Roberts v Department of Natural Resources and Mines
[2003] QLC 65
•3 October 2003
LAND COURT OF QUEENSLAND
CITATION: Roberts v Department of Natural Resources and Mines [2003] QLC 0065 PARTIES: George V and Dalva E Roberts
(applicants)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO:
AV2000/0351
DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under Valuation of Land Act 1944 DELIVERED ON: 3 October 2003 DELIVERED AT: Brisbane HEARD AT: Townsville MEMBER Mrs CAC MacDonald ORDERS: (i) The appeal is allowed.
(ii) The unimproved value of Lot 1 on RP 722451 and Lot 2 on RP 701633, County of Elphinstone, Parish of Coonambelah as at 1 October 1999 is determined at Two Hundred and Forty Thousand Dollars ($240,000).
CATCHWORDS: Valuation – Sales – Use of Sales – None available in area of subject – Sales in nearby area – Need to compare general attributes of two areas – Some differences but overall similar – Sales applied.
Valuation – Sales – Unacceptable sales – Subject to be assessed as single unit residential – Some sales had influence of potential for multi-unit development and subdivision – Such sales not applied.
Valuation – Heritage-listed property – Appropriate methodology to determine unimproved value – Assume no heritage listing – Then determine effect, if any, of listing.
Valuation – Heritage listed property – Whether allowance for increased cost of maintenance of heritage improvements – Requirement to assume non existence of improvements – No maintenance allowance made – Departure from previous Court precedent.
Valuation – Heritage-listed property – Effect on unimproved value – No market evidence of effect of listing – But restrictions limit redevelopment and consequent views – Important in subject case – 20% allowance made.
APPEARANCES: Mr G Eales, of Collins and Eales, for the applicants
Mr CP Rabaa of Crown Law
This is an appeal against an annual valuation of land in Townsville owned by the appellants. Pursuant to s.13 of the Valuation of Land Act 1944 (the Act), the land was valued by the respondent as at 1 October 1999 at $290,000. The appellants contend for a value of $190,000.
The land, which is described as Lot 1 on RP 722451 and Lot 2 on RP 701633, County of Elphinstone, Parish of Coonambelah, has an area of 1,879 m². The two contiguous allotments form a rectangular shaped site located at 24 Cleveland Terrace, Melton Hill, Townsville with frontages also to Armati Street and Herbert Street. All these streets are bitumen sealed with kerbing and channelling. The property is situated on the upper western slope of Melton Hill, an inner city suburb. Electricity, telephone, town water and sewerage services are available to the property.
The land is designated “Residential 3” under the 1994 Townsville City Council Town Plan. It is located within Precinct 2 of the Townsville City Council Development Control Plan No. 2 – Melton, Stanton and north-east Castle Hill slopes. The intention of the Development Control Plan is that this precinct is to be “… reinforced as a high quality, low rise, residential area where residents may take advantage of views …”. A mix of single dwellings and more intensive residential uses is envisaged. The permissible maximum number of storeys above ground level on the subject site is two, while two to three storey buildings can be built in most of the surrounding area. The appellants submitted that some of the developments in the vicinity of the subject land have impacted adversely on the value of the land.
An extensive range of educational, shopping and recreation facilities is available within easy walking distance of the appellants’ property.
The site has been cut and filled with topsoil. The excavation on the eastern boundary is 1.2 metres deep and retained by a rock wall located on the boundary line. The eastern side is drained by using a concrete “U” drain.
The property, which is known as “Warringa”, is otherwise improved with a lowset, single level, plastered brick single residential dwelling. “Warringa” is listed in the Heritage Register under the Queensland Heritage Act 1992. The effect on the unimproved value of the land of the inclusion of the property in the heritage register is a major issue in this case.
The other major issue in contention between the parties is the unimproved value of the land at the relevant date, leaving aside the effects of the heritage listing.
At the hearing of the appeal, the appellants were represented by Mr G Eales, a registered valuer of Collins and Eales, Valuers and Property Consultants. Evidence was given on their behalf by
· Mr GV Roberts, one of the appellants
· Mrs MCM Langbridge, a licensed real estate agent and auctioneer with extensive experience in selling real estate in Townsville; and
· Mr MW Evans, a registered valuer, of Collins and Eales.
Mr CP Rabaa of Crown Law appeared on behalf of the respondent. Evidence was given on behalf of the respondent by Mr RA Noakes, a registered valuer employed by the Department of Natural Resources and Mines.
