Pekol v Department of Natural Resources and Mines
[2003] QLC 21
•25 March 2003
LAND COURT OF QUEENSLAND
CITATION: Pekol v Department of Natural Resources and Mines [2003] QLC 0021
PARTIES: Donna Pekol
(applicant)
vChief Executive, Department of Natural Resources and Mines
(respondent)
FILE NO: AV2002/0246
DIVISION: Land Court of Queensland
PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944
DELIVERED ON: 25 March 2003
DELIVERED AT: Brisbane
HEARD AT: Brisbane
MEMBER: Dr NG Divett
ORDER: The appeal is upheld. The valuation as determined by the Chief Executive is set aside, and the unimproved value of Lots 14 and 15 on RP 908538 is determined in the sum of Four Hundred and Thirty-Five Thousand Dollars ($435,000).
CATCHWORDS: Valuation – particular factors in valuation – restrictions on use – local government constraint – impact of buffer area – reduction allowed.
Valuation – sales evidence – use of sales – averaging rejected – bulk allowance applied.
Valuation – sales evidence – offers rejected.
APPEARANCES: Mr A Pekol for the appellant
Mr K Fisher of Crown Law for the respondent
Background:
This matter relates to land at 50 Buchanan Road, Banyo and described as Lots 14 and 15 on RP 908538, Parish of Toombul. The subject land has an area of 5,461 m² and is located about 11 kilometres north of Brisbane, in the North Gateway Industrial Park, and adjoining the Gateway Arterial Road. There is good access to Buchanan Road which is bitumen sealed with concrete kerbing and channelling. There is no direct access permissible on to the Gateway Arterial Road. All normal utility services are available.
The subject land is zoned partly as Light Industry area, and partly as General Industry area, under the Brisbane City Plan 2000, effective at the date of valuation of 1 October 2001. The subject land is developed with a modern industrial building and office. The key issues are the nature of the land, the impact of a nature buffer area, changes in the valuation and comparison of sales.
On 25 February 2002 the Chief Executive issued a valuation of the subject land at $500,000. Following an objection the Chief Executive confirmed that figure on 30 June 2002. The appellant has now appealed claiming the unimproved value should more properly be $435,000. This matter was heard consecutively with an appeal on another property of the appellant’s at 157 Granite Street, Geebung (AV2002/0245), and part of that matter also has relevance in the current matter.
Adam Alois Pekol, a professional civil engineer and principal advisor, appeared and gave evidence for the appellant. Mr K Fisher counsel of Crown Law appeared for the respondent, calling evidence from Edward Antoni, the departmental registered valuer responsible for determining the valuation. Mr Antoni had personally undertaken all revaluations of that market area since 1997.
The Evidence:
The Nature of the Land –
The subject land has an overall average depth of 78 metres, a frontage of 40 metres, and a rear width adjoining the Gateway Arterial Road of about 104 metres. The rear 15 metres of depth adjoining the Gateway Arterial Road is subject to a buffer zone required by the Brisbane City Council (the Council), for landscaping purposes associated with the arterial road system. The area of that buffer land is about 1,500 m², and while not a registered easement upon the subject title, the buffer restrictions prohibits any development except the planting of trees. The subject land is a level building site following some filling of the site.
The subject land is currently developed with an existing leased concrete tilt-up panel warehouse (2,600 m² GFA). The existing tenant (Cool Line Pacific Pty Ltd) has negotiated a special approval for a free standing pylon advertising sign within the buffer area. The only other use of the buffer area is for some restricted recreational purposes associated with the existing lease of the land. Similar recreational uses are generally available on other industrial sites not impacted by the buffer zone.
The impact of the buffer zone is the major difference between the parties. Mr Pekol sees the buffer as a restriction upon any development potential of that area, restricting the effect of the building area to 72% of the total site. Because of that restriction upon any building within the buffer area, Mr Pekol sees the buffer as only a burden upon the effective use of the land. He argues that ownership of the buffer area (as part of the overall area) carries with it a responsibility for additional rate charges and ongoing maintenance of the area. As such he sees the buffer as a liability not an asset.
