Nimmo v Department of Natural Resources and Mines
[2003] QLC 60
•14 August 2003
LAND COURT OF QUEENSLAND
CITATION: Nimmo v Department of Natural Resources and Mines [2003] QLC 0060 PARTIES: Geoffrey K Nimmo
(applicant)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO:
AV2001/0206
DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 14 August 2003 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Dr NG Divett ORDER: The appeal is upheld. The unimproved value as determined by the Chief Executive is set aside, and the unimproved value of Lots 16 and 17 on RP 11691 is determined in the sum of Three Hundred and Sixty Thousand Dollars ($360,000). CATCHWORDS: Practice and procedure – Precedent when binding – Application of New Authority to case in progress – Declaratory theory in establishing current Law – Proper role of Courts – Clarification of intentions of legislation [186] to [195].
Valuation – Sales evidence – Acceptable sales - Scarcity of vacant sales – Use of improved sales – Determination of unimproved value – Impact of views [148] to [154].
Valuation – Factors in valuation – Restrictions on use – Impact of heritage restrictions – Queensland Heritage Act 1992 – Impact on residential land – Generalised approach not applicable [209] to [214]; [221].
Statutory valuations – s.17 residential use – Valuation of Land Act 1944 [155] to [158] – Appropriate approach – Use of site value.
Valuation – Factors in valuation – Restrictions on use – Impact of heritage restrictions – Annualised costs – Capitalisation method not appropriate where no proven annualised costs available [230] to [237].APPEARANCES: Mr G Nimmo for the appellant
Mr P Rabaa counsel for the respondent
Background:
This matter relates to land at 38 Dorchester Street, South Brisbane, and described as Lots 16 and 17 on RP 11691, Parish of South Brisbane. The subject land has an area of 1,255 m² and is located at 1.5 kilometres south of the Brisbane CBD. Access is available from Dorchester Street which is bitumen sealed with concrete kerbing and channelling. All normal urban utility services are available, including overhead power. The subject land is zoned Residential BR4 under the Town Plan of the Brisbane City Council of 1987, effective at the date of valuation of 1 October 2000. The key issues are the nature of the land, relativity, changes in the unimproved value, impact of heritage listing, comparison of sales and impact of views. In view of the very detailed comprehensive evidence submitted in respect of the heritage implications, both parties saw this matter in the form of a benchmark decision on those issues.
On 26 February 2001 the Chief Executive issued a valuation of the subject land at $420,000. Following an objection the Chief Executive revised that figure, and on 29 May 2001 issued a revised valuation of the subject land at $380,000. The appellant has now appealed that figure, claiming that the unimproved value should more properly be $260,000. At the subsequent hearing the appellant led evidence arguing that the unimproved value should have even been less, concluding for an unimproved value of $125,000. In contrast during the hearing the respondent led evidence which he argues should now support an unimproved value of $420,000.
Geoffrey Keith Nimmo appeared and gave evidence on his own behalf. Mr P Rabaa, Counsel of Crown Law appeared for the respondent, calling evidence from Arend Boudewyn Van Hees, the departmental registered valuer responsible for determining the valuation. The respondent also called evidence from Professor John Brannock, Chair of the Queensland Heritage Council, and Paul Thomas Grennan, a certified practising valuer.
This is one of three matters in Dorchester Street heard consecutively, each of which has generally common features, except for differences imposed by heritage restrictions. One is impacted by “Character Housing” constraints (“Toomey”); the second by “National Heritage” classification constraints (“Street”); and the third by heritage classification under the Queensland State Heritage Legislation (“Nimmo”). The decisions on each of those matters were deferred pending completion of all three matters, in order to ensure a consistent overall approach to the valuations. The three decisions also provide guidance in respect of the varying levels of heritage impacts in an otherwise consistent market situation. With the agreement of the parties, a site inspection of all three matters was undertaken.
The Evidence:
History of the Valuation -
Mr Nimmo explains that he has a long association of over 25 years in dealing with land in his professional role as an architect and asset manager. He also advises that he purchased the subject land in 1976, and that he has had repeated discussions with officers of the respondent in respect of the subject land over several years. Mr Nimmo provides a very comprehensive and detailed statistical analysis of his understanding of the valuation processes. He advises also that as a consequence of detailed conferences in respect of the previous valuations at 1 October 1998 and 1 October 1999, there had been agreed allowances made in those valuations to allow for any disability as a consequence of the heritage listing of the subject land.
Mr Nimmo notes that at those times reductions in the then determined unimproved values of $180,000 (1998) and $240,000 (1999) reflected reductions of 38% and 33% respectively for that disability. He argues that is now inconsistent with the 9.5% allowed belatedly for the same reason in the current valuation. In preparing the initial valuation of the subject land at $420,000 in the current matter, Mr Van Hees had been unaware of the heritage listing of the subject land. That had been amended in the revised valuation at $380,000.
The Nature of the Land –
The subject land is a rectangular parcel on the northern side of Dorchester Street. Dorchester Street connects Stephens Road to the east and Gladstone Road to the west. There are good views of the Brisbane CBD from lands on the northern side of Dorchester Street, but views of the CBD from the southern side of Dorchester Street are either obstructed, or have the potential to be obstructed, by buildings along Dorchester Street. The subject land is below Dorchester Street, falling to the rear about 5 metres from the south to the north, and from the west to east, falling about 1.5 metres. (Exhibit 12).
The appellant advises that there is a Brisbane City Council bus route along Dorchester Street, which provides some disability to traffic at a restricted carriageway area west of the subject land near Gladstone Road. Parking of vehicles is only allowed on the southern side of Dorchester Street in that location. (Exhibit 4). Dorchester Street is also used extensively by teachers and parents of children at the nearby Somerville House College in Stephens Road, both as a drop-off point for school and also for sporting events at the sports complex and swimming pool in Stephens Road. Those heavier traffic volumes also contribute to a higher level of noise intrusions on the subject land. There are some noise problems from emergency helicopters delivering patients to the nearby Mater Public Hospital, but those intrusions are generally experienced across the general locality of the subject land. There is also some evidence of public discarding of rubbish in the area, but that is also typical of inner City suburban localities.
Mr Van Hees agrees that the traffic is heavier in Dorchester Street than in normal residential streets, but argues that is to be balanced by the greater proximity to quality facilities nearby to Dorchester Street. He notes that there are two prestigious schools nearby, and the South Bank developments are within close walking distance.
Mr Nimmo has some concern with the relative accuracy of the contour map of the subject land (Exhibit 12), which he notes was only prepared from aerial photography, reflecting contour lines only to within half of one metre in accuracy. He notes that map does not reveal the presence of the retaining walls around the subject dwelling. He advises that those retaining walls have existed on the subject land well before he acquired the property in 1976, and probably date back to the original construction of the dwelling in 1864. Mr Nimmo argues that the presence of the retaining walls confirms the steepness of the subject land, which he notes conflicts with the understanding of Mr Van Hees as “a slight fall to the northern boundary”.
However it is noted that the scale of the contour mapping is depicted at 1 to 500 (Exhibit 12), having been enlarged from 1 to 2500 Orthophoto mapping supplied by the respondent department in the 1980s. As such those contours are predicted to reflect an accuracy of 90% of all reduced levels falling within half of the contour interval of 1 metre. On that basis the contours in Exhibit 12 may be taken to reflect the general level of the topography of the area. I believe that the fall across the subject land is reasonably reflected by the contours as shown, and for the purpose of the valuation, provides a fair understanding of the nature of the land. On that basis it is also noted that the adjoining land to the east (Street) is about 1.5 metres below the subject land; while the cleared vacant land to the west (34-36 Dorchester Street) is about 1 metre higher than the subject land. A comprehensive detailed survey of 34 to 36 Dorchester Street confirms those levels.
