Pulley v Chief Executive, Department of Natural Resources
[1999] QLC 29
•16 April 1999
|
BRISBANE
16 April 1999
Re: Appeal against Annual Valuation
Valuation of Land Act 1944
Valuation Roll No: 3136
Local Government: BCC-Sandgate
(AV98-612)
Kenneth J and Sandra A Pulley
v.
Chief Executive, Department of Natural Resources
D E C I S I O N
Background:
This matter relates to a property at 36 Third Avenue, Sandgate, and described as Lot 24 on RP29179 and Lot 3 on RP 29185, Parish of Nundah. The parcel has an area of 1,047 square metres and is situated about 400 metres north of the Sandgate Railway Station, about 150 metres east of the Sandgate Commercial Centre, and about 200 metres south-west of Bramble Bay. Access is good to Third Avenue which is bitumen sealed with concrete kerbing and channelling.
All services are available, and the land is zoned “Residential B R3” under the Brisbane City Town Plan of 13 June 1987, and effective at the date of valuation of 1 October 1997. The land is used for four converted flats, which have been developed from a 90 year old former Queensland-style dwelling, built as a guesthouse. The current zoning allows for 471 square metres of gross floor area to be constructed on the site. The key issues are the value of improvements, the method of valuation, the grounds of appeal, the impact of zoning, the ongoing use of the land and comparison of sales.
On 9 March 1998, the Chief Executive, Department of Natural Resources, issued a valuation of the subject land at $204,000. Following an objection the Chief Executive on 25 August 1998 issued an amended valuation at $175,000. The appellants have appealed that figure claiming the unimproved value should more properly be $146,000.
Mr K Pulley appeared and gave evidence for the appellants. Mr A Grams, the Departmental Senior Valuer responsible for determining the valuation appeared and gave evidence for the respondent.
The Evidence:(1)The Value of Improvements –
Mr Pulley argues that the respondent has made a fundamental error by virtually depreciating almost to zero any residual value of the current improvements as an income-earning multi-unit dwelling for flats. He argued that over the period since the appellants acquired the property in 1981, the margin between the assessed market value of the improved site, and the determined unimproved value has steadily declined. In 1981, the unimproved value represented only 32% of market value, and in 1998 the unimproved value represents approximately 97% of estimated market value.
The appellants attribute such a major shift in the relative significance of the value of the improvements, to the apparent conclusion by the respondent that the potential value of the subject land is now as a site for redevelopment purposes. Mr Pulley bases that view on advice from the respondent that there is now a market for such redevelopment sites and, in such circumstances, the residual value of the improvements is declining rapidly due to depreciation of the building, and the shift to other uses.
It is agreed by the parties that there is a growing demand for older Queensland-style dwellings which are being refurbished for use as single residence sites. Such a market apparently commenced in that locality on the higher lands of Shorncliffe to the south of the subject, and is now also occurring at Sandgate. There appears to be some misunderstanding of the use of the word “developer”, where the appellants conclude such use to relate only to entrepreneurs who develop lots for townhouses or units.
However the term can also relate to persons who seek to refurbish existing old dwellings for on-selling as future single residences. The key for entry into the market for old homes in the Sandgate area, will always relate to the demand for such properties. At present it is agreed that the major part of the market for older homes remains with owner/occupiers.
Mr Pulley argues that it will be some time, if at all, before any appreciable market for redevelopment through the demolishing of existing properties occurs in that area. He argues that, because the market is currently mainly for the refurbishment of old existing dwellings, then the respondent should allow a larger residual value for the existing improvements.
To counter that view Mr Grams argues that a recent sale of an old block of flats at Fifth Avenue, Sandgate, demonstrates that developers have now entered the marketplace for the purpose, in that case, of demolishing and rebuilding five new townhouses. He believes such developments support his concluded comparable sales at Nundah and Chermside, discussed later.
