Masters v Chief Executive, Department of Natural Resources and Mines
[2001] QLC 46
•31 May 2001
|
BRISBANE
31 MAY 2001
Re: Appeals against Annual Valuations
Valuation of Land Act 1944
Property ID Nos: 1231765A, 1231764A and 1231763A
Local Government: BCC-Brisbane
(AV99-667, AV99-668 and AV99-669)
Peter Warwick Masters
v.
Chief Executive, Department of Natural Resources and Mines
D E C I S I O N
Background:
These matters relate to three adjoining properties at 611, 619 and 625 Brunswick Street, New Farm and described as:
Lot 6 on RP 8613 - 501 m² (AV99-667);
Lot 1 on RP 8626 - 405 m² (AV99-668);
Lot 2 on RP 40261 - 405 m² (AV99-669).
The subject lands are located about 1.3 km north-east of the Brisbane GPO, 1 km south-west of the local primary school, 1.5 km north-west of the local New Farm shopping centre, and 1.5 km south-east of the Fortitude Valley business centre. Access is available from Brunswick Street, which is a two-way bitumen sealed carriageway with concrete kerbing and channelling, and is the main access into the suburb of New Farm.
The subject lands are all zoned as "Mixed Use Centres (Precinct 4)" under the New Farm and Teneriffe Hill Development Control Plan of 20 December 1996 of the Brisbane City Council (the Council), effective at the date of valuation of 1 October 1998. The key issues are the nature and use of the lands, impact of zoning, comparison of sales, impact of access, relativity and the method of valuation.
On 8 March 1999 the Chief Executive issued valuations of the subject lands at $190,000 (AV99-667), $148,000 (AV99-668) and $148,000 (AV99-669). Following objections the Chief Executive confirmed those unimproved values on 29 June 1999. The appellant appealed those values on 9 August 1999, arguing the unimproved values in each case should be $89,000.
The three appeals were the subject of a joint preliminary conference before this Court on 15 March 2000, subsequent to which on 22 March 2000 the respondent issued revised valuations under s.68 for $142,500 each in respect of AV99-668 and AV99-669.
A hearing was scheduled for 29 November 2000, but with the consent of both parties that was rescheduled for 30 January 2001. By agreement the three matters were heard concurrently. Peter Warwick Masters appeared and gave evidence on his own behalf. Mr R Paterson, Principal Legal Officer, appeared for the respondent, calling evidence from David Robert McKinnon, the departmental registered valuer responsible for determining the valuation.
The Evidence:The Nature of the Land -
The three subject parcels are gently sloping inside lots falling from south to north towards Brunswick Street, with some suburban views. All normal utility services are available, and the lands are used for multiple residential purposes. 611 Brunswick Street is currently used with a multiple unit residential building (flats), 625 Brunswick Street is currently used with a dwelling connected to a multiple residence (boarding house) and 619 Brunswick Street is used by a dwelling converted to flats. The three existing dwellings are all old colonial houses.
Mr McKinnon initially assessed 611 Brunswick Street as benefiting from an easement (Easement D on SP 125218) across an adjoining parcel to the west (599 Brunswick Street), providing access to Bowen Street. However, that easement was not registered until January 2000, subsequent to the date of valuation on 1 October 1998. As the benefit of the easement had been allowed for in his valuation of 611 Brunswick Street, Mr McKinnon then sought leave to amend his valuation to ignore the benefit of the easement on 611 Brunswick Street (AV99-667), which directly adjoins 599 Brunswick Street. The other two parcels were unable to directly benefit from the access easement as separate valuations, and there had been no special allowance for those two parcels.
Mr McKinnon then led evidence to a valuation of $175,000 for AV99-667, which became the amount appealed against.
Because of their relatively small size the subject lands have limited frontages of 15.09 to 15.65 metres to Brunswick Street, and depth varying from 25.86 metres to 33.19 metres. Those restrictions provide some constraints upon future development potential.
Impact of Planning -Mr Masters explains that he had a contract of sale upon the adjoining 599 Brunswick Street, but withdrew from the sale because of a resumption of part of the land that had not been disclosed in the negotiations. He also notes that was about the time of the preparation of the Council's Development Control Plan, where restrictions upon parking and access to Brunswick Street had been foreshadowed.
Because of difficulties with parking in the narrow side street such as Bowen Street, it was finally determined that the upper floor residential level of 599 Brunswick Street would be restricted to low-cost type housing. The original intentions for 599 Brunswick Street had been for six one-bedroom units, and the change to low-cost housing was to the disadvantage of that owner.
