Mallee Estates Pty Ltd v Chief Executive, Department of Natural ResourcesChief Executive, Department of Natural Resources
[1999] QLC 79
•23 July 1999
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LAND COURT
BRISBANE
23 JULY 1999
Re: AV98-284
An Appeal against an Unimproved Valuation –
Valuation of Land Act 1944
Local Government: Douglas
Mallee Estates Pty Ltd
v.
Chief Executive, Department of Natural Resources
(Hearing at Cairns)
D E C I S I O N
Mallee Estates Pty Ltd owns land described as Lot 31 on PTD2091, Parish of Salisbury, County of Solander, containing 819 m². The land is situated at the southern corner of Wharf and Warner Streets, Port Douglas. All town services are available and connected.
The land is zoned "Light Industry" under the Douglas Shire Town Plan gazetted on 20 December 1996. Structural improvements on the land comprise a ground floor commercial style building with a residence on the upper level.
As at 1 October 1997, the chief executive's unimproved valuation of the land was $245,000.
An appeal has been lodged against the chief executive's determination on the following grounds:"The subject property has been inaccurately valued by the Chief Executive, Department of natural Resources.
1.The basis for objection is that the adjoining property in Warner Street which has the same light industrial zoning and comprises 1012 square metres was simultaneously valued at $133,000.
2.The adjoining property which enjoys a rear lane access and therefore theoretically a higher value, is 193 square metres larger in area than the subject property.
3.By analysis, the valuation placed on the adjoining property in Warner Street equates to $131.42 per square metre and therefore my property the subject property should value for the identical amount per square metre.
4.The subject property comprises 819 square metres and at the value of $131.42 per square metre, our estimate of the unimproved value of the land is $107,632.98.
5.The valuation that the Chief Executive has placed on the subject property is $245,000 which equates to $299 per square metre being more than double the adjoining land and therefore totally inaccurate."
Mr MR Phillips, a director of the appellant company had lodged the appeal and appeared at the hearing to conduct the appellant's case. He gave evidence in support of the appeal. Mr Phillips is a real estate agent and had been a registered valuer in New South Wales until 1986.
The basis of Mr Phillips' case was that the land, in common with all lots on the southern frontage of Warner Street, between Wharf Street and Grant Street, with the exception of one lot on the corner of Grant Street, was zoned "Light Industry". However, the subject land was valued as if it was zoned "General Business", at $300 per m², a sharp increase over the previous valuation, while each of the other "Light Industry" zoned lots had been either valued as zoned, with no increase above the previously existing valuation, or pursuant to s.17(1) of the Valuation of Land Act 1944 (the Act) as exclusively used for purposes of a single dwelling, at an even lower level of value.
When Mr Phillips had decided to challenge the increasing disparity in valuations, he had made specific reference in the grounds of appeal to the immediately adjoining lot (Lot 33) which had been valued at $133,000 and equivalent to $131.42 per m². Curious as it was to him, because of his knowledge of the industrial use of that land, he had since been informed that Lot 33 had received the benefit of the concessional valuation applied pursuant to s.17(1) of the Act. His further inquiries revealed that another lot (Lot 36), despite its primary industrial use, also enjoyed the s.17(1) concession. Although he was firmly of the opinion that those lots did not qualify to receive that concession, Mr Phillips accepted that he could not reasonably use those examples for an argument based on relativity. However his investigations revealed that the light industry level of value which had been applied to the remaining six lots in Warner Street varied between $170.45 per m² and $175.80 per m², averaging $172 per m². In his opinion, the subject land, as zoned, should not have been valued at more than $172 per m² or $140,870.
He had established that the lot at the corner of Grant Street and Warner Street (Lot 31), zoned "General Business", had been valued at $298.50 per m², a pro-rata value slightly less than that applied to the subject land. He assumed "that the subject property may have been identified as a general business zoning and mistakenly valued as such."
It is a fact that the land, despite its "Light Industry" zoning, had been valued by the chief executive as a commercial site at a general business level of value, rounded from $300 per m².
Mr IS Quirk-Anderson, a registered valuer employed by the chief executive, gave evidence to that effect. He had not been the valuer responsible for making the valuation appealed against, but had accepted the task of supporting the valuation with which he agreed.
In his tendered report, he described the land as being a corner site, irregular in shape with 27 metres frontage to Wharf Street, a major local road, and 36 metres to the secondary Warner Street, with good access and exposure from both streets. The situation of the land was described as being "in the main northern commercial precinct of Port Douglas, approximately 200 metres south-west of the Port Douglas Post Office and about 400 metres north of the Marina Mirage complex."
