Musumeci v Valuer-General
[2014] QLC 15
•30 April 2014
LAND COURT OF QUEENSLAND
CITATION: Musumeci v Valuer-General [2014] QLC 15 PARTIES: Alfio John and Brenda Maria Musumeci
(appellants)v Valuer-General
(respondent)FILE NO: VLA436-10, LVA401-11, LVA440-12 and LVA208-13
DIVISION: General Division PROCEEDINGS: Appeals against annual valuations DATE OF HEARING: 1 October 2013 DELIVERED ON: 30 April 2014 DELIVERED AT: Brisbane HEARD AT: Townsville PRESIDENT: CAC MacDonald ORDERS: 1. Appeal VLA436-10 is allowed.
2. The unimproved value of Lot 551 on SP 126589 in the County of Elphinstone, Parish of Stuart is determined at One Hundred and Sixty-Two Thousand, Five Hundred Dollars ($162,500) as at 1 October 2009.
3. Appeals LVA401-11, LVA440-12 and LVA208-13 are allowed.
4. The site value of Lot 551 on SP 126589 in the County of Elphinstone, Parish of Stuart is determined at One Hundred and Sixty Thousand Dollars ($160,000) as at 1 October 2010, 1 October 2011 and 1 October 2012.
CATCHWORDS: Valuation - valuation methodology - use of sales - whether analyzed or applied value should be used in comparing subject - derivation of applied values - rationale of using applied values - relativity desirable.
Valuation - valuation methodology - use of sales - substantial difference between analyzed value and applied value - whether appropriate to apply sale - suggests sale well above market - but absence of other sales evidence.
Valuation of Land Act 1944
Land Valuation Act 2010Barnwell v The Valuer-General (1989) 13 QLCR 13 at 16
Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd (1997-98) 18 QLCR 397.
Fischer v The Valuer-General (1983) 9 QLCR 44 at 46.
Scougall v Chief Executive, Department of Natural Resources (1996-1997) 16 QLCR 536.APPEARANCES: Mr AJ Musumeci, one of the appellants
Mr IR Pepper, principal lawyer, Department of Natural Resources and Mines, for the respondent
Alfio John and Brenda Maria Musumeci (the appellants) have appealed against four annual valuations issued by the respondent Valuer-General under the provisions of the Valuation of Land Act 1944 and the Land Valuation Act 2010. As all the appeals concern the same property, the appeals were heard together and the evidence given was, where relevant, applied to all the appeals.
Appeal VLA436-10 concerns the unimproved value of the subject property as at 1 October 2009, issued under the Valuation of Land Act 1944 (VLA). The respondent valued the subject property at $202,500. The appellants' estimate of value in the notice of appeal was $160,000.
The remaining three appeals, which were brought under the Land Valuation Act 2010 (LVA), concern the site value of the subject property. Details of the appeals are set out in the table below:
Appeal number Date of Valuation Respondent's valuation Appellants' estimate LVA401-11 1 October 2010 $200,000 $160,000 LVA440-12 1 October 2011 $200,000 $160,000 LVA208-13 1 October 2012 $200,000 $160,000
Although, as a result of changes in the legislation, the issued valuation as at 1 October 2009 was for the unimproved value, and for the remaining three appeals the issued valuations were for the site value of the subject, the distinction was of no significance to the outcome of these appeals.
At the hearing of the appeals, Mr AJ Musumeci conducted the appellants' cases and gave evidence on their behalf. He had supplied written statements in relation to each of the appeals prior to the hearing. Mr BK Gilbert, a registered valuer employed by the respondent, gave evidence on behalf of the respondent. Mr Gilbert was not the valuer responsible for the valuations under appeal but he said that he agreed with the values previously set by the respondent. Mr Gilbert also supplied written reports prior to the hearing of the appeals.