Mr Antoni disagrees with that conclusion, arguing that the buffer provides an enhanced ability to maximize advertising exposure to the Gateway Arterial Road. Mr Pekol agrees that the existing site has good exposure to the arterial road, and that exposure is an important asset for commercial properties. However he argues that it would even be better, and closer to the passing traffic, if building development could be achieved over the entire site. However Mr Pekol concedes that all adjoining sites adjoining the Gateway Arterial Road have similar exposure. For that reason he argues that it would be preferable to compare the subject land with similar sites, rather than to seek comparisons of lands without the buffer constraint, and then seek to apply a premium for the presence of the buffer, as Mr Antoni has sought to do.
Mr Pekol has detailed personal experience of the buffer restriction as part of another property at Navigator Place. He advises that any development application to the Council, where lands adjoin a major arterial road, under the Local Government Act and the Transport Infrastructure Act, must be referred to the Main Roads Department. The purpose of the Main Roads requirement is to accommodate any possible future road widening. He advises that development approval of any site adjoining the arterial road, where the buffer is in existence, is always subject to an acceptable landscaping plan prepared by an owner. He concedes that some of his neighbouring properties (for example Compradore) have made some use of the buffer area for storage purposes, but the only major use of such buffer is for landscaping purposes.
Mr Antoni argues that some of the buildings on the adjoining sites appear to have provided for gates at the rear of their buildings fronting the buffer area. However he does not clarify the significance of such gates, other than his personal assumption that those owners must see some benefit in having physical access to the buffer area. However he confirms that direct access to the arterial road is not permissible.
In applying his valuation of the subject land, Mr Antoni has valued the unrestricted area of the site (3,961 m²), and then sought to add an allowance for the additional area of the buffer. He advises that it is a standard practice in such circumstances to allow for the additional buffer area at a rate reflecting about 33% of the normal unit rate, in order to provide for the more restricted use of the buffer area.
He notes that in the current matter he had applied a premium of 5% (or $30,000) for the buffer area of the subject land. He argues that premium of 5% is conservative compared to the $50,000 which might have been applied by the 33% principle. Mr Antoni also suggests that a further advantage of the open space buffer zone might be its possible utility as a fire break. Mr Pekol rejects such a notion, pointing out in such fire emergency there would always be an opportunity to escape to the actual arterial road reserve itself.
Changes in the Valuation –
To support his estimate of the valuation Mr Pekol argues that the increase of 25% in the unimproved value of the subject land is inconsistent with both the overall Consumer Price Index (CPI – 3.1%) of the wider community, and also the average annual rental return of the subject land (3%). Mr Pekol’s comparison follow a similar logic to those explored in the accompanying appeal at 157 Granite Street, Geebung (AV2002-0245). Based upon his generous estimate of change in the market of 5%, Mr Pekol estimates an unimproved value of $435,750.
Mr Antoni advises that the history of changes in the valuation of the subject land were as follows:
·1 October 1998 - $395,000
·1 October 1999 - $395,000
·1 October 2000 - $415,000
·1 October 2001 - $500,000
He advises that at the date of sale of the subject land as a vacant site for $540,000 on 3 March 1999, the unimproved value had been $480,000, but that had subsequently been reduced on objection to $395,000. Mr Antoni argues that the current increase in the unimproved value reflects similar changes in surrounding areas.
Method of Valuation –
As a further support method of valuation Mr Pekol seeks to determine the unimproved value adopting a development potential approach. Adopting similar development costs, unit market rental rates, and a capitalization rate (9%) as applied to the 157 Granite Street, Geebung appeal, he concludes an improved value of $2,166,667, with costs of improvements at $1,716,000, revealing, in his opinion, an unimproved value of $450,667. It is noted that the subject land was purchased by the appellant as an improved site for $2,010,500 on 21 November 2000.
Mr Antoni rejects the use of the capitalization of returns method in view of the availability of comparable vacant sales. However he notes that if such a method was to be employed, then it should also take note of any revenue being received from the signage upon the subject land. He concludes that such a capitalized advertising value was likely to exceed the 5% he has allowed for the buffer area allowance.
