Ramsay v Chief Executive, Department of Natural Resources
[1999] QLC 41
•30 April 1999
|
BRISBANE
30 APRIL 1999
Re: AV98-450 –
An Appeal against a determination of Unimproved Value –
Valuation of Land Act 1944 –
Inglewood Shire
JG and IM Ramsay
v.
Chief Executive, Department of Natural Resources
(Hearing at Inglewood)
D E C I S I O N
As at 1 October 1997, the unimproved valuation of land situated at Spooners Road about 15 km east of Texas, described as Lot 1 on RP 164418, Parish of Texas, County of Clive, containing 34.08 ha, was determined by the chief executive in the amount of $10,800.
In the Notice of Appeal against that valuation, the appellants estimated the unimproved value to be $6,000. Mr W.G. Major acted as agent and gave evidence for the appellants as he did for a number of other appellants throughout the Shire at the same sittings of the Court.
The main thrust of Mr Major's submission in this appeal was that, in his opinion, the land was being used for purposes of "farming" and pursuant to s.17(1) of the Valuation of Land Act 1944, any enhancement in the unimproved value for rural homesite use should be disregarded.
Section 17(2) of the Act provides the meaning of "farming" as follows:"(a) the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; or
(b)any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock;
if the business or industry represents the dominant use of the land, and -
(c)has a significant and substantial commercial purpose or character; and
(d)is engaged in for the purpose of profit on a continuous or repetitive basis."
In a tendered statement Mr Major gave some background to the facts on which he relied in forming the opinion that the land was used for the purpose of "farming" and more specifically "orchard and vineyard". Until 1996, the land was said to have been used for the grazing of about 40 sheep, 20 cows and one bull. The appellants' son and daughter-in-law own a cafe/fruit shop in Texas and the son worked part-time on an orchard. After what was said to be considerable research, the decision was taken by the appellants to grow olives, grapes and fruit trees, on the subject land. A dam was built, an area cleared and deep ripped and a soil improvement program commenced in early 1996. The sheep were sold in 1996 and the cattle in October 1997. However, it was not until August 1998 until 200 grapevines were planted, followed by 100 olive trees with the intention to increase the olive grove to 500 trees. It was proposed to grow various fruit trees as well. In the spring of 1998 1,000 tomato plants were grown and that project was said to have been "very successful" to the extent that it is intended to double the planting of tomatoes in 1999. Mr Major had not been provided with specific financial figures which might have assisted in interpretation of the "very successful" terminology. The farming project will comprise 12 ha of clearing. The costs to date, together with estimated costs of establishment of the olive grove (to 500 trees) and vineyard were said to be as follows - dam ($10,961); clearing of land and deep ripping ($2,154); irrigation pump ($1,528); olives ($11,000); grapes ($4,000). Mr Major estimated that the projected gross income from grapes would progress to $10,000 per annum ($9,000 net) after four years, while the income from olives was estimated to reach $34,000 per annum gross ($25,300 net) after eight years. The growing of small crops would provide cash flow (unestimated income) in the interim period.
Mr Major, under cross-examination, described the soil types on the property as "fairly poor" but quite suitable for olives and grapes. Photographs were tendered showing the tomato crop and erosion which had emanated from an access road on the property.
In Mr Major's opinion, "as every business had to start somewhere", the use for purposes of "farming" had commenced with the clearing, cultivation and dam construction. He submitted that at that point in time, the activities represented the dominant use of the land and had a significant and substantial commercial purpose or character and were engaged in for the purpose of profit on a continuous or repetitive basis once the income stream commenced.Based on relativity with valuations of property and for the purposes of farming Mr Major suggested a valuation of $2,750 for the subject land.
In the alternative, if it was found that the activities on the appellants' land did not constitute use for the purposes of "farming" as defined, then Mr Major offered an opinion that the unimproved value of the land for highest and best use as a rural homesite was $4,000. He is not a registered valuer but has a keen interest in local property and the real estate market. According to Mr Major there had been no sales of comparable homesites but there were properties on the market with asking prices "less than the value of the improvements". He had discussed the question of rural homesite values with two local real estate agents, independently, and had been informed that depending on distance from town, cost of connecting power, availability of a water source and supply, and the quality of the homesite, in true unimproved condition, the range of value would be $2,000 to $10,000. Mr Major felt the subject site would fall into the lower range of value and had suggested $4,000 accordingly.