Mr Masters has subsequently made inquiries of the Council on 9 May and 11 August 2000 in respect of the current impact of the planning regime for the subject lands, with little detailed success. He argues that, while he has not received a definitive refusal for access from the subject lands directly onto Brunswick Street, it is his understanding of Council's intentions that access was likely to be denied, unless it could be obtained from either of the side streets of Balfour Street or Bowen Street. However, he concedes that he has not yet made a formal application for development to test that conclusion.
Mr McKinnon advises that the subject lands are actually in Precinct 4A, which is a subset of Precinct 4, and includes lands fronting Brunswick Street, and involving a wide range of retailing, entertainment and commercial uses. The general maximum floor height of development in Precinct 4 is to three storeys, except that development in Precinct 4A may be approved to four storeys on the south side of Brunswick Street, which includes the subject land, and where the additional storey is used for residential purposes. The maximum gross floor area permitted is 1.0, or the gross floor area of the existing building, whichever is the greater. A total of 30% of the first three storeys is to be for residential purposes. Both Mr Masters and Mr McKinnon agree that commercial premises on the second-storey level are problematic enterprises.
In respect of the easement for access across 599 Brunswick Street, that apparently was negotiated by Mr Masters after a lengthy dispute with the adjoining owner of 599 Brunswick Street. The response from the Council to Mr Masters of 27 November 2000 identifies a wide range of issues which need to be addressed before vehicular access from the subject lands could be approved. A key issue amongst those specific issues is the need for the consent of the owner of 599 Brunswick Street, regardless of the current legal agreement being in place. It is noted that that advice was provided by an engineering officer of Council, and may not definitely represent Council's opinion in respect of its legal obligation. However, as the impact of that easement is not relevant in the current matter, I see no need to comment further on the legal implications of the easement.
Mr Masters also notes that the southern side of Brunswick Street, including the subject lands, suffers a disadvantage, in his opinion, in respect of car parking for shopping excursions by New Farm residents. He argues that convenience shopping, which is the major function of the strip commercial development along Brunswick Street, is focused on afternoons, when residents are returning from work. Parking on the northern side of Brunswick Street (except 4 p.m. to 6 p.m.) allows for more direct setdown and pickup by vehicles, to the disadvantage of commercial sites on the southern side of the street. Mr Masters also compares the more accessible street and off-street parking near the Coles Supermarket to the north-east of Brunswick Street, compared to the narrow Balfour and Bowen Streets. For all of the above reasons Mr Masters sees parking, both onsite and in the surrounding streets, as a major problem to be resolved for the subject lands.
A further matter for consideration is the separate nature of the three parcels, and the capacity for individual developments of those parcels to accommodate onsite vehicular movements and parking. He argues that it is not appropriate to see the three sites as a single development with increased capacity for cars.
The Use of the Lands -In seeking to determine a reasonable use for the subject lands, Mr McKinnon has had discussions with Council officers who confirmed, in his opinion, that access would be preferred either by way of a rear easement or from a side street, rather than directly from Brunswick Street. However, Mr McKinnon formed the view that, when such an arrangement was not possible, or where adverse impacts would occur in the side streets, then Council could consider direct access to Brunswick Street, but would favour in such circumstances proposals which allowed for:
· a mix of residential and non-residential developments;
· the timing of traffic flows;
· the ability for service vehicles to collect garbage, etc;
· where the gross floor area (GFA) was not maximised and did not seek to maximise to full development potential;
· entry and exit driveways of adequate width (6 metres) to allow simultaneous flows in both directions.
As a means of seeking some understanding of the possible potential developments which might accommodate adequate onsite parking, Mr McKinnon supplies rough sketches of the sites allowing 60% of the allowable GFA to illustrate possible future uses of the land. Those sketches are not definitive, and merely represent one option for each site consistent with the planning constraints. Those options were seen by Mr McKinnon as indicative only of a form of use which a prudent purchaser of the lands might contemplate. Mr McKinnon has then based his valuations of the lands assuming that a prudent purchaser was likely to have seen their future development as viable possibilities.
However, Mr McKinnon concedes that his opinion is only based upon verbal discussions with Council officers, and any response without a formal application and fee to Council was likely to contain elements of uncertainty about the final level of access approved by Council. Mr McKinnon argues that such views were also likely to have been available to any prudent purchaser contemplating acquiring the sites, who made preliminary inquiries of Council.
