Rainey v Chief Executive, Department of Natural Resources
[2000] QLC 18
•29 March 2000
|
BRISBANE
29 March 2000
Re: Appeal against Annual Valuation –
Valuation of Land Act 1944 –
Valuation Roll No: 615 –
Local Government: Redcliffe City.
(AV99-1238).
John F and Margaret E Rainey
v.
Chief Executive, Department of Natural Resources
(Hearing at Redcliffe)
D E C I S I O N
Background:
This matter relates to a property at 7 Kennedy Esplanade, Scarborough, and described as Lot 1 on RP58311, Parish of Redcliffe. The subject land is located at the southern end of Scarborough Beach on the Redcliffe Peninsula, and is an esplanade site with a north-easterly aspect, and with excellent uninterrupted views across Moreton Bay to Moreton and Bribie Islands. Kennedy Esplanade is bitumen sealed with concrete kerbing and channelling, and all normal utility services are available. The subject land is zoned "Residential C" under the City of Redcliffe Town Planning Scheme of 19 April 1986, effective at the date of valuation of 1 October 1998. The key issues are the comparison of sales, the nature of the land, the method of valuation and relativity with adjoining parcels.
The Chief Executive, Department of Natural Resources, on 29 March 1999 issued a valuation of the subject land at $205,000. Following an objection the Chief Executive confirmed that unimproved value on 30 August 1999. The appellants have now appealed that figure, claiming that the unimproved value should more properly be $166,000.
Mr J Rainey appeared and gave evidence for the appellants. Mr R Paterson, Principal Legal Officer, appeared for the respondent, calling evidence from Clay Jason Edward Eaton, the Departmental Registered Valuer responsible for determining the valuation.
The Evidence:
(1)The Nature of the Land –
Mr Rainey argues that the valuation has failed to adequately allow for the triangular shape of the subject land which, in his opinion, severely impedes the effective building of a dwelling upon that land. Mr Rainey is a very experienced quantity and building engineer, who has extensive expertise in building costs and practices. Mr Rainey advises that the impact of a restrictive site shape can impact heavily upon both the method of construction of a building, and its eventual cost, which he claims, can increase by up to 25% to 30% as a consequence of those limitations.
The subject land has a frontage to Kennedy Esplanade of approximately 31.9 metres, but then narrows quickly to a single point at its rear, which is a distance of about 33 metres from Kennedy Terrace. The subject land has an area of 577 square metres, has a gentle crossfall to the west, and is occupied by a high-set two-storey timber dwelling. Mr Rainey concedes that views from the subject land are excellent, but argues that they are only comparable to parcels adjoining the subject land at 3 and 5 Kennedy Esplanade, and both of those parcels are much larger in area. Mr Rainey notes that 3 Kennedy Esplanade has an area of 703 square metres, and an unimproved value of $215,000, while 5 Kennedy Esplanade has an area of 675 square metres and an unimproved value of $212,500.
Mr Rainey argues that the smaller area of the subject land (577 square metres) does not reasonably represent a fair valuation at $205,000, where the restrictive shape of the subject land would impact the location of a swimming pool at the rear, or vehicle access to that part of the land.
Mr Rainey concedes that valuations of residential sites are generally not determined on a rate per square metre basis, but argues that, because of the restrictions of the subject land , a comparison on a per square metre basis lends some support to its lack of parity compared to adjoining parcels. The subject land has a rate per square metre 30% higher than those parcels.
Mr Eaton by comparison rejects that the shape of the subject land is its most significant feature. Mr Eaton argues that any disability resulting from the narrowness at the rear, is more than off-set by the additional benefits accruing to the subject land from the wide frontage (32 metres). Mr Eaton argues that the most important feature of lands along the esplanade is the excellent views to Moreton Bay, and the extent to which rooms of a dwelling can take the opportunity to experience those views. Mr Eaton confirms that residents regularly step back the walls of a dwelling in order to gain views from rooms removed from the street alignment. Because the subject land has a frontage well in excess of the adjoining parcels, Mr Eaton believes prudent purchasers would be prepared to pay extra to obtain such flexibility for views.
To support his conclusion Mr Eaton supplies examples of newly-constructed dwellings along the esplanade on parcels of only 10 metre frontages. These owners have constructed large plate-glass window walls at second floor level, in order to maximise the views. However at ground level, after car accommodation is provided, the owner often only has limited window space to observe the views to water. Mr Eaton argues that the subject land, because of its much larger frontage (32 metres), has twice or three times the room to get views from ground level. However it is noted that because of the tapering of the western boundary of the subject parcel, any attempt to increase views to water from rooms further removed from the frontage, would be restricted to the eastern side of any new dwelling.