Mr Antoni explains that in adopting his current valuation of the subject land at $500,000 ($92 per square metre for 5,461 m²), he has sought comparisons with sales of parcels preferably approximately comparable to the individual sizes of each of the two separate parcels comprising the subject land (Lots 14 and 15). He notes that having determined an appropriate unit rate based upon such comparisons, he then allows a slight bulk allowance (5%) for the joint purchase of the two parcels. Mr Antoni advises that such an approach is required as there is no provision under the Valuation of Land Act to value the subject land as if it were a single parcel, similar to that applicable under s.17 for residential or farming uses.
In concluding his valuation Mr Antoni has adopted the base rate of his primary Sale 1 at $114 per square metre. He then applies a reduction of 20% to allow for the smaller frontage of each of his subject parcels, concluding a reduced rate of $92 per square metre by 5,461 m² or $502,412 (Transcript 54). To that figure he adds a nominal premium of 5% to allow for the additional area of the buffer beyond the size of his key Sale 1, concluding a figure of $529,717. In accordance with Departmental practice he has then allowed 5% for bulk allowance of the two subject parcels, concluding an unimproved value of $503,222, rounded to $500,000.
Mr Antoni seeks support for his valuation also in relativities with similar parcels in Buchanan Road at Lots 17 and 18 (area 5,210 m² at $490,000), and also Lots 19 and 20 (area 5,371 m² at $490,000). He argues those unimproved values are consistent with the current value of the subject land. Mr Pekol rejects such a comparison as he argues they have also been increased by an inappropriate allowance. Mr Antoni explains that the reason Lots 17 and 18 have a lesser value than the subject land is because it has less exposure to the Gateway Arterial Road, and there is also a SEQEB power station intruding into its frontage to Buchanan Road. Mr Antoni sees the exposure to the Gateway Arterial Road as an important advantage.
Comparison of Sales –
To support his estimate of the unimproved value Mr Pekol refers to the following sales of vacant lands:
·Sale 1 – (1 to 3 Huntington Place, Banyo – Lots 1 to 3 on RP 908538). This is a parcel of area 4,051 m² at the corner of Huntington Place and Buchanan Road, located about 100 metres north of the subject land, and is a common sale with Mr Antoni. The sale sold in August 2001 for $500,000 ($123 per square metre).
·Sale 2 – (629 Nudgee Road, Banyo – Lot 20 on RP 813320). This is a 2.519 hectare triangular site located about 2.5 kilometres south-west of the subject land, and backing on to the Gateway Arterial Road. The sale sold for $1,700,000 in May 2002 ($67.50 per square metre). To allow for the much larger size of his Sale 2, compared to the smaller subject land, Mr Pekol allows a further 10% and estimates that the comparison provides a figure of $73 per square metre for the subject land. Sale 2 has also a similar 15 metre wide buffer area adjoining the arterial road.
Mr Pekol also refers to a vacant parcel of two adjoining lots only 55 metres north-east of the subject land at Lots 7 and 8 on RP 908538, and also backing on to the Gateway Arterial roadway. He notes that those parcels of area 4,245 m² have remained unsold for the last two and a half years at an asking price of $290,000 ($68 per square metre). The land was initially advertised at $250,000, and more lately at the $290,000. The highest offer rejected by the owners had apparently been $288,000. He argues that while that parcel is not a consummated sale, it nevertheless reflects a maximum rate per square metre that the subject land could be expected to realize. That parcel also suffers from a 15 metre wide buffer strip similar to the subject land.
Lot 7 has an area of 2,357 m² and suffers from an overhead power easement along its northern side boundary. Lot 8 has an area of 1,888 m². Mr Pekol confirms that the asking unit rate of Lots 7 and 8 ($68 per square metre) is much lower than the recent sales rates in the Huntington Place ($123 per square metre). He attributes that difference to the presence of the landscape buffer strip and the slightly larger areas of Lots 7 and 8. He argues that the unit rate for the subject land should be nearer to the asking price of Lots 7 and 8, which are generally comparable to the subject land.