Mr Pulley draws comparison between the subject land and his personal residence at Wharf Street, Shorncliffe, noting that the subject land (since 1993) appears to have had the improvements reduced in value by a much larger percentage than with the Wharf Street property. Mr Pulley provides evidence to support that conclusion in the form of a statistical analysis of the unimproved values of the two sites (Document 1b) which demonstrates a divergence in the relativity between the parcels since 1993. During the same period he notes that the actual market value of the Wharf Street property would have increased at a greater rate than the subject land.
The unimproved values have increased between 1988 and 1999 as follows:
Wharf Street - $24,500 to $78,000 (318%)
Subject - $47,000 to $175,000 (372%)
In seeking to assess the residual value of the improvements on the subject land, Mr Pulley notes that the dwelling is currently insured at a replacement value of $140,000, although he does not seek such a comparison in his assessment. The appellants believe that a figure of $40,000 to $50,000 would represent a realistic assessment of the value of the improvements, noting that it is the existence of the current dwelling which provides the current annual net rental income of $12,000.
In his opinion Mr Pulley believes that the current use of the land, its rating designation as “Flats” by the Brisbane City Council, and the unimproved value of the subject as a site used for flats by the respondent, all suggest that the existing building improvements must have some residual value greater than as assessed by the current valuation. Mr Pulley concludes that the added value of the improvements is defined by the market value, less the unimproved value of the land. However Mr Pulley provides little empirical information to support his estimate of the value of the improvements.
As a broad comparison Mr Pulley notes that, if the appellants had to replace the investment capacity of the flats at current commercial rates, the capital involved would represent something well in excess of the market value of the subject land. He believes the dwelling must therefore reflect a substantial value on its own, supporting his personal investment in maintaining the property.
In supporting his valuation Mr Grams notes that as dwellings age it is usual for them to depreciate in value, and consequently the percentage value of the improvements upon the subject is not inconsistent with that observation. Mr Pulley argues that regular maintenance of the building may lead to its retaining its value, as demonstrated by the current demand for old Queensland homes in the area. Mr Pulley provides a hypothetical economical analysis of the potential to redevelop the subject land as multi-units, concluding that it was uneconomic to do so at that stage.
(2)The Method of Valuation –
Mr Pulley argues that the respondent would appear to have changed the method used in valuing the subject land since 1993. While he does not challenge the current assessed market value of the improved property, it is how the respondent infers the determined unimproved value from the market value, which he claims, is now inappropriate. Mr Pulley understands that the concept of unimproved market value relates only to a vacant land parcel.
Mr Pulley also notes that section 3(1) of the Valuation of Land Act specifies that any assessment of unimproved value must determine that level from the perspective of the “vendor”, and not from the perspective of the “purchaser”. As such he concludes that it is incorrect, and in conflict with the Act, for the respondent to conclude that the unimproved value should be based upon the premise that a hypothetical purchaser/developer would acquire the land for demolition, and reconstruction purposes. He argues that the current market in that area is for sale as a single residence, for refurbishment purposes, and any vendor would consider the market value from that perspective.
Mr Pulley is uncertain how the respondent determines the unimproved value from the market value, but surmises that an appropriate formula was likely to be applied to the market value. He draws support from an analysis of sales of “Residential B R3” and “Residential B R4” lands in Sandgate between 1992 to 1997 (Exhibit 3). That analysis demonstrates that historically the unimproved value was well below the market value, until more recently when the relativity has now changed. Mr Pulley believes that, as the respondent has changed his method of valuing the subject land, there is a responsibility upon the respondent to justify that change.
In his assessment of the subject land, Mr Grams notes that the land does not satisfy the requirements for a concessional value under section 17. He also notes that in line with directions found in section 3(4), the land may be used for its current purpose, or for a higher purpose, assuming that the improvements had not been made at the time of the valuation. In respect of the subject land, Mr Grams believes that it can be used for the higher purpose of multiple units.