The subject land is a residential allotment situated in the suburb of Annandale in Townsville. The land has an area of 837 m² and is located on the corner of Jireena Court and River Park Drive. The property lies within a Traditional Residential precinct under the Townsville City Council City Plan 2005. Mr Gilbert described the site as an irregular shaped corner allotment with a near level contour which provided a good building platform. The parcel overlooks Windsor Park, a pleasantly landscaped suburban park. Seven utility inspection and connection points are located along the Jireena Court footpath outside the subject land, he said.[1] A flood warning sign and lights are located about 40 m from the parcel’s south-east corner.
[1]The exact location of the utility and connection points was in issue between the parties. It is unnecessary to determine that issue.
Grounds of Appeal
Although there is some variation in the grounds of appeal filed in each of the appeals, the summary provided by Mr Musumeci in his written statement provides a convenient outline of those grounds –
· The respondent's land valuation processes are not perceived to be transparent or robust.
· The respondent now considers that the site value for Lot 551 in each of the four years is essentially the same.
· There is a prima facie case for a reduction in the site value of the subject property.
· The rate of increase in the respondent’s valuations since October 2009 is not commensurate with the movement in property sales in Annandale.
· The subject property is overvalued compared to other similar properties in Annandale.
· The site value does not take proper account of the physical impediments and external nuisances that have an ongoing impact on the occupiers of the property. Specifically, the respondent has significantly understated the impacts of the impediments on the site value.
· The subject property is valued in the range 106% to 129% of comparison properties. Further:
o Lot 551 is overvalued, and
o Lot 551 should not be valued higher than $188,000, and
o Lot 551 could be valued as low as $155,000, and
The value of Lot 551 based on the average value of the comparison lots is $164,441.
Valuation methodology
Mr Gilbert adopted the same general approach to all of the valuations, namely the direct comparison approach, in which the subject property was compared with sales in order to derive the value of the subject property. Because of the different dates of valuation in each appeal, Mr Gilbert used different sales to support each valuation. Details of these sales will be considered when each appeal is discussed. However, it is convenient to make some general comments about the methodology adopted by Mr Gilbert, before considering the evidence relating to each appeal.
Mr Gilbert selected sales of vacant or lightly improved properties, comparable with the subject, for the purpose of establishing the value of the subject land. He analyzed each of the sales to an analyzed sale price by deducting from the sale price his estimated value of the improvements on the sale properties. He then determined the unimproved value of the subject property by applying the analyzed sale prices and taking into account the differences between the sales properties and the subject.
Conventionally, the valuation process adopted under both the VLA and the LVA is that, having determined the analyzed sale price of each sale property, the valuer "applies" an unimproved or site value to each of those properties. The "applied" value is then used as part of the process of determining the unimproved value of the subject land.
Mr Gilbert did not use the applied values of the sales properties in determining the subject values. Rather he used the analyzed sales prices, as stated above.
This issue was considered by the Land Appeal Court in Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd.[2] In that matter the respondent had challenged the valuation methodology adopted by the department. The evidence was that it was the value "applied" to the sale lands rather than the unimproved value analyzed from the individual sales which had been adopted as the basis of comparison for the valuation of the subject land. The chief executive had identified the sales which were considered to be comparable with the subject land and thereafter had considered details of other sales before values were applied to the sale lands. The Land Appeal Court interpreted the relevant evidence to suggest that the totality of vacant or lightly improved sales evidence in the local government area had been considered in deciding the range of values indicated for the various classes of land in that area. Ten "out of line" sales were identified and discarded, narrowing the range suggested by the market for those various classes of land. The values applied were conservative as compared with the analyzed values shown by the sales.
[2](1997-98) 18 QLCR 397.
The Court held that such an approach was desirable when all land within a particular Local Government Area is to be valued. It would be a different matter, said the Court, if the overall sales evidence had been disregarded and supplanted by unsupported valuation opinion.
The effect of that decision is that the Land Appeal Court has said that it is desirable, when valuing all land within a particular local government area, that the valuations should proceed on the basis of the values applied to the sales properties. The advantage of that approach is that it should ensure that valuations of comparable lands, made for the purposes of the legislation, bear proper relativity to one another. It has long been recognised that it is desirable that valuations of comparable lands made for the purposes of the Act should bear proper relativity to one another, provided the valuations are soundly based[3].
