P & P Laing Pty Ltd and Kg Phillips v Department of Natural Resources and Water
[2007] QLC 9
•27 February 2007
LAND COURT OF QUEENSLAND
CITATION: P & P Laing Pty Ltd and KG Phillips v Department of Natural Resources and Water [2007] QLC 0009 PARTIES: P & P Laing Pty Ltd and Kenneth George Phillips
(appellants)v. Chief Executive, Department of Natural Resources and Water
(respondent)FILE NOS.: AV2005/0070 and AV2005/0551 DIVISION: Land Court of Queensland PROCEEDINGS: Appeals against annual valuations under the Valuation of Land Act 1944 DELIVERED ON: 27 February 2007 DELIVERED AT: Brisbane HEARD AT: Coolangatta MEMBER Mrs CAC MacDonald ORDER: 1. The appeals are dismissed.
2. The unimproved valuations of Lot 2 on RP 72058, County of Ward, Parish of Tallebudgera are affirmed at Four Hundred and Sixty Thousand Dollars ($460,000) as at 1 October 2003 and 1 October 2004.
CATCHWORDS: Valuation – unimproved value – correct methodology – onus of proof – sales evidence. APPEARANCES: Mr KG Phillips for the appellants
Mr W Isdale of Crown Law for the respondent
The appellants are the owners of property situated at 545 Gold Coast Highway, Tugun, Gold Coast. They have appealed against two determinations by the respondent of the unimproved value of the land under the provisions of the Valuation of Land Act 1944. The respondent determined the unimproved values at $460,000 as at 1 October 2003 and 1 October 2004. The appellants estimated the value of the land to be $320,000 as at each date.
The land is an irregular shaped rectangular allotment of 759 square metres with a small frontage of 10.8 metres. It is located on the eastern side of the busy Gold Coast Highway. The allotment is low lying and faces west. The morning sun is blocked from the rear of the site by large shady trees on the adjoining Council parkland, with the result that the environment is damp and cold in the winter months. The property is under the flight path to the Coolangatta airport and is subject to low flying aircraft.
The land is designated Residential Choice under the Gold Coast City Council Planning Scheme 2003. At the dates of valuation the property was improved with a multi unit development consisting of four 3 bedroom flats with basement car parking.
Mr KG Phillips, one of the appellants, conducted the appeal and gave evidence on behalf of the appellants. Mr Phillips said that the appellants had chosen to develop the property with a two storey building of four 3 bedroom flats rather than the feasible three storey building with five 2 bedroom flats because they considered that would give them a better return on their investment. Because of its narrow shape, the property was more expensive to develop than other allotments, he said, as it was necessary to locate the car park underground which required an increased setback from the front boundary. It was also necessary to obtain Council relaxation for side boundary clearances which required fire proofing the side walls of the building.
Ms H Wilson, a qualified valuer employed by the respondent department, was responsible for the valuation under appeal and gave evidence on behalf of the respondent. Ms Wilson said that she had valued the property using the comparable sales method. She relied on five sales to support the valuation of $460,000 ($610/m²) applied to the property as at both dates.
The grounds of appeal in both the subject appeals referred initially, under the heading 'System', to perceived defects in the respondent's valuation system.
These appeals were heard by me immediately after I heard an appeal concerning the valuation of a residential property owned by Mr Phillips (AV2005/0594). Some of the grounds of appeal in the preceding matter related to alleged flaws in the respondent's valuation system. Those grounds were identical with the grounds relating to the flaws in the system in the subject appeals. It was agreed by the parties at the hearing of the subject appeals that the evidence given in the earlier matter concerning those grounds was applicable to the subject appeals also.
I held in relation to the residential property that the appellant's evidence and submissions concerning the defects in the valuation system had not satisfied me that there was any error in that valuation – see Phillips v Chief Executive, Department of Natural Resources and Water [2007] QLC 0008. The same reasoning and conclusions apply to this aspect of the present appeals and I conclude therefore, that these appeals do not succeed on those grounds.
The appellants also provided a history of the valuations of the subject since 1997 in both written and graph format. This information indicated, the appellants submitted, that the value of the subject had risen by a total of about 800% since 1997. The effect of the increases is that the rates payable to the local authority have increased by $1,500 in four years. Mr Phillips said that the valuations had been relatively stable up to 2000. There was a 50% increase in 2001 and then a 69% increase in 2002. Mr Phillips did not lodge an objection to that valuation as he was unable to comply with the time limit for lodging an objection for personal reasons. In 2003 the valuation increased by 39.5% which was reduced on objection by 7%. Mr Phillips considered that this was another example of an issue he had raised in the appeal relating to his residential property, namely, that unless an owner objects, the valuation as issued remains in force. In this way errors are perpetuated.
Section 33 of the Valuation of Land Act provides that any valuation made by the Chief Executive under the Act shall be deemed to be correct until proved otherwise upon objection or appeal. Section 45(4) provides that the burden of proving the grounds of an appeal shall lie on the owner.
Values of the subject properties are determined by the market and there are periods when prices rise dramatically in particular markets. The evidence that the valuations of the appellants' property have increased substantially since 2000 does not satisfy me that the valuations under appeal in these matters are incorrect.