Section 13 of the Valuation of Land Act requires the Chief Executive to decide the unimproved value of the land to be valued for the Acts under which local authorities are established.
Section 3 of the Act provides, so far as is relevant –
“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.”
The subject land is improved land and therefore the valuation is to be made under s.3(1)(b).
To determine the unimproved value of the land at the relevant date, the principles laid down in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 are to be applied. For example, Isaacs J said (at 441):
“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”
It was accepted by both parties that because the subject property is used solely for a single dwelling house, s.17 of the Act applies. Section 17 provides that, in making a valuation of the unimproved value of land which is used solely for a single dwelling house, any enhancement in the value of the land because it has been subdivided or because it has a potential use for subdivisional purposes, is to be disregarded. It follows that, although the subject land is designated “Residential 3” under the Townsville City Council Town Plan, the valuation is to be made on the basis that the highest and best use of the land is for single unit residential purposes.
At the relevant date, there had been no sales of comparable heritage listed residential properties and the valuers, therefore, were unable to value the subject by direct comparison with comparable sales. As an alternative, both valuers approached their valuations by seeking to determine the unimproved value of the land on the assumption that the property was not listed on the heritage register. They then sought to determine the effect, if any, on that value, of the heritage listing. I consider this to be an appropriate methodology.
The valuers relied on evidence of sales of unimproved or lightly improved land to determine the value of the subject, absent the heritage listing.
Sales Evidence
In his written report tendered in evidence, Mr Evans detailed sales of 13 properties in support of his valuation of $250,000, assuming the property were not heritage listed. He relied primarily on 5 of those sales – Nos. 1, 2, 4, 7 and 13. There was also some reliance on Sale 3. All of Mr Evans’ sales are in an area of Townsville called Yarrawonga.
Mr Noakes listed 28 sales in his valuation report, but relied primarily on Sales Nos. 2 and 3 which are also located in Yarrawonga.
As Yarrawonga lies approximately two to three kilometres from Melton Hill, (the location of the subject), and has a number of different characteristics from Melton Hill, a preliminary matter to be determined is whether it is appropriate to rely on the sales of the properties in Yarrawonga, or whether sales of properties on Melton Hill, which were also available, should be used.
Melton Hill was originally developed as a prestigious residential area in close proximity to the central city area of Townsville which is within easy walking distance, as are the beach and other recreational amenities. In more recent times, the character of the area has changed as a number of multi-storey blocks of residential apartments have been constructed, in the place of single unit residences, and other older residences have been demolished and replaced by ultra modern single unit residences. In the appellants’ view, the construction of apartment buildings has had a detrimental effect on the area generally and on their property specifically.
Yarrawonga has been developed comparatively recently as a prestigious residential suburb. The first lots were sold about forty years ago and new allotments have become available for sale over the intervening period up to the present.
Apart from their respective locations, the major differences between Melton Hill and Yarrawonga relate to their zoning, topography, views and general amenity.
As there had been sales of three properties on Melton Hill within the three years prior to the date of valuation in this matter, I invited the parties to make submissions as to why those sales should not be used either in preference to or in conjunction with the multiplicity of sales of properties at Yarrawonga.
The Melton Hill sales were
(i)a purchase by CC Spry of land at 27 The Strand, Townsville City on 21 December 1995,
(ii)the purchase by MG and P Menkens of land at 11 Cleveland Terrace, Melton Hill on 12 November 1996, and
(iii)the purchase by Cassimatis of land at 5 Melton Terrace, on 20 January 1997.
These sales have previously been analysed in detail in this Court by Mr RP Scott in Menkens and Spry v Chief Executive, Department of Natural Resources and Mines (unreported, Land Court, 8 March 2002). The Cassimatis sale was also considered by the learned President in Lyons v Chief Executive, Department of Natural Resources and Roberts v Chief Executive, Department of Natural Resources (unreported, Land Court, 12 December 1997). (The latter decision concerns, in part, an earlier appeal by the appellants in this matter against the annual valuation of the subject property as at 1 January 1996. The decision of the learned President was altered on appeal, by the Land Appeal Court, but not in respect of the analysis of this sale.) In both Menkens and Spry, and Roberts it was held that the sales could not be relied on for the purposes of determining an annual valuation of a single unit residential property on Melton Hill.
