Re Lago
[1997] QLC 96
•27 June 1997
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BRISBANE
27 JUNE 1997
Re: Appeal against Minister’s Decision on the purchase
price of land for conversion purposes
Land Act 1994
Special Lease No.: 200631
Lessee: William Alex Lago
(Hearing at Innisfail)
D E C I S I O N
Mr WA Lago is the lessee of Special Lease No. 200631. Under the provisions of s.165 of the Land Act 1994 (“the Act”), Mr Lago applied to convert the Special Lease to a Deed of Grant. In granting the application, the Minister for Natural Resources decided that the purchase price for conversion purposes was $85,000.
Mr Lago appealed against the Minister’s decision on the purchase price under s.170(1) of the Act. Following the internal review process provided for in s.422 to s.425 of the Act, Mr Lago’s solicitors were advised by letter dated 8 November 1996, that the delegate for the Minister had reviewed the amount of the purchase price and confirmed the original decision of $85,000. By Notice of Appeal dated 5 December 1996, Mr Lago appealed to the Land Court against that decision, advising that his estimate of the unimproved value was $36,000.
Section 170 of the Act provides as follows:
“(1)Unless a price or formula has already been stated in the lease to be converted, the Minister decides the purchase price for the conversion of a lease to a deed of grant.
(2)The lessee may appeal against the Minister’s decision on the purchase price.
(3)The purchase price is an amount equal to the total of -
(a)the unimproved value of the land being offered, as if it were fee simple; and
(b)the market value of any commercial timber that is the property of the State on the land.
(4)The unimproved value of the land is calculated at the day the Minister receives the conversion application.”
In this case the value of commercial timber was not a consideration. The parties agreed that the relevant date for the determination of unimproved value is 22 September 1995.
“Unimproved value” is defined in s.434:
“(1)In this Act, the ‘unimproved value’ of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing, if the parties had acted knowledgeably, prudently and without compulsion.”
At the hearing of the appeal, the appellant was represented by Mr D Morzone, of Counsel, while the respondent was represented by Senior Valuer, Mr PF Goodman-Jones. Valuation evidence for the appellant was given by Mr R Dickson, a registered valuer in private practice, and for the respondent by Mr EM Migliorini, a registered valuer employed by the Department of Natural Resources.
Special Lease No. 200631 is in respect of the land contained in Lot 26 on Crown Plan T9482, Parish of Rockingham, County of Cardwell, which has an area of 680 m². It is situated at 6 Taylor Street, Tully Heads, a township immediately to the north of the mouth of the Tully River and about 22 km by road south-east of the Town of Tully. Taylor Street has a bitumen strip carriageway to the northern boundary of the subject land and the balance of the street frontage is gravel, with earth shoulders and shallow table drains. The road from Tully to Tully Heads is subject to seasonal flooding and is inaccessible at times. Water, electricity and telephone services are connected to the property.
The land is zoned “Residential” under the Town Planning Scheme for the Shire of Cardwell. It is used for single unit residential purposes.
The land is a beachfront allotment rising gently from Taylor Street to its eastern boundary which fronts an unformed esplanade. It has very good views of the ocean and islands. However, a rock boulder seawall has been constructed on the seaward side of the esplanade, about 15 metres from the eastern boundary of the subject land. The seawall is from 10 to 12 feet high and is composed of rock boulders which have been dumped at the eroded edge of the esplanade to prevent further erosion.
Mr Lago admitted that there are good views from the land, but the presence of the rock wall detracts from its value. Furthermore, because of the rock wall there is no immediate access from the subject land to the beach as the Council has prohibited people from walking on the rocks in case they are injured.
Mr Lago had taken a series of photographs to illustrate the difference between the esplanade frontage of the subject land with its rock wall and the beachfront allotments at Hull Heads, a township about 3 km to the north of Tully Heads and immediately to the south of the mouth of the Hull River. Those properties fronting the esplanade at Hull Heads have similar ocean and island views, but have easy access to an extensive sandy beach.
According to Mr Lago, there was at one time a road constructed along the esplanade on the seaward side of the subject land. However, because of periodic erosion by the sea, the esplanade had been eroded away, but gradually the sand had built up again. In order to prevent further erosion, the land owners of the frontage lots at the southern end of Tully Heads constructed a rock wall at their expense. Approximately 18 months to two years ago, the Council had taken over responsibility and constructed the present rock wall.