The Methods of Valuation -Mr Masters adopts two approaches for determining his estimates of the unimproved values. Initially he compares the lands with a sale of a developed site at 116 Heal Street, New Farm. That lot has been developed as a similar type of use as an old boarding house/multiple dwelling, and is discussed later. The second method involves a feasibility or a hypothetical development approach.
In exploring his hypothetical development of the lands, Mr Masters agrees that a prudent developer was likely to seek a profit of about 20% to 25% on the total costs of developing the project, and to have estimated his likely success of developing prior to purchasing the lands. Allowing for his estimates on 611 Brunswick Street for approval, design and construction costs, and allowing for the 25% profit and interest, Mr Masters then estimates the likely selling costs of the developed units, concluding that the proposals would not be viable based upon the land components assessed by Mr McKinnon.
Mr McKinnon rejects such an approach, arguing that he would only use a hypothetical development approach as a check on his primary valuation by comparing sales of vacant or lightly improved lands.
Relativity -Mr Masters also seeks relativity with the adjoining parcel to the east of 625 Brunswick Street, 629 Brunswick Street, on the corner of Balfour Street. That is a small parcel of 230 m², but has a frontage of 8.9 metres to Brunswick Street, plus 25.8 metres to Balfour Street, and has an unimproved value of $89,000.
Mr Masters sees the corner position and extra street frontage as balancing the smaller area of 629 Brunswick Street, and therefore argues that the adjoining subject lands should have comparable unimproved values. Mr Masters sees the potential for vehicular access from Balfour Street as an advantage to 629 Brunswick Street, which allows that owner to utilise 100% of the GFA.
Mr McKinnon, by comparison, sees the constraints imposed by the smaller dimensions of 629 Brunswick Street as a major impediment to development and onsite car parking. He argues that the rate of $387/m² reflects those disabilities as well as providing some additional premium for its corner location. He argues that because of the small frontage to Brunswick Street there was no likelihood of any vehicular access to that street, and further he notes that access would only be allowed in Balfour Street well clear of the corner of Balfour and Brunswick Streets.
Comparison of Sales -To support his estimate of the unimproved value Mr Masters seeks comparison with the following sale:
Sale 1 - (116 Heal Street - 673 m²). This was the sale of an improved parcel with an old dwelling used as flats. The sale sold on 5 May 1998 for $250,000. The sale is located in a medium density living precinct and has a GFA of 50% for lots less than 1,000 m². Mr Masters estimates the value of the existing building at between $150,000 and $200,000 concluding the land value was $100,000.
Mr Masters concedes that the value of the existing building could vary between nil and $150,000 depending upon the views of the particular purchaser. He personally saw value in the building for its current use as flats. Mr McKinnon argues that the 50% GFA is inferior to the GFA allowed on the subject lands, and the added value of the old building on 116 Heal Street may well represent nil for redevelopment purposes.
However, Mr McKinnon did not analyse that sale, but did see it as a site for redevelopment, which would indicate that the $250,000 actually reflected a site value for the land. Any residual value in the structure was then likely to be offset by the costs of clearing the site.
To support his valuation Mr McKinnon provides the following sales:
Sale 1 - (599 Brunswick Street - Lots 4 and 5 on RP 8613). This is the sale of the adjoining property of area 1,002 m² in the "Mixed Use Precinct", and on the corner of Brunswick and Bowen Streets. Three old derelict houses were demolished after the sale, and the site was then developed as a three-storey commercial and residential building, containing a low-cost housing component. Because of the low-cost housing requirement the sale is seen as inferior to the subject lands.
The sale sold in January 1997 for $540,000, which was analysed at $540,000 ($539/m²), and applied at $500,000 ($500/m²).
Sale 2 - (650 and 652 Brunswick Street - Lots 2 and 3 on RP 42924, Lot 4 on RP 9045 and Lot 1 on RP 9070). This is a 1,098 m² "Mixed Use Precinct" inside parcel on the northern side of Brunswick Street opposite the subject lands. The existing old dwelling was demolished, and a new three-storey commercial and residential building is now constructed. Overall the sale is seen as superior to the subject land, being larger with a wider street frontage.
The sale sold in June 1998 for $715,000, which was analysed at $715,000 ($651/m²), and applied at $715,000 ($651/m²) under s.17.
Sale 3 - (694 Brunswick Street - Lot 58 on RP 9068). This is a 1,163 m² "Mixed Use Precinct" inside parcel about 155 metres south-east of the subject lands. The land falls moderately to the north from Brunswick Street, and an old dwelling was demolished for a new three-storey commercial and residential building. Overall the sale is seen as superior to the subject due to its larger size and wider frontage.'