Briefly, the principal reasons for the learned Member’s conclusions in Menkens and Spry that the sales could not be used were:
· Each of the sale properties was zoned R3 which allows the development of a multi-residential unit building. Mr Scott rejected the respondent’s contention that, at least in respect of the Menkens and Cassimatis properties, the topography of the sites were such that they were not suitable for unit development and that such a development would not be economically viable. The learned Member therefore considered that, because of their development potential, the prices paid for each of these three properties was greater than would have been paid for a residential site without that potential. As s.17 of the Act requires that land used exclusively for purposes of a single dwelling house be valued for that purpose only, the sales were not comparable, because the prices reflected the development potential of the sales properties.
The same reasoning had been applied by the learned President in Roberts (12 December 1997), who also rejected the applicability of the Cassimatis sale.
· In Menkens and Spry, the learned Member also found that the respondent had not proved that the price of property purchased for single unit residential purposes on Melton Hill exceeded the price a developer would pay for a site to be developed with a multi-unit residential development.
· Each of the Menkens and Cassimatis properties comprised two lots. In Menkens and Spry, the learned Member held that the sales prices would have included a component for the subdivisional potential of these properties, and such potential is to be ignored under s.17 of the Act.
· Although in all of the three sales the purchasers had demolished or removed the buildings on the sites, the Menkens and Spry sales could not be regarded as sales of unimproved or lightly improved land as there were site works in place of substantial value, which had not been taken fully into account by the respondent’s valuer in his analysis of the sales.
My invitation to the parties to reconsider these sales has elicited no new evidence concerning the properties, and no new analysis of the sales data. Both valuers have, in the evidence given before me, adopted the same position in relation to these sales, as that adopted in the earlier cases. That being the case, I can see no reason to draw any different conclusions from those drawn by the learned Members in the earlier cases. The evidence is compelling that it is inappropriate to rely on these sales. I consider that the zoning of each of the sites was such that the sale prices would have included a component for unit development, and I am not persuaded that the topography and location of the Menkens and Cassimatis sites are such that unit development would not have occurred there. In addition, the Menkens and Cassimatis properties contain two lots, so that the prices paid would include an amount for subdivisional potential, which is to be ignored under s.17 of the Act. Further I do not consider that the respondent’s analysis of the Spry sale adequately allows for the improvements on the property at the date of sale. I conclude, therefore, that the three sales can not be used for the purposes of determining the unimproved value of the subject land.
Mr Evans’ Sale No. 1 was a near regular shaped allotment of 1,251 m² situated at 7 Braemar Crescent, Castle Hill. The property was sold on 10 May 2000 for $190,000, which is an after valuation date. Mr Evans described the land as lying at street height, and sloping steeply below the road to the rear of the property. At the time of sale it was a cleared vacant parcel with large rock outcrops. There are expansive views available to the north over Magnetic Island and Pallarenda. Overall, Mr Evans considered this land to be inferior to the subject land.
Mr Noakes said that the land sloped very steeply, and that it hung precariously over the street below.
Sale No. 2 is an irregular shaped allotment of 1,239 m² which sold on 20 April 1998 for $287,500. The property is located at 4 Arundel Court, Castle Hill, which is a cul-de-sac. Mr Evans described the land as lying below street level, and sloping steeply to the rear of the allotment. At the time of sale, it was a cleared vacant parcel with large rock outcrops. There are expansive 270 degree views available of the ocean, island and City/Port areas. Mr Evans said that this property and his Sale No. 3 are probably the two properties with the most exceptional views in Yarrawonga. Overall, Mr Evans considered this property to be superior to the subject property.
This property was also Mr Noakes’ Sale No. 2. Mr Noakes said that in comparison with the subject, this property is smaller and is very steep with resultant higher housing construction costs, but the views are more expansive than those available from the subject. Overall, Mr Noakes considered the subject to be superior to the sale.
Sale No. 3 is located at 5 Arundel Court, next door to Sale No. 2. The sale took place on 29 September 1999 for $275,000. The property is smaller than No. 4 Arundel Court, being 888 m² but is less steeply sloping than No. 4. Overall, Mr Evans said that the sale was slightly superior to the subject.
This property was also Mr Noakes Sale No. 3. Mr Noakes described the sale property as being considerably smaller than the subject. It is steep with resultant higher housing construction costs. He said that it has a westerly aspect with more expansive views than the subject. However, there is some restriction on the views from ground level, which is also the case with the subject. Overall, Mr Noakes considered the subject to be superior to this sale.