Further, I do not consider that the subject valuations have been proved to be incorrect because, from time to time, owners lodge successful objections or appeals. The effect of s.45(4) is that the appellants must prove that there is an error in the valuations under appeal.
Sales Evidence
No sales evidence was adduced by the appellants in support of their appeals. The appellants submitted that an unimproved capital value of $320,000 would reflect a more realistic value based on current costs of improvements (2004), when subtracted from a current market appraisal (2004).
As explained in the previous decision, Phillips v Chief Executive, Department of Natural Resources and Water at [20], s.3(1)(b) of the Valuation of Land Act requires that the unimproved value of the subject land be assessed on the assumption that, at the date of valuation, the improvements did not exist. The valuation is not made by deducting the costs or the value of the improvements on the subject land from the improved value of that land.
Ms Wilson relied on sales of five properties in support of her valuation of the subject which was valued on a rate per square metre basis because it is a multi-unit site. Ms Wilson analysed each of the sales by deducting the value of the improvements from the sale to reach an analysed unimproved value and then applied a value to the particular sale to reach the unimproved value for that land as at 1 October 2004.
Each of the sale properties has the same designation as the subject under the Gold Coast City Planning Scheme 2003 – Residential Choice Domain.
Sale 1
This 632 m² property is situated at Biggera Waters. It is a regular shaped corner allotment which was improved with a house at the time of sale. The house has since been demolished and the property redeveloped. Ms Wilson considered the sale to be, overall, superior to the subject.
The property sold for $520,000 on 2 May 2003. Ms Wilson was unable to say precisely how much she allowed for demolition and clearing costs but she deducted a nett allowance of $1,250, and analysed the sale to $518,750 ($820/m²). She applied a value of $540,000 ($854/m²) as at 1 October 2004 to reflect the upward movement of the market between the date of sale and the date of valuation.
Mr Phillips challenged the relevance of the sale because of its location at Biggera Waters at the northern end of the Gold Coast which is some considerable distance away from Tugun where the subject is situated.
While Ms Wilson sought to defend her use of the sale on the basis that a developer would be just as likely to develop a site at Biggera Waters as Tugun, I am not satisfied that the markets in the two areas are comparable, given the distance between them. I do not consider, therefore, that this sale should be relied on to support the valuation of the subject.
Sale 2
This 1,017 m² property is situated at McLean Street, Coolangatta which is south of the subject site. Ms Wilson described the sale as a regular shape allotment improved at the time of sale with an older style dwelling. The site has since been redeveloped with a multi-unit building. The sale is close to the ocean, as is the subject. It is a larger site than the subject and Ms Wilson considered Coolangatta to be a superior area to Tugun. Overall, she considered the sale to be superior to the subject on a rate per square metre basis.
The property sold on 29 September 2003 for $740,000 which Ms Wilson analysed to $740,750 ($728/m²) by adding a nett amount of $750 after adding $5,000 for demolition costs and deducting $4,250 for site clearance. Ms Wilson applied a value of $700,000 ($688/m²) saying that was a conservative application of the sale price.
Mr Phillips considered that this sale was not comparable with the subject because values in Coolangatta are completely different from those in Currumbin and because the sale property is larger than the subject. In his opinion, the larger the site the higher the price paid because of the number of units able to be built on a larger site.
Although there are differences in the location and size of the sale as compared with the subject, I do not consider that those differences are such as to make the sale irrelevant in the valuation of the subject. The process of valuing land on a comparative sales basis requires the valuer to select sales of property comparable to the subject, as evidence of the market value of the land to be valued. It is well recognized that two properties are rarely exactly alike and, therefore, that adjustments have to be made, in comparing the sale property with the subject. Ms Wilson said that she considered the sale to be superior to the subject and has, consequently, applied a lower rate to the subject ($610/m²) at both valuation dates. In my opinion the sale supports the valuation of the subject.
Sale 3
This 405 m² property is located at Teemangum Street, Currumbin. Ms Wilson described the property as a corner allotment which was improved with an older-style dwelling. The site is suitable for a duplex development but no redevelopment had occurred as at the date of hearing. Ms Wilson chose the sale because it is located close to the subject, about 150 metres away across a park. The sale property is closer to the beach than the subject. Overall, Ms Wilson considered the sale to be superior to the subject.
The property sold on 29 March 2004 for $775,000. Ms Wilson added $1,000 for demolition costs and analysed the sale to $776,000 or $1,920/m². She applied a value of $610,000 ($1,506/m²), saying that was a conservative application.
Mr Phillips submitted that this sale should not be used because the site had not been redeveloped and there was still a house in use there.
The evidence concerning this sale is incomplete and therefore the sale is difficult to apply in the valuation of the subject. Ms Wilson analysed the sale on the assumption that the property was to be redeveloped because a development application had been lodged at the time the property was advertised for sale. The property apparently continues to be used as a single dwelling house but there was no indication that s.17 of the Act had been taken into account in determining the applied value. Further, there was no evidence as to the comparative values of a site capable of redevelopment with a duplex only and a site such as the subject. There is also a large difference between the value applied to the sale ($1,506/m²) and that applied to the subject ($610/m²). In those circumstances I do not consider that the sale should be relied on to value the subject.