The subject land is situated only two allotments away from Lot 28, the southernmost residential allotment at Tully Heads. The parties agreed that at one time there was a spit of land extending from the southernmost allotment southwards to the mouth of the Tully River, on which had been constructed a toilet block and boat ramp. Over the years that land had been completely eroded away. Recently, the Council had extended the rock wall around the eastern, southern and western boundaries of Lot 28. Concern was expressed that erosion may continue further around the western boundary of Lot 27 and perhaps even threaten the western boundary of the subject land.
Mr Dickson was of the opinion that because of the disadvantages suffered by the eight beachfront allotments south of Carpenter Street at Tully Heads, they would be very difficult to sell. For that reason, he felt that sales at Hull Heads were not comparable and that any sales used for comparative purposes should be drawn from the locality at Tully Heads.
According to Mr Dickson, the situation at Hull Heads was very different. He agreed with Mr Lago’s evidence that allotments fronting the esplanade not only had the same ocean views as the subject land, but also had direct access to a wide sandy beach, with no unsightly rock wall. He particularly drew attention to the fact that the subject land is only two allotments removed from where he said 4 acres of land had been lost to the sea and the extension of the rock wall was required to prevent further erosion.
When asked about the factors of amenity that he took into account in preparing his valuation, Mr Dickson replied as follows:
“Well, I mean, you take them into account simply because the market takes them into account in the safety factor of the allotments. The land at Hull although the beach has come in and gone out, there’s been no major threat with the exception of the block at the end where they’ve had to put that brick wall around right next to the mouth of the river. The land at Hull Heads has maintained and increased its value. At Tully Heads, when we talk about Tully Heads, if we talk about the southern part of Tully Heads, where the threat of erosion is most severe, well, the fear attaching to that erosion has reflected in the market that the properties are difficult to sell and if you can sell them, or do sell them, you only sell them at a reduced value and the market reflects that.”
Mr Dickson was of the opinion that at the relevant date the unimproved value of the subject land was $36,000. He arrived at that opinion by considering a number of factors:
1.The sale of Lot 24, two allotments north of the subject land. That freehold allotment of 607 m², sold in August 1991 for $116,000. It resold in March 1994 for $96,000
2.Lot 27, the allotment adjoining the subject land to the south, had been offered for sale at auction approximately 12 months previously and had received no bid.
3.The subject land had been on the market for 36 months and had attracted no inquiries.
4.The sale of Lot 7, a 607 m² allotment in Taylor Street, on the western or inland side of the street, for $90,000. That land was improved with a large two-level dwelling containing five bedrooms and two kitchens.
5.In 1992, he had valued the allotment five removed north of the subject land (which he called Lot 28 but which is actually Lot 16) at $86,000, attributing $50,000 to the land component.
Although he relied on all that information, Mr Dickson saw the difference in the sale prices of Lot 24 from 1991 to 1994 as confirming the downward trend of values in the locality due to the threat of erosion. He stated that his basis of valuation was confirmed by “a dissection” of the 1994 sale of Lot 24. Although he did not tender an analysis of that sale, he stated that, “Based on selling price of $96,000 the land component of the sale is no more than $36,000.”
In his oral evidence, Mr Dickson referred to other sales. Lot 6 (adjoining and to the north of Lot 7 and developed with a substantial house) sold in September 1996 for $67,000. In Mr Dickson’s opinion that sale supported the sale of Lot 7 for $90,000, which he considered would show an unimproved value of $20,000. However, he produced no analysis of that sale.
In normal circumstances, Mr Dickson thought that beachfront lots would have values twice those of Lots 6 and 7, which would place the value of the subject land at $40,000. However, he did not consider the subject land to be a normal beachfront allotment, because of the threat of erosion, not just from the east but also from the south.
When cross-examined as to his basis of valuation, Mr Dickson replied as follows:
“... when the subject property can’t be sold for three years, when the property next door to it is auctioned and gets no offer and is still not sold, when a property over the road, a five-bedroom home with two bathrooms, with two kitchens, can only bring $90,000, when the house next door later, a three-bedroom very nice home with a shed can bring only $67,000, when a block of land with a $15,000 shed next door is auctioned and offered for $55,000 and they can’t get a taker - I mean, please permit me as an experienced valuer and real estate agent to assume there’s a drop in values in that area.”
The case on behalf of the Minister relied on very different evidence. Mr Migliorini was not the valuer originally responsible for the unimproved value of $85,000. However, he knew the area well and had inspected the subject land and the sales and agreed with the valuation.
