Riana Pty Ltd v Valuer General
[2004] NSWLEC 336
•04/23/2004
Land and Environment Court
of New South Wales
CITATION: Riana Pty Ltd v Valuer General [2004] NSWLEC 336 PARTIES: APPLICANT
RESPONDENT
Riana Pty Ltd
Valuer GeneralFILE NUMBER(S): 31238 of 2003 CORAM: Moore C KEY ISSUES: Valuation of Land :- LEGISLATION CITED: Valuation of Land Act 1916 CASES CITED: DATES OF HEARING: 21, 22 and 23 April 2004 EX TEMPORE
JUDGMENT DATE :04/23/2004 LEGAL REPRESENTATIVES: RESPONDENT
APPLICANT
Mr J Maston, barrister
INSTRUCTED BY
Stevens Legal
Mr A Pickles
INSTRUCTED BY
I V Knight
Crown Solicitor
JUDGMENT:
THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALESMoore C
23 April 2004
JUDGMENT31238 of 2003 Riana Pty Ltd v Valuer General
1 COMMISSIONER: This is an appeal against a valuation as at the base date of 1 July 2002 concerning Special Lease 1978/1 in the Land District of Port Macquarie and is for land known as Lot 369 in Deposited Plan 257052. The land has a total area of 12,350 sq m.
2 The expert valuers appearing for the parties have agreed that it is appropriate to regard the land as comprising two distinct and separate elements and they agree as to the highest and best use of each of those elements.
3 The elements are an area of 2,000 sq m which should be regarded as being of commercial use and 10,350 sq m which should be regarded as being of industrial use.
4 The valuation appealed against is of $2,400,000.
5 In order to provide maximum fairness to the applicant in these proceedings, I have treated the process that I have undertaken of analysing this appeal as, in effect, being an appeal against a commercial valuation for the 2,000 sq m and an appeal against the industrial valuation for the 10,350 sq m - even though the valuations provided by the Valuer General against which this appeal is lodged, do not divide the total sum appearing.
6 Pursuant to s 40(2) of the Valuation of Land Act 1916 (the Act), the applicant has the onus of satisfying me that I should disturb the valuation.
7 Comparative sales methods were used by both experts and as a consequence s 14(I) of the Act is called up. It reads that, effectively, where land is crown lease restricted, I am to take into account two additional factors. One is the restrictions which arise in disposition of the land as a consequence of the restrictions and, secondly, any restrictions that arise or are imposed on the manner of use as a consequence of the leasing.
8 Section 14(I) is triggered only if the lease is that of a type referred to in s58F of the Act and special leases such as that in the instant case are encompassed by s 58F(1)(a). Therefore, I am required to have regard to the issues of restrictions on dispositional manner of use in assessing the valuation.
9 I turn firstly to the industrial element. There are three comparative sales relied on in the valuers’ expert evidence, they being of 158 Lake Road, 215 Lake Road and 174/180 Lake Road. The valuers, in their table of valuation and adjustments, show differences in the adjustments that they have made in the various categories of improvements - topography, size, location and the matters called up by s14(I). They give, as a result, adjusted dollar ranges generally ranging between $100 for Mr Jeffrey’s approach on behalf of the applicant and $120 for Mr Turpino’s approach on behalf of the Valuer General, each rate being a per square metre rate.
10 I am not satisfied that the applicant has discharged the onus contained in s40(2) of the Act to persuade me that I should depart from the rate contended for by the Valuer General’s expert witness with respect to the industrial component of the land, that rate being a rate contended of $120 sq m.
11 There is no compelling difference between the witnesses, although there are differences between their rates of adjustment which were not fleshed out sufficiently in the evidence, particularly the evidence on behalf of the applicant to satisfy me that there is any reason for me to disturb the conclusions of Mr Turpino, and therefore I confirm that the valuation of the industrial element of the site should be regarded as being $1,242,000.
12 However, a different position obtains with respect to the commercial element. There are again three sites offered in the comparative sales. They are at Murray Street, Williams Street and Grant Street.
13 I indicated to counsel during the course of addresses that I did not accept that either the Murray Street or the Grant Street sites provided significantly acceptable bases for such a comparison and that the primary comparison is one that should be made with 136 William Street. It is appropriate in these reasons that I outline for both the Murray Street and Grant Street sites why I reached that conclusion.