Sale No. 4 is located at 91 Yarrawonga Drive, Castle Hill. It is a near rectangular shaped, fairly steep, corner allotment of 1,015 m² which sold on 1 April 1998 for $160,000. Mr Evans said that the lot is situated above street height at the front with a steep rise to the rear boundary. Views are available over the suburb of North Ward to the Port and Cleveland Bay. Although the property is more elevated than Sales Nos. 2 and 3, the views from it are partially obscured by a hill in front of it. Overall, Mr Evans considered the sale to be inferior to the subject.
This property was Mr Noakes’ Sale No. 24. He did not offer any direct comparison with the subject.
Sale No. 7 is an irregular shaped allotment of 1,288 m² which sold on 7 October 1999 for $130,000. The property lies below the road height in Yongala Court, where it is situated, and rises steeply to the rear. Views are available over North Ward to the Port and Cleveland Bay. Overall, Mr Evans considered the sale to be inferior to the subject.
Mr Noakes did not include details of this sale in his report. He did report on the sales of Nos. 2, 3, 5 and 8 Yongala Court which took place between 11 September 1998 and 1 March 1999 for prices ranging from $139,000 to $155,000, but he did not rely particularly on any of these sales. It is noted that all of these properties are smaller than Mr Evans’ Sale No. 7, as they range in size from 798 m² to 995 m². For that reason, Mr Evans’ sale would appear to be more comparable with the subject than the other sales in Yongala Court, although they are useful to establish the general market in the street.
Mr Evans’ Sale No. 13 is a property located at 30 Balmoral Drive, Castle Hill, which sold on 25 August 1999 for $150,000. The allotment, which is 1,015 m² in area, is an irregular shaped inside allotment situated slightly below road height with a gentle to moderate fall to the rear boundary. Views are available over North Ward to the Port and Cleveland Bay. Mr Evans described the sale as being, overall, inferior to the subject.
Mr Noakes reported this sale as No. 13, although he made no direct comparison with the subject. He also provided details of sales at 32 and 34 Balmoral Drive both at $159,000.
Since all the sales properties are situated in the Yarrawonga area, the process of comparing the sales properties with the subject property requires a comparison of the general attributes of both areas. The appellants submitted that Yarrawonga was a superior area to Melton Hill, and that factor should be taken into account in applying the sales evidence. On the other hand, the respondent submitted that the Melton Hill area was superior to Yarrawonga.
Mr Roberts gave oral evidence as to the amenity of Melton Hill and a written statement by him was tendered. As mentioned previously, the subject property is designated R3 in the Townsville City Council Town Plan. It is clear that the amenity of the area has been adversely affected, for a single unit residence, by the construction of a number of multi-unit residential buildings, some of which are in the immediate vicinity of the subject property. It is likely that further blocks of units will be developed in the area in the foreseeable future. Mr Roberts drew attention, in particular, to a three storied block of 8 units situated in Herbert Street immediately behind the appellants’ property, which has completely obstructed the appellants’ view over the city and southern suburbs. The building overlooks the rear garden and living area of the appellants’ house thus destroying the privacy of that part of their property. The appellants have sought to alleviate that problem by planting two large trees, which were brought from Mackay, at a cost of some $10,000.
Developments of this nature have increased the population of the area, with a consequent increase in the amount of traffic, and number of vehicles parked on the streets there. Parking problems are exacerbated during the week by city workers leaving their cars there during the day.
Mr Roberts also said that the general amenity of the area is deteriorating for other reasons. Rubbish bins are left permanently on the streets by the occupants of some of the units and flats in the area. A Bed and Breakfast establishment in Cleveland Terrace has been granted a liquor licence. There have been a number of burglaries and attempted burglaries of the appellants’ house, a stone was thrown through the closed window of the room in which Mr Roberts was working late one evening, and a bomb threat has been made. Mr Roberts attributes the occurrence of these crimes to the location of Melton Hill, between the Strand and the central city area.
These undesirable features of Melton Hill are offset by undoubted advantages, such as its proximity to the city, the beach and other recreational amenities. In addition extensive shopping and entertainment facilities are close at hand. Melton Hill is an historic precinct, and is acknowledged as being a significant area of Townsville.