Impact of Views –
Mr Van Hees argues that the presence of expansive intimate views of the City CBD is an important feature of parcels, including the subject land, along the northern side of Dorchester Street. He argues that those outlooks were in high demand in the residential home market at the date of valuation, and have continued to increase in value to the present time. To illustrate the prominent position of the subject land on a ridge overlooking the CBD, Mr Rabaa draws attention to photographs supplied by the appellant (Exhibit 4). Mr Nimmo concedes that such views of the subject dwelling were available in 1985, but notes that photography in 2002 reveals how vegetation is now severely destroying views of, and from, the subject dwelling. (Exhibit 5).
Mr Van Hees argues that in its well elevated position the subject land could maximise sweeping 180 degree views of the CBD by selective clearing upon the subject land. He argues that while existing vegetation on the subject land does restrict those views, that is as a result of the appellant’s decision not to clear the vegetation, and the potential views must therefore add to the value of the subject land.
To support that conclusion Mr Van Hees notes the expansive views from both properties adjoining the subject land. He notes that views from 34 to 36 Dorchester Street are virtually uninterrupted; while views from 40 Dorchester Street (Street) are only restricted by the presence of the adjoining historically listed Serbian Church and Hall to the north of that parcel. An analysis of the Street property was discussed in Street v Chief Executive, Department of Natural Resources and Mines (AV2001/0327), 17 April 2003, to be reported, at paragraphs [90] to [93]. It is also noted that the land immediately behind the subject land to the north falls about 10 metres to Vulture Street. The ability for intrusion into the CBD views by buildings on that parcel is remote. However it is agreed that there are several trees, including two old mango trees on that parcel which currently partially restrict the views of the CBD. Any opinion that the appellant may be able to negotiate pruning of those trees is purely speculation. Potential growth of those trees is also a matter for consideration by a prudent buyer. However, it is Mr Van Hees’ opinion that careful pruning upon the subject land itself would restore about 80% of the total views potentially available to the subject land.
Mr Van Hees also notes that originally the subject dwelling was built facing north towards the City centre. Subsequently with the later redevelopment of Dorchester Street the rear and kitchen quarters of the dwelling have now become the front yard to Dorchester Street. On that basis Mr Van Hees argues that if an appropriate remedial action was taken on the subject land, then the potential City CBD views would be capitalised upon. He notes that the first dwelling in an old area usually maximises the best views available. That was the subject land. However it is now agreed that, due to buildings along South Bank, there are now no views of the Brisbane River. It is also agreed that the high units on 28 Dorchester Street (Kallis) to the west of the subject land has intruded into any views towards Mt Coot-tha (see Toomey v Chief Executive, Department of Natural Resources and Mines (AV2001/0211, 17 April, 2003, unreported at paragraph [17].
In respect of the potential for removal of those trees on the adjoining land to the north, Mr Grennan agrees that the market would pay more if those trees did not exist, than if there remained any uncertainty to having those removed or trimmed. He notes that he has had experience in other matters in Bulimba where an owner paid a neighbour to remove a large mango tree. However he agrees that you would pay less if you had to wait for the trees to die naturally. It is worth noting that such trees can live for extended periods, and in the context of an annual valuation, that speculation has little impact upon the theoretical prudent purchaser at the relevant date.
But Mr Grennan advises that without the intrusion of the trees on the adjoining land, the subject land would have one of the best City CBD views that he has seen. He believes such uninterrupted views might add a premium of up to 100% compared to a similarly located parcel without those views. Mr Van Hees agrees with that premium for those City CBD views. However he does concede that the City CBD views from the subject land are partially obstructed by the trees. Mr Van Hees also agrees that the presence of City CBD views was the major reason for the significant increase in value for properties on the northern side of Dorchester Street. Mr Van Hees also advises that the most highly sought after properties in South Brisbane, Sherwood to Hamilton, and Greenslopes to Wilston, are those with CBD views.
In respect of potential City CBD views from parcels in Dorchester Street, Mr Van Hees offers the opinion that the views from 28 and 30 Dorchester Street to the west of the subject land are possibly the premium views, being slightly better than views from 34 Dorchester Street and the subject land. That tends to align with the general elevation along Dorchester Street, where 28 Dorchester Street is the highest parcel. (Exhibit 12). Mr Van Hees also observes that if the City CBD views were totally obstructed in some way, then lands on the northern side of Dorchester Street would likely revert to values approximately comparable to those for similar land on the southern side of Dorchester Street. However the potential for restricting the views on the north of Dorchester Street is far less than on the southern side of Dorchester Street.
Mr Nimmo notes that the large Norfolk Island pine tree on the subject land is to the east of the dwelling, and has no impact upon views of the CBD. In respect of comparisons with views from a heritage listed property at 27 Hampstead Road (“Wairuna”), Mr Van Hees agrees that those are good CBD views, comparable to unobstructed views from the northern side of Dorchester Street. (Exhibit 11, page 4).
In contrast to the views from the subject land, which has restrictions upon the potential to modify the existing dwellings to maximise any views because of its heritage restrictions, Mr Nimmo refers to other dwellings to the west along Dorchester Street. Those properties have been able to add decks and picture windows to take increased advantage of the views. (Exhibit 8).
Changes in the Valuation –
Mr Nimmo argues that the percentage changes applied to the subject land on the relevant date (58%), is inconsistent with corresponding changes for the adjoining parcel at 34 Dorchester Street (15%). To further strengthen that argument he draws reference to other increases in Dorchester Street which he argues demonstrates an apparent arbitrary approach to the valuation. He notes for instance that parcels on the southern side of Dorchester Street have had no increases applied during that period from 1 October 1999 to 1 October 2000. Mr Van Hees now concedes that some parcels on the southern side of Dorchester Street do have City CBD views, and were therefore probably under-valued at 1 October 2000.
Mr Nimmo notes also that the adjoining 40 Dorchester Street (Street) increased by only 40%. To demonstrate those inconsistencies he supplies a map of percentage changes (Exhibit 2, map 1). Clearly only two parcels (including the subject land) increased by 50% to 100%; while others increased by lesser percentages, some remaining the same, and two parcels (227 Vulture Street and 22 Gladstone Road) actually decreased.
Mr Nimmo argues such variations provide little confidence that the valuations have been undertaken consistently. Mr Nimmo also notes that the only other large increase greater than 50% was at 203 Vulture Street, which is a purpose built block of 1960s flats. Mr Nimmo also provides a second schedule of changes in value between 1998 and 1999. (Annexure 7). He notes that a similar level of inconsistency with increases also occurred in that period. He notes that the subject land increased by 33% in that period, while 40 Dorchester Street increased by 25%, and 34 Dorchester Street increased by 24%. Mr Nimmo compares those erratic variations in Dorchester Street with more consistent patterns of increase in other areas that he has investigated in Sword Street in Buranda, and in Dickson Street and Toorak Road in Hamilton. He argues that those more consistent patterns demonstrate the unreliability of the current valuations in Dorchester Street. Mr Van Hees rejects Sword Street which he says is more industrial lands and is not comparable to the subject land.
