McCahon and Repatriation Commission
[2000] AATA 736
•24 August 2000
DECISION AND REASONS FOR DECISION [2000] AATA 736
ADMINISTRATIVE APPEALS TRIBUNAL )
) Nos. N1999/1833 & 1834
VETERANS' APPEALS DIVISION )
Re MALCOLM and IRENE MARGARET McCAHON
Applicants
And REPATRIATION COMMISSION
Respondent
DECISION
Tribunal Mr B. H. Pascoe, Senior Member
Date24 August 2000
PlaceSydney
Decision The Tribunal varies the decision under review by assessing the value of the applicants' property at Corlette at $155,000 and remits the matter to the respondent to calculate the appropriate rate of pension.
....…(Sgd) B. H. Pascoe……..
Senior Member
CATCHWORDS
VETERANS' AFFAIRS – assets test – value of second residence – whether valuer took into account appropriate matters – whether alternative value appropriate
Veterans' Entitlements Act 1986
REASONS FOR DECISION
24 August 2000 Mr B. H. Pascoe, Senior Member
This is an application to review a decision of a delegate of the respondent dated 23 November 1999 which varied a determination of 5 June 1999 to assess the value of a second residence owned jointly by the applicant and his wife. This property is a holiday unit at Corlette, a suburb of Port Stephens. The value of the property had been assessed in September 1995 at $135,000. In the determination of 5 June 1999, the value was assessed by the respondent at $140,000. The applicants requested a review of this valuation and the decision of 23 November 1999 was to increase the value to $170,000 based on a report from the Australian Valuation Office ("AVO") dated 27 September 1999.
At the hearing, Mr McCahon represented himself and his wife. The respondent was represented by Mr R. Wallis, an advocate with the respondent. The Tribunal had the documents provided by the respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (T1-T16). Mr McCahon tendered letters from two neighbours and photographs of the property and a neighbour's property. The respondent tendered a further report from the AVO dated 26 April 2000 and a letter from the AVO dated 14 June 2000. Oral evidence was given by Mr McCahon.
The valuation in September 1995 was described as being "valued from the roadside only". An internal inspection was not carried out. The value ascribed to the McCahon's property was arrived at by comparing recent sales of similar nearby units each of which had been sold for $190,000, one in July and one in September. The valuer commented that both had enclosed rear verandahs and were in superior condition to the McCahon's property. The valuer noted also that an electricity substation was located at the corner of the street frontage and that this would be a negative factor in the value of the McCahon's property.
Following a preliminary conference at the Tribunal, a further valuation was arranged at which Mr and Mrs McCahon would be present. Arrangements were made for the valuer to inspect the interior of the unit and, further, to inspect a neighbouring property where improvements and extensions had been made in a similar fashion to many other units, including the two recently sold. This resulted in a further AVO valuation dated 21 April 2000 which arrived at a value of $155,000. The valuer commented that the previous valuation referred to the properties sold having enclosed verandahs which understated the extent of the work completed on those properties. The valuer referred in his report to the existence of the electricity easement at the front of the subject allotment and in a subsequent letter of 14 June 2000 the AVO confirmed that, in its view, adequate allowance had been made in the valuation for the impact of the easement.
Mr McCahon said that the property was used by himself and his family as a holiday house. Many of the other owners of adjoining units were permanent residents. As a non-permanent resident, he considered that his property was not necessarily as well maintained. He said that he had no intention of remodelling or extending the property, as many others had done, as the property was adequate for his needs and he could not afford the cost. Mr McCahon said that the typical remodelling and extensions done on other units had cost some $35,000 to $37,000. His was one of 20 similar units built some 20 years ago, it was the original unit built and, initially used as a display unit for the purpose of selling the subsequent units. He believed that his brick work was not as well done as the subsequent units. Mr McCahon demonstrated, by comparative photographs of his unit and a neighbour's unit, that the typical extension had fully enclosed the kitchen, formerly a galley design, and added an enclosed living area in lieu of an open verandah. A letter tendered from an immediate neighbour stated that the property had been purchased in 1997 for $145,000 and the approximate cost of improvements had been $40,000. Another letter from the owners of a unit two away from the McCahon's stated that the unit had been purchased with improvements in 1991 for $185,000, a further $12,000 had been spent on additional renovations and the owners considered that the overall value of their property was now $205,000.