The valuation appealed against was made by Mr M.W. Malone, a registered valuer employed by the Department of Natural Resources. He described the nature of the land as being an undulating forest ridge with poor quality traprock soils.
Although he had not inspected the property other than from the road, he saw the dominant use of it as being a rural homesite. He valued it accordingly. In common with rural homesites generally in the Texas locality, the basis of his valuation was obtained from two sales which he considered were representative of the local rural homesite market. The first of those sales was of a 50.17 ha site situated on the Inglewood-Texas Road. It was sold on 21 August 1996, for $45,000, the sale analysed to show an unimproved value of $24,100 with an applied valuation of $21,000. The second was a sale of a 207.3 ha property in Sweedmans Road, Texas on 24 November 1995, for $100,000, the sale analysed to show an unimproved value of $31,000 with an applied valuation of $29,000. The valuations applied to those sale lots represented an increase of 80% over the previous valuation. That level of increase had been seen to be supported by rural homesite sales generally in the Shire and had been applied initially consistently, maintaining the previously established relativity, adjusted only where it was considered warranted.
Mr Major argued that the two sales were of lots considerably superior to the subject land as evidenced by the applied valuations. He did not agree with Mr Malone's analysis of unimproved value, a question which was argued in another appeal.
During his evidence Mr Malone referred to a sale of a 34 ha lot about 25 km north of Texas near the Inglewood-Texas Road, the land having been sold in February 1998 for $15,000. The sale had not been known to Mr Malone at the time of making the valuation but he was confident that it supported the $11,000 applied to that land. He had not however investigated or analysed the sale. He knew it had poor access, and described the land as poor sandy forest. Mr Major knew of that sale land also and suggested it was a better type of country with frontage to Brush Creek.
Valuation Considerations
Purposes of Farming
It is my opinion that in the period relevant to this valuation, ie from 1 October 1997 (date of valuation) to 30 March 1998 (date of issue of notice), there had been no business or industry such as orcharding, viticulture, horticulture or vegetable growing commenced on the subject land. The development of land which would permit a business to be established does not, in my view, constitute a business or industry. Even so, the development which had taken place in the relevant period did not necessarily represent the dominant use of the land but might still have been regarded at that time as ancillary to the residential orientated use of a rural site. Had the grazing use been continued, the level of viable carrying capacity would not have been seen to have represented the dominant use.
Having decided that, within the relevant period, the land was not used for the purposes of "farming", it is unnecessary to analyse the nature of the business which may have commenced later. However, it should be said that the details provided lacked, in my opinion, the criteria which needed to be considered in deciding whether a particular business has a significant and substantial commercial purpose or character. The business plan, if there was one, lacked substance particularly with regard to financial detail and planning.
Rural Homesite
Delivered today is a decision in AV98-337 (E.B.and D.M. Knapton) in which is contained comments relative to appeals against the chief executive's determinations on rural homesites throughout the Shire. Those comments are repeated here for the sake of completeness:" This appeal is one of a number heard at the same sittings of the Court in Inglewood, many of which related to rural residential sites. It is clear that many owners of rural residential sites in the Inglewood-Texas locality do not accept that the market for this type of land had increased since the previous valuation, let alone to the degree (80%) which the Department's valuations suggested. In the Texas area in particular, the Court was informed that an earlier proposal to expand the Wyalla feedlot complex had brought with it various expectations in the community, particularly with regard to employment prospects and improvement in the local economy. It is said, that linked to those expectations, had been a keen demand for real estate of a rural homesite nature. The expansion proposal did not eventuate and it is said that there is now, and was at the date of valuation, little demand for rural homesites, even at reduced levels of asking prices.
Certainly, the extent of sales evidence put forward by the Department, as a valuation basis in this and other appeals, is limited. The basic sales evidence has brought complaints from appellants that the sale properties are generally not comparable to the appeal lands and are not indicative of the depressed market which was said to exist.
There is substance in the allegations that the sales evidence used by the Department is generally not ideal. It is not the kind of evidence which would suggest the activity which would normally be associated with a significant increase in value. There is a suggestion by some that the sales which have taken place are 'one-off' and not representative of the true market. However, having heard the totality of the evidence, I do not accept that such is the case. The analysis of sales evidence by Mr Malone, has in some instances been challenged, but not, in my opinion, with any significant success. The result has been that the sales evidence has generally been proved by the Department to support the relevant date valuations applied to the actual sale properties.