[3]Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd, (1997-98) 18 QLCR 397 at 403, citing Scougall v Chief Executive, Department of Natural Resources (1996-1997) 16 QLCR 536.
Accordingly I consider that the valuer has been in error in using the analyzed sales prices, rather than the applied values of the sales, in valuing the subject land. The consequences of that error will be considered in relation to each of the appeals.
Appeal VLA 436-10: Valuation as at 1 October 2009
Mr Gilbert relied on three sales to support the valuation of the subject property as at 1 October 2009 at $202,500.
Sale 1 is a residential property situated at 2 Wiranda Court, Annandale, with an area of 780 m². The property sold on 19 February 2010 for $280,000. Mr Gilbert analyzed the sale to $278,000. Mr Gilbert said that the sale was a smaller allotment situated in an overall superior location, as compared with the subject. The sale had comparable building contour and shape. Overall he considered the sale to be superior to the subject.
Sale 2 is a residential parcel of land of 740 m² situated at 5 Manersley Place, Annandale. The property was sold on 27 October 2009 for $397,500. Mr Gilbert analyzed the sale price to $382,500.
Mr Gilbert said that the sale was a smaller allotment than the subject but situated in a far superior location. It had a comparable building contour and a slightly superior regular shape although this was somewhat offset by the corner influence of the subject. Overall the sale was far superior to the subject.
Sale 3 is a residential lot of 738 m² situated at 3 Brooklyn Court, Annandale. The property sold on 26 May 2009 for $235,000. Mr Gilbert analyzed the sale price to $233,000.
Mr Gilbert said that the sale was a smaller allotment than the subject but situated in a superior location. It had a comparable building contour and a slightly superior near regular shape although that was somewhat offset by the corner influence of the subject. Overall he considered the sale to be slightly superior to the subject.
Mr Gilbert did not have the information available in Court to enable him to say what values were applied to the sales. Mr Musumeci’s unchallenged evidence was that the unimproved value applied to Sale 1 as at 1 October 2009 was $177,500 and the unimproved value applied to Sale 3 was $170,000. There was no evidence before the Court as to the unimproved value applied to Sale 2.
As discussed above, I have concluded that the valuer was in error by using the analyzed sale prices of the sales properties rather than their applied unimproved values. If the subject property were to be valued by comparison with the applied values of the sales, the valuation would be less than $170,000 because Mr Gilbert’s opinion was that Sales 1 and 3 were overall superior to the subject. However I have some doubt about whether these sales should be used at all because of the difference between the analyzed sale prices and the applied sale prices. Sale 1 has been applied at 64% of the analyzed price and Sale 3 at 73%. The large reductions made to reach the applied values tend to point to the fact that both sales were made at above market value. If that is the case it is difficult to see how they can be applied appropriately in the subject valuation. In the absence of any other sales evidence, however, I can see no alternative but to use these sales.
In the circumstances, I consider that the subject land should be valued at $162,500 as at 1 October 2009. This allows for the superiority of Sales 1 and 3 as compared with the subject.
Appeal LVA401-11: Valuation as at 1 October 2010
Mr Gilbert relied on four sales to support the valuation of the property at $200,000 as at 1 October 2010.
Sale 1 is a 637 m² residential allotment situated at 42 Petrie Way, Idalia. The property sold on 7 July 2010 for $240,000. Mr Gilbert analyzed the sale price to $237,000.
Mr Gilbert described the sale property as a regular shaped inside parcel overlooking a landscaped drainage reserve and located in a quiet suburban street. The property has a near level building contour at road height and is surrounded by average quality dwellings. Mr Gilbert considered that the sale property was overall superior to the subject property. The sale is a smaller allotment situated in a superior location with a comparable building contour. The sale has a slightly superior regular shape although this is somewhat offset by the corner influence of the subject.
Sale 2 is a 700 m² residential allotment situated at 53 Lakeland Boulevard, Idalia. The property sold on 8 October 2009 for $265,000. Mr Gilbert analyzed the sale to $262,000. He described the sale property as a regular shaped inside parcel in close proximity to a lake front park fronting a busy suburban connecting road. The property has a near level building contour at road level and is surrounded by modern high quality dwellings.