As further evidence of an apparent inconsistent approach in the South Brisbane area, Mr Nimmo also refers to a change applied to a particular property at 136 Dornoch Terrace, Highgate Hill. He notes that property had been formerly valued by the Chief Executive at an unimproved value of $212,500 at 1 October 1999, but later sold at auction in August 2000 for $200,000, after a fire had destroyed the old dwelling. At the subsequent revaluation of that property at 1 October 2000, the unimproved value was reduced to $180,000, in line with the sale price for the land. He argues that type of adjustment lends support to his opinion that the former mass produced valuation at $212,500 had been incorrect. Mr Nimmo uses that parcel at 136 Dornoch Terrace as a relativity and sales check discussed later in paragraph [45].
In support of the changes in the unimproved values applied over recent years, Mr Van Hees advises that when he accepted joint responsibility for valuations in South Brisbane in 1999, the relativity in some areas had become inaccurate over a period of time. As a consequence of seeking to rectify those inconsistencies, Mr Van Hees explains that the changes now noted in relativities had to be made. He argues those variations made by Mr Nimmo do not reflect errors in the valuations, but rather the outcome of rectifying the previous inaccurate valuations. Mr Van Hees argues that the subject land had been just one of the properties that needed to be rectified. Mr Van Hees advises further that until there is a clear pattern of sales suggesting an increase in value, then the respondent applies a conservative approach giving any uncertainty to the benefit of the landowner. Hence some values are delayed in being increased.
Mr Van Hees agrees that s.33 of the Act directs that previous valuations should be accepted as correct for purposes of assessing responsibility for revenue charges. However he notes that s.33 has application, unless it is proven to be incorrect. He argues that when an error is disclosed, ensuring the purpose of the Act to provide fair and equitable valuations, then those errors should be corrected. Mr Nimmo also provides an internal departmental document establishing the revaluation basis for South Brisbane for the valuation at 1 October 1997 (Edmonds – Exhibit 10).
That report also notes inconsistent relativities, and recommends a major review of the valuations in that area. Mr Nimmo also comments that the Edmonds report also appears to highlight certain inconsistencies in the departmental mass appraisal process, a situation which causes Mr Nimmo some concern in respect of overall fairness in the process. The need for manual adjustments of individual valuations is a key issue. Mr Van Hees agrees with that recommendation, and he has been progressively addressing that issue over the last few years.
In seeking support for his opinion of a lesser increase in the unimproved value of the subject land, Mr Nimmo draws attention to quoted statistical variations for median house prices over the relevant period. While he accepts that median prices reflect an overall market average, Mr Nimmo argues that there should be a general level of consistency between the median price statistic for homes, and the unimproved value of lands in the area. However Mr Van Hees rejects that conclusion, noting the obvious disparity with increases in vacant land sale prices compared to sales of improved lands. It is noted that the subsequent subdivision and sale of the adjoining vacant land at 34 Dorchester Street supports that there is not a parallel movement in the two separate markets. Mr Grennan also rejects median house prices as a measure of changes in land values.
Mr Nimmo also seeks some support in the change in unimproved values of heritage properties in a sale and resale of “Wairuna” at 27 Hampstead Road, South Brisbane (Exhibit 11). He notes that heritage house sold in October 1997 ($730,000) and resold in January 2001 ($835,000), reflecting an increase of 14% in sale price over 3.25 years. Yet in the same period the unimproved value increased from $225,000 to $375,000 (67%). Mr Van Hees rejects the use of only one sale and resale as a reliable measure of market trends, as he notes there can be high and low sales in any market situation. He notes however that the larger increase in the unimproved value reflects the increasing value for land in the area. Mr Van Hees advises that those large increases in value for land extend generally to inner suburbs out to about five kilometres from the City CBD.
In respect of general market trends Mr Van Hees argues that land prices increased generally from 1999, flattening temporarily from mid-2000, but escalating away from about October 2000. He notes that the subsequent valuation will reveal significant increases in unimproved values. Mr Grennan supports that conclusion, arguing that land comprised most of the increases, as building costs did not rise appreciably in that period. Mr Grennan argues that small single residence vacant sites and large single residence vacant sites reflected comparable like with like increases in value at that time.
In considering changes in land values in Dorchester Street, Mr Grennan draws reference in passing to the adjoining vacant land at 34 Dorchester Street. However he notes those more recent sales of those subsequently subdivided lands reflected much higher “site” values, and he draws no support in the current matter from those small parcels as unimproved land values. The site value prices reflected other associated costs such as subdivision and Council requirements. However as a broad trend only, Mr Grennan sees the resales of 34 Dorchester Street as supporting the escalating value of land in that area.
In further explaining his approach to the valuation, Mr Van Hees advises that, in recognition of the growing paucity of sales of vacant lands for the last few years, he has modified his vacant land sales information by comparing overall trends evident in sales of improved land. To demonstrate that approach he provides part of an overall working map of South Brisbane (Exhibit 53). However on that extract of the overall working map, only three sales of improved lands in Dorchester Street were evident, at 8 Dorchester Street, 27 Dorchester Street and 41 Dorchester Street. Mr Nimmo notes that adopting Mr Van Hees’ analysis of those sales reveals possible increases in land values of 8 Dorchester Street (42%), 27 Dorchester Street (-37%) and 41 Dorchester (8%).
Mr Van Hees rejects the sale of 27 Dorchester Street as a family sale, being well below the general market level. Details of those three improved sales reveal:
Sale Price Date Added Value of Improvements Analysed Land Value Applied UCV 1999 Applied UCV 2000 8 Dorchester Street $312,000 10/1999 $50,000 $262,000 $185,000 $210,000 27 Dorchester Street $172,000 9/1999 $40,000 Family sale $210,000 - 41 Dorchester Street $260,000 9/1999 $60,000 $200,000 $185,000 $185,000 The sale at 41 Dorchester Street reflected two flats which also represents a s.17 application in the valuation process. In the final application at 1 October 2000, 8 Dorchester Street was increased by 12% and 41 Dorchester Street remained unaltered. Mr Nimmo asked how did those comparisons assist the application of the sales of vacant lands applied to the subject land?
As further evidence of changes in the residential property market over this period, Mr Grennan also provides the following sales and resales in Highgate Hill (Exhibit 29):
Property Area Sale Price Date Resale Price Date Use Percentage Increase 26 Emily Street 830 m² $500,000 3/2000 $660,000 1/2002 Flats 32% 17 Laura Street 857 m² $380,000 3/1998 $780,000 6/2002 Boarding House 105% Both of those properties have good views. Mr Nimmo rejects those comparisons as reflecting sales of lands other than those used under s.17 of the Act.
Use of the Land –
It is agreed that the subject land has been valued as a land use under s.17 of the Act. Mr Van Hees advises that even with the agreed use by tenants in part of the subject premises (in the old kitchen area), the concessional valuation under s.17 continues to apply. The unimproved value under the Act is similar to a single family occupation of the dwelling. Mr Van Hees notes that under the two-tiered categorisation process of the Brisbane City Council, there are differing rates applied for single family occupation and multiple rented property occupation.
Mr Van Hees argues that in valuing the subject property under s.17 there has been a considerable concession applied to the unimproved value, which would not occur if a parcel of that size was valued for a higher development potential. He cites the sale of the adjoining vacant lands at 34 Dorchester Street at $925,000 in May 2000, which demonstrates that higher potential use. While that sale occurred prior to the relevant date, it has not been used in this exercise as it did not reflect a s.17 use of the land.
