Pallett v Chief Executive, Department of Natural Resources
[1999] QLC 43
•30 April 1999
|
BRISBANE
30 APRIL 1999
Re: AV98-448 –
An Appeal against a determination of Unimproved Value –
Valuation of Land Act 1944 –
Inglewood Shire
P.C. and T.A Pallett
v.
Chief Executive, Department of Natural Resources
(Hearing at Inglewood)
D E C I S I O N
Mr and Mrs Pallett are the owners of land situated on the eastern frontage of Tobacco Road, near Coolmunda Dam, about 19 km east of Inglewood. The land is described as Lot 6 on RP 203010, Parish of Greenup, County of Clive, and contains an area of 16.2 ha.
Tobacco Road is bitumen sealed. Electricity and telephone services are capable of being connected.
As at 1 October 1997, the unimproved value of the land was determined by the chief executive in the amount of $16,000 having been reduced on objection from $18,800. The owners have appealed against the reduced valuation, their estimate of unimproved value being stated in the Notice of Appeal in the amount of $11,400.
The appellants appointed Mr W.G. Major to act as their agent in the appeal proceedings. The Court was advised that this appeal had been selected by agreement, as a "test case" for several other appeals relating to valuations of rural homesite properties in Tobacco Road.Mr Major conducted the appellants' case and gave evidence on their behalf. Mr Major is not a registered valuer but has been a lifetime resident of the Inglewood Shire. He takes a keen interest in community affairs, and matters associated with the local economy and real estate market. The basic thrust of Mr Major's evidence was that there had been no increase, as had been suggested by the Department's valuation, but, if anything, a decrease in the value of rural homesites in the Tobacco Road locality since the original subdivisional activity in the mid-1980s. In a tendered statement he included the sales history of some of the lots as follows:
· Lot 5 had sold in 1986 for $25,000 with some clearing and contour banks, then resold in 1994 for $21,000 with fencing, some additional clearing, the same contour banks and the shell of a house. In his opinion the earlier sale would have shown an analysed unimproved value of $21,000 but the resale only $5,000.
· Lot 12 had sold in 1985 for $16,950 in an unimproved condition then resold in 1989 for $18,000. The applied unimproved value had first been $6,500 and increased on 30 June 1989 to $7,200.
· Lot 10 had sold in 1991 for $18,500 unimproved and according to Mr Major, had subsequently been selectively cleared at a cost in excess of $10,000, together with the clearing of fencelines.
· Lot 11 had been sold in 1996 for $16,500 by contract which had provided vendor finance, according to Mr Major. He had requested a copy of the contract from the purchaser but it had not arrived in time for the hearing. The transfer had not been registered, apparently due to the vendor finance arrangements. Mr Major described the block as having been fully fenced in good condition, partly cleared with some slashing, with a bore and electricity connection. On his analysis, with electricity connection valued at $5,000, fencing $4,000, bore $2,000, clearing $1,000, slashing $500, the resultant unimproved value would have been $4,000. It was his opinion that although this lot had been valued in the same amount as the subject land by the Department, Lot 11 was a little inferior, being further removed from the dam basin.
· Lot 24 (40.04 ha) with Coolmunda Dam access for domestic water, had sold in 1998 for $46,000. On Mr Major's analysis, improvements including electricity connection ($18,000) and telephone connection ($500), had value of $56,500 being in excess of the actual sale price.
The subject land had been purchased by the appellants, on Mr Major's evidence, in November 1996, for $17,500. Mr Major described the land as having been quite attractive because it had been selectively cleared and protected by contour banks. He analysed the sale to show an unimproved value of $6,500 by assessing the value of the improvements as follows:
selective clearing $5,000;
5 large contour banks $2,000;
fencing on three sides $3,000;
clearing of fencelines $1,000.
As far as Mr Major was concerned the sale of the subject property was genuine. The purchasers had a good knowledge of the locality and had found the availability of vendor's finance to be attractive.
In summary, it was Mr Major's perception of the market in this particular locality, that while the actual sale prices of blocks had not increased over the years and had in some cases decreased, the earlier sales were of either unimproved or lightly improved blocks while the more recent sales were of blocks which had been significantly improved. This indicated to him that the unimproved values must have fallen. He did not accept that improvements which made a rural homesite more attractive or improved its utility might not add value commensurate with cost. He did not accept the argument that the earlier valuations made by the Department were necessarily wrong if they were significantly lower than the actual sale prices at that time. To the contrary, he saw it as wrong for the Department to increase the statutory unimproved value of land when it was common knowledge that values had not increased.
