Mayne Property Development Pty Ltd v Chief Executive, Department of Lands
[1996] QLC 6
•16 February 1996
|
BRISBANE
16 February 1996
Re: Appeals against Annual Valuations
Valuation of Land Act 1944
City of Brisbane
(AV94-64 and AV94-366).
Mayne Property Development Pty Ltd
v.
Chief Executive, Department of Lands
D E C I S I O N
These are two appeals by Mayne Property Development Pty Ltd against the respondent's unimproved valuations of the same parcels of land at successive annual valuations, the dates of which were 31 March 1992, and 30 June 1993.
The land in question is situated at 19 Elliot Street, Albion, a back street in the industrial area of that suburb, on the corner of Elliot and Immarna Streets. It is described as Lots 35 to 41 on Registered Plan 18372, Parish of Enoggera, County of Stanley, and contains an area of 2,843 square metres.
Under the provisions of the Valuation of Land Act 1944, as at 31 March 1992, the respondent determined the unimproved value of that land at $310,000, and the valuation remained unchanged when the following annual valuation was carried out as at 30 June 1993. The company objected against both annual valuations and following receipt of advice that the respondent had disallowed both objections, it appealed to the Land Court against those decisions upon its objections.
The land is zoned "Service Trades" under the City of Brisbane Town Planning Scheme and is developed with an industrial warehouse building which is generally superior to the surrounding development. All services are available.
The land comprises seven separate lots, three of which front Elliot Street, and three of which front Immarna Street. The corner lot fronts both streets. However, it has been developed as one site and has been valued by the respondent as one industrial parcel.
The property is situated about 4 kilometres north of the Brisbane General Post Office. Both Elliot Street and Immarna Street are fully made but narrow, with no exposure to through traffic. Vehicular access is difficult, particularly for semi-trailers. Elliot Street is subject to local flooding.
In its natural state, the land was generally level but low-lying and was subject to flooding in 1974 to depths of from .7 metre to 1.2 metres. The site has been filled to a height of approximately 1 metre above natural ground level.
Evidence on behalf of the appellant company was given by Mr BC Cox, a director and secretary of Mayne Property Development Pty Ltd. Mr Cox is a chartered accountant and also holds an Associate Diploma of Business (Real Estate Valuation). However, he is not a registered valuer.
Mr Cox contended for unimproved values for the subject land of $274,000 for both 1992 and 1993. He relied on the sales of parcels of land of similar size in the periods immediately prior to the dates of valuation. He explained that only limited sales evidence was available for industrial land because of the economic recession. The only comparable sale in the Albion/Breakfast Creek area during that period was the sale in July 1991 by a mortgagee of a parcel of 1424 square metres, situated at 15 to 19 Nariel Street, with the same "Service Trades" zoning, for $160,000, or $112 per square metre. While that property is an unusual shape, it has been developed with a modern office/show room/warehouse complex and Mr Cox felt that the amenity of the area was superior to that of the subject land.
Because of the absence of other sales in the area, Mr Cox referred to sales of land zoned "General Industry" in the Virginia and Northgate areas, which he felt could be taken as a guide to the value of industrial land in the northern suburbs. A parcel of 3,799 square metres of land situated at 10 Pritchard Street, Virginia, sold in October 1991, for $340,000, or $90 per square metre. While situated further from the City Centre than the subject land, Mr Cox said that it is in the heart of a very active retail/warehouse area.
A sale of a parcel of 3,135 square metres of land in Yarraman Place, Virginia, in November 1991, showed $65 per square metre, while sales in Crockford Street, Northgate, with areas of 3,018 square metres and 3,041 square metres, in December 1991 and March 1992, showed $60 per square metre and $54 per square metre respectively.
Of the sales that occurred between 31 March 1992 and 30 June 1993, sales of three properties situated in Yarraman Street and Vauxhall Street, Virginia, and Wentworth Place, Northgate, with areas ranging from 3,135 square metres to 4,011 square metres, showed unimproved values of from $50 per square metre to $78 per square metre.
While Mr Cox conceded that there was a premium price paid for land closer to the City Centre, he felt that there was a limit to this as the value of industrial land was essentially related to its potential to generate income. To demonstrate this, he carried out an analysis of the rentals paid for the subject land with those paid for similar parcels of land in the Northgate and Virginia areas. He concluded that this exercise showed that the rent obtained for the subject land was not necessarily any greater than for those properties further removed from the City.