Overall, Mr Gilbert considered the sale property to be superior to the subject. The sale is a smaller allotment situated in an overall superior location with a comparable building contour. The sale has a slightly superior regular shape although this is somewhat offset by the corner influence of the subject.
Sale 3 is an 800 m² residential allotment situated at 27 Petrie Way, Idalia which sold on 5 January 2010 for $268,900. Mr Gilbert analyzed the sale to $265,900. He described the sale property as a regular shaped inside parcel located in a quiet suburban street. It has a near level building contour at road height and is surrounded by modern average quality dwellings.
Mr Gilbert considered the sale property to be overall superior to the subject. The sale is a slightly smaller allotment situated in a superior location with a comparable building contour. The sale property has a slightly superior regular shape although that is somewhat offset by the corner influence of the subject.
Sale 4 is a 621 m² residential allotment situated at 10 Girraween Avenue, Douglas which sold on 27 September 2010 for $180,000. Mr Gilbert analyzed the sale to $178,500. He described the sale property as a regular shaped sloping parcel with a Council utilities easement to the rear boundary. The property has limited local views and a difficult sloping building contour. It has a hillside location exposed to considerable road noise from the Townsville ring road located about 180 m to the north. The site is partly cut, filled and retained. Average quality investor style housing surrounds the parcel.
Mr Gilbert considered that the sale was overall inferior to the subject. The sale is a smaller allotment located in an overall inferior location with an inferior building contour. It has a slightly superior regular shape although that is somewhat offset by the corner influence of the subject.
There was no evidence before the Court as to the applied values of any of these sale properties. I am therefore unable to determine the value by comparison with the applied values. I will return to a consideration of the value to be determined for this appeal later in this decision.
Appeal LVA440-12: Valuation as at 1 October 2011
Mr Gilbert relied on three sales to support his valuation of the subject as at 1 October 2011 at $200,000.
Sale 5 is an 837 m² residential allotment situated at 23 Horizon Drive, Douglas which sold on 4 April 2011 for $249,000. Mr Gilbert analyzed the sale to $247,000. He described the sale property as a near regular shaped inside parcel located in a quiet suburban street. The parcel slopes moderately, falling below road level and providing a difficult building contour. It is surrounded by average quality dwellings. An elevated location provides good northerly views to the rear.
Overall Mr Gilbert considered the sale to be superior to the subject. The sale is a similar sized allotment situated in a superior location but with an inferior difficult building contour. The sale and subject overall are comparable in shape.
Sale 6 is a 510 m² residential allotment situated at 49 Petrie Way, Idalia which sold on 9 June 2011 for $207,900. Mr Gilbert analyzed the sale price to $204,900. He described the sale as a regular shaped inside parcel located in a quiet suburban street with a near level building contour at road height. It is surrounded by modern average quality dwellings.
Mr Gilbert said that the sale was, overall, slightly superior to the subject. The sale was a far smaller allotment situated in a superior location with a comparable building contour. The sale has a slightly superior regular shape although that is somewhat offset by the corner influence of the subject.
Sale 7 is a 734 m² residential allotment situated at 20 Twinview Terrace, Idalia which sold on 13 September 2011 for $215,000. Mr Gilbert analyzed the sale to $212,000. He described the sale property as a regular shaped inside parcel located in a quiet suburban street which backed onto Lakeland Boulevard which is a busy suburban connecting roadway. The sale has a near level building contour at road height and is surrounded by modern average quality dwellings.
Mr Gilbert said that the sale was overall superior to the subject. The sale is a smaller allotment situated in an overall slightly superior location with a comparable building contour. The sale has a slightly superior regular shape although this is somewhat offset by the corner influence of the subject.
As with the other valuations, Mr Gilbert used the analyzed sale prices for the purpose of determining the site value of the subject land. No evidence was given as to the site values of the sale properties as at the date of valuation although Mr Gilbert, under cross-examination, was able to give evidence as to their site values as at 1 October 2012.
