Radgown Pty Ltd as Trustee for Centrepoint Unit Trust v Chief Executive, Department of Lands
[1996] QLC 123
•18 September 1996
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LAND COURT
BRISBANE
18 September 1996
Re: Appeal against a determination of Chief Executive,
Department of Lands
(AV95-323)
Radgown Pty Ltd as Trustee for Centrepoint Unit Trust
v.
Chief Executive, Department of Lands
(heard in Gladstone)
Introduction
Radgown Pty Ltd (the “appellant”) owns Lot 1 on RP616293, Parish of Gladstone.
The respondent Chief Executive determined that the unimproved value of the subject land as at 1 January 1995 was $265,000. The appellant objected against that valuation. The objection was allowed and the amount was reduced to $212,500. The appellant then appealed to the Land Court. The Notice of Appeal nominated a valuation of $136,000. At the hearing, however, it contended for a value of $175,000.
The grounds of appeal were as follows:
The unimproved value assessed is not supported either by unimproved land sales or analysed improved sales evidence.
The unimproved value assessed is not in relativity with either applied 1995 values or values amended following consideration of Notices of Objection.
The unimproved value assessed does not take into consideration the disadvantages and the disabilities of the land.
The application of an overall percentage increase is unrealistic and does not follow market evidence or trends.
The appellant was represented at the hearing by Mr P Little (a solicitor) and valuation evidence was given on its behalf by Mr MD Sheehan, a registered valuer. The respondent was represented by Mr B O’Connor and valuation evidence was given by Mr RG Hewitt, a registered valuer with the Department of Lands (now the Department of Natural Resources).
This case was one of five appeals against annual valuations of land in or near to the main commercial district of Gladstone. The cases raised the same issues and were heard successively. The appellant in each case drew on a common set of information about properties in that area prepared by Mr Sheehan (Exhibit 5). The respondent relied on sales evidence drawn from a common set of information prepared by Mr Hewitt for these proceedings. The parties relied on many of the same sales when making their respective submissions.
The law
The legal principles to be applied in this case were usefully summarised in Grahn v TheValuer General (1992) 14 QLCR 327. In its reasons for judgment, the Land Appeal Court relied on decisions of the High Court of Australia and the Land Appeal Court as authority for a series of propositions which, in summary (updated to reflect legislative and administrative changes) are as follows:
(a) It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable land should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis.
(b) The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land.
(c) Section 33 of the Valuation of Land Act 1944 creates a presumption that the value in money terms shown by the Chief Executive in his notice of valuation is correct.
(d) Once it is shown that:(1) in making the valuation the Chief Executive acted upon a wrong principle, or made a serious error of fact; or
(2) the valuation was made by a method fundamentally erroneous,
the presumption created by section 33 is rebutted.
(e)Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence.
(f)If possible, the Chief Executive should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error.
The subject land
The block has an area of 3,757m² and is situated on the eastern side of Goondoon Street, which is a full-width bitumen-sealed carriageway with single opposing lanes separated by a traffic island with concrete kerbing and channelling and parallel parking. The land also has rear lane access via Oaka Lane and easement access along the south-western boundary. Although there is some question about the extent of the easement, it seems that the adjacent land is Council property and the Council has not restricted public access to the subject land along the south-western boundary. It may be, as Mr Little suggested, that the Council could fence its boundary. Were it to do so, it may be necessary to reassess the value of the subject land.
The land is a level to easy sloping inside allotment which falls from the Goondoon Street frontage to the rear eastern boundary. The main North Coast railway line adjoins the northern boundary.
The land is located in the central business district of Gladstone, just south of the Goondoon Street Mall. The land is zoned Comprehensive Development and is used for commercial office and retail purposes. Electricity, water, sewerage and telephone services are connected. Regulated kerbside parking is available. Fair but restricted access is available from Goondoon Street, which has a median strip. Oaka Lane has a narrow bitumen strip carriageway and good access is available from the lane to the rear of the land.