Based primarily on the sale of 15 to 19 Nariel Street at $112 per square metre, and 10 Pritchard Street, Virginia, at $90 per square metre, Mr Cox valued the subject land at $115 per square metre, to arrive at an unimproved value of $326,945. From this, he deducted the value of fill, which the parties agreed at $54,000, to arrive at an unimproved value of $274,000 for the subject land as at 31 March 1992.
After considering the sales which had occurred in the intervening period, he concluded that the same unimproved value should be adopted as at 30 June 1993.
Evidence for the respondent was given by Mr JT Houghton, a registered valuer employed by the Department of Lands. Mr Houghton led evidence to an unimproved value of $300,000. He explained that the respondent had valued the land at $310,000 because of a miscalculation of area. Recent title searches had revealed the true area and Mr Houghton considered that an adjustment to the valuation was necessary.
Mr Houghton valued the land as follows:
2843 square metres @ $125 per m2 = $355,375
Less filling (as previously determined) = $ 53,730
$301,645
Adopt $300,000
In support of his valuation, Mr Houghton referred to the sales of five parcels of industrial land. However, he relied principally upon two sales, one situated at Herston and the other at Newstead.
Mr Houghton's Sale No. 1 is of a parcel of land zoned "General Industry", situated at 37 Butterfield Street, Herston, with an area of 3,247 square metres, which sold in January 1990, for $520,000. This land was a redevelopment site upon which, at the time of sale, were some obsolete industrial sheds. Mr Houghton attributed a value of $40,000 to the improvements, which left an unimproved value of $480,000. For the purposes of the valuation at each of the relevant dates, the respondent had applied unimproved values of $440,000, or $135 per square metre.
The sale land is adjacent to Enoggera Creek and was flooded in 1974. An area of 304 square metres is affected by an easement for encroachment. Butterfield Street is fully made and carries local traffic only. Although the sale property is an inside lot, with smaller street frontage than the subject land, the street is wider. Mr Houghton considered the sale to be superior to the subject land because of its easier access.
Mr Cox was critical of the use of this sale. He said that the area was developed with new showroom warehouses. Rentals there are much higher and the property adjoins the Royal Brisbane Hospital. He considered it was not comparable to the subject land, which is suitable only for the development of a warehouse.
Mr Houghton's Sale No. 2 is situated at 31 Longland Street, Newstead, at its corner with Masters Street. It is also zoned "General Industry" and contains an area of 1,083 square metres. It sold in March 1993, for $250,000 and at the time had included a derelict building. Mr Houghton attributed $15,000 to the improvements on the land, to arrive at an unimproved value of $235,000. As at the relevant dates, the respondent applied unimproved values of $175,000, or $161 per square metre.
Mr Cox also considered this sale to be not appropriate. He said it is an area which is being redeveloped for residential purposes and a premium was therefore being paid.
The other three sales referred to by Mr Houghton are situated in the Bowen Hills/Mayne/Albion area and are zoned "Service Trades". All three were flooded in 1974.
Sale No. 3 is situated in Allison Street, Bowen Hills, has an area of 427 square metres and sold in October 1991, for $125,000. This sale analysed to show an unimproved value of $124,500 and as at the relevant dates, the respondent applied unimproved values of $90,000, or $210 per square metre.
This small property is a narrow, inside lot with access to Breakfast Creek at the rear. Mr Houghton considered it to be superior to the subject land on a rate-per-square-metre basis, because of its locality and access.
Sale No. 4 is situated on the corner of Abbotsford Road and Taylor Street, Mayne, and has an area of 3,093 square metres. It sold in November 1990, for $835,000, and analysed to show an unimproved value of $785,000. As at the relevant dates, the respondent applied unimproved values of $640,000, or $207 per square metre.
It is larger than the subject land and has been redeveloped as a car show room. Mr Houghton considered it to be superior to the subject land, because of its exposure and access.
Sale No. 5 is situated at the corner of Nariel and Wallace Streets, Albion. It has an area of 608 square metres and sold in March 1991, for $105,000. The sale analysed to show an unimproved value of $104,000, and $90,000, or $148 per square metre, was applied by the respondent at the relevant dates.