To support that valuation, Mr Migliorini relied upon four sales of vacant residential allotments, two of which are situated at Hull Heads and two at the northern end of Tully Heads. There were no sales of vacant residential land in the vicinity of the subject land, at the southern end of Tully Heads.
Sale No. 1 is situated in Luff Street, Hull Heads, about 3.5 km north of the subject land. That allotment, of 546 m², sold in October 1994 for $85,000 and analysed to show an unimproved value of $84,000. It is a regular shaped inside lot, at street level, with an esplanade frontage and very good ocean and island views.
Mr Migliorini described the sale property as comparable to the subject land because of its esplanade location and good views. However, he considered it to be inferior, because of its size and its location. He expressed the opinion that Hull Heads is generally inferior to Tully Heads.
Mr Migliorini’s Sale No. 4 is also situated in Luff Street, Hull Heads, about 500 metres south of Sale 1. That allotment, of 648 m², sold in October 1996 for $100,000 and analysed to show an unimproved value of $99,000. He described it as a regular shaped inside lot at street level, with esplanade frontage. It had restricted ocean outlook because of vegetation growing on the esplanade.
Mr Migliorini described the sale property as comparable to the subject land because of its esplanade location, but inferior because of its restricted ocean outlook and its location at Hull Heads.
Mr Migliorini’s Sale No. 2 and Sale No. 3 are situated towards the northern end of Tully Heads, approximately 0.9 km and 1.5 km north of the subject land. Sale No. 2, with an area of 673 m², sold in August 1994 for $47,500 and analysed to show an unimproved value of $46,500. He described it as a regular shaped inside lot, at street level, with an outlook into a timbered area and with no ocean views.
Mr Migliorini considered the sale to be inferior to the subject land because of its situation, being removed from the beach and with no views.
Sale No. 3, with an area of 663 m², sold in April 1994 for $48,000 and analysed to show an unimproved value of $47,000. Mr Migliorini described it as a regular shaped corner lot, at street level, with an eastern aspect into a timbered area and no ocean views.
He described the sale as inferior to the subject land for similar reasons to those in respect of Sale No. 2.
Mr Dickson rejected any comparison between Mr Migliorini’s Sales 1 and 4 at Hull Heads and the subject land. He considered them to be not comparable because of the expanse of sandy beach, possibly 100 metres in width, between the Hull Heads allotments and the sea. He conceded that there had been erosion in the past at Hull Heads and that some allotments to the north of the sale properties had to be protected by a seawall. However, in his opinion, there was no erosion risk in the area of the sales, nor was there any unsightly rock wall. In addition, there was immediate access from the two sales to the beach.
Somewhat surprisingly, Mr Dickson considered that Mr Migliorini’s Sales 2 and 3 were superior to the subject land, even though they were separated from the beach by a timbered area and had no ocean views, at least from street level. However, he felt that ocean views could be obtained from the upper level of a highset house. In addition, there was no risk of erosion or unsightly rock wall. Although there was a distance of perhaps 100 metres from the allotments to the beach, once the timbered area had been negotiated, access to the beach was unrestricted.
During the course of the evidence, it emerged that there were two other sales of improved lands in the vicinity of the subject land. Both were Special Leases. Lot 25, Special Lease No. 52743, with an area of 607 m², upon which was constructed a lowset metal and asbestos cement cottage, sold in July 1995 for $40,000. The difference between that sale price and the sale price of the adjoining Lot 24, was explained as being made up of two components, the quality of the improvements and the fact that Lot 24 was a freehold property.
The other sale, Lot 22, Special Lease No. 52737, with an area of 607 m², upon which was a lowset asbestos cement cottage, sold in March 1996 for $43,000. That property is only four allotments removed from the subject land and in the same area which Mr Dickson considers to have depressed values. Notwithstanding the problems in the area, the purchaser removed the cottage from that property and built a new house.
It is clear, therefore, from that outline of the evidence, there is little agreement between the two valuers. Mr Dickson concentrated on the evidence that was available in the immediate vicinity of the subject land. However, because there were no sales of vacant land in that area, Mr Migliorini looked further afield. The nearest sales with esplanade frontage and with ocean views were at Hull Heads. Although he conceded that there was no immediate threat from erosion at Hull Heads, Mr Migliorini knew the whole area had been subject to erosion in the past. In addition, he had found that there was a lagoon forming about 10 metres from the beach at the northern part of Hull Heads which, he though, could be the beginning of further erosion.