Mr Nimmo argues that in applying a concessional valuation for the subject land under s.17 of the Act, it is inappropriate for the Chief Executive to merely compare the subject land with sales of small single residence sites, and then make some allowance for the larger area of the subject land. He notes that because of the additional constraint of heritage listing of the subject dwelling, any potential for greater use of the larger area of the subject land is severely diminished.
In seeking some understanding of the impact of a s.17 valuation, Mr Nimmo draws examples from comparisons of the unimproved values of large and smaller lots, both with, and without, the effects of s.17 as a single residence site. (Exhibit 2 – Tables 3 and 4). He notes that comparably located parcels revealed variations ranging from about 45% to 63% where s.17 was applied to the parcels, and from 10% to 25% where s.17 had no application. On those comparisons he concludes that a diminution factor of between 35% and 50% would be reasonable for s.17 impacts, due to a difference in size of a parcel, and he seeks to apply 40% to the subject land. He bases those comparisons upon a rate per square metre basis for each parcel. Mr Van Hees rejects that single residence sites are purchased on such a basis, noting that the market reveals that such parcels are purchased on a site value basis. Mr Van Hees notes that the subject land is three to four times larger than any of the sales used in this matter.
Planning Impacts –
It is agreed that the subject land falls within the general area of “Character Housing” under the Brisbane City Plan 2000 – Demolition Control area. Within that planning regime any demolition of such a pre-1940 dwelling must get Council approval before any action could proceed. While the Brisbane City Plan 2000 did not become effective until 30 October 2000, the draft plan was on public display for 12 months prior to that date. Consequently any prudent buyer would have been aware of that impending legislation.
It is also agreed that the inner residential zoning existing under the Town Plan 1987, was intended to continue under the new Brisbane City Plan 2000, but that was subsequently amended to Low to Medium Rise Residential BR4 under the new City Plan. The land continues to fall in Precinct 14 in the South Brisbane area development control plan (Exhibit 3). Mr Van Hees advises that such zoning continues to be valued under s.17 of the Act. In that Precinct 14 detached houses and apartment buildings to a maximum height of two storeys are permitted. Mr Nimmo argues that even under the “Character Housing” restriction, the subject dwelling could not be relocated or removed without the consent of the Council.
To demonstrate that “Character Housing” restrictions are onerous, Mr Nimmo draws reference to a parcel across Dorchester Street, where an old art deco frontage had to be retained in order to maintain the streetscape. However as discussed previously in Toomey v Chief Executive, Department of Natural Resources and Mines (supra) at paragraph [22], that façade was retained by the owner in order to maintain the existing footprint of the building line, and does not definitively reflect Council’s intentions to refuse demolition applications.
The impact of “Character Housing” policy was discussed in Toomey at paragraphs [42] onwards. Mr Van Hees notes that while most inner suburban areas are now protected by development control restrictions, there continues to be a strong demand for people seeking to demolish old houses, and replace them with new ones, often in the same style as the streetscape. On that basis he believes that the market value for old dwellings so restricted, is not necessarily depressed because of those “Character” restrictions. Mr Nimmo argues that even the Chief Executive’s own handbook on Land Planning Guidelines, part G, chapter G11 (section 2.1) states that the valuer must have regard to any planning statutory restrictions.
Relativity –
Mr Nimmo draws comparisons with relativity with various parcels in Dorchester Street, but particularly with parcels immediately adjoining the subject land. He notes that the unimproved value of 34 Dorchester Street, of similar area 1,255 m², and slightly higher than the subject land, and with unobstructed views of the City CBD, is only $450,000. While the subject land prior to any adjustment for heritage impacts was valued at $420,000. He notes that if the same relativity between those parcels at 1 October 1999 was carried forward (61.5%), then the subject land would only be valued at $277,000. (Exhibit 2, page 4). Mr Nimmo advises that comparison formed the basis of his original claim of $260,000 for the subject land. Mr Nimmo can see no logical reason for any changes of local relativity within Dorchester Street. Mr Nimmo advises that, following examination of aerial photography of the area, the dwelling upon 34 Dorchester Street was burnt down between 1972 and 1976. That parcel had been vacant since that period.
Mr Nimmo also notes relativity with the improved land at 43 Dorchester Street (Lot 28), on the southern side of Dorchester Street, which has an unimproved value of $185,000, and has good City CBD views at the relevant date. Those views are across the current vacant car park area on the northern side of Dorchester Street at the corner of Stephens Road. However on reflection Mr Nimmo agrees that the much smaller area of 43 Dorchester Street (627 m²) probably does not fully support his theoretical estimate of the subject land at $180,000, based upon his interpretation of the impact of s.17 upon larger parcels. (Exhibit 2, page 11). However there is rear access to 43 Dorchester Street, which would enhance the value to $280,000. Based upon relativity with 43 Dorchester Street Mr Nimmo concedes that a value of $215,000 might be appropriate for the subject land.
Mr Nimmo also seeks relativity with the sale at 136 Dornoch Terrace (see para [24]). He argues that parcel has an easier slope than the subject land, has partial views of the City CBD, and was valued on 1 October 1999 at $212,500, compared to the corresponding value of the subject land at $240,000. Maintaining that old relativity (1.13) would now suggest a figure of $205,000 for the subject land, as 136 Dornoch Terrace is now reduced to $180,000.
As a further check on a relativity approach Mr Nimmo applies a pro rata per square metre derived from unimproved values of large single dwelling parcels in the area, concluding an overall figure of about $210,000 for the subject land.
He also seeks relativity with other heritage properties in that area at 27 Hampstead Road (“Wairuna”), 116 Dornoch Terrace (“Kimauld”), and the subject land (“Coorooman”). He notes changes that have occurred in the relativities between 1997 and the current valuations, which virtually suggest that there has been a marked increase in the relative comparisons of the subject land. (Exhibit 11). Based upon a statistical analysis of those three properties, and assessing a possible market value free of heritage restrictions between $1.21 million and $1.24 million for “Coorooman”, and then deducting a suggested market value by a real estate agent of $850,000, Mr Nimmo concludes an unimproved value of the land at between $110,000 and $125,000. It is on that basis that he seeks to lead evidence to a lower figure of $125,000 in this matter. (Exhibit 11, page 3).
Mr Van Hees rejects such a statistical approach to relativities, but agrees that a soundly based relativity between “Wairuna" and the subject land (“Coorooman”) could be a useful check method. But he advises that relativities are constantly changing with differing market forces. At the present time the impact of City CBD views is having a major impact on former relativities.
Method of Valuation –
In seeking to outline his method of valuation Mr Nimmo explains that he first sought to identify the highest and best use of the subject land, and to value it for that purpose. He then sought to identify the level of value which would be deducted for a s.17 use of the land in order to identify the concessional valuation for rating purposes. From that latter figure he then sought to deduct a component to reflect the impact of heritage legislation upon the subject land. He notes that in accordance with directions of the High Court in Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited & Ors (1946-47) 74 CLR 358, the sales evidence adopted should not be at the higher end of the market. To support that conclusion Mr Nimmo relies on the Chief Executive’s own advice to owners via the departmental website on the Internet. (Exhibit 6).