Although a higher rate per square metre has been applied to this property than to the subject land, in Mr Houghton's opinion it is far inferior, the rate per square metre merely reflecting the size difference.
As a result of an application made under the provisions of the Freedom of Information Act 1992, Mr Cox had obtained a document relating to the 1992 valuation of the subject land, stating that most larger industrial properties on the Northside were reduced by 10%. However, the reason that the subject land was not reduced related to the findings as to the relativity of values by the then President of the Land Court in respect of the 1988 valuation (Mayne Property Developments Pty Ltd v. The Valuer-General (AV89-51, decision 7 September 1989, not reported). Mr Cox did not agree with the Department's interpretation of the decision.
It is sufficient to say that the learned then President determined that matter and made certain findings on the evidence presented in that case. The evidence in this case is quite different. The values of industrial land have altered since that time. It would be wrong for either of the parties to feel constrained by the findings of the Court in that case, if the evidence at a later time indicates that the situation is different.
Flowing from that decision was an argument based on the relativity of values with other lands in the area. It appears that the valuation of the subject land was reduced following an objection conference for the 1990 valuation. Mr Cox submitted that: "It seems obvious that if the value of one parcel of land is reduced as a result of the Land Court hearing or an objection conference that in order to maintain relativity other land in the immediate area must also be adjusted".
It seems that Mr Houghton felt that the valuation of the subject land had got out of relativity with those applied to the surrounding lands because of the reduction by the Land Court and a later reduction upon objection. Therefore, he did not reduce the valuation of the subject land in the 1992 annual valuation when the valuations of other industrial lands were reduced generally by 10%.
It emerged in evidence that the document obtained by the appellant in response to the Freedom of Information application, was a copy of Mr Houghton's report to his superior officer regarding the objection by the appellant company to the 1992 annual valuation.
After explaining that by not reducing the valuation of the subject land, the relativity of values found by the Land Court had been maintained, the report went on to state that: "Although the valuation was unaltered and no direct sales evidence was used to determine the subject value as relativity only had altered, the value applied to the subject is supported by the following smaller sales in the locality, all of which have been given to the objector under a Freedom of Information search". Details of three sales were then set out.
In response to what appears to be a further Freedom of Information application in respect of the 1993 valuation, the respondent's Manager, Freedom of Information, advised the appellant by letter dated 22 March 1994, that three documents had been identified as relevant to that request. After dealing with these documents, the letter then went on to volunteer the following:"... I have been advised by the valuer responsible for valuations in the area in which the subject property is located, that since the previous assessment, no specific sales evidence in relation to establishing a value on this individual block was particularly examined. Rather general sales evidence throughout Brisbane indicated that little or no movement had occurred in the industrial market, either up or down, since the previous assessment."
In commenting on the information obtained under the Freedom of Information Act, Mr Cox rejected the sales of the small parcels of land shown in the report in respect of the 1992 valuation as in any way supporting the value applied to the subject land with its much greater area. He had investigated the background to each of the sales and for reasons which are set out in his statement of evidence, he concluded that there were unusual circumstances relating to each transaction which rendered them unreliable as evidence of value.
However, Mr Houghton's valuation report tendered at the hearing contained only one of the three sales, Sale No. 5, which he included as a supporting sale rather than his primary basis of valuation. The appellant's solicitor submitted that having provided the abovementioned information in response to Freedom of Information applications, the respondent cannot then purport to rely on different sales before the Land Court. He likened the situation to estoppel in contract.
In my opinion there is no merit in the appellant's argument. Whatever the respondent's obligations to provide information under the Freedom of Information Act, this does not prevent him from relying on additional information before this Court. He is not required to advise the appellant of his case in advance. Here there are no pleadings by which a party is bound. On most occasions, neither party will know with any certainty what sales the other will be relying upon until they are produced at the hearing.
The unimproved value of a parcel of land is a matter of fact. A valuer forms an opinion of that value based on the evidence he has available at the time of making the valuation. Other evidence may subsequently come to his attention. If, upon closer investigation, he finds that other sales support his opinion then he is entitled to include them in his evidence or substitute them for his initial evidence.