In respect of the potential building area of the subject land, Mr Eaton also argues that, allowing for standard building setbacks, there is a building area footprint of about 201 square metres at ground level. The Redcliffe City Council (the Council) has some flexibility in its relaxation of building requirements, but buildings up to three storeys are permitted. Mr Eaton therefore argues that a dwelling up to 600 square metres could be erected upon the subject land. While costs of such a structure would be substantial, in Mr Eaton's opinion, they are likely to be seen as an acceptable cost of maximising the available views. While there was no evidence provided of the cost of such a three-storey structure, the costs of installing a domestic lift at that height would be of the order of an additional $50,000 above normal building costs. Mr Eaton argues that for a multi-storey residence the costs of construction on the subject land would be similar to that on a standard esplanade fronting lots of only 10 metre frontage (Sales 1 and 2).
Mr Eaton also offered the considered opinions of the Council building inspector, that there was scope for further relaxation of boundary clearances in certain circumstances. Mr Eaton appears to place some emphasis on the Council's policy of allowing certain discretion to their building inspectors, although the risk of appeal to the Courts was not explained.
However those opinions were not substantiated by the evidence of Mr Rainey, who had also sought guidance from Council officers. Without the benefit of examining the Council's officer personally, I place little weight upon the likelihood of either extending any new building up to only 3 metres from the road alignment, or building closer up to the side boundaries (down to 0.75 metres). I believe any prudent owner would need to weigh the risk of gaining such relaxations from Council, when they purchased the land.
However Mr Eaton notes that even at a standard 6 metre setback, the effective frontage of the subject land is still 20 metres. Mr Eaton further argues that should a swimming pool be desired, then its construction could be staged at the rear of the parcel prior to building the dwelling, or located at the front near the road alignment. He also notes that any of the narrow esplanade fronting parcels would suffer limitations upon light and air and privacy from adjoining parcels, similar to that currently experienced by the subject land from the adjoining large dwelling at 9 Kennedy Esplanade.
(2)Comparison of Sales –
Mr Rainey provides no sales to support his estimate of the valuation, relying mainly upon relativities with adjoining parcels, based upon rates per square metre. However he seeks some support from two recent appraisals of the subject land by local real estate firms. Both of those assessments concluded an average sale price for the existing improved property of $275,000. Mr Rainey then adopted his estimated for the value of the dwelling at $109,000, using his experience as a quantity surveyor/engineer. That figure is also supported by the current insurance appraisal on the dwelling. Mr Rainey's estimate of the building's value was based upon new costs of construction, less 30% to allow for depreciation. By deducting the $109,000 from the $275,000, Mr Rainey concluded a value for the land of $166,000.
Mr Eaton adopts the following sales of vacant lands:
·Sales 1 and 2 – (155 Flinders Parade, Scarborough – Lot 4 on RP30474).
This is a 405 square metre "Residential C" parcel about 50 metres east of the subject land. The sale is a level rectangular in shape lot with a narrow frontage of 10 metres, and similar access and utility services are available. Overall the sale is seen as inferior to the subject.
The sale sold initially in February 1998 for $163,500, which after allowing for fencing and clearing improvements, and the additional cost of demolishing the existing old dwelling (asbestos contaminated) at a residual additional cost of $3,000, the sale was analysed at $166,500.
The sale was subsequently resold in June 1998 (once the dwelling was removed) for $200,000, which after allowing for clearing and fencing was analysed at $198,250, and applied at $190,000.
·Sales 3 and 4 – (153 Flinders Parade, Scarborough – Lot 3 on RP30474).
This is a 405 square metre "Residential C" parcel adjoining Sales 1 and 2 to the south. The land has similar features and views as Sales 1 and 2, has a narrow width of 10 metres, and is overall inferior to the subject land.
The sale sold initially in February 1998 for $143,500, which after allowing for improvements was analysed at $142,250.
The sale subsequently resold in November 1998 for $182,500, was analysed at $181,250, and applied at $175,000.
·Sale 5 – (5 Kennedy Esplanade, Scarborough – Lot 2 on RP58311).
This is a 675 square metre "Residential C" parcel adjoining the subject land to the east. The land has similar features and views as the subject land, but has a truncated rectangular shape, with a 15 metre frontage. The sale is seen as overall superior to the subject land.