In seeking a direct market comparison with the heritage property at 27 Hampstead Road (“Wairuna”), Mr Nimmo notes that well restored heritage home sold in January 2001 for $835,000. “Wairuna” was designed by the architect Robert Dodds, and occupies a 1,482 m² parcel, with superior City CBD views, and also a good outlook to Mt Coot-tha and the hills to the west of Brisbane. Mr Nimmo sees “Wairuna” as a superior property to the subject land, particularly in view of its considerable restoration. Mr Nimmo speculates that “Wairuna” would be 20% superior to the subject land.
In explaining his method of valuation Mr Van Hees advises that, apart from his own personal opinion as to reasonable comparisons with the comparable sales, the departmental process provides for moderation of the outcome by other senior valuers. He acknowledges that the process is a mass appraisal system, where a structured approach requiring the use of a general pattern of market variations over specific sub-market areas (SMAs) is applied, using a major computer process involving the Queensland Valuation System (QVAS). He agrees that there are constantly evolving modifications to the process, but argues that the quality processes have been favourably received by the courts.
Mr Van Hees further notes that while the QVAS computer system provides a broad mathematical estimation of the final unimproved values, it is the personal experience of each valuer that makes the final decision as to whether the sales evidence, including sales of improved properties, reflect fair relativities between the individual parcels. Mr Van Hees confirms that valuation is not merely the application of a mathematical formula, but relies upon market analysis.
In respect of public confidence in such a mass appraisal system, I note that the process was closely examined in the matter of BG and AK Wilson v Chief Executive, Department of Lands (1994-95) 15 QLCR 63, where the Land Appeal Court said at pp.70-71:
“It has been said on many occasions that valuation is not an exact science. It rests upon the opinion of those in the market place who will prefer one aspect to another, one suburb to another and so forth. It is the duty of the valuer to interpret and apply that market on principles which require comparisons to be made of “like with like” wherever possible. The process of annual valuations which was introduced by legislation in 1985 was designed to avoid the penalty of an owner being cemented to a value for rating purposes for up to five years and possibly eight years. The scheme of annual valuation enables values to follow the market on an annual basis. The scheme would not work without the aid of computers.
…
In the context of an annual valuation, the process involves the activity described previously including the “charts” and the collation of that material from the charts by the computer processors through to the public display of the printouts containing the respective valuations and relevant dates. The process is our opinion does not offend the statute.”
Mr Nimmo seeks to gain some perspective of the likely impact upon the use of the subject land as a large single residence site, as a consequence of the lack of freedom resulting from the restriction of the heritage dwelling. He gained some understanding of the flexibility normal inherent for buildings on larger parcels from a decision in this Court in CR Gay v Chief Executive, Department of Natural Resources (1997-98) 17 QLCR 247, where the Member said at p.273:
“In respect of the impact of the extra size of the subject, the key benefit would appear to lie in the greater flexibility afforded in locating the dwelling and other features. This would allow the designers greater flexibility in maximising living and entertaining areas, with possible reduced building costs as a consequence.”
It is argued that flexibility does not occur where a heritage building prevents such flexibility in the construction of a dwelling. Mr Van Hees agrees that a larger parcel, all else being equal, would have a higher value than a smaller parcel. However he advises that additional value is not pro rata in relation to the area of the parcel, except in very selected areas such as river front lands, or where spectacular views may be achieved.
In respect of the impact upon the value of a parcel of land being purchased as a single residence site only, Mr Van Hees argues that it depends upon the particular market level being paid for residential lands. He agrees that generally where land is purchased for use as multi-unit residential development, the site value is higher than when purchased as a single residence site. For that reason Mr Van Hees has sought to only compare sales of properties which were purchased as single residence sites. However he argues that in the Highgate Hill area there is currently little difference in value between those two land uses. However Mr Nimmo notes that the later sale of 34 Dorchester Street as vacant land, would appear to reflect a much higher value where subdivisional development may be achievable. While that later sale is not relevant in the current matter, its subsequent sale price at $1,950,000 as three small parcels raises questions about the impact of s.17.
In seeking to explore the possible impact of s.17 upon residential land prices, Mr Nimmo draws comparisons with unimproved values at Gladstone Road and Beaconsfield Street, Highgate Hill (Exhibit 9). Mr Nimmo notes that a single residence site at 188 Gladstone Road reflects a rate per square metre 45% less than a multi-unit site at 200 Gladstone Road. He notes also that a corresponding difference between single residence sites at 35 Beaconsfield Street and a multi-unit site at 17 Beaconsfield Street reflects a reduction of 65% for the former. While Mr Van Hees agrees that on face value such differences in rates per square metre would appear to exist, he notes that he has no details of the specific features of any of those parcels, which might not otherwise be truly comparable.
Mr Nimmo also draws some analogy with the discount of 40% allowed for a parcel of land subdivided, and valued under s.25 of the Act. He argues that such an allowance could be perceived as equivalent to a s.17 application. However Mr Van Hees explains that s.25 is a special discount provision provided for the developers of large subdivisions, which have been developed for sale, but not yet purchased by new owners. Mr Van Hees refers to those parcels as “splits”, and he argues that the discounted provisions in the Act refer to other matters other than just any discount allowed for a vacant single residence site. He argues those provisions have no correlation to s.17 of the Act.
In respect of the application of s.25 of the Act, the current amended s.25 was introduced into the Act under Natural Resources Legislation Amendment Act 1997, No. 41, assented to on 25 August 1997. Its purpose was to rationalise the previous arrangement where the major subdividers of land were granted a period of reduced valuations, in order to reflect the normal selling periods of newly created land parcels, and thus provide some respite against some major rating liabilities while the lands were sold to owners. It is also noted that under s.25(6) of the Act, the operations of s.17 are specifically excluded. On that understanding s.25 has no application in the current matter.
Heritage Impacts -
The Evidence of Mr Nimmo –
Mr Nimmo argues that by their very nature heritage listed properties are examples of unique buildings, each bringing with it specific individual features, which must be treated peculiar to that property. However he also notes that previous decisions of courts have established principles which should be followed when determining the unimproved value of such lands. It is in pursuit of establishing such principles that Mr Nimmo has pursued the current matter as a test case for historic residential properties.
Mr Nimmo particularly draws reference to decision of this Court in Cooke v Chief Executive, Department of Natural Resources (1998) 19 QLCR 258; and Conias v Chief Executive, Department of Natural Resources (AV97-336), 8 October 1998, unreported; and also of the Land Appeal Court in Roberts v Chief Executive, Department of Natural Resources (1998) 19 QLCR 186. He notes that in respect of allowing some reduction in value for the disability of heritage listing, those decisions are consistent with the decision in respect of a commercial property in Ballow Chambers Limited v Valuer-General (1992-1993) 14 QLCR 422. Mr Nimmo argues that in principle the Chief Executive has virtually agreed with the decisions in both Cooke and Conias, in as much as having initially appealed against those decisions, the respondent then withdrew the appeals, thus accepting the principles outlined in those cases.
Before exploring the impact of the heritage legislation, I note first the agreed historical significance of the subject land. The current building known as “Coorooman” and also known as “The Grange”, was designed by Richard Galey, and built about 1864, and originally faced Vulture Street. The dwelling is a large house of area 772 m². The property later became the home of the Chief Government Geologist (Ball) who renamed the property “Coorooman”. The subject land is currently listed as a heritage place in the Queensland Heritage Register under the Queensland Heritage Act 1992, in the register of the National Estate (1994), the Australian Heritage Places Inventory, the Heritage Register of the Brisbane City Council (1993) and is also listed by the National Trust of Queensland (1982). (Exhibit 2, Annexure 3). In the Brisbane City Council citation of “Places of Cultural history Significance” the streetscape of the northern side of Dorchester Street is particularly noted for its interesting roofscapes. Mr Rabaa agrees that because of its unique quality of design and construction “Coorooman” was unlikely to ever be demolished.