By way of contrast, Yarrawonga, which is zoned Residential 1, is a much more uniform development of single residential units. It does not have the mix of single residences and multi-unit apartment blocks to be found in Melton Hill. There is no foreseeable likelihood that the suburb will be “crowded” with disparate buildings, nor that views will be interrupted by a substantially larger apartment building being constructed near a particular lot. There appear to be no problems with parking, nor rubbish bins being left permanently on the streets. The greatest physical attribute of Yarrawonga is its elevation which results in expansive views being available from a large number of the allotments. This, no doubt, is reflected in the prices paid for the land there.
Yarrawonga does not have the advantage of Melton Hill’s proximity to the city, recreational facilities, and retail outlets. The topography of the area is also inferior to most of Melton Hill in that the Yarrawonga area generally climbs, in places very steeply, up the side of Castle Hill. There was some evidence given by the respondent’s valuer that the area may be prone to slippage, but I do not consider that was established by the evidence considered as a whole. Nevertheless the topography of Yarrawonga is such that the costs of housing construction on some of the sites would be greatly increased. That is not to say that Melton Hill is a flat area. There are parts of Melton Hill that are steep and the frontage to the Strand is a straight cliff face. Nevertheless, as a generalisation, most of the land at Melton Hill is not as steep as that at Yarrawonga.
Each of the two areas has its advantages and disadvantages. Mrs Langbridge said that a property at Yarrawonga with the same features as a property on Melton Hill would achieve a higher sale price. Taking into account the attributes of each area, however, I do not consider that the evidence as a whole has established that one area is inherently inferior or superior to the other. In the absence of any market evidence to the contrary, it appears to me that it would be a matter of personal choice whether a purchaser preferred one area to the other. I propose therefore to consider the sales at Yarrawonga as a direct comparison with the subject. I am aware that in Roberts (1997) and Spry and Menkens it was found that Melton Hill was a superior area to Yarrawonga, and that factor was taken into account in determining the values of the relevant properties. I consider that in this matter the evidence was such that I cannot make such a finding.
Of the Yarrawonga sales detailed in the valuers’ reports, Mr Evans’ Sales Nos. 2 and 3 at $287,500 and $275,000 respectively were considered by both valuers to be the most comparable with the subject. Mr Evans concluded that both were superior to the subject because of their “vastly superior” views and superior amenity. That conclusion does not, I consider, give full weight to the advantages of the appellants’ site. The subject land is much larger than both the sales. Access to the subject is superior and construction would be much easier there as compared with the sales. Although there is a seepage problem on the subject land in its unimproved state, it has superior topography having a comparatively gentle fall of 1.8 metres. While the views from Sales Nos. 2 and 3 are undoubtedly spectacular, the appellants’ property also has the advantage of views, particularly if it is assumed that the land is unimproved. Mr Evans said that if the appellants’ property were unimproved, a two storey house could be built there which would have the advantage of unsurpassed views. However, it is noted that those views would be less expansive than the views available from Sales Nos. 2 and 3, and may also be built out, it appears, if, for example, a 3 storey apartment building were constructed in front of the subject property. In addition, for the reasons explained above, I do not consider that the evidence establishes that Yarrawonga is a superior area to Melton Hill and insofar as Mr Evans has struck his valuation on the basis that Yarrawonga is superior to Melton Hill, I consider that it understates the value of the subject land. In my opinion therefore, on a site comparison basis, the appellants’ land is superior to both the sales.
On the other hand, I do not consider that Mr Noakes has given sufficient weight to the decline in the amenity of the Melton Hill area particularly as it impacts on the appellants’ land which is to be valued as a single unit residential property. The construction of the units behind the subject site has destroyed the views from the subject across the City and southern suburbs. The appellants’ property, if assumed to be unimproved, is overlooked by some of the windows in that apartment building. In general terms, I consider that Mr Noakes’ valuation is too high in that it is based on the premise that Melton Hill is superior to Yarrawonga.
Taking into account all the above matters, I consider that the subject land should be valued at $300,000, leaving aside the effects of the heritage listing.