(3)The Impact of Zoning –
It is acknowledged by Mr Grams that the zoning of the subject land as “Residential B R3”, provides for a lesser gross floor area than does “Residential B R4”, which is the zoning of several of his sales. However in applying those sales to the subject land, Mr Grams has allowed for the difference in his gross floor area allocations between the “B R3” and “B R4” zones. The “B R3” zone allows for a maximum gross floor area of 45% of the land, giving approximately 1 unit for each 200 square metres of land. The “B R4” zone allows for a gross floor area of 50% of the land.
However, because of the often more desirable nature of larger residential units, Mr Grams has not adopted the rate per unit approach to establish the unimproved value of the land, relying instead on a unit rate per square metre basis. Based upon comparisons of “B R3” and “B R4” sales at Nundah, he has revised the unimproved value of the subject land from the initial figure of $204,000 to the current figure of $175,000 to allow for the different zoning of the subject.
In the matter of any possible heritage nature of the building, Mr Grams accepts that the subject is located in an area designated for preservation purposes in the Town Plan. However he notes those areas to be very extensive, and to contain a great variety of dwellings of comparable age and character. Mr Grams notes that the planning restriction is to “encourage” the preservation of certain buildings, and is not definitely prescriptive that all of the buildings must be preserved. He sees support for his conclusion in the recent late sale of a former old “flats” at Fifth Avenue, Sandgate, which has only recently been demolished for redevelopment as discussed previously.
Mr Grams also notes that there is a Development Control Plan covering the area which lists heritage properties of significance. He notes that the subject land is not part of that list. He also notes that it is also possible for any new redevelopments to be constructed in an external style which complements the character of the area, with the consent of Council, thus providing a further opportunity for redevelopment of the subject land.
(4)Comparison of Sales –
The appellants have chosen to compare the subject on the basis of statistical averages of improved properties in the area. On that basis they do not challenge the unimproved value of the subject land. Mr Grams by comparison has sought to compare the following sales of vacant lands:
· Sale 1 – (16 Fourth Avenue, Sandgate – Lot 21 on RP 29170)
This is an 809 square metre parcel, zoned “Residential B R4”, located about 100 metres west of the subject. The sale is similar but has a higher density zoning, and has been developed with four units.
The sale sold in March 1996 for $164,000 and, after allowing for improvements, was analysed at $163,000 ($202 per square metre), and applied at $162,500 ($201 per square metre). The sale was also analysed at 403 square metres of gross floor area.
· Sale 2 – (34 View Street, Chermside – Lots 73 and 74 on RP 42122)
This is an 809 square metre parcel, zoned “Residential B R3”, and located 700 metres south of the Chermside Regional Shopping Centre. The sale is elevated and level, and has the same zoning as the subject, and has been redeveloped as four units.
The sale sold in June 1997 for $185,000, and after allowing for improvements, was analysed at $177,500 ($219 per square metre), and applied at $167,500 ($201 per square metre). The sale has a maximum of 364 square metres gross floor area.
· Sale 3 – (11-13 Davenport Street, Chermside – Lots 1 and 2 on RP 59843)
This is a 1204 square metre parcel, zoned “Residential B R4”, located 900 metres south of the Chermside Regional Shopping Centre. The sale is a corner site, above road level, has a higher density than the subject, and has been redeveloped to six units, with the maximum of 602 square metres of gross floor area.
The sale sold in April 1997 for $270,000, and after allowing for demolition for an existing building and other improvements, was analysed at $278,700 ($231 per square metre) and applied at $260,000 ($216 per square metre).
· Sale 4 – (35 Melton Road, Nundah – Lots 3 and 4 on RP 33947)
This is an 834 square metre parcel, zoned “Residential B R3”, located 350 metres north-east of the Toombul Regional Shopping Centre. The sale is above road level, and is located on the busy connecting Melton Road, which links Northgate, Nundah and Clayfield. The sale has been developed for four units, with a maximum of 375 square metres of gross floor area.
The sale sold in March 1999 for $139,500, and after allowing for improvements, was analysed at $138,000 ($165 per square metre) and applied at $133,000 ($159 per square metre).