The sale sold in January 1999 for $312,500, which is after the date of valuation, but before the date of issue of the valuation. However the notification of the sale was not received until early April 1999. Because of this late receipt of the sales information, the impact of the sale will be considered in the succeeding year's valuation. The sale was provided merely to demonstrate the on-going level of value being paid for esplanade lots. This late sale was analysed at $311,500, but only applied at $212,500.
In his analysis of the property market along the esplanade at Scarborough, Mr Eaton advises that the residential market has been increasing steadily for the last two years. The subject locality has tended to escalate more quickly in the last year. During this period Mr Eaton has observed that older established houses are often purchased and subsequently either sold for removal, or demolished. Each of his sales evidence supplied demonstrates that practice. Mr Eaton argues that the new owners have virtually purchased a house site, and placed little, if any, value in the existing old dwelling. On that basis Mr Eaton disagrees with Mr Rainey that the residual value of the existing dwelling upon the subject land was unlikely to have an added value anything like $109,000.
Mr Rainey sought parity with the old dwelling upon the adjoining parcel (Sale 5), which he argues supports his assessment of $205,000 for the subject land. However Mr Eaton notes that property was subsequently exchanged for removal at nil cost, subject to the clearing of the site for new building works. Mr Eaton argues that sale also supports his conclusion that old dwellings bring little added value to properties within that locality.
In applying his unimproved values on the subject land, and the adjoining parcels, Mr Eaton has maintained the original relativity between those parcels, merely increasing that whole market sector by about 35% as demonstrated by the sales evidence.
In respect of any loss of flexibility to belatedly decide whether to install a swimming pool once a new dwelling is constructed, Mr Rainey notes the restrictive shape of the subject land would be weighed in a prudent purchaser's mind when he purchased the land. However Mr Eaton disagrees with that conclusion, noting that Sales 1, 2, 3, 4 and 5 all demonstrate what people will pay where they can overlook building a pool at the rear, and have no ability to build one in the future. The parcels involved in those sales are only 10 metres wide, and even the new concrete slab for the new dwelling on Sale 5, will preclude further vehicle access to the rear of that parcel.
Decision:
(i)The Nature of the Land –
I turn first to consider the impact upon a prudent purchaser of the triangular shape of the subject land. I note that generally a regularly shaped parcel provides the maximum flexibility for an owner upon which to build. However "odd or irregular shapes are not necessarily detrimental and those so shaped which can be attractively developed may be preferred by some people rather than those sites which are rectangular in shape". (Land Valuation and Compensation in Australia Third Edition 1996 by Rost & Collins, page 142).
I believe that Mr Rainey's experience of increased building costs on irregularly-shaped parcels, would be a factor for consideration, based only upon actual costs of construction. However a residential site is chosen by owners for other than just the final costs of development. The market at Scarborough indicates that location upon the esplanade with views across Moreton Bay, are very actively sought after by purchasers. The pattern would indicate that many of those purchasers intend to rebuild a new dwelling, either immediately, or after a short period, during which the old property may be tenanted as a holding arrangement. In those type of sales, as typified by the evidence, the added value of the existing old dwelling is seen as small.
The market generally also places high value upon properties with views of some outstanding character, such as city views, or across water. Mr Eaton provides evidence that lands of area 400 square metres, but removed from the esplanade at Scarborough, tend to sell at prices about $50,000; while comparable lands with direct views of Moreton Bay, and on the esplanade, sell up to $300,000. The explanation is clearly the high value that owners see in the potential for views of the water.
Mr Rainey does not dispute that conclusion, but argues that the benefits of an approximate 32 metre frontage of the subject land to Kennedy Esplanade, cannot be utilised because of the rapidly reducing width as one moves back from the street alignment. Mr Eaton concedes such a decline in frontage, but argues that even allowing for a standard 6 metre building setback, the available building envelope would still allow for an 18.8 metre wide dwelling of 6 metres depth (area 113 square metres), and further step into the building as it extends from the street, would enable a reasonably regularly shaped building footprint of about 200 square metres, or up to 600 square metres with multiple levels.
In concluding such building locations, I believe a prudent buyer would base his purchase price upon the standard building setback distances, and see any relaxation of those distances by Council as a bonus to be maximised. I also agree with Mr Eaton that the potential to maximise the views from the subject land is a greater benefit, than any detriment as a consequence of the triangular shape of the parcel.
(ii)Comparison of Sales –
I note first that the best basis for assessment of unimproved value has been determined to be by comparison of sales of vacant or lightly improved lands, if they are available. That was followed by the Land Appeal Court in RJ Scougall v. Chief Executive, Department of Natural Resources (1996-97) 16 QLCR 536, at 544; and also in Fischer v. Valuer-General (1983) 9 QLCR 44 at 46; and Barnwell v. Valuer-General (1989) 13 QLCR 13, at 17. Those matters were also referred to by the Land Appeal Court in Chief Executive, Department of Natural Resources v. Radlett Enterprises Pty Ltd (1997-98) 18 QLCR 397, at pages 402 to 404.