The structural improvements were described as including "a small retail complex that is used as a marine chandlery and hardware store, office for a tourist dive operation, and a take-away food store. A residence is located above the shops. An car rental operation is due to be established on the property."
In explanation of the chief executive's position, an excerpt from the discussion under the heading "Valuation Basis and Rationale" in Mr Quirk-Anderson's report is reported here:"The property has been valued in accordance with Section 3.4 of the Valuation of Land Act 1944 which states that:
(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that –
(a)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
(b)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.
This section effectively allows the application of a higher level of value then (sic) the zoning confers, on the basis of the nature of the improvements on the land. The property has been developed as a commercial entity and consequently has been valued as such.
Irrespective of the zoning and the above mentioned section of the Valuation of Land Act; the property market acknowledges the subject land as commercial rather then (sic) industrial, on the basis of its DCP 2 designation and not its zoning."
Mr Quirk-Anderson was of the opinion that the building on the site was designed and constructed as a commercial complex rather than as an industrial one. Photographs were attached to his report which depicted the commercially orientated appearance, at least of the ground floor, and the attractive streetscape setting. Mr Quirk-Anderson believed that the use of the premises, through the various tenancies including the "Dive Shop and School" were of a type likely to be found in the "General Business" zone.
Mr Phillips who had, as I understand it, constructed the building, gave evidence, which I accept, that the building was designed, approved by Council, and constructed "for the purpose of industrial showrooms and bulk storage". He contends that all of the "Industrial" zoned land in Warner Street is capable of similar development. He provided to the Court an extract of the intent, in the Town Plan, of the "Light Industry" zone. This contained the following:
"(11)Light Industry
This zone is intended to have a higher amenity, greater public access and accommodate more non-industrial land uses than the General Industry Zone. It can therefore be suitable in some locations within urban areas adjacent to shopping and business areas and close to residential areas. Low density offices and showrooms are permitted without consent because they can support and not detract from development in the business zones. Shops, higher density commercial premises and professional offices, restaurants and the like may be permitted with the consent of Council where in accordance with the relevant Development Control Plan or where the nature of the goods or services provided, or a direct relationship to nearby industries, makes it less appropriate for such uses to be located in one of the business zones."
It seems to me, as Mr Phillips submitted, that the actual uses within the complex, as at the relevant date, could be accepted as, if not as of right within the "Light Industry" zone, then capable of being permitted with the consent of Council. I am not persuaded that the improvements to the subject land although attractive in appearance, or the use of those improvements through the various tenancies, should be regarded as uses higher than those permitted in the "Light Industry" zone, or triggering a valuation approach at a general business level of value. However, as is found in s.3(4)(b), nothing in that subsection then prevents regard being had, in determining unimproved value, to any other purpose for which the land may be used on the assumption that any improvements referred to in s.3(1) of the Act, had not been made.
The evidence produced to the Court indicated that the original "General Business" zone extended from both frontages of Macrossan Street (the hub of the commercial area) southerly to Warner Street, then the land on the southern side of Warner Street was included in the "Light Industry" zone. However, in the Development Control Plan for Port Douglas was defined a "Tourist Centre" area which generally conformed with the "General Business" zone, except as is relevant to this matter, it also included the "Light Industry" zone on the southern side of Warner Street. Within that "Tourist Centre" area was further defined "Special Area 3" the boundaries of which included the subject land and one lot immediately to the south in Wharf Street, then excluded most of the internal lots within the "General Business" zone and the "Light Industry" zone on both sides of Warner Street towards the corner of Grant Street. The corners of Grant Street and one internal lot westerly of Grant Street were included in "Special Area 3".
As I understood the evidence, the original intent of "Special Area 3" was to identify the area favoured for consolidation and progressive extension of commercial development in the existing "General Business" zone and, where appropriate, external to that zone, through rezoning. In Mr Phillips' opinion, "Special Area 3" had become obsolete, due to the take-up of vacant land within its area. It was his perception that all land within the "Tourist Centre" as shown on the Development Control Plan and which had not already been rezoned to "General Business", had potential for that to occur. Indeed, land on the southern corners of Warner and Grant Streets had been rezoned to "General Business" subsequent to the Town Plan.
While Mr Phillips discounted the effect of "Special Area 3", the facts seem to be that the only rezonings from "Light Industry" to "General Business" have occurred within that "Special Area 3", within which the subject land is located. It seems logical that extension of the "General Business" zone and consolidation of intense commercial development would occur southerly along Grant Street and Wharf Street, which are the road links between Macrossan Street and the somewhat prestigious Marina Mirage complex.
It seems to me that, if unimproved, at the date of valuation the subject land would have been ripe for rezoning to "General Business", just as had been the land at the corner of Grant Street. It also seems to me that while the internal lots between Wharf and Grant Streets presently zoned "Light Industry" also have future rezoning potential in accordance with the Development Control Plan, that potential was more futuristic than for the subject land at the relevant date.