Mr McCahon submitted that valuations in 1995 and an earlier valuation in 1992 had discounted an otherwise fair value by $5,000 for the existence of the electricity substation easement. He argued that an appropriate valuation of his property was $145,000. He arrived at that figure by taking the recent sale prices of $190,000, deducting $40,000 for the estimated cost of equivalent improvements made to those properties and deducting a further $5,000 for the negative effect of the easement. He considered that such net figure was acceptable and that it should remain assessed at that figure for a further two years, at least.
For the respondent, Mr Wallis submitted that the valuation of 21 April 2000 by the AVO was appropriate and that the respondent was bound by it. He accepted that the earlier valuation of $170,000 was not appropriate in that, as a roadside valuation, it had not properly recognised the differences between the properties sold and the property of the McCahon's. It was said that there had been a clear regular increase in the value of the property over the years and the difficulty was to assess the quantum of the latest increase. It was argued that a value of $155,000 in 1999/2000 did not appear unreasonable for a property valued at $135,000 in 1995 and $140,000 in 1998.
The Veterans' Entitlements Act 1986 ("the Act") contains no guidance for the valuation of property such as that with which this application is concerned. "Value" can be taken as "fair market value" which is generally accepted to be the price which a willing but not anxious vendor would be prepared to accept and a willing but not anxious purchaser would be prepared to pay in a normal and orderly market. Mr McCahon said that he had no present intention of selling the property and had promised his son that the property would be retained for so long as the son and grandchildren wanted to use it as a holiday venue. He has not sought offers and has no intention of doing so. He has no particular expertise in property valuations and has submitted that an appropriate value of this property is $145,000. An experienced valuer with the AVO has assessed the value as at 30 April 1999, although assessed in April 2000, at $155,000. Mr McCahon's neighbour believes his property with renovations and extensions is worth $205,000. Another neighbour appears to suggest $185,000 but based on a static unrenovated purchase price in 1997 of $145,000. The Tribunal has not inspected the property and, itself, has no particular expertise in real estate valuations. The difference in the two figures submitted by the parties is $10,000 or between 6% and 7% of those figures. While not directly relevant, when Mr McCahon was asked by the Tribunal whether he would be prepared to sell the property he said, after reiterating that he had no intention of selling, that, if he took such a price, he would be seeking an inflated figure for the furniture. While it is accepted that his response was in a somewhat jocular vein, the impression was clearly given that a value for pension purposes might be one amount, it is not necessarily the same amount as would be sought if the property was for sale.
Given the relatively modest difference in the values submitted in the context of a difficult and uncertain art of valuation, it is difficult for the Tribunal to do other than accept the view of the only qualified valuer who has provided an assessment of value. While the difference in relation to the values submitted has been described as modest when comparing $145,000 and $155,000, it is accepted that Mr and Mrs McCahon are anxious to preserve their even more modest pensions. It should be noted, perhaps, that the retention of the property with modest usage and the non-letting of the property to produce some income are personal choices of Mr and Mrs McCahon. Nevertheless, the amount of $155,000 is accepted as the appropriate valuation of the relevant property being the opinion of a qualified valuer and the evidence provided satisfies me that such valuer appropriately took into account the allowance for the electricity easement and that properties involved in recent sales had been remodelled and extended as compared to this subject property.
Given that the decision under review increased the value of the property at Corlette to $170,000, such decision should be varied by assessing the value of such property at $155,000.
I certify that the ten (10) preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B. H. Pascoe, Senior Member
Signed: .....................................................................................
Personal AssistantDate/s of Hearing 9 August 2000
Date of Decision 24 August 2000
For the Applicants Self-represented
Solicitor for the Respondent Mr R. Wallis, Departmental advocate
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