· Sale 5 – (137 Ryans Road, Nundah – Lot 2 on RP 65164)
This is a 809 square metre parcel, zoned “Residential B R4”, located 400 metres north of the Nundah Commercial Centre, and 100 metres east of the Nundah Industrial area. The sale has been developed with five units, and the sale has a maximum gross floor area of 404.5 square metres.
The sale sold in May 1997 for $152,000, and after allowing for demolition of an existing building and improvements, was analysed at $157,000 ($194 per square metre) and applied at $143,000 ($177 per square metre).
While not relying directly upon a further late sale at Fifth Avenue, Sandgate, Mr Grams notes that sale, which occurred after the date of issue of the valuations, was sold in April 1998 for $204,000 ($252 per square metre), or $504 per square metre of gross floor area. He argues that that sale confirms that the market for land is increasing in the area of the subject, and also supports his conclusion that there is now a developing demand for redevelopment of new sites in the area. However he admits that, while Council did eventually give permission to demolish the former old building on the Fifth Avenue sale, that only occurred after an extensive period of investigation (12 months) prior to the approval being given.
(5)The Grounds of Appeal –
The appellants further argue that there is inconsistency in the public information documents supplied by both the respondent and the Brisbane City Council. Mr Pulley notes that the Chief Executive advises objectors that referral in the grounds of appeal to the resulting impacts upon liability for revenue purposes, cannot assist the claimant. Mr Pulley claims that would appear to be inconsistent with the declared purpose of the Valuation of Land Act, noting the preamble of the Act as defined at page 7. He argues, that if the purpose of the Act is to define the process of valuing land for “rating and taxing”, then it would appear inconsistent to then refuse to allow such impacts as part of the grounds of appeal. Mr Pulley seeks to be informed as to avenues open to him in order to ensure that he is not carrying any unfair burden of rates as his contribution to community costs.
Decision:
(1)The Method of Valuation –
I turn first to the Legislation and note that section 3 provides direction about how the unimproved value is to be determined. I note that section 3(4) directs that any higher use of the land, beyond that which currently exists, may be considered, because the land itself must be seen to be vacant at the date of valuation, and that the current improvements upon the land never actually existed. On that basis I am reminded that it has long been held by Courts at all levels throughout Australia that, when determining unimproved value, the best test is to compare the subject land with sales of vacant or lightly-improved properties, in the locality.
Indeed that principle was succinctly described by the Land Appeal Court in PH Clough v. The Valuer-General (1981-82) 8 QLCR 70, where the Land Appeal Court said at page 76:
“It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements. ”
The principle was also followed in NR and PG Tow v. Valuer-General (1978) 5 QLCR 378, where the Land Appeal Court said at page 381:
“Courts of the highest authority have laid down that the best test of value is to be found in the sales of comparable properties, preferably unimproved, on the open market round about the relevant date of valuation and between prudent and willing, but not over-anxious parties. ”
Reference can also be found in Ussher v. Valuer-General (1986-87) 11 QLCR 169, at 176; and Fischer v. Valuer-General (1983) 9 QLCR 44, at 46.
On those precedents there is nothing to discredit Mr Grams’ method of approaching the valuation. However I note Mr Pulley’s assumption that it may be inappropriate to analyse the sales adopted from the perspective of any potential developer, who may intend a new use of the site for multiple unit purposes. It is his assertion that it is the value of the land from the perspective of the vendor that is important. Mr Pulley then concludes that it is fallacious to assume that the existing dwelling would be demolished to make way for a new building, in light of the wider demand for refurbishment of old Queenslander homes in the area, and the current town planning constraints for that purpose.