Mr Hewitt provided the following calculation to achieve the valuation of the land at $212,500.
26.8 metre effective frontage at $5,400/m $144,720
plus, extra depth of 21% $ 30,391
$175,111
plus, balance:
20.153m at $5,400/m plus extra depth
21% = $131,679
less, 20.153m at $5,400/m less shallow
depth of 4% = $104,473 = $ 27,206
$202,317
plus, rear access of 5% $ 10,116
Total Value = $212,432
Adopt: $212,500 (average of $56.56/m²)
The rate per linear metre approach to valuing the subject land (with appropriate allowance being made for the depth of each block) is appropriate, and Mr Hewitt used the same method to compare the sales on which that valuation was based.
Sales evidence
The appellant contended that the unimproved value assessed by the respondent is not supported either by unimproved land sales or analysed improved sales evidence.
The appellant provided detailed written evidence from Mr Sheehan about vacant land sales in the area as well as improved land and rental sales evidence (Exhibit 5). In his written valuation report (Exhibit 4) Mr Sheehan referred to the lack of sales of large blocks zoned Comprehensive Development. When giving oral evidence, Mr Sheehan said that only one block of unimproved land on the appellant’s list of sale properties was comparable in size to the subject land.
Sale 1 (respondent’s Sale 3) Lot 132 on CP 843037: The land is an easy sloping inside lot rising from Goondoon Street to Oaka Lane on the rear eastern boundary. Good access is available from both streets, each of which has good bitumen strip carriageway.
The land is located to the north of the Central Business District, is zoned Comprehensive Development and has an area of 2,400m² (some 64% of the area of the subject land). Auckland Inlet is reasonably close and the land has restricted views over the Inlet.
The land was sold in November 1994 for $162,000. The analysed unimproved value was $158,000 and the applied value was $142,000 (or 90%). The applied figure was calculated by Mr Hewitt as follows:
31.24 metre frontage at $3,750/m
plus, extra depth of 16% and rear access of 5% = $141,751
Adopt: $142,000
Mr Sheehan noted that the adopted value is equal to $59.17/m².
Mr Hewitt described the land as inferior to the subject land in position not being located in the main commercial development. Overall he described the sale as inferior. The sale land is well to the north of the subject land and is separated from it by the main business area of Gladstone. The subject land is in a better area with more development around it.
Mr Hewitt listed 6 sale blocks in his valuation report (Exhibit 7), but relied on Sales 5, 2 and 3. Sale 3 was the appellant’s Sale 1 discussed above.
Sale 5 (appellant’s Sale 2) Lot 5 on RP606125 and Lot 3 on RP617715: The land comprises two narrow rectangular blocks, one of which has a frontage to the Goondoon Street Mall and the other has a frontage to Central Lane in the main business district. The blocks are zoned Comprehensive Development and have a combined area of 1,630m² (or 43% of the area of the subject land). They are easy to moderately sloping inside lots falling away from Goondoon Street to Central Lane on the rear western boundary.
The land has good exposure to the Goondoon Street vehicle and pedestrian mall. Restricted kerbside parking is available in the mall area. Central Lane has a narrow bitumen strip carriageway with concrete kerbing and channelling. Good access is available.
The rear allotment provides rear access to the front allotment and provides off street carparking.
The land was sold in March 1995 (some 10 weeks after the relevant date of valuation) for $250,000. The analysed unimproved value was $225,000 and the applied value was $200,00 (or 89%). The analysed value was calculated by Mr Hewitt as follows:Goondoon Street lot - 14.02 metre frontage at $10,300/m ($144,406)
plus, Central Lane lot - 925 m² at $60/m² ($55,500) = $199,906
adopt: $200,000.
Mr Hewitt described the land as overall superior to the subject land, being superior in its location in the mall. On a rate per metre basis, the above calculation shows the front lot of the sale land to be almost twice the value of the subject land.