The sale sold in February 1997 for $725,000, was analysed at $725,000 ($623/m²), and applied at $660,000 ($567/m²).
Sale 4 - (285 Bowen Terrace - Lot 3 on RP 44886). This is a 501 m² "High Density Living Precinct" inside lot about 100 metres south of the subject lands. Generally level, the old dwelling was demolished, and the lot is currently being redeveloped for residential units, with a maximum GFA of 100%. The sale is seen as superior on a rate per m² basis, due to the location of the subject lands on busy Brunswick Street and possible impacts upon future development of the subject land.
The sale sold in June 1999 for $360,000, and was analysed at $360,000 ($719/m²), and applied at $360,000 ($719/m²) under s.17.
Mr McKinnon places greatest reliance upon his Sales 2 and 3, noting that Sale 1 was an older sale, and that there had been known difficulties in obtaining approvals for Sale 1 in respect of providing onsite car parking, and the low-cost housing requirement.
The date of the sale coincided with release of the Development Control Plan for the precinct, and the public awareness of the new planning constraints. Because of the low-cost housing presence, and a perceived lesser need for parking onsite for those low-cost units, Council had relaxed development constraints in respect of parking on that site. Mr McKinnon therefore placed lesser weight on his comparisons with his Sale 1.
In respect of his Sale 4 Mr McKinnon agrees with Mr Masters that it is not directly comparable to the subject lands. Mr McKinnon only provides his Sale 4 (which was a late sale), to demonstrate the price paid for smaller and narrower frontages, where higher residential lands are developed to their maximum potential. Mr McKinnon notes that a similar argument should also be applied to Mr Masters' Sale 1 at 116 Heal Street. Mr McKinnon argues that relativities between his Sale 4 (501 m² at $719/m²) and the subject land at 611 Brunswick Street (501 m² at $585/m²) demonstrates that lack of comparability.
Decision:(i) Impact of Planning -
The evidence supports that the impact of parking and access to the subject lands is likely to be a major consideration during future developments. While neither party has definitive understanding of Council's final requirements in that respect, the separate nature of the three parcels was likely to dictate that some solution to the access from Brunswick Street to each site would be possible.
However, because of the limited size of each of the subject lands, and the lack of any commercial viability of second-storey commercial enterprises in that area, future developments are likely to be constrained to commercial use at ground level and residential use on the upper levels to four storeys overall.
In respect of the need for suitable ingress and exit for vehicles, any proposed development would need to provide for both adequate onsite parking and manoeuvring of vehicles, as well as a wide entry point to each site.
In respect of the rough sketches for possible developments provided by Mr McKinnon, I accept those as only indicative of a form of development that might be considered by a potential prudent purchaser in assessing the value of the lands. I also accept that the adoption of a GFA at something less than the maximum allowance under the Development Control Plan, was also a strategy that would be contemplated by such a prudent purchaser. On that basis I accept Mr McKinnon's approach to analysing his sales.
(ii) The Method of Valuation -
In adopting his comparison of sales approach Mr McKinnon has followed guidance provided by Courts at all levels. In that regard I am directed by Mr Paterson to the decision of the Land Appeal Court in Hans and Else Grahn v. The Valuer-General (1992-93) 14 QLCR 327, at 328; and particularly the decisions of WM & TJ Fischer v. The Valuer-General (1983) 9 QLCR 44, at 46; and also R & MM Barnwell v. The Valuer-General (1989) 13 QLCR 13, at 17.
In Fischer I am particularly reminded that in comparing relativity with adjoining parcels, such as 629 Brunswick Street in the current matter, the Land Appeal Court said at p.46:
"It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels. Whilst maintenance of correct relativity is also of considerable importance for rating or revenue type valuations, we cannot prefer in the circumstances of this case, the use of the principle of relativity to the exclusion of the sales evidence."
In respect of the use of the hypothetical development or feasibility approach as proposed by Mr Masters, I am also directed by Mr Paterson to the decision of Thomas Nominees Pty Ltd v. The Valuer-General (1986-87) 11 QLCR 283. That matter involved the valuation of a Buranda Shopping Centre, which was at that time only eight years old. The agreed highest and best use was for a shopping centre complex; and the subject land had been recently sold for $6,575,000 only one month prior to the relevant date of valuation. The valuer for the appellant analysed that sale of the subject land, and as a check undertook two hypothetical development approaches, to which he sought to apply a percentage of the open market value so determined. Matters of concern to the President in Thomas Nominees Pty Ltd included the possibility of errors in the value of the extensive improvements; the appropriate rate of depreciation to be applied to the building; and the extent of any potential obsolescence extant in an eight year old building.