Having regard to all the circumstances, Mr Migliorini considered that his Sales 1 and 4 were valid comparisons, provided that allowance was made for the rock wall and the lack of access to a sandy beach. He felt that appropriate allowances had been made in his valuation. To support those two sales, Mr Migliorini relied upon two sales situated at the northern end of Tully Heads, but somewhat removed from the beachfront. They are separated from the beach by Crown land which is heavily wooded. Therefore, it would seem that even if ocean views would be available from the upper level of a highset house, such views would be inferior to those available from the subject land.
Mr Dickson also relied upon sales removed from the beach front. However, his sales were of improved properties, with substantial dwellings upon them. Mr Dickson produced no analysis of either of those sales to unimproved value. However, he expressed the view, the foundation for which was not explained, that the unimproved values of those lands would be $20,000.
To the extent that the sales which do not front the beach are of any assistance, I prefer the vacant land sales relied upon by Mr Migliorini. They indicate that at about the relevant date a residential allotment in close proximity to the beach, but not fronting it, would sell for between $46,000 and $47,000. I accept Mr Migliorini’s evidence that a beachfront property, even one suffering from the drawbacks suffered by the subject land, would be more valuable.
I found the information relied upon by Mr Dickson to support his opinion of the unimproved value of the subject land, to be of little assistance. The sale and resale of Lot 24 may indicate the improved value of that land, but not its unimproved value. No analysis of either sale was produced, simply Mr Dickson’s opinion that the later sale would show an unimproved value of $36,000.
Apart from the sale and resale of Lot 24, the other information relied upon by Mr Dickson has little weight. The fact that the neighbouring property (Lot 27) received no bid at auction is no indication of its unimproved value. Nor is the fact that the subject land has been on the market for three years and has had no offers. Nor is Mr Dickson’s 1992 valuation of Lot 16.
It may well be, however, that Mr Dickson relied upon that information not to support his unimproved value, but as justification for his opinion that the market for the land in that area had declined in the last few years. That opinion was based principally upon the sale and resale of Lot 24.
On the other hand, Mr Migliorini was of the opinion that the March 1994 sale of Lot 24 was out of line. He had no knowledge of the earlier sale in 1991 for $116,000. I assume that his opinion was based on the sale prices for beachfront land at Hull Heads, his Sales No. 1 and No. 4.
After considering the evidence, I have no doubt that the sales of vacant land must be preferred to the sales of improved properties: Grahn v. The Valuer-General (1992) 14 QLCR 327.
However, I have come to the conclusion that the two sales relied upon by Mr Migliorini at Hull Heads are superior to the subject land. In my view, the presence of the rock wall diminishes the value of the subject land for two reasons: first, it prevents ready access to the small beach area and, second, although it might prevent further erosion, it is a scar on the landscape.
I have also come to the conclusion that the sales of vacant land removed from the beach front at the north end of Tully Heads are inferior to the subject land. Although Mr Dickson considered them to be superior because they are not threatened by erosion, they are not beachfront lands. Even if views could be obtained from the upper level of a highset house, such views would not be of the same quality as those available from the subject property.
Having arrived at those conclusions, the unimproved value of the subject land must be somewhere between $47,000 and $84,000. Mr Dickson’s unimproved value of $36,000 is simply too low.
However, I cannot accept that Mr Migliorini’s unimproved value of $85,000 is correct. Although some substantial houses have been constructed in the immediate vicinity of the subject land, the evidence indicates to me that the allotments to the south of Carpenter Street at the southern end of Tully Heads have declined in value and were, at the relevant date, less valuable than the esplanade allotments at Hull Heads.
Despite the fact that values have declined in the immediate area, there is no doubt that the subject land has redeeming features, the most of important of which is its attractive ocean and island views. The extent to which this attraction is offset in the mind of a prudent purchaser by the existence of the rock wall and the lack of access to a sandy beach is, at the end of the day, a subjective judgment.
However, having regard to the whole of the evidence and to the definition of unimproved value in s.434 of the Act, I have come to the conclusion that if the subject land was held in fee simple and was in an unimproved state, as at the relevant date, 22 September 1995, it would have been worth $75,000.
Therefore, the appeal is allowed, the determination of the Minister is set aside and the unimproved value of Special Lease No. 200631 for the purposes of conversion of tenure is determined at Seventy-five Thousand Dollars ($75,000).
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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