Sale 2 (appellant’s Sale 5) Lots 13 and 14 on Plan G141: The land comprises two almost square lots with a total area of 1,520m² (or about 40% of the area of the subject land). It has a frontage to William Street, near the intersection with Goondoon Street Mall, and is zoned Comprehensive Development. William Street has a full width bitumen carriageway with concrete kerbing and channelling. There is regulated kerbside parking and good access is available.
The land was originally moderate to steeply sloping, rising from William Street to the rear. It has been excavated to provide a level site.
The land was sold in October 1994 for $150,000. The analysed unimproved value was $114,150 and the applied value was $111,000 (or 97%). The applied figure was calculated as follows:50.3 metre frontage at $3,500/m
less, shallow depth of 20% and excavation of $30,000 = $110,840
adopt: $111,000.
In the earlier Macefoil proceedings, Mr Sheehan acknowledged that the land had been cleared and levelled. He mistakenly thought that the analysed value was $145,000 (with the applied value being 76.55% of that amount) and on that basis had argued that the respondent considered that the sale price was high. I accept the respondent’s analysis of the sale.
Mr Hewitt described the sale land as overall inferior to the subject, particularly because it is not located in Goondoon Street. The difference in the rate per metre for the two properties reflects their values relative to each other.
The evidence about sales of unimproved land just summarised does not establish that the respondent acted upon a wrong principle, or made a serious error of fact or that the valuation was made by a method fundamentally erroneous. Consequently, on that evidence, the presumption created by section 33 of the Valuation of Land Act 1944 has not been rebutted by the appellants.
This part of the appellant’s case, however, was not put in complete reliance on sales evidence about unimproved land.
In general terms, Mr Sheehan argued that the respondent did not apply the sales evidence. His real argument, however, was not with the application of the evidence of sales of unimproved land but with the apparent inconsistency between that information and “levels supported by analysed improved sales or rental levels”. Because, he argued, there were no sales of large blocks of vacant land within the area zoned Comprehensive Development, regard should have been given to the improved commercial sales evidence and trends in rental levels over the previous three to four years. The analysis of improved commercial sales and the adoption of existing rentals illustrate that in some instances no increase was warranted. In other instances, the increase was minimal.
Mr Sheehan’s oral and written evidence about the sales of improved land and rental levels is discussed in detail in other decisions concerning Gladstone commercial land, including Macefoil Pty Ltd and Robsan Investments Pty Ltd v Chief Executive, Department of Lands (AV95-324, decision dated 18 September 1996). Much of the evidence was to the effect that an analysis of the sales based on current rentals and returns shows a land value well below the respondent’s determination for each block. In one instance, the analysis suggested that the building on the land was worth more than the amount for which the land and improvements were sold.
In my opinion, it is neither necessary nor appropriate to deal with that evidence in detail in this case. First, there was sufficient evidence of sales of unimproved or lightly improved blocks for a decision to be made without having to rely on that other evidence. Both valuers were able to give their opinions about the comparability of the sale blocks and the subject land.
Second, use of rental properties is hypothetical and fraught with problems. The amount of rent paid will be influenced by such things as the age, layout and design of the building, how the rent is negotiated, and the supply of and demand for commercial floor space in the area. In Gladstone there has been a high level of vacancies and that would influence whether there was any shift in the level of rents being paid for commercial premises. By contrast, there had been more sales of vacant land in the relevant year than in other recent years and they provided better evidence than had been available for some years.
The relevant authorities would be well known to the parties and need not be considered in detail here. Indeed, I understood Mr Sheehan to acknowledge (at least in the case of improved Sale 4) that the unimproved value of land cannot be proved by evidence of sales of improved land.
