity with other rural homesites.
General Observations and Considerations Relative to Inglewood Shire Appeals
This appeal is one of a number heard at the same sittings of the Court in Inglewood, many of which related to rural residential sites. It is clear that many owners of rural residential sites in the Inglewood-Texas locality do not accept that the market for this type of land had increased since the previous valuation, let alone to the degree (80%) which the Department's valuations suggested. In the Texas area in particular, the Court was informed that an earlier proposal to expand the Wyalla feedlot complex had brought with it various expectations in the community, particularly with regard to employment prospects and improvement in the local economy. It is said, that linked to those expectations, had been a keen demand for real estate of a rural homesite nature. The expansion proposal did not eventuate and it is said that there is now, and was at the date of valuation, little demand for rural homesites, even at reduced levels of asking prices.
Certainly, the extent of sales evidence put forward by the Department, as a valuation basis in this and other appeals, is limited. The basic sales evidence has brought complaints from appellants that the sale properties are generally not comparable to the appeal lands and are not indicative of the depressed market which was said to exist.
There is substance in the allegations that the sales evidence used by the Department is generally not ideal. It is not the kind of evidence which would suggest the activity which would normally be associated with a significant increase in value. There is a suggestion by some that the sales which have taken place are "one-off" and not representative of the true market. However, having heard the totality of the evidence, I do not accept that such is the case. The analysis of sales evidence by Mr Malone, has in some instances been challenged, but not, in my opinion, with any significant success. The result has been that the sales evidence has generally been proved by the Department to support the relevant date valuations applied to the actual sale properties.
It is appropriate to discuss the position in which the Department is seen to have found itself. It is the suggestion of the Department that when the previous valuation was made a "conservative" approach had been taken, although there were sales at that time of rural homesites at levels of value significantly higher than those applied. It seems that those responsible for the valuation at that time were not confident that the level of values as shown by the higher sale prices was realistic or capable of being maintained. However, when it came to the making of the Shire valuations now under appeal, it had been found that the available sales evidence continued to reflect a level of value significantly higher than the level previously applied. That did not mean that there had necessarily been an increase in market value in the intervening period. However, the sales evidence had been seen to consistently confirm that the previous valuation was too low as at 1 October 1997. The decision was taken to increase the valuations of rural homesites in line with the relevant sales evidence, rather than perpetuate an under market valuation.
The owners of rural homesites understandably perceive that the Department, through its methodology in increasing valuations of this category of property, by "a blanket" 80% above the previously existing base, had concluded that the market value had increased by that factor. It is clear that the owners of these sites are confident that such a conclusion is wrong and inconsistent with the real marketplace.
The increase in valuation has considerable relevance to owners who face significant increases in rates payable to the local government.
However, the level of increase above the previous valuation is not relevant to the matters which this Court now has to decide. As the Land Appeal Court found in Tow v. The Valuer-General (1978) 5 QLCR 378 at p.381:" Subject to certain statutory requirements as to the onus of proof and the restriction of the appellants to the grounds of appeal specified in their notice of appeal, the duty of the Land Court and of this Court is to make determinations of unimproved value based on the evidence presented to it by the parties and conforming to the aforementioned statutory formula.
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. The Valuer-General and the Court are concerned with finding unimproved value and not with the amount of rates that may be levied as a result."
The chief executive's valuation of lands in Inglewood Shire as at 1 October 1997, was made pursuant to s.37 of the Valuation of Land Act 1944. Section 33 of the Act provides that the valuation shall be deemed to be correct until proved otherwise upon objection or appeal. Section 45(4) of the Act provides that the burden of proving any and every such ground of appeal shall be upon the owner.
In the appeals heard at the Inglewood Shire sittings, no appellant chose to engage the services of a registered valuer, no doubt due to cost implications. However, the task of an appellant is difficult in the absence of professional assistance, particularly when it comes to challenging the veracity of an assessment made by a professional valuer and based on that valuer's analysis of market evidence.