Effect of heritage listing
The respondent’s valuation of the appellants’ property at $290,000 reflects a discount of 10% on the unimproved value of the land to allow for the perceived adverse impact of the heritage listing on the unimproved value of the land. This allowance was made consistently with the decision of the Land Appeal Court in Roberts v Chief Executive, Department of Natural Resources (1998) 19 QLCR 186, which concerned the unimproved value of “Warringa”, the subject of this appeal. At the hearing of this matter, Counsel for the respondent submitted that the evidence was such that the value of the appellants’ property was not adversely affected by the heritage listing and that no discount should be allowed. The appellants have claimed a discount of 23% relying on the decisions of Cooke v Chief Executive, Department of Natural Resources (1998) 19 QLCR 258 and Conias v Chief Executive, Department of Natural Resources AV97-336 (unreported, Land Court, 8 October 1998).
In Roberts, the Land Appeal Court held (at 189) that in line with the principle enunciated in The Valuer-General v Queensland Club (1991) 13 QLCR 207 at 221 and Ballow Chambers v The Valuer-General (1993) 14 QLCR 422 at 453-4 the effects of heritage listing are to be considered in any determination of the unimproved value of the land. In Roberts, there was no market evidence to establish the effects of heritage listing on the unimproved value of the land – whether adverse or beneficial. The Land Appeal Court held, nevertheless, that it was obliged to make an assessment of impact, and went on to say (at 189):
“Prima facie, the imposition of a heritage listing imposes restrictions in limitations on the owner’s use of the land. It follows that two blocks side by side, in all respects identical save that one is heritage listed, would most likely have different values. Bearing in mind the task at hand is to determine the unimproved value of the land looking at it as though the dwelling “Warringa” never existed, seeing the land in its virgin state but as presently zoned and with all the statutory restrictions imposed by the Heritage Act.
The starting point is to look at the statutory restrictions. At least with regard to the improved property some of these could possibly have been assessed in financial terms eg, increased cost of maintenance capitalised over the expected life of the building. Others would not be susceptible to any arithmetic approach eg, the loss of control over removal of the building, extensions to and renovations of the building, the planting of trees etc. There is also loss of time and inconvenience in having to deal with and take directions from the staff of the Heritage Council.”
The Court also said (at 190) that these financial detriments must be weighed against any evidence of enhancement to the owner, although in that case there was no evidence that there had been any enhancement in value resulting from the heritage listing. And (at 190,191):
“Quite apart from the lack of evidence, it was argued on behalf of the appellants that even if there was evidence of enhancement, by reason of the listing, that enhancement would relate to the structure only, resulting in an increase in the value of the improvements and not in the unimproved value of the land. Similarly it might be argued that in the analysis of an improved sale of a heritage listed property any alleged detriment might be restricted to the added value of the structures (improvements) …”
Subsequently, the Court said (at 192):
“We are not able to accept, however, that there is logic in the opinion that two hypothetically directly comparable residential properties, located in the same environment, one with a heritage listing, and the restrictions on freedom of use and private enjoyment which that entails, would be seen as equally desirable in the market place as the other, which could be used and privately enjoyed free of bureaucratic interference and direction.
The difficulty is of course the assessment of what the difference in value might be, in the absence of convincing market evidence. A further difficulty is recognised in apportioning loss in value to a heritage listed improved property, between land and improvements.”
The Court ultimately decided (at 193) that a discount of 10% reflected their appreciation of the probable effect of loss of freedom of choice in the use and quiet enjoyment of the land content of “Warringa”.
Following the decision of the Land Appeal Court in Roberts, the decisions in Cooke and Conias were handed down. In Cooke, the appeal concerned a residential property in Clayfield, Brisbane which had been placed on the interim list of the Register of the National Estate by the Australian Heritage Commission. It appears that the restrictions flowing from that listing are less onerous than those imposed on an owner of property listed on the heritage register under the Queensland Heritage Act, but for the purposes of this discussion those differences need not be considered.
Evidence was given in Cooke as to the annual increased costs of maintaining a heritage house as compared with a modern similar-sized building. That amount was capitalised using an interest rate of 10% per annum. The learned Member apportioned that capitalised loss between the improvements and the land in accordance with the following equation:
Unimproved Value of Land x Capitalised loss in the value of the property
Total value of land and improvements
(assuming no heritage listing)
The resultant amount was found to be 26.5% of the unlisted unimproved value which the learned Member rounded to 25% and allowed as a discount on the unlisted improved value.
A similar exercise was undertaken in Conias where the evidence lead to the application of a discount of 17.5%.