The valuation appealed against had been carried out by Mr M..W. Malone, a registered valuer employed by the Department of Natural Resources. He described the nature of the land as being easy sloping sandy forest, the block being elevated "with good rural and Coolmunda Dam views". A photograph was tendered through him, indicating that a view of the waters of the dam had been available in a north-easterly direction, from ground level near the centre of the block. The photograph had been taken in June 1998 when Mr Malone said the dam level was at about 50% capacity.
Mr Malone's report stated that the valuation had been made "having regard to all the sales in the Inglewood Shire, in particular those sales listed on the attached schedule".
There were four sales listed on the schedule from which the following brief details of the first three are extracted:
(1)Lot 6 RP 800273, 17.18 ha, sold 3 July 1997 for $31,000, improved with dam, fencing, shed/caravan. The value of the improvements was stated as being $2,925 (see later comments) and the analysed unimproved value $28,075 (see later comments). The unimproved value applied at the relevant date of valuation had been $23,000.
(2)Lot 7 RP 849203, 33.8 ha, sold 22 February 1997 for $77,750, improved with fencing, small shed, windmill/bore, small dam, timber treatment, analysed to show an unimproved value of $40,828 with an applied relevant date valuation of $36,000. This sale land in comparison with the subject was described as consisting of "easy sloping elevated forest country with good rural and Coolmunda Dam views … situated on the western side of the Coolmunda Dam access road and approximately 600 metres south of the Cunningham Highway."
(3)Lot 161 BNT1334, 84 ha, sold 18 March 1996 for $35,000, improved with fencing, dams, diesel tank and shed frame, analysed to show an unimproved value of $23,838, with an applied relevant date valuation of $23,500. In comparison with the subject land it was described as "similar country … consisting of easy sloping sandy forest … large amount of regrowth". This land was situated fronting the Cunningham Highway, northerly of the north-eastern extremity of the Coolmunda Dam.
It had been suggested by Mr Major that the directors of the company which purchased this land were residents of Singapore with no knowledge of local values. However, Mr Malone's evidence was that the purchasing company dealt in land in southern Queensland and in fact had resold the land subject of this transaction reportedly on the same day, (and to a person with a similar name to one of the persons Mr Major believed to be a director of the company) for $74,950.
The fourth sale on the schedule attached to Mr Malone's valuation was that of the subject land for $17,500 reported as having taken place on 19 January, 1997. Improvements were described by Mr Malone in the schedule as being fencing (on three sides) and timber treatment, having value of $2,300, the sale showing on his analysis an unimproved value of $15,200. In the schedule, the views of Coolmunda Dam were described as "small". In Mr Malone's opinion, the property had been purchased below market value. His reasoning for this conclusion was that Sales 1 to 3 in the schedule were "representative of the rural homesite market" and in comparison, the analysed unimproved value of the sale of the subject was too low to be representative of its true market value. He relied in particular on Sale 1 as support for that contention. Mr Malone had spoken to the purchasers of the subject land and accepted that they knew the locality well. They told him that they would not have been prepared, or financially able to pay more, but were satisfied with the purchase price and the vendor's terms offered. Mr Malone had not spoken to the vendor who lived in Sydney but he inferred that, not being a local resident, the vendor would have been unaware of the true market value of the land. During Mr Malone's evidence, reference was made to a sale of Lot 3, two lots removed to the north of the subject land, in January 1998 for $50,000. This sale had been unknown to Mr Malone at the time of making the valuation but he believed it would have shown an analysed unimproved value of around $40,000. That land had been valued at $19,600. The reference to this sale, as I understood it, was intended to refute Mr Major's contention that sale prices in this locality had fallen. When the details of that sale had been put to Mr Major for comment, he had suggested that no weight could be given to it because of a family relationship between the vendor and purchaser.
Introduction of evidence as to the sale of Lot 3 has been of no assistance to the Court. The sale had not been used as a valuation basis or, as I understood it, investigated by Mr Malone. It offered no support for the much lower unimproved valuation applied to that land.