Sale 4
This 825 m² property is situated on the western side of the Gold Coast Highway, Palm Beach. Ms Wilson described the property as a regular, rectangular shaped, level, allotment which was improved at the time of sale with an older style residential dwelling. The property has the potential for redevelopment with a multi-unit building, and Ms Wilson said that at the time of the sale it looked as though it would be developed. That has not occurred. The house is a fibro two-storey building about 35 to 40 years old. Ms Wilson selected the sale because of its location on the Gold Coast Highway. She considered that, overall, the sale was superior to the subject.
The property sold on 8 April 2004 for $825,000. Ms Wilson valued the improvements at $153,750 which she deducted to show an analysed value of $671,250 or $813/m². She applied a value of $340,000 having applied a concession under s.17 of the Act because the land is used exclusively as a dwelling house.
Mr Phillips considered that the value of the residence on the property was a little under-estimated. However, in the absence of any evidence as to an alternative value for the house, I have accepted Ms Wilson's opinion as to its value.
I consider that the sale property is sufficiently comparable with the subject to enable it to be used in the valuation. Since the applied value includes a s.17 concession, the value to be applied to the subject should be determined by comparison with the analysed unimproved value. Ms Wilson has valued the subject at $610/m² which is consistent with the sales analysis and her opinion that the sale is, overall, superior to the subject.
Sale 5
This 405 m² property is situated close to the subject at Wade Street, Tugun. Ms Wilson described the property as an irregular shaped allotment which was improved with a single unit dwelling. Ms Wilson said that at the time of sale it appeared as though the site was to be redeveloped. That has not occurred and the house remains in place. The planning laws allow a three storey development with a density of 1/50m². The subject similarly has the potential for a three-storey development but an allowable density of 1/33m². Ms Wilson considered that the sale was, overall, superior to the subject.
The property sold on 8 April 2004 for $595,000. Ms Wilson added $2,000 for the costs of demolition of the house to reach an analysed unimproved value of $597,000 or $1,474/m². Because the property is still used as a dwelling house, Ms Wilson applied a concessional value of $310,000 under s.17 of the Act.
There is a substantial difference between the analysed unimproved value of Sale 5 and the value applied to the subject. The difference is such as to indicate that the two properties are not comparable, although the only evidence before me pointed to their being comparable. In the absence of any explanation for the difference, my opinion is that this sale should be relied on only to establish the upper limits of the valuation. To that extent Ms Wilson's value of $610/m² for the subject is consistent with the analysed unimproved rate of $1,470 m² for the sale, given Ms Wilson's opinion that the sale is superior to the subject.
Section 17, Valuation of Land Act
Mr Phillips queried the application by Ms Wilson of s.17 of the Act in her analyses of Sales 4 and 5.
Section 17(1) provides, relevantly, that where land is used exclusively for purposes of a single dwelling house, any enhancement in value because the land has been subdivided by survey or has a potential use for subdivisional or any other purposes shall be disregarded in making a valuation of the unimproved value of the land.
Sale 4 comprises two lots. Mr Phillips submitted that s.17 did not apply in a case such as Sale 4 where the building straddles both lots.
The two lots in Sale 4 have been included in one valuation and the house on the land was used as a single dwelling house as at the date of valuation. The effect of s.17 is that where land which has been subdivided by survey is used exclusively for the purpose of a single dwelling house, the valuation is to be made on the basis that any enhancement in the value of the property flowing from the subdivision is to be disregarded. The section applies whether the house is situated on one lot or straddles both.
Sale 5 comprises one lot only. Mr Phillips submitted that s.17 did not apply to a property comprising one lot.
It is not necessary that a property have subdivisional potential to attract the benefit of s.17. The section also applies where a property used exclusively for purposes of a single dwelling house has an alternative potential use. In this case, the sale property has a potential for redevelopment as a multi-unit site. The effect of s.17 is that that potential for redevelopment is to be disregarded in making a valuation of the unimproved value of the sale land, because the land was used exclusively for the purpose of a single dwelling house as at the date of valuation.
Conclusion
I have decided that Sales 2 and 4 provide reliable evidence on which the valuations of the subject may be based. Sale 5 indicates the upper limit of the subject's value. Although the subject property has a number of defects, as set out above, I consider that those defects are allowed for in the valuations when the values of the subject are compared with that sales evidence. I have concluded therefore that the valuations are supported by the sales evidence.
Section 45(4) of the Valuation of Land Act provides that the appellants have the burden of proving the grounds of their appeal. For the reasons set out above, I do not consider that the appellants have discharged that onus.
There are, therefore, no reasons for allowing the appeals.
ORDERS
1.The appeals are dismissed.
2. The unimproved valuations of Lot 2 on RP 72058, County of Ward, Parish of Tallebudgera are affirmed at Four Hundred and Sixty Thousand Dollars ($460,000) as at 1 October 2003 and 1 October 2004.
CAC MacDONALD
MEMBER OF THE LAND COURT
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