There has been a misconception by some appellants as to the meaning of "unimproved value". Section 3 of the Act, as far as it is relevant to the Inglewood Shire appeals provides as follows:
"3.(1) For the purposes of this Act –
'Unimproved value' of land means –
in relation to unimproved land – 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; and
in relation to improved land – 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.
(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act.
…….
(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that –
the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and
such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used;
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made."
The question of availability of services and infrastructure to land, particularly in cases where owners have had to contribute significantly to the cost of provision of electricity, and the correct interpretation of the meaning of unimproved value were dealt with by the Land Appeal Court in Clough v. The Valuer-General (1981-82) 8 QLCR 70 at pp.73-74 where the following is found:
" Á road, or service (sewerage, water or electricity) are not in the strict legal sense appurtenant to a parcel of land. They do not belong to it as a property right … the wires … exterior to the parcel (and in some cases within the bounds of the parcel) are owned by the relevant service authority."
Then at p.75:
" We think it beyond doubt that what has to be valued is the subject parcel of land viewed as if the improvements thereon, visible or invisible, never existed but that otherwise the parcel was situated in the community (and environment) with the amenities and facilities that had grown up around it as at the date of valuation."
Findings
In this appeal, the matters raised by the appellants relative to the nature of the land, timber regrowth and erosion and the inability of the land to be used for a viable primary production activity, have been considered and accepted by the Department. It is observed that the land has in fact been valued in terms of s.17(1) of the Act, on the basis that it is exclusively used for purposes of a single dwelling-house, and not as two surveyed sites as it might have been valued, if it had been vacant land.
The only sales evidence before the Court was provided by Mr Malone. The sales support the unimproved values applied to the sale lands.
The real challenge then must lie in the application of that sales evidence to the valuation of the subject land. Mr Malone is of the opinion that the relativity between the valuation of the subject land and the values applied to the sale lands is correct. It is clear that he must have been of the opinion that the relativity expressed in previous valuations, from block to block including the blocks which have been sold, was correct and had remained so. In other words, the 80% increase in values was initially applied uniformly across all blocks categorised as rural homesites. The Court has observed that the Department has seen the need, in some instances, and after specific consideration, to alter previously existing relativities. In some of the decisions delivered today, further alterations to previously existing relativities will result.
The Court has been placed in the position of being able to consider not only the particular sales adopted as a basis in this locality, but in other localities as well. It appears to me that in the majority of cases the sales evidence has indicated a market preference for rural homesites with a particular feature. In a number of cases that feature has related to the suitability of the land for wider than pure residential use. For example, purchasers were attracted to several of the sale blocks because of their suitability for pursuits of a primary production nature. Those pursuits might not however, constitute use for the purposes of "farming" as defined in s.17 of the Valuation of Land Act, and for that reason those sale lands have been valued by the Department as falling within the general category of rural homesites.
From the evidence I have heard regarding the subject land, it would be seen as unlikely that the purchasers of the two sale blocks used in the particular valuation basis, would have had any interest in the subject land had it been available for purchase in an unimproved or lightly improved state. Nevertheless, the subject land does have one feature which sets it apart from many rural "homesites" – its size.
After hearing the overall evidence regarding rural homesite appeals, and due primarily to the overall dearth of sales evidence which has a direct comparability with the many rural sites, large or small, the uses of which by the very nature of the land is limited to those ancillary to dominant residential use, a doubt has emerged in my mind as to whether previously existing relativities, if they were then correct, have remained generally unchanged as at the date of this valuation.
That doubt will be expressed in my decision to allow this appeal and to reduce the valuation to a degree which has been found reasonable in other localities where better proof was available.
Accordingly, the appeal is allowed, the determination of the chief executive set aside and the unimproved value as at 1 October 1997 determined in the amount of Sixteen Thousand Five Hundred Dollars ($16,500).
RE WENCK
MEMBER OF THE LAND COURT
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