14 In each instance, I should specifically note that I have reserved reliance on one aspect only of each of the valuer’s evidence with respect to Murray Street and Grant Street, and those are the elements which I will discuss at some length later in this decision relating to the time adjustment to the valuations – that is as to how I should deal with the time adjustment proposed by each of the witnesses to the 136 Williams Street site.
The Murray Street site
15 There was as I understand the evidence, agreement that it was a highly specialised purchase for the use of construction of a cinema complex, a use which has not yet been effected. I do not understand it to be contested that, as a consequence, the purchaser paid a premium - which premium has not been quantified in evidence before me. I also consider that that being a sale on 6 November 1998, it is too remote in time to be relevant in the present proceedings.
The Grant Street site
16 This sale is significantly closer in time, taking place some three months after the base date, but the zoning is quite significantly different and indeed in this regard there was a copy of a special zoning variation to the Local Environment Plan that was necessary to create the proposed uses for this site. The issues of existing buildings needing to be demolished and the costs that would ordinarily be adjusted off the site to deal with that was not sufficiently developed and that there was a very significant variation between the positions adopted by the expert valuers on that position. There was also a somewhat significant size difference between the sites. However, I primarily reject that site because of the nature of the uses and the special zoning created for it.
136 William Street
17 The single appropriate site to be used for comparative purposes, in my view, is that of 136 William Street. There is, in consideration of the adjustments proposed (although some difference between the individual elements in the adjustments), an underlying pattern of agreement, broadly speaking, between the expert witnesses on this point. Both of them concluded that, leaving aside the very significant differences as to the time adjustment, there were similar other adjustments required to make a valid comparison between the sites. Mr Turpino, proposing that the adjustment should be a minus 40% adjustment and Mr Jeffrey a minus 35% adjustment.
18 It is, therefore, appropriate for me to consider at some length how I should regard and resolve the quite radical differences between the two witnesses as to the proposed time adjustment.
19 The time for which adjustment needs to be made is the movement between the sale date of the site on 20 November 2001 and the base date of 1 July 2002, a period which for convenience has been treated as being seven months.
20 Mr Turpino contended that the adjustment for this period should be 75%. Mr Jeffrey contended that the adjustment should be 10%. I am unable to accept 75% which is essentially the adjustment that is needed to get to the $206 per sq m to sustain a $600 per sq m proposed by the Valuer General for the commercial element of the site which is the subject of the appeal. That is effectively at the absolute maximum postulated by the respondent’s witness.
21 I do not accept that that is capable of being sustained.
22 Therefore, I am satisfied that the applicant has at the threshold discharged the onus that is required pursuant to s 40(2) of the Act to lead me to disturb the valuation that would be applied to the commercial element of the site. That leads me having answered the comparatively simple question, to the much more difficult question of, by how much?
23 Mr Turpino conceded that the absolute minimum time adjustment he would allow would be 60%. On the other hand Mr Jeffrey conceded a maximum of 20%. I have concluded that the truth lies somewhere from one of these figures to the other.
24 However, I specifically reject any concept of averaging of the maximum or minimum differences between the witnesses as being an appropriate place at which to lie the result. If one approached it in such a fashion, averaging the maxima would give a difference of 42.5% and averaging the maximum difference and averaging the minimum difference would give a 40%.
25 The problem that I find with accepting Mr Turpino’s figure is that it is based on his evidence that there was during the seven month period under consideration a very rapid increase in values for commercial property in Port Macquarie. However, I would also be obliged to assume that for Murray Street during a period of three years and seven months, there was in a time adjustment for which Mr Turpino contended of 100% leading on a logical application of his approach to a 25% adjustment over a three year period and a 75% adjustment over the final seven month period.
26 Grant Street, a sale which I do not accept there has being sufficiently comparable on other bases to warrant consideration, is however a sale for which Mr Turpino suggests that the appropriate adjustment for a three month period after the base date is an adjustment downwards by 5%.
27 The Murray Street proposition would be somewhat difficult but perhaps possible to digest, but it is not in my assessment capable of digestion and acceptance when coupled with Mr Turpino’s evidence concerning Grant Street.
28 Effectively, Mr Turpino’s evidence concerning Grant Street implies that at or shortly after the base date, the rate of improvement in capital values commercial property in Port Macquarie effectively collapsed and I do not see that there is any evidence both in front of me or that would generally be available as a matter of common public knowledge that would support a proposition that a rapidly accelerating basis of valuation over a seven month period would effectively run into a quagmire at or shortly after the base date.