The President noted at p.287:
" Where there are no sales available for comparative purposes, the method of hypothetical development may assume greater importance as a guide to unimproved value but I strongly doubt, as a general rule, that it should be preferred to evidence of comparable sales in matters arising under the Valuation of Land Act."
I note also that the Land Appeal Court found in Merivale Motel Investments Pty. Limited v. The Brisbane Exposition and South Bank Redevelopment Authority (1984-85) 10 QLCR 268, at p.281:
"Residual value (notional development) exercises of the type undertaken by the valuers in this case are well recognised as being fraught with difficulty. The end result (land value) is subject to wide variation depending upon the accuracy of the statistics provided.
…..
No doubt the method is used in feasibility studies by real estate consultants, developers and others as a means of determining the amount at which a property may be economically purchased for a particular venture. The difficulties from an evidentiary point of view of establishing in judicial proceedings the correctness of each step are obvious. The desirability of testing the residual value against comparable sale data achieved in the market place is likewise obvious. In the absence of such test there can be no certainty that the residual value approximates market value. The forces in the market place, the affect of peculiarities inherent in a particular site may or may not be adequately reflected in the residual feasibility exercise."
I note also that in considering the feasibility approach, one should also consider directions found in s.3(2) of the Valuation of Land Act. Where there was actual evidence of the improved value of a parcel, such as a sale. Section 3(2) states relevantly in respect of determining unimproved value of improved lands:
"3(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."
But the onus is upon the appellant to demonstrate the value of the improvements in such an approach where there is no evidence provided that the Court would uphold the respondent's value. (See Dunlop Rubber Australia Limited v. The Valuer-General (1957) QSR 189 at pages 192 to 193).
On directions from those precedents I would consider the feasibility approach of Mr Masters with some caution, and I will adopt the comparative sales approach.
(iii) Comparison of Sales -
In considering the sales at 116 Heal Street and 285 Bowen Terrace, I believe those sales represent a different highest and best use, and therefore provide less comparability to the subject lands. Because of the uncertainty of any added value of the old dwelling upon 116 Heal Street, I also treat that sale with some caution.
The 116 Heal Street sale is in a medium density residential precinct (50% GFA), and the 285 Bowen Terrace sale is in a high density residential precinct (100% GFA). If I was to accept Mr McKinnon's opinion that the $250,000 sale price of 116 Heal Street represented a site value, then the $371/m² rate would be consistent with the $719/m² rate for the 285 Bowen Terrace site.
If I then consider the sale of 599 Brunswick Street, I believe its age in early January 1997, the known difficulties in obtaining approval and the low-cost housing presence, all contribute to treating that sale with some caution.
The key sales are therefore Mr McKinnon's Sale 2 (applied at $651/m² under s.17), and Sale 3 (applied at $567/m²). The difference between the applications of those two sales lies in the separate multiple titles available for Sale 2, which has been applied under s.17(3) which relevantly states:
"17(3). For subsection (1), land is not exclusively used for purposes of a single dwelling house or farming if -
(a) the land is divided into individual lots; and
(b)there is evidence, including advertising or actual sales, of intention to sell the individual lots."
In respect of Sale 3 I note that was also an older sale (February 1997), but is used to support Mr McKinnon's Sale 2 which is nearer to the date of valuation. In final comparison then I have:
Sale Applied Rate/m² Comparison 2 $651 (s.17) Superior 3 $567 Superior Subject Lands (3) $585 -
I note further that while Sale 2 has an overall area of 1,098 m², it has been applied under s.17(3) and is valued on the basis that the smaller individual lots exist. On that basis I believe the smaller subject lands are more appropriately compared with the applied value of Sale 2 at $651/m². There is nothing in that comparison to discredit Mr McKinnon's application of the subject lands.
Summary:
I am reminded that under s.33 of the Valuation of Land Act the valuations of the Chief Executive are deemed to be correct unless proved to the contrary. I am also reminded that the onus to prove that an error has been made in the valuation, or a wrong principle applied, rests with the appellant under s.45(4) of the Act. In the current matter that has not been proved.
ConclusionHaving considered the whole of the evidence I am not persuaded that the appellant has proved his cases. The appeals are dismissed and the unimproved values as determined by the Chief Executive in the sums of $175,000 (AV99-667), $142,500 (AV99-668) and $142,500 (AV99-669) are affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
0
0
0