Mr Nimmo notes that there has been, in his opinion, some misguided themes in the judgments so far discussed, that there may be some potential for heritage registration to add value to a property. He refutes that conclusion, noting that any potential for enhanced market place value lies in the intrinsic quality of the buildings themselves, rather than in any “heritage listing”, which creates obligations and limitations not required of other similarly aged properties which have not been listed for heritage purposes. He argues that it is the character of the buildings itself which gives it the added value. Mr Van Hees and Professor Brannock both disagree with that conclusion, noting that of recent times there is a small market sector which sees positive social value in owning a “heritage listed” property.
Mr Nimmo also refers to architectural and lifestyle limitations that are evident in old dwellings. He notes that by suitable opening of windows and doorways in an old dwellings, there can be marked improvements in light and air to suit Queensland’s climate. With an unlisted dwelling those remedial refurbishments can be achieved. However he notes that cannot be achieved with a heritage listed property. He argues that from an asset management perspective those limitations detract from the worth and market value of a dwelling.
In seeking guidance from the decision in Ballow Chambers Limited, Mr Nimmo does not agree that there is any difference between heritage impacts upon the value of a commercial property and upon the value of a residential property. He agrees that heritage may impact the economic potential of a commercial property; but, in his opinion, it would also impact the potential of living styles on a residential property. On that basis he argues that it is not correct to infer that commercial properties would always have a greater impact than residential properties as a consequence of heritage listing. In respect of why he did not appeal at the time that the listing was applied under the Queensland Heritage Register in 1992, he argues that virtually provided no viable ground for him to appeal against. He argues that those listings were virtually imposed by Government. The advice to the appellant was on 9 July 1992, and the Queensland Heritage Act 1992 was proclaimed on 21 August 1992.
Mr Rabaa rejects that heritage impacts are similar for both commercial and residential properties, noting that the commercial property values are based upon the potential for making a profit for the owner. He argues that there are no comparable profit making uncertainties for a residential home site, other than for any capital gain in value which would accrue to all property values.
Mr Rabaa also argues that there are no specific legislative provisions which would require the owner of a heritage listed property to undertake certain works, beyond those which are also required on a non-heritage listed property. Mr Nimmo rejects that conclusion, noting that the Queensland Heritage Act 1992 establishes provisions for protecting a heritage listed property, which are more onerous than those required for normal building approvals under the Integrated Planning Act 1997 (IPA). However he concedes that there are no powers of the National Trust of Australia, which would require something to be undertaken on a property listed under that trust.
Mr Nimmo accepts that the subject dwelling is relatively unique in design and construction style, and is a place of cultural or heritage value. Its preservation under the Queensland Heritage Act 1992, in his opinion, is of greatest benefit to the wider community, than any benefit accruing to the owner, who must pay the cost of any preservation. It is that lack of any public acceptance or contribution towards increased costs of preservation, that is fundamental to Mr Nimmo’s concerns in this matter. Mr Nimmo has no concerns with the staff of the Environmental Protection Agency (EPA), which he admits, on the few occasions that he has contacted them, have been helpful and understanding.
However he notes the quite large penalty provisions that may be imposed for extreme illegal actions involving a heritage listed property, including a ban on demolition. He notes for instance that at $1,275,000 the maximum penalty under the Queensland Heritage Act 1992, is of the order of ten fold the maximum penalty under IPA. He argues that the possible threat of such a draconian penalty, in his opinion, is probably the major reason why only 10% of building approvals under the Queensland Heritage Act 1999 are refused.
There was considerable discussion in respect of remedial works undertaken by the appellant on the timber posts supporting the verandas of the subject dwellings. However, while Professor Brannock notes that the existing steel post and strap foundation were not in sympathy with the original design of the timber posts, they were not seen to be in conflict with the spirit of the Burra Charter, which drives the standards required by the EPA. On that basis it is agreed that the current approach to avoiding further rotting of the wooden posts is an acceptable maintenance solution, not requiring EPA approval. Mr Nimmo further advises that his maintenance approach for those posts would have not been dissimilar even if the dwelling had not been heritage listed. He accepts that similar ageing problems would be encountered on a dwelling of that age, irrespective of whether the dwelling was heritage listed or not.
Mr Nimmo acknowledges several references to the marketability of heritage properties, agreeing that such sales promotion articles generally extol the advantages of old heritage dwellings. He notes that it would be unusual for a “selling article” to do otherwise. However he ponders what might be the market value of similar non-heritage listed properties in the area. (Exhibits 13 and 14). He notes that he has had several offers to sell the subject land over the last 15 years, but has chosen to retain the property as a lifestyle residence.
In seeking to provide a balanced perspective for the Court, Mr Rabaa provides a detailed examination of the effects of the Queensland Heritage Act on commercial properties. (Exhibit 16). That report by a leading valuer notes the workings of the Act, and speculates that the public benefits in such preservation of old buildings is at the cost to the private owners. The report also draws distinction with the failure by the Act to list many State Government buildings, thus reducing any recriminations against the Government on those specific cultural heritage properties. Mr Nimmo argues that while that article specifically refers only to commercial properties, the inference that some public buildings are not specifically listed, while other comparable privately owned buildings are listed, reflects the Government’s acknowledgement that additional preservation costs are involved with formal heritage listing.
Mr Rabaa also provides considerable detail in respect of possible taxation incentives for heritage conservation work (Exhibit 15). However those Australian Tax Office documents condition such claims for taxation offsets by limiting the cost to 20% of amounts greater than $5,000 in a year, and subject to the lodgment of a final certificate from the Department of Environment and Heritage in the year 2001-2002. Subsequently the broad tax offset arrangements has been replaced with a specifically targeted project list of heritage properties across Australia. Any benefits to the subject property would be theoretically only at the relevant date. Mr Rabaa also provides a comprehensive list of material downloaded from the EPA website in respect of the operations of the Queensland Heritage Act 1992 (Exhibit 17). While broadening knowledge about the EPA, they provide little insight into the market place’s appreciation of heritage properties.
However among that plethora of detail, there is one specific guideline for the assessment of heritage planning applications which may have some bearing upon the current matter. In its advice to applicants in respect of “domestic verandas”, the following has some significance to the now partially enclosed verandas of the subject land:
“Many buildings and houses have or once had verandas. Verandas served numerous functions including shelter from the sun, wind and rain; interior cooling; and the creation of outdoor sheltered space. Verandas are also an important design element in many buildings and can provide a great deal of visual interest in their design and in the play of light that is created by the columns, decorative timber, cast iron and other decorations.
On many houses, especially terrace houses, verandas have been enclosed to create additional rooms. Removal of the later alterations should only be undertaken where the alteration itself is not significant or where the later work has negatively affected the significance of the place.”
Mr Nimmo claims that the existing northern veranda is still enclosed by fibro sheeting, erected during the later periods when the dwelling was used as a multiple dwelling. He believes that such old fibro was unlikely to be able to be removed as maintenance, minor works or emergency repairs. As such that would require the approval of the EPA. He argues that impacts upon how the owner could enjoy the house, and any views available from it. Mr Nimmo confirms that he has opened up the verandas on the other three sides of the dwelling, as part of ongoing maintenance work.