29 Therefore, I am not prepared to accept Mr Turpino’s range for this adjustment.
30 On the other hand Mr Jeffrey said that the rate of increase over the relevant period for industrial land was 10-15%, for residential was some 20-30% and that there had been movement in the market from early 2001 or thereabouts.
31 It is comparatively unusual, in my experience in these cases, for there to be such a radical disparity between the valuers on these points. The nature of the disparities which normally exist are those of comparative fine distinction in the matters of adjustment that are otherwise reflected in the table of adjustments.
32 I am therefore left to consider in a very broad range, what rate of adjustment I should apply to the Williams Street site. I consider it appropriate, given its proximity to the central business district of Port Macquarie, to accept that, as a consequence, there might be a somewhat more aggressive movement as a consequence of that. The best I am able to do under the circumstances is to indicate that I am not prepared to accept 60%. However, Mr Jeffrey’s position seems to be far too conservative. I am therefore prepared to accept that a time adjustment of 45% might be appropriate under the circumstances.
33 With respect to the remaining adjustment factors which do not have a significant impact on the outcome of the case, I am not satisfied that Mr Jeffrey has demonstrated any particular reason with respect to any one of those adjustment factors to displace the figures that have been given in Mr Turpino’s evidence. Therefore, I accept the remainder of Mr Turpino’s adjustment factors for the commercial element.
34 Applying a 45% time adjustment coupled with the remainder of Mr Turpino’s factors, on my calculation, gives an adjusted value for the site of $501.99 per sq m, which for convenience I take to be $500 per sq m, giving a resultant valuation for the commercial land of $1,000,000.00.
35 In doing so, I specifically record that I am accepting Mr Turpino’s adjustments for disposition and lease restrictions as being appropriate factors to take into account for the purposes of s14(I) of the Valuation of Land Act 1916.
36 There remains one further matter for me to deal with and that is whether or not I should adjust the resultant aggregated value of the special leased land subject to this appeal as a consequence of the mixture of uses that are contained on the land.
37 The land elements, that is this special lease, were subject of an earlier appeal by Assessor Davies in a rating appeal which was matter 30399 of 1993. The Assessor gave a decision on 22 April 1994 as an extemporaneous decision. He dealt with the question of discounting for the mixture of use on page 6 of the decision, having reached a conclusion that for the purposes of his findings, there were three components on the site. These were a commercial site where the shops are presently located; a restaurant site within what I would loosely describe as the industrial area and the balance of the industrial area.
38 He went on to say, having set that out and ascribed a number of monetary amounts to them:
However I consider that a prudent purchaser in 1991 would expect some allowance for a development of a large parcel of the land with three distinct components. It could be argued that each component would support the other ones. On the other hand having regard to the history of the land it is clear that there are conflicting interests and difficulties in trying to make use of the waterfront for those scheduled uses permitted under the lease.
39 He therefore concluded that he should make an allowance of 10% from a figure that he had determined as being a figure which was one for the purposes of a rating adjustment.
40 I appreciate that that is a somewhat different position to the position in this case, where I am not dealing with a rating adjustment, I am dealing with a land tax valuation.
41 However, the principles it would seem to me are similar and that is to ask myself the question as to whether the bona fide purchaser examining the land as if it were vacant land and considering the matter under s6A of the Act would make some allowance for the interrelationship between the two sub areas of the site.
42 I am satisfied under all the circumstances that a bona fide purchaser of vacant land in those circumstances would probably make a modest discount for those purposes.
43 I am not however persuaded that 10% would be an appropriate sum. I consider that a much more modest discount is appropriate, and I determine that that should be a discount of total value that I have determined of 2.5%.
44 Therefore the arithmetic which is involved is that the valuation of the industrial land is $1,242,000; the value of the commercial element of the land is $1,000,000, giving a total of $2,242,000 but subject to a 2.5% discount, which gives a resultant value of $2,185,950, which I round to $2,185,000.
45 Therefore the orders of the Court are:
- The appeal is upheld.
- Pursuant to s 41(b) of the Valuation of Land Act 1916, the valuation of $2,185,000 is substituted for that of $2,400,000 for special lease 1978/1 Port Macquarie land district over lot 639 in deposited plan 257052.
- The exhibits are returned.
Commissioner of the Court
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