In explaining how he allowed a factor of 10% for the larger size of his Sale 2, Mr Pekol explains that was merely only his opinion of what might reflect an extra rate to allow for the larger size of Sale 2. He also agrees that his Sale 2 was closer to Hendra than Banyo where the subject land is located.
To support his valuation Mr Antoni provides the following sales of vacant lands:
·Sale 1 – (109 Buchanan Road, Banyo – Lot 34 on RP 908539). This is a 2,728 m² parcel located 400 metres south-west of the subject land, and sold in October 2000 for $395,500. It was analysed at $318,500, after allowing for clearing and fill, and applied at $310,000 ($114 per square metre). This key sale is fairly regular in shape, and almost the same size as either of the subject parcels, but is seen to lack the exposure of the subject land to the sub-arterial road.
Sale 1 has a 59 metre depth, compared to a 63 metre depth on the subject land, clear of the buffer area. The sale has a wider frontage to Buchanan Road. The sale is seen as marginally superior on a overall basis reflecting a slightly higher rate per square metre. There is no landscape buffer on the sale.
·Sale 2 – (Huntington Place, Banyo – Lots 1 to 3 on RP 908538). This is the common sale with Mr Pekol, and is seen as a supporting sale with an area of 4,057 m², and which sold in August 2001 for $500,000, was analysed, after allowing for clearing and fill, (depth to 1.2 metres) at $420,000, and applied at $420,000 ($103 per square metre). The sale is almost similar in aggregate size, but each parcel of the sale is smaller in area. There is an overhead power Easement B (5 metres wide) along the southern boundary facing Huntington Place. Overall the sale is very slightly superior to the subject land on a rate per square metre basis. A single industrial building and offices has been built across the whole of Lots 1 to 3.
·Sale 3 - (7 Buchanan Road, Banyo – Lot 1 on RP 226020). This is a 2,791 m² parcel with an old dwelling. The sale has no access to Nudgee Road (an access restriction strip), and obtains physical access to Buchanan Road only via a 10 metre wide easement over an adjoining property to the north-east (Lot 2 on RP 226020). Mr Antoni advises that Sale 3 was purchased by the adjoining owner of Lot 2, as that parcel had no physical access other than through Lot 1, hence the low rate of $88 per square metre.
The sale is seen as very inferior on an overall aggregate basis, and adjoins an open drain to the rear. The sale sold in January 2001 for $275,000, was analysed after allowing for clearing and fill at $249,000, and applied at $245,000 ($88 per square metre).
In respect of the common sale at 1 to 3 Huntington Place, Banyo, Mr Antoni agrees that property is impacted by overhead power lines (Easement B), but argues that area is used for car parking purposes, and the easement is not a major impediment to developing building works. Mr Pekol agrees with that conclusion, and notes further that any perceived buyer resistance to purchasing below those overhead power lines is still a very subjective matter. For example, he notes that there has not yet been any definitive research connecting close proximity to overhead power and unsafe living and working environments.
Mr Antoni explains that other than the corner lot (Lot 12), Sale 2 in Huntington Place has been the only sale since development in 1996. Clearly the power lines are seen as a problem by potential buyers. Mr Pekol concedes that there is a market perception that there is a problem. However on the above basis he does not agree that Easement B is as severe a restriction upon Sale 2, as is the buffer strip on the subject land.
While he has made no special allowance for the impact of the overhead power lines on his Sale 2(1 to 3 Huntington Place), bearing in mind the apparent market resistance to development near those power lines, Mr Antoni notes that he may need to reassess the unimproved value of that parcel (Lots 1 to 3) at the next valuation. However before making that adjustment he would seek sales of properties affected by overhead power lines.
Mr Antoni differs in respect of the overhead power (Easement B) along the side boundary of Lots 7 and 8 in Huntington Place, which he argues has a greater impact upon the ability to build upon that parcel than exists on Lots 1 to 3 across the road (Sale 2). However he rejects the use of Lots 7 and 8 as they are not demonstrated sales.