It was clear from his verbal evidence that Mr Malone relied heavily on Sale 1 in his valuation of the subject land. However, he had attended the hearing without a detailed analysis of the sale. Although it was put to Mr Malone that it might be argued that the sale had not been adopted, when the applied value was significantly less than the analysed unimproved value shown on the schedule, his verbal evidence was to the effect that the added value of the improvements as indicated in the schedule ($2,925) was correct. There were a number of appeals heard during the sittings in which Mr Major acted as agent for the appellants. Sale No. 1 had been used as evidence by Mr Malone in some of the other appeals. In a subsequent hearing, the Court was advised that file notes on the analysis of the sale had been, on request, forwarded by facsimile. An application was made for that analysis to be substituted in each matter where the sale had formed part of the valuation basis. In the circumstances, Mr Major did not object to that course of action. He had the opportunity in the subsequent matter to cross-examine Mr Malone on the substituted analysis of Sale 1 and it was permitted to be substituted in this matter without the need for a reopening. It should be said here, however, that Mr Malone had given verbal evidence, which at the time had been seen as forthright, that the added value of the shed/caravan was limited to between $500 and $800 due to its lack of utility in the development of the site. In the sales analysis which was substituted, the added value of the improvements was increased from $2,925 to $5,925, made up as fencing $2,425, dam $500, shed/caravan $2,300, attached rainwater tanks $700.
Mr Major argued strenuously that the sales used by Mr Malone were not comparable. Sale 1 in his opinion was significantly superior as a homesite due to a direct view of the nearby opposite waters of the dam obtained from an elevated site fairly close to the road. Sale 2 was seen by Mr Major to be of land so much superior as indicated by the applied value, to be of no assistance. As mentioned earlier, Mr Major's inquiries had led him to believe that the company which purchased Sale 3 was Singapore based. His assumption that the purchases had no local knowledge appears incorrect. Even so, he felt that a sale of a site of 84 ha with highway frontage offered no reliable basis for the valuation of the subject land.
General Observations and Considerations relative to Inglewood Shire Appeals
In appeal AV98-337 (E.B. & D.M. Knapton) the reasons for that decision which is also delivered today, included the following observations which are repeated here for the sake of completeness:
" This appeal is one of a number heard at the same sittings of the Court in Inglewood, many of which related to rural residential sites. It is clear that many owners of rural residential sites in the Inglewood-Texas locality do not accept that the market for this type of land had increased since the previous valuation, let alone to the degree (80%) which the Department's valuations suggested. In the Texas area in particular, the Court was informed that an earlier proposal to expand the Wyalla feedlot complex had brought with it various expectations in the community, particularly with regard to employment prospects and improvement in the local economy. It is said, that linked to those expectations, had been a keen demand for real estate of a rural homesite nature. The expansion proposal did not eventuate and it is said that there is now, and was at the date of valuation, little demand for rural homesites, even at reduced levels of asking prices.
Certainly, the extent of sales evidence put forward by the Department, as a valuation basis in this and other appeals, is limited. The basic sales evidence has brought complaints from appellants that the sale properties are generally not comparable to the appeal lands and are not indicative of the depressed market which was said to exist.
There is substance in the allegations that the sales evidence used by the Department is generally not ideal. It is not the kind of evidence which would suggest the activity which would normally be associated with a significant increase in value. There is a suggestion by some that the sales which have taken place are 'one-off' and not representative of the true market. However, having heard the totality of the evidence, I do not accept that such is the case. The analysis of sales evidence by Mr Malone, has in some instances been challenged, but not, in my opinion, with any significant success. The result has been that the sales evidence has generally been proved by the Department to support the relevant date valuations applied to the actual sale properties.
It is appropriate to discuss the position in which the Department is seen to have found itself. It is the suggestion of the Department that when the previous valuation was made a 'conservative' approach had been taken, although there were sales at that time of rural homesites at levels of value significantly higher than those applied. It seems that those responsible for the valuation at that time were not confident that the level of values as shown by the higher sale prices was realistic or capable of being maintained. However, when it came to the making of the Shire valuations now under appeal, it had been found that the available sales evidence continued to reflect a level of value significantly higher than the level previously applied. That did not mean that there had necessarily been an increase in market value in the intervening period. However, the sales evidence had been seen to consistently confirm that the previous valuation was too low as at 1 October 1997. The decision was taken to increase the valuations of rural homesites in line with the relevant sales evidence, rather than perpetuate an under market valuation.
The owners of rural homesites understandably perceive that the Department, through its methodology in increasing valuations of this category of property, by 'a blanket' 80% above the previously existing base, had concluded that the market value had increased by that factor. It is clear that the owners of these sites are confident that such a conclusion is wrong and inconsistent with the real marketplace.
The increase in valuation has considerable relevance to owners who face significant increases in rates payable to the local government.
However, the level of increase above the previous valuation is not relevant to the matters which this Court now has to decide. As the Land Appeal Court found in Tow v. The Valuer-General (1978) 5 QLCR 378 at p.381:
' Subject to certain statutory requirements as to the onus of proof and the restriction of the appellants to the grounds of appeal specified in their notice of appeal, the duty of the Land Court and of this Court is to make determinations of unimproved value based on the evidence presented to it by the parties and conforming to the aforementioned statutory formula.