While Mr Pulley’s interpretation of section 3 of the Act is correct for understanding the meaning of “unimproved value”, the use of sales evidence depends upon the principle of the value of land being assessed in the marketplace between a prudent buyer and a prudent seller. The meaning of the value of land was most clearly defined by the High Court of Australia in Spencer v. The Commonwealth of Australia (1907) 5 CLR 418, where Griffith CJ said at page 432:
“In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e. whether there was in fact on that day a willing buyer, but by inquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’ It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together. ”
The only problem then facing Mr Grams was to ensure that the sales he analysed provided a reasonable and fair comparison to the subject land.
(2)The Comparison of Sales –
In seeking to compare vacant lands sold at Chermside and Nundah, Mr Grams has selected sales of vacant lands which occurred within the relevant time period for the valuation, and also sought to compare lands with similar natural characteristics, zonings and proximity to major shopping facilities. In his conclusions he has noted the difference at Nundah between rates per square metre for “Residential B R3” and “Residential B R4” zonings. His earlier assumption had apparently been influenced by the lack of any real difference in the rates per square metre at Chermside, but he reduced the valuation following the objection in line with the Nundah sales.
On the basis of the rates per square metre Mr Grams has concluded the following applied values:
| Sale Sale | Rate per m² | Zoning |
| 1 (Sandgate – 809m²) | $ 201 | B R4 |
| 2 (Chermside – 809m²) | $ 201 | B R3 |
| 3 (Chermside – 1204m²) | $ 216 | B R4 |
| 4 (Nundah – 834m²) | $ 159 | B R3 |
| 5 (Nundah – 809m²) | $ 177 | B R4 |
| Subject (Sandgate-1047m²) | $ 167 | B R3 |
I note that Sales 1, 2, 4 and 5 are all about 809 square metres in area, while Sale 3 is 1204 square metres and the subject has an area of 1,047 square metres. Allowing something for the larger areas of Sale 3 and the subject, I see no reason to discredit Mr Grams’ comparisons based upon zoning and area. I note that all of those vacant sales have subsequently been developed for new units, consistent with the zoning of the land.
I also note that Sale 1 was purchased by the Queensland Housing Commission, but I make no allowance for that, as that body must compete in the marketplace for land, and is generally constrained by the same planning constraints as private owners. While I am aware that there is sometimes a perception that Government agencies may seek exemption from local government requirements, there are sound reasons why that may well not be the case. Certainly State powers are not constrained for Government purposes by the lesser authority. However, where the Queensland Housing Commission land is to provide residences for citizens who, in the effluction of time, may even elect to purchase those units from the Government, the State is really not in any position to force its superiority. Should that occur there could be problems with the supply of essential services such as water, sewerage, etc. In the end the Queensland Housing Commission should merely be seen as just another owner. Certainly within the constraints of the Valuation of Land Act, the particularity of ownership has little relevance.
While I note that Mr Grams’ Sale 4 would appear to have occurred well after the relevant period, and therefore should only be considered with caution, I note that the purpose of that sale was to demonstrate the difference in the zoning of parcels in the Nundah area. I note also that the date of sale at 17 March 1999 was only five days prior to the hearing, and I conclude that the date shown was a mistake. I will therefore accept the date as within the relevant period for demonstrating only the impact of the difference in zoning.
(3)The Value of Improvements –
In concluding his unimproved value by comparisons with vacant sales, Mr Grams has virtually eliminated any need to seek to address the residual value of the existing improvements. While he may have concluded that the land may have the potential for redevelopment by a developer, that is entirely irrelevant to this exercise. In the end the prudent purchaser in the marketplace will seek to acquire the land for the purpose of either refurbishing the old dwelling, or rebuilding a new premises, according to his own needs. What price he has to pay to gain the property will depend upon the desires of the current owner, and any competition he has to face in the marketplace.
On the evidence before me, the present value of the subject as flats for the appellants, is probably greater than the figure that a prudent purchaser might be prepared to pay for whatever purpose. Mr Grams has demonstrated by his approach that the difference between the market price and the final unimproved value is not determined by any arbitrary in-house formula applied by the respondent. Mr Grams did however make a small adjustment to the analysed value of his sales, in order to arrive at the applied unimproved value of those sales. He has done that in order to ensure a conservative estimate of the valuation.