Appeal LVA208-13: Valuation as at 1 October 2012
Mr Gilbert relied on four sales in support of the site value of the subject property as at 1 October 2012 at $200,000.
Sale 8 is a 495 m² residential allotment situated at 86 Springbrook Parade, Idalia which sold on 30 April 2012 for $210,000. Mr Gilbert analyzed the sale to $207,500. He described the sale as a regular shaped inside parcel located in a quiet suburban street with a near level building contour at road height. The property is surrounded by modern average quality dwellings. Mr Gilbert said that the sale was, overall, slightly superior to the subject. The sale was a far smaller allotment situated in a superior location with a comparable building contour. The sale had a slightly superior regular shape although that was somewhat offset by the corner influence of the subject.
Sale 9 is a 737 m² residential allotment situated at 23 Rivergreen Circuit, Douglas which sold on 3 July 2012 for $260,000. Mr Gilbert analyzed the sale to $255,000. He described the sale property as a truncated corner shaped parcel located in a cul-de-sac situated within an exclusive riverfront precinct opposite a small park. However the sale backs onto a busy connecting suburban roadway. The property has a near level building contour and is surrounded by high quality dwellings.
Mr Gilbert considered the sale to be overall superior to the subject. The sale is a smaller allotment situated in a superior location. It has a comparable building contour and shape.
Sale 10 is a 757 m² residential allotment situated at 85 Klewarra Boulevard, Douglas which sold on 19 March 2012 for $172,000. Mr Gilbert analyzed the sale to $170,000. He described the sale property as an irregular shaped moderately sloping parcel with a difficult building contour requiring significant cut and fill. Average quality investor style housing surrounds the parcel. The sale backs onto the Townsville ring road which is a major connecting roadway.
Mr Gilbert said that, overall, the sale was inferior to the subject. The sale was a smaller allotment situated in a far inferior location with an inferior building contour and shape.
Sale 11 is an 883 m² residential allotment situated at 167 Freshwater Drive, Douglas which sold on 27 June 2012 for $285,000. Mr Gilbert analyzed the sale to $282,000. He described the sale property as a near regular shaped corner parcel fronting a landscaped walkway overlooking Ross River. Water views are obscured by dense riparian vegetation. The sale has a highly exposed location opposite a major bridge which is part of the Townsville ring road. The property has a near level building contour and is surrounded by average quality dwellings.
Mr Gilbert considered the sale property to be overall superior to the subject. The sale is a larger allotment situated in an overall superior location with a comparable building contour and comparable near regular shape.
Mr Gilbert said in the course of his oral evidence, that the site value of the sales properties as at the date of valuation, 1 October 2012, were as set out in the table below. I have also set out Mr Gilbert's overall comparison between the sale and the subject.
Site Value Overall Comparison Sale 8 - $185,000 Sale slightly superior to subject Sale 9 - $210,000 Sale superior to subject Sale 10 - $157,500 Sale inferior to subject Sale 11 - $280,000 Sale superior to the subject
Sale 11 appears to be significantly superior to the subject and I would place less weight on that sale than Sales 8, 9 and 10. Taking into account the site values of the sales properties, the relative values of the subject as determined by the respondent as at each valuation date and Mr Gilbert’s opinion as to the comparability of the sales and subject, my conclusion is that the site value of the subject should be determined at $160,000 as at 1 October 2012.
Values as at 1 October 2010 and 2011
As noted above, there is no evidence of the site values of the sales which were used for the purposes of the valuations as at 1 October 2010 and 1 October 2011. However both parties are agreed that the site value of the subject was constant throughout that period. Therefore having determined the site value of the subject as at 1 October 2012, at $160,000, and in the absence of any other persuasive evidence as to the site values for the two previous valuations, I consider that the value of $160,000 should be applied as at 1 October 2010 and 1 October 2011.
Other Issues
Although I consider that these appeals should be allowed for the reasons set out above, it is useful to make some observations about a number of the appellants' submissions so that it is understood that I have not overlooked those submissions.