Mr Van Hees notes that other verandas to the south and east have previously been restored to their original open condition, and he argues that an approach to do likewise to the northern veranda would be readily approved. That would open up the opportunity to maximise views of the City CBD, and would appear consistent with the Burra Charter, the “Australian ICOMOS Charter for Places of Cultural Significance”, which notes “restoration” as:
“Restoration means returning the existing fabric of a place to a known earlier state by removing accretions or by reassembling existing components without the introduction of new material.”
Mr Nimmo provides two articles to support his opinion that heritage legislation is currently unfair to private property owners. The first was published in the Valuer and Land Economist of May 1993 by Catherine Arnold, and speculates that legislative intervention is necessary to provide a more equitable and just allocation of costs associated with the preservation of historic buildings (page 430); while the second article from the Queensland Law Society Symposium of 1994 by DR Gore QC, examines the ex-appropriation of rights of owners without compensation under the heritage legislation. However both of those articles merely reflect considered opinions by experts, and do not reflect a definitive direction in the matter. It is also worth noting that should the matter of a formal recognition of any disability as a result of heritage listing become enshrined in legislation at some future time, there is also the possibility of the matter of “betterment” being considered. But that is pure speculation at this time.
Mr Nimmo further provides two other articles to support his contention of a downside to heritage listing of properties. The first by the Property Council of Australia of June 1999 to the National Strategy for Australia’s Heritage Places (Exhibit 35), does highlight both the upside and downside of heritage listing. (Page 12). That report also identifies “that, in most cases, heritage buildings are more expensive to operate, and more expensive to refurbish and offer fewer future opportunities than non-registered buildings” (page 9). The second report by Catherine Arnold and Karen Garner in the Queensland Law Society Journal of October 1993, emphasises the need for legislative reform (page 466).
[79}Mr Nimmo also draws reference to some limited relief provisions undertaken by the Brisbane City Council in respect of transferable developmental rights in the CBD; and also the potential for financial, technical and other professional advice or assistance to owners under s.40 of the Queensland Heritage Act 1992. However that latter assistance may be conditional upon the owners entering into an agreement to make the heritage listed property available for public inspection. Such assistance would then be more appropriately referred to as a fee for service rather than any form of compensation for heritage listing. Under s.40(2)(f) a heritage agreement could also provide for a review of the valuation of the registered place.
As further evidence of the impact of heritage listing Mr Nimmo provides details of two recent sales of two adjoining properties to the east of the subject land (Exhibit 51). While those sales occurred well after the relevant date of 1 October 2000, he argues that they demonstrate the difference in market value of vacant land (46 Dorchester Street), and of an historic dwelling which cannot be demolished for redevelopment (40 Dorchester Street - the Street property). Both properties sold in January 2003, and both have comparable aspects and views of the City CBD.
The vacant land at 46 Dorchester Street has an area of 1,748 m² and sold for $1,800,000. The heritage home at 40 Dorchester Street sold for $1,170,000 and has an area of 1,378 m², and is occupied by a 540 m² brick and stone Colonial home which is categorised as a heritage listed place by the Brisbane City Council. That property was the subject of a decision of this Court in Street (supra) mentioned in paragraph [14]. Mr Nimmo estimates the old dwelling to have a replacement cost of $875,000, based upon new costs of $2,000 per square metre, a figure accepted by this Court in the Cooke matter. Mr Nimmo then uses his wide architectural experience to estimate the sub-floor basement ($1,500 per square metre), and unenclosed covered areas ($1,000 per square metre) and the existing swimming pool ($30,000), landscaping ($30,000), paving ($10,000) and fencing ($10,000), providing a total replacement cost of $955,000. From that figure he deducts depreciation of 30% concluding a depreciated value of the total improvements at $670,000, and a land component of $500,000.
I turn then to consider the varying restrictions of the Integrated Planning Act 1997 (IPA) and the Queensland Heritage Act 1992 (QHA), as they relate to heritage listed and non-heritage listed properties. I note first that Professor Brannock speculates that future legislative changes may require remedial maintenance actions to avoid neglect by owners of heritage properties, but he agrees that at the relevant date there is no such requirement. However I note that in the current Bill before the Parliament at the current time, in respect of changes to the QHA, that is still not proposed.
While Queensland currently has no legislation requiring the future maintenance of heritage listed properties, I note that similar legislation is provided for in Victoria. That was noted by the Supreme Court of Victoria in Tonkin v Rajendran [2003] 124 LGERA 1, where Balmford J considered whether that court had the power to require restoration or reinstatement, under s.168 of the Heritage Act 1995 (Victoria). In that matter a heritage listed residential building had been the subject of an application to the Heritage Council to demolish part of that building. The Court upheld the refusal by the Heritage Council, directing that the owners undertake certain reinstatement rectification works on the building.
In his considerations Balmford J noted that under s.160 of the Act an owner must not allow such a place to fall into disrepair; or fail to maintain such a place to the extent that its conservation is threatened. While such provisions do not exist in Queensland, their existence in statute law elsewhere in Australia may raise concerns in the mind of a prudent purchaser contemplating acquisition of such a property in Queensland. More recent indications from the Government in Queensland, that it is contemplating similar moves to assist owners of heritage places in their moves to restore such buildings, may indicate their future reconsideration on that issue.
I note also in the proposed Queensland Heritage and Other Legislation Amendment Bill 2003 the major thrust is to bring the development approval process provided in the QHA for privately owned placed entered into the Queensland Heritage Register, into the Integrated Development Approval System (IDAS) under the IPA. The new Bill also proposes to include in IPA the separate processes for development by the State, in line with those provided in the QHA. Those distinguished the directory nature of the Queensland Heritage Council for private lands (s.33(1)), compared to the advisory nature of the Heritage Council for State developments. (s.37(5)). Clearly that distinction now evident in the QHA is proposed to extend to the IPA.
I turn then to the suggested market place evidence of heritage listed properties, and I find that the comparison by Mr Van Hees and Mr Grennan of the upmarket properties at 14 Sutherland Avenue and 64 Enderley Road (paragraph [102]), would suggest that heritage listing has no impact upon prudent buyers seeking such quality residences. However I note that while 64 Enderley Road is not actually heritage listed at the relevant date, that property is also actively being considered as such by the Heritage Council (paragraph [101]). Now in Conias that property was not specifically heritage listed, but was well known to the Council and likely to have been listed should the need arise. A similar condition also applied to an old historical residence in Hill End in the matter of Spender v Department of Natural Resources and Mines [2003] 19 June 2003, to be reported; and also in Robt Nettleford Pty Ltd v Hobart City Council (paragraph [214]). That information thus was likely to be available to a prudent purchaser who was able to conclude that 64 Enderley Road was, to all intents, likely to be a heritage listed property. On that basis any comparison between those properties was likely to be a more like with like comparison with respect of heritage impacts.
Other evidence from the market place was offered in respect of the two adjoining similar style basic Colonial cottages at 45 and 47 Merton Road (paragraph [103]). Now while I have no definitive detailed analysis of the two obviously similar cottages, I have the benefit of Mr Grennan’s opinion that the non-heritage listed 47 Merton Road cottage was slightly larger in area. However Mr Nimmo argues that the existence of the attic in the heritage listed 45 Merton Road cottage would suggest that it has the larger floor area, or at least a similar floor area to 47 Merton Road. Without the benefit of actual detailed analyses of the two adjoining buildings, there remains some conjecture on the relative size of the two cottages.