(4)The Grounds of Appeal –
Finally I come to the appellants’ assertion that the uses to which the unimproved values are placed, by virtue of their mention in the purposes of the Act, should in themselves constitute grounds for appeal. I accept that the Act is designed to ensure a fair and equitable basis for apportioning responsibility for revenue contributions to the operations of society. That such a purpose may sometimes appear to be distorted by the implementation of the Act, is no doubt of concern to the citizens. However it is not the functions or purposes of the Act which may be taken to form the grounds of any appeal, but rather any errors in implementing that purpose which may result in unfair burdens being raised for taxpayers, as a result of the Act being implemented unfairly or incorrectly.
While the preamble of the Act states the purpose for the Act to be “to make better provision for determining the valuation of land for rating and taxing purposes”, the preamble as such has no effect upon the enactment of the statute unless the meaning of the Legislation lacks clarity. (Craies on Statute Law, 7th Edition, by Edgar, page 202).
The preamble statement merely includes a statement of the policy objectives of the Government (see Acts Interpretation Act 1954, section 36).
In seeking to understand the policy of the Government in this matter I note that section 14(B)(3)(f) of the Acts Interpretation Act 1954 provides for the use of certain extrinsic materials, including the Second Reading Speech of the Member moving the Bill in the Legislative Assembly. (Hansard, 5 September 1944, page 307, and 9 September 1944, page 476). That Bill sought to introduce a uniform system of assessing unimproved value across Queensland by establishing the position of Valuer-General, whose task was to create a single authority for determining values in the State. The Valuer-General has subsequently been replaced by the Chief Executive, who now ensures consistency of valuations through delegations to the appropriately qualified registered valuers.
If, as a consequence of a fair assessment of the unimproved value, owners find themselves, in their opinion, to a disadvantage over comparable property owners, then the remedy lies not with the respondent in implementing the Act. The remedy lies elsewhere with those in the political process who set the taxing and rating regimes for revenue raising. It is also not the Act which appears to unduly impact certain property owners in society, such as the appellants, but rather how the Act is used to reflect the relative value that the land has in the marketplace.
Indeed the role of the respondent was clearly separated from the role of the taxing authorities by Justice Sheehy in his report to the Minister in his review of the “Valuation Act 1952” 9 July 1953, where he said at page 12:
“The Valuer-General has a duty to do and he must carry out that duty regardless of consequences. If he allows possible consequences to influence him in finding a value lower than the true unimproved value he is simply not carrying out that duty.
The Brisbane City Council can always adjust their rates and it is that body and not the Valuer-General who is in control of the position from the economic angle.
In like manner, Parliament can always adjust the rate of tax. ”
That role for the respondent was further clarified by the Honourable HA Bruce, Secretary for Public Works, in introducing the Second Reading of the new Bill on 9 September 1944, where he said at page 476:
“I should particularly like to impress on Honourable Members that this is simply and purely a Valuation Bill. On the initiatory stage there was a very great tendency on the part of some speakers to introduce the subject of taxation, but its sole purpose is to fix the valuations of land on an unimproved basis. ”
The intentions and wording of the Act are very clear, and the preamble should merely be taken as the introductory purview of the Act and therefore not as separate grounds for appeal.
Summary:
In summary I am reminded that section 33 of the Valuation of Land Act 1944 dictates that every valuation of land is deemed to be correct unless proved to the contrary. I am also reminded that section 45(4) places the onus upon the owner to prove that an error has been made, or a wrong principle has been applied. (See Brisbane City Council v. Valuer-General (1978) 140 CLR 41 at 56).
In the current matter I find that the appellants have not proved that the respondent has made any error in his valuation.
Conclusion:
Having considered all of the evidence before me I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the unimproved value of Lot 24 on RP 29179 and Lot 3 on RP 29185, as determined by the Chief Executive at $175,000 is affirmed.
(NG Divett)
Member of the Land Court
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