I note also that residential lands are purchased on a site basis, and not on a per square metre basis. That was clearly defined in Hans and Else Grahn v. Valuer-General (1992-93) 14 QLCR 327, where the Land Appeal Court said at page 330:
"As the Land Appeal Court said in its decision on the appellants' previous appeal (H and E Grahn v. The Valuer-General, AV89-246 and 247, 13 December 1990);
'For the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the basis of a unit area of valued comparison. Site for site comparison should take into comparison such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots etc and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features. ' "
In deciding whether a prudent purchaser might discount a purchase of the subject land, because of any loss of potential to later build a swimming pool to the rear of the land, after the construction of a new dwelling, I look to guidance of what might be considered in the marketplace. The definition of a prudent transaction of land was best 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 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."
Clearly any prudent buyer would take on note all of the potential features of the land in his comparisons with other available lands. The fact that the purchaser of Sale 5 initially considered a proposal to refurbish the existing building, and later changed his mind and demolished the building in order to construct a new more modern one, demonstrates the options considered by a prudent purchaser. Therefore all of the available options would be considered in the agreed sale price.
If I then consider Mr Rainey's assessment of the unimproved value, I note that he has relied upon his assessment of the value of the dwelling. The difficulties of assessing the added value that such improvements bring to the land, was best described 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.
Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement."
In further support of that principle in the current matter, I also note that the current market for old dwellings along the esplanade, tends to place little residual value in the old buildings.
That then leaves the following comparisons of Mr Eaton:
Sale Analysed Value Comparison to Subject
2 $ 198,250 Inferior
4 $ 181,250 Inferior
5 $ 311,500 Superior
I note that Mr Eaton has not relied upon his Sale 5, but uses that sale only to demonstrate a continuing high level of demand at or about the date of the issue of the valuation at 29 March 1999. In that respect I note that it has been generally held that it is appropriate to compare sales up to the date of issue of the valuation. That was directed in KP and RD Weisenberger v. Valuer-General (1978) 5 QLCR 125; and also in RG McMurray v. Valuer-General (1983) 9 QLCR 35, at 36.
Support for use of a subsequent sale may be found in the decision of Daandine Pastoral Company v. Commissioner of Land Tax (1943) 7 The Valuer 299. In that matter Williams J in the High Court of Australia said at page 304:"Values must be calculated in the light of circumstances which existed on the material date, in this case 30 June, 1939, but subsequent events can be taken into account in order to determine the proper weight to attach to such circumstances. Subsequent sales are just as admissible in evidence as prior sales provided that in all the circumstances they are comparable. If between the material date and the date of the subsequent sale, supervening events occur which alter the conditions previously existing, the subsequent sales would not be comparable and would be useless."
Support for the use of subsequent sales is also to be found in McCathie v. Federal Commissioner of Taxation (1944) 69 CLR 1, at page 16, and also in Federal Commissioner of Taxation v. Harris (1980) 30 ALR 10, at 18. However in Harris, Fischer J noted at page 25 that the subsequent event cannot create an expectation which was not in existence at the relevant date.
In the current matter Mr Eaton has clearly relied mainly on his Sales 2 and 4, but uses his Sale 5 to further demonstrate that a 15 metre wide parcel adjoining the subject land, has an applied unimproved value of $212,500 at the relevant date. His application at $212,500 is well below the actual analysed sale price of $311,500, demonstrating, in his opinion, a very conservative use of that sales evidence. The principle to apply a conservative valuation is supported by the decision in Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Company of South Australia Limited and Others (1946-47) 74 CLR 358, where in the High Court Dixon J said at page 373:"I have had the advantage of reading the judgment prepared by Williams J and agree in it. I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate."
Summary:
In considering the current matter I note that the onus of proof in the appeal falls upon the appellant under section 45(4) of the Valuation of Land Act. I note also that unless the appellant proves that the Chief Executive has made an error, or applied a wrong principle, then the valuation shall stand. (See Brisbane City Council v. Valuer-General (1977-78) 140 CLR 41, at page 56 – High Court of Australia).
Conclusion:
Having considered the whole of the evidence I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the unimproved value as determined by the Chief Executive, Department of Natural Resources, in the sum of $205,000 is affirmed.
(NG Divett)
Member of the Land Court
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