Turning to the sales evidence relied upon by the two valuers, Mr Cox has relied upon sales which are situated at Virginia and Northgate, generally further from the City Centre than those relied upon by Mr Houghton. His closest sale (Sale A) was a sale by a mortgagee-in-possession. Mr Cox made submitted that the sale be accepted because of the obligations of a mortgagee to take reasonable care to ensure that the property is sold at market value. Although such sales have traditionally been avoided if other sales are available, it is clear that not every sale by a mortgagee has to be rejected. (See Pike J. in Waterhouse v. Valuer-General (1927) 8 LGR 137 and Re Murray (1934) 13 VLR 25.)
However, Mr Houghton has investigated the background of that sale and rejected it as he felt that it was part of a larger transaction between the same vendor and associated purchasers on the same day. Therefore, I prefer not to place too much reliance upon that sale.
Mr Cox's other sales are much further removed from the subject land and show unimproved values ranging from $50 per square metre to $90 per square metre for areas ranging from 3018 square metres to 3799 square metres, all zoned "General Industry".
Mr Houghton's primary sales are situated closer to the City Centre at Herston and Newstead, with areas of 3247 square metres and 1083 square metres respectively, both are zoned "General Industry" and both were flooded in 1974. However, Sale No. 1 occurred in early 1990, at which time the market for industrial land had neared its peak. Mr Houghton said that he had allowed for this by applying $440,000 from an analysed unimproved value of $480,000.
His Sale No. 2 analysed to $235,000, but he applied only $175,000. It occurred in March 1993, some twelve months after the date of the 1992 valuation and just prior to the date of the 1993 valuation. However, no explanation was given as to why the unimproved value applied was so much less than the analysed figure.
Mr Houghton's other sales are much closer to the subject land, but are smaller. All were flooded in 1974. The relationship of applied values to the analysed unimproved values in each case are as follows: $90,500 from $124,500; $640,000 from $785,000, and $90,000 from $104,000. They range in date from late 1990 to late 1991. He regarded them as supporting sales rather than a primary basis of valuation.
As often happens in these cases, the sales evidence is by no means ideal. Neither Mr Cox nor Mr Houghton thought that the other's sales were relevant. If the sale in Nariel Street is excluded, Mr Cox's other sales are much further from the City Centre than the subject land. I was not persuaded by his analysis of rentals that the location of sales and subject is of only limited importance. Although capitalisation of rentals is one method of arriving at the improved value of a property, without further analysis, a comparison of rentals for improved warehouse properties provides no indication of the relative unimproved values of the land. Even then, it is a method which is not favoured. (See the comments by the learned then President in the 1989 Mayne Property decision at pp.4-6.)
Nor am I persuaded by Mr Cox's arguments based on the relativity of values for reasons stated earlier in this decision. In Grahn v. Valuer-General (1992) 14 QLCR 327 at pp. 328 and 329, the Land Appeal Court set out the principles which this Court must consider in assessing any argument based upon relativity. I do not propose to repeat those principles, but it is clear that while the Land Appeal Court regards proper relativity as important, any argument based on relativity is not a substitute for a valuation based upon sales evidence even if, as in this case, that evidence is not ideal.
On the evidence before me, I tend to favour the sales produced by Mr Houghton rather than those of Mr Cox. Although there were differences between the sales and the subject land, he seems to have made sufficient allowance for the differences. However, from that sales evidence it is difficult to see how Mr Houghton arrived at an unimproved value of precisely $125 per square metre for the filled land. Whatever was his reasoning, there has certainly been a conservative application of values to each of the sales, compared with the analysed unimproved values. In the circumstances, the evidence produced by the appellants has not persuaded me that the valuation of the subject land is excessive.
However, Mr Houghton has led evidence to valuations of $300,000 in each case, instead of the $310,000 applied to the subject land at the two relevant dates. The appeals must be allowed to that extent.
Accordingly, the appeals are allowed, the valuations of the Chief Executive are set aside, and the unimproved value of the subject land as at 31 March 1992, is determined at Three hundred thousand dollars ($300,000) and the unimproved value of the subject land as at 30 June 1993, is also determined at Three hundred thousand dollars ($300,000).
President of the Land Court
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