It is appropriate to discuss the position in which the Department is seen to have found itself. It is the suggestion of the Department that when the previous valuation was made a 'conservative' approach had been taken, although there were sales at that time of rural homesites at levels of value significantly higher than those applied. It seems that those responsible for the valuation at that time were not confident that the level of values as shown by the higher sale prices was realistic or capable of being maintained. However, when it came to the making of the Shire valuations now under appeal, it had been found that the available sales evidence continued to reflect a level of value significantly higher than the level previously applied. That did not mean that there had necessarily been an increase in market value in the intervening period. However, the sales evidence had been seen to consistently confirm that the previous valuation was too low as at 1 October 1997. The decision was taken to increase the valuations of rural homesites in line with the relevant sales evidence, rather than perpetuate an under market valuation.
The owners of rural homesites understandably perceive that the Department, through its methodology in increasing valuations of this category of property, by 'a blanket' 80% above the previously existing base, had concluded that the market value had increased by that factor. It is clear that the owners of these sites are confident that such a conclusion is wrong and inconsistent with the real marketplace.
The increase in valuation has considerable relevance to owners who face significant increases in rates payable to the local government.
However, the level of increase above the previous valuation is not relevant to the matters which this Court now has to decide. As the Land Appeal Court found in Tow v. The Valuer-General (1978) 5 QLCR 378 at p.381:
' Subject to certain statutory requirements as to the onus of proof and the restriction of the appellants to the grounds of appeal specified in their notice of appeal, the duty of the Land Court and of this Court is to make determinations of unimproved value based on the evidence presented to it by the parties and conforming to the aforementioned statutory formula.
It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation. The Valuer-General and the Court are concerned with finding unimproved value and not with the amount of rates that may be levied as a result.'
The chief executive's valuation of lands in Inglewood Shire as at 1 October 1997, was made pursuant to s.37 of the Valuation of Land Act 1944. Section 33 of the Act provides that the valuation shall be deemed to be correct until proved otherwise upon objection or appeal. Section 45(4) of the Act provides that the burden of proving any and every such ground of appeal shall be upon the owner.
In the appeals heard at the Inglewood Shire sittings, no appellant chose to engage the services of a registered valuer, no doubt due to cost implications. However, the task of an appellant is difficult in the absence of professional assistance, particularly when it comes to challenging the veracity of an assessment made by a professional valuer and based on that valuer's analysis of market evidence.
There has been a misconception by some appellants as to the meaning of 'unimproved value'. Section 3 of the Act, as far as it is relevant to the Inglewood Shire appeals provides as follows:
'3.(1) For the purposes of this Act -
"unimproved value" of land means -
(a)in relation to unimproved land - the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require; and
(b)in relation to improved land - the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.
(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act.
(3) …….
(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that –
(a)the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and
(b)such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used;
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made.'
The question of availability of services and infrastructure to land, particularly in cases where owners have had to contribute significantly to the cost of provision of electricity, and the correct interpretation of the meaning of unimproved value were dealt with by the Land Appeal Court in Clough v. The Valuer-General (1981-82) 8 QLCR 70 at pp.73-74 where the following is found:
' A road, or service (sewerage, water or electricity) are not in the strict legal sense appurtenant to a parcel of land. They do not belong to it as a property right … the wires … exterior to the parcel (and in some cases within the bounds of the parcel) are owned by the relevant service authority.'
Then at p.75:
' We think it beyond doubt that what has to be valued is the subject parcel of land viewed as if the improvements thereon, visible or invisible, never existed but that otherwise the parcel was situated in the community (and environment) with the amenities and facilities that had grown up around it as at the date of valuation.'"
As in the Knapton appeal, which relates to an aggregation of two lots as a large rural site in close proximity to the north of the subject land, I have found the sales evidence provided by Mr Malone to be of no real assistance. While it may be that the Brush Creek sale will support the valuation placed on that land, as Mr Malone anticipates, it was not used as a basis and there is insufficient detail before the Court for that transaction to assist the respondent's case.
The evidence overall, including sales evidence from other localities within the
Shire, has created some doubt as to Mr Malone's interpretation of the market particularly for the lesser quality rural sites such as the subject appears to be, regardless of the owners' plans for its development.That doubt does not extend to acceptance of Mr Major's interpretation of unimproved value but I have decided to reduce the valuation appealed against generally in line with my interpretation of the overall evidence.
Finding:
The appeal is allowed, the determination of the chief executive set aside and the unimproved value determined in the amount of Nine Thousand Five Hundred Dollars ($9,500).
RE WENCK
MEMBER OF THE LAND COURT
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