1. The appellants have complained about the respondent's failure to give adequate reasons for the objection decisions for the 2010, 2011 and 2012 valuations.
There is some doubt as to whether such an argument is open to an appellant in an appeal of this nature. Given the outcome of these appeals, it is unnecessary to consider this submission further.
2. The appellants submitted that there was a prima facie case for a reduction in the valuations because an analysis of the most recent sale of the improved subject property demonstrated that the valuations under appeal attributed too high a value to the land as a proportion of the total value of the improved property. Similarly an analysis of building costs and the estimated sale price of the subject showed that the land value of the subject was disproportionate to the total value of the property.
There are many cases where the Land Appeal Court has held that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land – see, for example, Fischer v The Valuer-General[4] and Barnwell v The Valuer-General[5]. The reason for this is that in applying such sales there is no room for error in analysing the value of the improvements[6]. Thus where there are sales of vacant or lightly improved comparable properties available, such sales are to be preferred as evidence of unimproved value rather than the exercises undertaken by the appellant relying on the sale price of the subject improved property. It is considered that a similar approach should be applied in determining site value.
[4](1983) 9 QLCR 44 at 46.
[5](1989) 13 QLCR 13 at 16.
[6]Clough v The Valuer-General (1981-1982) 8 QLCR 70 at 76.
It is noted that the appellants did not adduce any evidence of unimproved or lightly improved properties to challenge the respondent’s evidence.
3.The appellants submitted that in determining the appropriate values for the subject, the following considerations are relevant –
(a)The rate of increase in the valuation is not commensurate with the movement in property values in Annandale.
That submission is based on improved sales prices and also relies on averaging. Neither of those processes is consistent with the methodology required to be applied by the Land Appeal Court in Fischer and Barnwell, as set out above.
(b)The subject property is overvalued compared to other similar properties in Annandale.
As the appellants have been successful and the valuations are reduced, the relativity is likely to be more appropriate. Mr Musumeci supplied only brief details of the properties he used as a comparison for relativity purposes. Those details were insufficient for me to draw any conclusions as to whether the relativities are now appropriate. In any event, the authorities indicate that while maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant, if not ideal, sales evidence[7].
(c)The site value does not take proper account of the physical impediments and external nuisances that have an ongoing impact on the occupiers.
[7]Fischer v The Valuer-General (1983) 9 QLCR 44 at 46.
The appellants presented detailed evidence as to the nature of the impediments. They submitted that the respondent had not shown what allowances had been made for the disabilities. The allowances were not adequate.
The impediments identified by the appellants include –
· flooding on nearby Glendale Drive which is the direct access route to amenities;
· the headlights of traffic on a T junction close to the subject shine into the appellants' house; noise and danger from hooning motorists; exiting the subject requires negotiation of traffic from three different directions; visitor parking is not advisable as River Park Drive outside the subject is a significant thoroughfare; flood warning lights shine directly into the appellants' house;
· youths who gather in the park opposite the subject have vandalised and stolen property from the subject.
Mr Musumeci went to some lengths to establish what he considered to be appropriate allowances.
In view of the outcome of these appeals, I do not consider it appropriate to make any further allowances, for the subject's disabilities. The valuations made are based on Mr Gilbert's professional opinion, which I accept, as to the comparability of the subject and the sales properties. That comparison should take into account the disabilities suffered by the subject.
ORDERS
1. Appeal VLA436-10 is allowed.
2..The unimproved value of Lot 551 on SP 126589 in the County of Elphinstone, Parish of Stuart is determined at One Hundred and Sixty-Two Thousand, Five Hundred Dollars ($162,500) as at 1 October 2009.
3.Appeals LVA401-11, LVA440-12 and LVA208-13 are allowed.
4.The site value of Lot 551 on SP 126589 in the County of Elphinstone, Parish of Stuart is determined at One Hundred and Sixty Thousand Dollars ($160,000) as at 1 October 2010, 1 October 2011 and 1 October 2012.
CAC MacDonald
PRESIDENT OF THE LAND COURT