Mr Antoni notes the late nature of Mr Pekol’s Sale 2 (629 Nudgee Road) and advises that while he does not rely upon more recent late sales, well after the relevant date of valuation at 1 October 2001, he believes that more relevant assistance might be made from the sale of Lots 17 and 18 in Buchanan Road, which sold recently in July 2002 for $700,000 ($134 per square metre). That parcel also has a similar 15 metre wide buffer strip adjoining the arterial road, but has a wider frontage to Buchanan Road, and a more regular shape. However I believe that late sale is really a matter for a subsequent valuation.
In rejecting comparisons with Mr Pekol’s Sale 2 (629 Nudgee Road), Mr Antoni notes that separate 15 metre wide buffer areas were likely to be required on both the Gateway Arterial Road to the east, and also Nudgee Road to the west. Because of its triangular shape, and those possible buffer restrictions, he argues it would have a net useable area for development far less than the overall 2.59 hectare site area. He notes that apart from its lateness as a sale, it is too big to compare with the subject land. He also notes that the site is contaminated, but that information from the Environmental Protection Agency is obtained at this time on a confidential basis only, and will not be further clarified until that property is revalued at the next valuation.
Decision:
Directions in respect of the legislation were outlined in paragraph [32] of the matter of 157 Granite Street, Geebung (Av2002/0245). An explanation of reliance upon changes in some statistical indices were also explained in that matter at paragraph [41] to [47], and I will not repeat those observations.
The Nature of the Land –
The key issue in the current matter is clearly the nature of the planning constraints in respect of the 15 metre wide landscape buffer area, and how that restriction affects the market value of the subject land. Mr Antoni has valued that buffer area of 1500 m² as an area of diminished value per square metre, in addition to the higher rate for the balance of the 3,961 m² of the overall site area, where full development, within Council planning controls in respect of site coverage, may be exercised. While the buffer area can only be used for landscaping purposes, with some minor discretion for an advertising sign, in Mr Antoni’s eyes it remains an asset for the appellant, which must have a positive marginal value.
By comparison Mr Pekol sees the buffer area as a negative encumbrance upon the free use of the entire site area of the subject land. As such he sees the value of that encumbrance to represent a negative value to the appellant’s otherwise unencumbered land of 5,461 m².
In seeking to understand the purpose of the buffer area, the evidence would suggest that it has been created by planning constraint to provide mainly for the possibility that, at some future time, any widening of the Gateway Arterial Road could be more conveniently orchestrated. However in the event of such an eventuality, I am sure that any resumption of land in that buffer area, would be accompanied by a suitable compensation payment for the land taken. On that basis the buffer area must be seen to have some residual value to the appellant.
The basic difference between the two approaches could be encapsulated as follows. Mr Pekol has sought to value the entire site area of 5,461 m² as if there was no buffer restriction, and then to subtract the imposition of the restriction by the buffer area. By contrast Mr Antoni has sought to value the area of 3,961 m² clear of the buffer area, and then to add some further premium for the benefit of the extra 1,500 m² of buffer area. The question is whether those two approaches are disparate in their conclusions.
While Mr Pekol argues that the buffer area provides no further benefit to the remaining land, its presence as a suitable landscape area does ensure that exposure to the Gateway Arterial Road is maintained. That raises the question of the value to be placed upon the “ownership” of land where planning restrictions limit its total development. That is an event of everyday occurrence, where, because of local government conditions, the freedom to position buildings is constrained. The simple setback requirements for residential dwellings is a typical example of such a case. It is therefore untrue to claim that the buffer area in the current matter has no value to the appellant, however it is also true to argue that it does have a more restricted value than the balance of the site.
Comparison of sales –
In seeking comparisons with sales of vacant lands with similar zonings and development potential, both parties have sought to follow the principles outlined in Brewarrana Pty Ltd v Commissioner of Highways (SA) (1973) 32 LGRA 170, where Wells J said at p.180:
“It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to be sold, or the same thing as its true value. … Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; … there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. … some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. … the assessment of the risks of adjustment is peculiarly within his (the valuer’s) sphere of skill.”