It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation. The Valuer-General and the Court are concerned with finding unimproved value and not with the amount of rates that may be levied as a result.'
The chief executive's valuation of lands in Inglewood Shire as at 1 October 1997, was made pursuant to s.37 of the Valuation of Land Act 1944. Section 33 of the Act provides that the valuation shall be deemed to be correct until proved otherwise upon objection or appeal. Section 45(4) of the Act provides that the burden of proving any and every such ground of appeal shall be upon the owner.
In the appeals heard at the Inglewood Shire sittings, no appellant chose to engage the services of a registered valuer, no doubt due to cost implications. However, the task of an appellant is difficult in the absence of professional assistance, particularly when it comes to challenging the veracity of an assessment made by a professional valuer and based on that valuer's analysis of market evidence.
There has been a misconception by some appellants as to the meaning of 'unimproved value'. Section 3 of the Act, as far as it is relevant to the Inglewood Shire appeals provides as follows:
'3.(1) For the purposes of this Act –
"unimproved value" of land means –
in relation to unimproved land – the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require; and
in relation to improved land – the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.
(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act.
…….
Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that –
the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and
such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used;
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made.'
The question of availability of services and infrastructure to land, particularly in cases where owners have had to contribute significantly to the cost of provision of electricity, and the correct interpretation of the meaning of unimproved value were dealt with by the Land Appeal Court in Clough v. The Valuer-General (1981-82) 8 QLCR 70 at pp.73-74 where the following is found:
' A road, or service (sewerage, water or electricity) are not in the strict legal sense appurtenant to a parcel of land. They do not belong to it as a property right … the wires … exterior to the parcel (and in some cases within the bounds of the parcel) are owned by the relevant service authority.'
Then at p.75:
' We think it beyond doubt that what has to be valued is the subject parcel of land viewed as if the improvements thereon, visible or invisible, never existed but that otherwise the parcel was situated in the community (and environment) with the amenities and facilities that had grown up around it as at the date of valuation.'"
It is observed that in this appeal and those the result of which depend on this decision, the general observations in the Knapton appeal need to be varied in some respects. First, in this matter there was a greater volume of sales in the locality of Coolmunda Dam. Indeed, the subject property itself was the subject of a sale, at a date within the period relevant to the valuation.
It is generally accepted that a sale of a property subject of a valuation at or near the date of that valuation, should, in the absence of circumstances which might render the sale unreliable evidence, be regarded as the most relevant evidence of value available. As Carmichael J said in Inez Investments Pty Ltd v. Dodd (1979) 26 The Valuer at p.505:"(W)here persons answering the description of willing but not anxious seller and willing but not anxious buyer enter into a binding contract for the sale and purchase of a particular piece of land, the value of that piece of land at that day is the price stated in their contracts. It follows that where a valuation of a piece of real estate is sought as at a particular date the most relevant information for analysis is the sale of that very property, if there be one, at or close to that date. The matters requiring analysis are the terms and conditions of the contract, and was it a voluntary sale of a not anxious seller to a not anxious buyer?"
and then later at p.505:
"(A) prime matter for investigation when a valuation is sought is to ascertain whether there is current a contract for sale of the property and, if so, to make an analysis of that sale to see how it complies with the test of value as laid down in Spencer's case." (See Spencer v. The Commonwealth of Australia (1907) 5 CLR 418). "Failure to carry out these functions is to risk ignoring the best evidence of value."
The verbal evidence of Mr Malone was that he had rejected the sale of the subject lot as providing reliable evidence of market value. Although he had been unable to contact the vendor, Mr Malone assumed that, being a resident of Sydney and not a local, the vendor must have been unaware of the local market. While that may have been a possibility, it should not be assumed that a non-local interested in disposing of land has not investigated and tested the market.
Then, Mr Major gave evidence that another block (Lot 11) had "sold" in the same period at a price which fully supported the level of value shown in the sale of the subject land. That sale apparently would not be concluded until a vendor finance arrangement was completed. In the absence of evidence as to the contractual conditions of that "sale", which had not been reported to the Department, I am unable to place evidential weight on that transaction. However, it seems reasonable to accept that a prudent person making inquiries as to the local market at the date of sale of the subject land, would have become informed of the probability of the transaction to which Mr Major referred.