However what is not in dispute is that the heritage listed 45 Merton Road sold at the same price ($390,000) as the non-heritage listed 47 Merton Road, but some six months later, in a rising market. While I accept that both parties agree that those two properties do not provide direct sales comparisons with the subject land; they are identical to each other, except for the heritage listing, and provide a useful comparison for that purpose only. If I accept that the two cottages have virtually the same area, then I can conclude that, for some reason, the later sale did not reflect the agreed rise in market level. The only opinion of that market rise during that period was provided by Mr Nimmo at 17% in the six months (paragraph [104]).
Now Mr Nimmo provides no specific market details of market levels in the Merton Road, Woolloongabba, area at that time. However in the period October 2000 to October 2001, the unimproved value of those two similar parcels increased from $150,000 to $180,000 (paragraph [103]), reflecting an annual increase of 20%. On that basis an increase of about 10% during the six months between the sales dates might be appropriate. In seeking other indicators of market changes in the Highgate Hill area, I find that the wide disparity of noted changes, as a consequence of the need to revise the former relativities, provides little further support.
The Capitalisation Process –
In seeking to follow the approach adopted in Cooke and Conias, Mr Nimmo provides details of cost of maintenance and restoration outlined in paragraph [107] onwards. In concluding his comparisons of the estimated difference in costs associated with the heritage listed house, I believe it is not appropriate to seek comparisons with costs for a similar size modern brick house. If that approach is adopted, I agree with Mr Rabaa and Mr Van Hees that any comparisons should be made with a similar aged old timber non-heritage listed dwelling, where comparable problems of material and labour are likely to be encountered (paragraph [118]). While the costs of a modern brick house may have relevance if a dwelling could be demolished and replaced with a new dwelling, it has no direct relevance where that cannot occur due to heritage restrictions.
In respect of whether only costs for monies actually spent on restoring the dwelling should be accepted, I agree that there needs to be proof that indeed the costs incurred in obtaining materials are directly related to the subject land, and not some other property (paragraph [111]). However, due to their historical nature, and difficulties in obtaining similar matching materials, I accept that a scenario similar to vintage car restoration has application also with a heritage property.
However any attempt to store materials for later use must have a logical connection for the purpose to which they are required. On that basis I accept Mr Nimmo’s explanation of the cost associated with the cladding and bathroom repairs, but not yet scheduled, as being legitimate costs. However this explanation, like the other costs, should be annualised over a period of time. In the case of Conias, it was agreed that ongoing costs had been annualised over a period of 8 years; while in the Cooke matter the costs had been annualised over a period of 20 years.
If I consider then the proven costs of repairs incurred by Mr Nimmo, I find that there is evidence of $28,448 over a period of five years, or $5,690 annually. While those costs are relatively minor compared to the estimated annual costs of $41,000 claimed by Mr Nimmo for that purpose, which are based upon Mr Nimmo’s undocumented estimate of his own personal efforts to a large degree, they reflect the current level of refurbishment undertaken on “Coorooman”. However in seeking to adopt a capitalisation approach, Mr Nimmo has relied upon estimated costs following guidance from the decisions in Cooke and Conias. (see paragraph [114]).
Now apart from the inherent difficulties of the lack of any actual proven costs upon which to rely, Mr Nimmo has also some differences in his approach to the Conias and Cooke matters. There is general agreement in all three matters that the additional insurance cover is a further cost; as is also the cost of painting. However there is some divergence about the quantification of several annualised costs as follows:
Item “Cooke” “Conias” “Coorooman” Repairs and maintenance $10,000 $10,000 $41,000 Painting $20,000 $20,000 $13,564 Cleaning $32,000 $30,000 $4,160 Electricity Not identified $2,200 $1,600
In the Conias matter for instance, the level of electricity costs for “Carfin” was seen to be similar to costs applicable to a new rendered brick home the size of “Carfin”. (page 9). In the matter of Cooke, electricity costs were not seen to be a different factor in concluding the additional annualised cost of “Breffney”; while in “Coorooman” the additional electricity costs were seen as significant. Perhaps those diverging factors might reflect the individualistic nature of each heritage building, but they do not lend confidence to the adoption of such an approach where the cost of restoration have yet to be identified.
If I look also at Mr Nimmo’s method of adopting a capitalisation rate of 6.73%, based upon a three-year yield for property trusts, I could accept that as an appropriate approach in the current economic climate at the relevant date. I believe that Mr Nimmo’s reasoning of a more realistic capitalisation rate to reflect a reasonably assured income stream, reflects his wide experience in asset management, and has relevance for a residential property, compared to an industrial property approach applied in the Conias matter.
However I accept Mr Rabaa’s advice that the ownership of a heritage property is a lifestyle choice; and as such it is therefore not in the prudent buyer’s objective to acquire a new modern brick rendered dwelling as a residence upon a heritage listed site. As a lifestyle choice, a similar aged and character style dwelling would be a comparable lifestyle alternative. Hence, the reason, in my opinion, to seek comparisons with the similar older style dwellings when seeking to identify the impact, if any, of the heritage listing itself. On that basis I have no evidence of comparable costs of a non-heritage older style building, and I reject the use of capitalisation of the annual cost as reasonable in this matter.
Summary –
In summarising this matter I accept that the subject land, as a single residence house site under s.17, without any heritage impacts, would reflect an unimproved value of $400,000 at the relevant date. I also note that the proposed redevelopment of the adjoining 34 Dorchester Street for a modern dwelling to a maximum height of 8.5 metres only one metre from the side boundary, may impact upon the roof scape and streetscape features of the subject land. On that basis any potential benefit to the subject land, if any, as a consequence of the heritage listing, may be moderated by that adjoining development.
In accepting evidence of possible impacts upon unimproved values by heritage listing, the only conclusive evidence before me is the possible reduction of 10% at 45 Merton Street. Now while that may be similar to the 10% allowed in the Roberts matter, the latter was an allowance made where there had been no market evidence available.
If I look then at relativity between 27 Hampstead Road “Wairuna” and the subject land, I find “Waurina” has an unimproved value at 1 October 2000 of $375,000. (Exhibit 11). It is agreed that “Wairuna” has expansive views of the CBD, and also views to the west towards Mt Coot-tha, and is also slightly larger in area than the subject land. On that basis the subject land should have an unimproved value less than $375,000.
If I then apply a 10% reduction to the non-heritage listed value to the subject land at $400,000, I could conclude an unimproved value of $360,000. Now while Mr Nimmo speculates that “Wairuna” is 20% superior to the subject land, he provides no evidence to support that personal view. However at $360,000 the subject land is agreed to be less than “Wairuna”.
I then consider the potential impact upon views of the heritage listed property, by the Council approved conditions of the adjoining 34 Dorchester Street developments. As precedents such as Lyons v Sutherland Shire Council direct, where such streetscape was a feature of heritage listing, then an adjoining property may impact the value of the heritage land. On that basis the later redevelopment of 34 Dorchester Street may be a matter for consideration. However, that is not for this Court to consider in the current matter, but may be an issue for resolution at a later date.
Conclusion:
Having considered the whole of the evidence I am persuaded that the appellant has partly proved his case. The unimproved value as determined by the Chief Executive is set aside, and the unimproved value of Lots 16 and 17 on RP 11691 is determined in the sum of Three Hundred and Sixty Thousand Dollars ($360,000).
NG DIVETT
MEMBER OF THE LAND COURT
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