In his comparisons Mr Pekol has sought to use the rates per square metre of the sale prices of his Sale 1 (Huntington Place) at $123 per square metre; his Sale 2 (629 Nudgee Road) at $67 per square metre (adjusted for size difference to $73 per square metre; and the current asking price of Lots 7 and 8 Huntington Place at $68 per square metre, concluding an average rate of $88 per square metre. However the process of averaging of sales information was rejected by the High Court of Australia in Daandene Pastoral Company Pty Ltd v Commissioner of Land Tax (1943) 7 The Valuer 299 at 305, where Williams J said in the High Court of Australia on 26 August 1943:
“This method of averaging to my mind is unsound. The prices obtained at comparable sales should not be aggregated and averaged, especially when the prices obtained on sales of small areas are dealt with in this way in order to obtain the value per acre of a large area. The only safe course is to compare each sale with the subject land separately.”
However, the use of averaging was seen as a useful check by Chamberlain J in Robson and Jarvis v The Minister of Education (SA) (1964) 18 The Valuer 486, where he said at p.490:
“I recognise that the unscientific use of averages is a fruitful source of fallacy, but where there are a number of sales at about the same time of more or less identical blocks at somewhat different prices, an average may provide a useful check.”
However Robson and Jarvis can be distinguished in the current matter, which involves separate disparate parcels with differing attributes and features.
Mr Antoni has followed the principle of comparing each sale separately with the subject land, and has concluded the following comparison:
Sale Area Rate Comparison 1 (109 Buchanan Road)
2,728 m² $114 per square metre Marginally superior 2 (Huntington Place) 4,057 m² $103 per square metre Slightly superior 3 (7 Buchanan Road) 2,791 m² $88 per square metre Very inferior 4 (Subject lots) 5,461 m² $92 per square metre (allowing 20% for smaller frontage)
In making those comparisons Mr Antoni has relied mainly upon his Sale 1 (109 Buchanan Road), which is very similar in size to each of the subject parcels. I note that his Sale 1 (109 Buchanan Road) has a 58 metre frontage compared to the 20 metres of each of the subject parcels (total 40 metres); and is also 4 metres less in depth over the developable area. Sale 1 is clearly a more rectangular parcel, and I see no reason to question Mr Antoni’s adjustment for the respective differences in frontages of those parcels.
However Mr Antoni has applied that rate of $92 per square metre to the full site area of 5,461 m² concluding an unimproved value without any buffer restriction of $502,412. If the logic outlined in paragraph [38] is then to be followed, Mr Antoni should subtract the impact of the buffer limitation from the $502,412.
In seeking to understand Mr Antoni’s strategy in this matter, an addition of a premium for the additional benefit of a buffer area beyond the overall site area would be appropriate. However, where the buffer actually exists within the subject land itself, there is no logic for increasing the value beyond that which would apply if the subject land was unrestricted. Clearly land with some development constraint must have a lesser value than land that is unrestricted.
In seeking to apply the correction for the impact of the buffer restriction, I note that it is the usual practice of Mr Antoni to adopt a factor of about 33% of the unaffected value for the value of the buffer area, or a reduction of 66% of the unaffected value of that area. If I apply a reduction of 1,500 m² by 66% by $92 per square metre I could deduce a reduction of $91,080 for the impact of the buffer area. If I then deduct that from the unaffected value of $502,412, I conclude an unimproved value of about $411,332, and after allowing for bulk ownership of 5%, conclude a figure of $390,750.
However if Mr Antoni adopts the approach of comparing initially the developable area (3,961 m²) with his Sale 1, the adjustment for the difference in a smaller frontage of say 40 metres compared to the 58 metres of Sale 1, rather than the 20 metres for each of Lots 14 or 15, was likely to be much less than the previous 12% allowed. The 40 metre frontage would make acceptable provision for the movement of semi-trailers within the commercial site as discussed in the 157 Granite Street, Geebung matter (AV2002/0245) at paragraph [25]. If I adopt a rate marginally less than Sale 1 at say $110 per square metre, I could conclude a value for the developable land of 3,961 m² by $110 per square metre or $435,710, allowing for the exposure to the arterial road. To that figure could then be added the 5% for the advantage of the extra buffer area, or say $458,000, and allowing for bulk ownership of 5% would reduce that to $435,000.