The Court has not been assisted by evidence as to any discount which might have been seen to be relevant in the marketplace, for the need to have the subject land, if unimproved, rezoned to "General Business" before its full commercial potential could be reached.
However, I have gained the impression that any discount would be relatively insignificant in regard to risk. Nevertheless it seems to me that as zoned "Light Industry", the marketplace would be influenced by possible delays and costs associated with the rezoning procedure.
There was some dispute between Mr Phillips and Mr Quirk-Anderson, as to the general business desirability of the Grant Street corners, in comparison with the subject Wharf Street corner.
The comparison is relevant to the valuation because two of the three sales upon which Mr Quirk-Anderson relied in support of the chief executive's valuation were of land at the Grant Street/Warner Street intersection, one on the north-western corner, the second on the south-western corner, both sites zoned "General Business" at the date of sale. The first sale site contained 1,404 m² and was sold in August 1996 to show an analysed unimproved value of $358 per m². A valuation equivalent to $300 per m² had been applied as at 1 October 1997. The second sale also took place in August 1996, the site having an area of 1,055 m² with the sale showing an analysed unimproved value of $428 per m². A valuation equivalent to $300 per m² had been applied at the relevant date of this valuation. In his written comments regarding each of these two sales, Mr Quirk-Anderson referred to the inferior location of each site in comparison to the subject land. The third sale used by Mr Quirk-Anderson was of a much larger "General Business" zoned site of 8,096 m², of rectangular shape midway between Wharf Street and Grant Street, but with frontage to the commercially superior Macrossan Street, running through to Warner Street. That sale took place in June 1997 showing an analysed unimproved value of $337 per m² and the applied valuation at the relevant date had been $335 per m². The size differential of that third sale makes comparison with the subject land difficult.
Mr Phillips is of the opinion that the Grant Street/Warner Street location was superior to the subject land at the date of valuation and that superiority has increased subsequently. His reasoning is that the Grant Street location identifies more closely with Macrossan Street and the hub of the business centre and is on a more direct link with the Marina Mirage complex than is the subject. He pointed out that while the Port Douglas Post Office may be only 200 metres from the subject land, measured radially, its location is furthest from the Post Office than any other within the commercial precinct. Mr Quirk-Anderson saw the proximity to the waterfront as being a positive feature of the commercial potential of the subject land but Mr Phillips countered with the argument that the location was on the fringe of the commercial precinct while development potential along Grant Street was more compact and intense and recognised by the Council in its streetscaping improvements.
As it happened, although Mr Quirk-Anderson saw the Grant Street location of the sales as commercially inferior, the same pro-rata value of $300 per m² had been applied to the subject land on the basis that its development and use was equivalent to general business. I am persuaded by the logic of Mr Phillips' argument that, if unimproved, the commercial potential of the subject land may have been at the relevant date, inferior to the Grant Street corners, but I think only marginally so. That inferiority might become more distinct as development of the commercial precinct extends.
Conclusions
I have decided that, if the land was zoned "General Business" at the relevant date, a valuation of $285 per m² would reflect the differential which I have been persuaded existed between the Grant Street corner and the Wharf Street corner of Warner Street and based on the values applied to the relevant Grant Street sale sites. It seems to me that the inferior zoning of the subject land is best considered in a "top down" valuation approach. Through its corner position and exposure and particularly its inclusion in "Special Area 3" in the Development Control Plan, I am comfortable with the conclusion that the subject land had superior "General Business" rezoning and usage potential than did the internal "Light Industry" zoned sites in Warner Street. In the absence of evidence as to the cost and time which would have been involved in effecting a rezoning to "General Business" at the date of valuation and doing the best I can to interpret the market attitude which might have existed towards the zoning status of the land, I have decided that the need for rezoning to achieve full potential would have had a deleterious market effect no greater than 10% of its rezoned value (which I adopt as being $285 per m²). That would result in a rounded valuation of $210,000.
Mr Phillips' opinion as to correct relativity of values between the subject land and the internal "Light Industry" lots in Warner Street is not persuasive or accepted. However his evidence as to the use of those properties which enjoy the concessional residential use valuation under s.17(1) of the Act indicates the need for investigation and, if necessary, review of those valuations by the chief executive, to ensure that the rating burden is fairly distributed.
Finding
The appeal is allowed. The determination of the chief executive is set aside and the unimproved value of the land as at 1 October 1997 is determined in the amount of Two Hundred and Ten Thousand Dollars ($210,000).
RE WENCK
MEMBER OF THE LAND COURT
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