Although it was denied by Mr Malone, I have not been convinced that the sale of the subject land was in fact ignored when the valuation appealed against was determined. It is factual that the initial valuation of the land was reduced from $18,800 (it is assumed based on a "blanket" 80% increase factor as referred to in the Knapton matter) to $16,000. Mr Malone was satisfied that the relativity of the valuation applied to the subject land in comparison to that applied to the land in Sale 1 remained reasonable. The valuation applied to the Sale 1 land is demonstrably reasonable compared with the substituted analysed unimproved value, derived from the sale. Mr Malone was convinced that Sale 1 met the Spencer test although it is not known whether he had been able to interview the vendor in the transaction, in establishing the full background to the sale.
The task of maintaining reasonable relativity from block to block, including sale lands, is not a simple one. Because one sale indicates a level of value slightly higher or lower than other sales of comparable lands, is not sufficient reason to exclude that sale from consideration, or mean that it has been discarded if the applied value is, within reason, higher or lower. The real estate market is not so precise. Prima facie, I would not be influenced to alter the subject valuation, merely because the analysed sale price of the subject land indicated a level of value of $15,200. However, there is still the need to consider Mr Malone's analysis of the sale of the subject land, because of the significant difference in Mr Major's opinion as to the added value of the improvements. This is demonstrated as follows:
Mr Malone Mr MajorClearing $500 $5,000
Contour Banks $800 $2,000Fencing including clearing of fencelines $1,000 $4,000
Mr Major based his assessment of the added value of clearing on the cost of $10,000 which the purchasers of Lot 10 had expended in clearing that land (16.2 ha). Mr Malone's assessment was based on 2 ha of selective clearing. Mr Major saw the contour banks as adding near full value to the land, while Mr Malone had placed relatively nominal value on them because they were constructed to protect the original rural holding which had subsequently been subdivided into hectarage homesites.
The basis for Mr Major's assessment of the value of the fencing was not explained except that he allowed $1,000 for clearing the fencelines. Mr Malone had dissected and described the fencing as 1,000 metres half share and 200 metres full share. As already mentioned, it was Mr Major's opinion that the added value of any improvement must be related to the cost of effecting such an improvement. That is not necessarily the case, depending on circumstances. It is important for consideration to be given to the question of the value which the improvements add to the land, irrespective of their cost (see s.5 of the Valuation of Land Act). The particular contour banks in this specific matter would not be expected to add value equivalent to replacement cost, when the highest and best use of the land had changed to that of a rural homesite.
While I generally prefer the evidence of Mr Malone relative to his analysis of the sale, I have gained the impression that he has been somewhat harsh with the added values applied to fencing and clearing. It seems to me that his analysis of unimproved value could have been reduced to around $14,000 based on the highest and best use of the land being as a rural homesite.
In what should have been a relatively simple matter, the remaining consideration concerns the relativity of the valuation applied after objection to the subject land and that applied to Mr Malone's Sale 1 land. Prima facie, the relativity which has resulted does not seem unreasonable, and Mr Malone believes it to be correct. Clearly, although a subjective criterion, the extent of available view accounts for the fairly significant difference in valuations. The evidence in this matter, as I understood it, is that the water views as described are obtained from a position fairly central on the subject block. On Sale 1 the elevated homesite position is close to the road. Although the privacy aspect is a consideration, it seems to me that all things being equal, the availability of water views would be the dominant consideration in the selection of a building site on any of these blocks. The other consideration, which has been raised in a number of appeals, is the significant cost involved in extension of electricity to a selected site. That aspect of comparison has not been raised specifically in this appeal, but it seems to me that the cost of extending services to a site on the subject land from where water views are available, as opposed to on Sale 1, is a negative feature which does not appear to have been considered in depth by Mr Malone.
Findings
As there was better sales evidence available, I have gained no real assistance from consideration of the evidence provided in Mr Malone's Sales 2 and 3
I am not prepared to ignore the sale of the subject land and furthermore, have decided that Mr Malone has been harsh in his analysis of that sale.
Mr Major's primary approach was designed to show that, if anything, the market for this type of land had decreased in the period subsequent to the chief executive's previous valuation. He failed, in my opinion, to give proper consideration to market evidence which might indicate the true value of the subject land, if it had existed in unimproved condition, in the local environment existing at the date of valuation.
The reasons for this decision are unusually long but are considered to have relevance not only to the other Tobacco Road appeals, but to my findings generally in rural homesite valuation appeals throughout the Shire.
I have decided, on the evidence, that a reduction is warranted to resolve the benefit of doubt in favour of the appellants. I will determine the unimproved value in the amount of $14,000 which I see as a reasonable interpretation of the unimproved value shown by the sale of the subject property.
The appeal is allowed, the determination of the chief executive set aside, and the unimproved value determined in the amount of Fourteen Thousand Dollars ($14,000).
RE WENCK
MEMBER OF THE LAND COURT
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