The difference between the two approaches may reflect the apparent subjective treatment of buffer areas. Mr Antoni has only sought to apply a factor of 5% for the buffer area, rather than his normal approach of applying 33%. There is no market evidence to support either approach, but as Mr Antoni’s approach has been to seek to add a marginal factor for the buffer area, I will adopt his approach as modified in paragraph [48], and conclude an interim figure of $435,000 for the unimproved value of the subject land.
In seeking guidance for the adoption of a bulk allowance for multiple ownership, I believe that should only be assessed in line with market evidence. I note that such an allowance was discussed by the Land Appeal Court in Burns Philp & Co Ltd v Valuer-General (1974) 1 QLCR 161. In that matter the Land Appeal Court found at p.166:
“It is apparently a practice in the Valuer-General’s Department when several parcels are included in one valuation to make an allowance for ‘bulk or multiple holding’. Often this is made at the rate of 2½ % per allotment or subdivision. As we understand the practice this is an acknowledgment that larger areas generally command a lesser overall unit value than smaller areas. We see no reason as presently advised to disallow this practice but the quantum thereof is one calling for discretion according to the circumstances of individual cases. The basis of the allowance cannot be a rule of thumb of 2½ % for each allotment included in the parcel. Logical and practical considerations require that a maximum limit be applied to the bulk allowance percentage, otherwise increasingly large numbers of allotments would result in inordinately low unimproved values until when 40 allotments are included the absurd position of a nil value would result.”
Clearly the direction from the Land Appeal Court is that discretion must be used in the application of any “bulk allowance”. Normal economic forces generally dictate the extent of any stages in a subdivisional development, the rates of sales being an important criteria. It would be a less than prudent developer who sought to develop a stage of new lots, well beyond his likely capacity to sell them to the market place. The allowance of 5% by Mr Antoni for the two parcels of the subject land appears very generous in this matter.
If I turn then to Mr Pekol’s reference to the two parcels currently offered for sale at Lots 7 and 8 in Huntington Place, I note that property does not yet constitute a record of a concluded sale. In Australian courts only binding contracts to sell and purchase have been accepted as evidence of value. The High Court of Australia considered the matter of a written offer to sell a property in McDonald v Deputy Commissioner of Land Tax for New South Wales (1915) 20 CLR 231, and found at p.239:
“When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands.”
A similar contractual agreement would also be required in respect of an “offer to buy”.
However, it is also noted that that principle is not inflexible, and some weight may be given to considerations of the offer in accordance with Goold v Commonwealth (1993) 79 LGERA 470. The test is to compare the reliability or genuineness of the offer.
In the current matter Mr Pekol advises that the highest offer for that area of 4,245 m², which was rejected, was $288,000 or $68 per square metre. However that property has not only the existence of a similar buffer strip along its rear boundary adjoining the Gateway Arterial Road, but also the presence of an overhead power easement along its northern (side) boundary. I believe that potential sale adds little to the current matter.
Summary:
In the end I find that there is some lack of clarity in respect of the final approach to apply to the valuation. While I accept that s.33 of the Act dictates that the existing valuation is correct unless proved to the contrary, I believe that the lack of clarity lends some weight to the appellant’s case. In such circumstances I should allow any uncertainty to the benefit of the appellant in a matter such as this. (Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited & Ors (1946-47) 74 CLR 358). In the end I will accept the appellant’s estimate of $435,000.
Conclusion:
Having considered the whole of the evidence I am persuaded that the appellant has proved her case. The appeal is upheld. The valuation as determined by the Chief Executive is set aside, and the unimproved value of Lots 14 and 15 on RP 908538 is determined in the sum of Four Hundred and Thirty-Five Thousand Dollars ($435,000).
NG DIVETT
MEMBER OF THE LAND COURT
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