Third, Mr Sheehan’s analysis of the evidence of the improved sales to the effect that the unimproved value applied was too high in each instance does not overcome the effect of section 33 of the Valuation of Land Act 1944 which provides that any and every valuation (or alteration of the valuation) of land made by the respondent shall be deemed to be correct until proved otherwise upon objection or appeal or until altered.The analysis of improved land sales or rentals of improved properties does not provide a reliable basis for ascertaining the unimproved value of the subject land. Apart from the numerous variables which may affect the result of any such analysis, it has not been shown that the movement (or lack of movement) in the market for improved commercial properties is in direct relationship to the state of the market for unimproved land. Furthermore, the market for comparable unimproved land supports the valuation in dispute.
The ground of appeal must fail.
Relativity
The appellant contended that the unimproved value assessed by the respondent is not in relativity with either 1995 values or values amended following consideration of Notices of Objection.
In particular, Mr Sheehan referred to a site described as the Indoor Cricket land (V272). The land is a corner block with frontages to Goondoon Street, Herbert Street and Oaka Lane. It is further from the heart of the main commercial district than the subject, being between that district and the Valley shopping area. In his valuation report (Exhibit 4) Mr Sheehan described the land as having an area of 5,345m² and being valued at $310,000 or $58/m². Mr Sheehan said that the subject land, with inferior access and position, had an applied rate of $56.56/m². In his opinion, such relativity is “clearly unrealistic”. It seems that the factual basis for Mr Sheehan’s opinion was incorrect. There was evidence (Exhibit 6) that the land has an area of 3939m² and was valued at $315,000, an average of approximately $80/m².
Mr Hewitt described the Goondoon Street land in the block bounded by Bramston and Herbert Streets as being less valuable than land closer to the heart of the city (to the north) or the Valley shopping area (to the south). He ascribed a rate of $5,000 per metre for the Goondoon Street frontage of the land, compared with the $5,400 per metre applied to the subject land.
As noted earlier, it is desirable that valuations of comparable land should bear proper relativity, one to another. But the valuations must be soundly based. It is untenable to adopt a value for one parcel on relativity with another which has no sound basis.
In this case there was no question about the accuracy of the valuation placed on the Indoor Cricket land. Given the operation of section 33, the valuation must be accepted as correct. Nor does the evidence just summarised give rise to any significant doubt that the valuation of the subject land is out of relativity with that block.
The grounds of appeal fails.
Disadvantages
The appellant contended that the unimproved value assessed by the respondent does not take into consideration the disadvantages and the disabilities of the land. No evidence was given to establish that the subject land suffered from any significant disadvantages and disabilities. Accordingly, this separate ground of appeal fails.
Rate of Increase
The appellant contended that the application of an overall percentage increase is unrealistic and does not follow market evidence or trends.
Mr Sheehan noted that in the 1995 revaluation the assessed unimproved value was increased from $136,000 to $265,000 (some 95.2%). On objection the value was reduced to $212,500 (an increase of 56.25%).
He also noted that, at the time of the hearing, some 42.62% of the total lettable area remained vacant. The vacancy factor had been constant for at least 3 to 4 years. Demand for office space was low. Despite the state of the market, the unimproved value of the subject land was increased by some 56.25%. In a broader sense he said that regard should have been given to the improved commercial sales evidence and trends in rental levels over the previous three to four years. The analysis of improved commercial sales and the adoption of existing rentals illustrates that in some instances no increase was warranted and in other instances the increase was minimal.
Mr Sheehan also referred to the Gladstone Area Water Board sale adjacent to the subject land.
For reasons given above, the analysis of improved land sales or rentals of improved properties does not provide a reliable basis for ascertaining the unimproved value of the subject land. Apart from numerous variables which may affect the result of any such analysis, it has not been shown that the movement (or lack of movement) in the market for improved commercial properties is in direct relationship to the state of the market for unimproved land. Furthermore, the market for comparable unimproved land supports the valuation in dispute.
The ground of appeal fails.
Order
The appeal is dismissed and the determination of the Chief Executive in the amount of $212,500 is affirmed.
GJ NEATE
MEMBER
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