The appellants in this case have followed the same path. Evidence was given by Mr Roberts and Mr Evans, and supporting documents tendered, which established the annual costs of maintaining “Warringa”, which Mr Evans then reduced by 50% to allow for the difference between the costs of maintaining a heritage listed house as compared with a modern similar-sized brick house. The balance of $23,000 was capitalised at 10% with the result that the capitalised annual cost of the increased maintenance was calculated at $230,000. Mr Evans then calculated the discount as follows:
Value of “Warringa” unaffected by heritage listing
Value of land $250,000
Value of house $740,400
Value of ground improvements $30,000
Total value of property $1,020,400
Calculation of Diminution
$250,000x $230,000 = $56,350
$1,020,400
= 22.54%
The appellants claim a rounded figure of 23% as a discount for the impact of the heritage listing.
Counsel for the respondent did not dispute that the appellants had spent the amounts claimed on the repairs and maintenance of their home. He did take issue with some of the items claimed, eg excess water, electricity, security, insurance etc. on the basis that they were not properly attributable to the effects of the heritage-listing. Counsel also challenged the appropriateness of comparing the costs of maintaining a heritage listed property with the costs of maintaining a modern property of equivalent size. In view of the approach I propose taking to this aspect of the appeal, it is not necessary for me to deal with these submissions.
The Land Appeal Court in Roberts recognized (at 189) that, with regard to an improved property, the impact of some of the restrictions could have been assessed in financial terms by capitalising the increased cost of maintenance over the expected life of the building. But the Court also recognized (at 192) that there would be difficulty in apportioning loss in value to a heritage listed improved property, between land and improvements. The Court did not discuss how that apportionment might be made as it was unnecessary to do so, given the evidence in the case.
The evidence in Cooke was accepted as establishing the increased costs of maintaining a heritage property. The effect of the calculations undertaken in Cooke is that the capitalised increased maintenance costs have been apportioned between the land and improvements in proportion to the ratio which the unimproved value of the land bears to the total value of the property, including improvements. There was no explanation given as to why that approach was adopted. With great respect to the learned Member in Cooke, I do not agree that the exercise that he undertook results in an appropriate apportionment of that loss between the improvements and the land.
In the cases in which the Land Appeal Court has considered the impact of heritage listing on the unimproved value of land, the reason the Court allowed a reduction in the value of the unimproved land is because of the adverse impact of the statutory restrictions on the use of the land. While the legislation in each of the cases differed, the underlying test is the same. Thus, in Queensland Club v Valuer-General (1991) 13 QLCR 207, a case dealing with the effect of the heritage provisions of the Brisbane City Town Plan, the Court said (at 221) that:
“There should be no difficulty then with the proposition that the valuer is required by the assumption [in s.3(1)(b) of the Act] to ignore improvements existing at the date of valuation. …
In this case the valuer must put from the mind … the fact that the Queensland Club existed, or ever existed, but for no other reason than to see the land in its virgin state but as zoned and in the existing environment. Once this scene has been set, the making of the valuation would indeed be conducted in a vacuum if any statutory restrictions (or advantages) attaching to the use of that land (no matter the historical happenings which created those restrictions or advantages, whether related to the local environment or confined within the boundaries of the particular site) and which had an effect on ‘the capital sum which the fee simple of the land might be expected to realise if offered for sale’, were to be ignored.”
And in Ballow Chambers Ltd v Valuer-General (1993) 14 QLCR 422 where the Court was considering the effect of the Heritage Buildings Protection Act 1990, the Court said (at 454):
“In the view which we take, the provisions of ss. 8, 10 and 18 of the Heritage Buildings Protection Act 1990 so clearly impose a potential constraint not merely upon the disposition of or dealing with parts of the “Ballow Chambers” building but also upon the land upon which, as an improvement, it forms part, that the assessment of the market value of the land at the relevant date, on the assumption that the building improvements on that land did not exist, requires the valuer to value the land free of the building improvements but subject to the statutory constraints placed upon that land by virtue of the existence of those improvements.”
Similarly, in Roberts where the legislation in issue was the same as that under consideration in this case, namely the Queensland Heritage Act 1992, the Land Appeal Court said (at 189), as noted earlier, that “Prima facie, the imposition of a heritage listing imposes restrictions on the owner’s use of the land.” The Court in that case consistently drew a distinction between the impact of the heritage restrictions on the land and the impact on the improved property, and ultimately allowed a 10% discount to reflect “the probable effect of loss of freedom of choice in the use and quiet enjoyment of the land content of “Warringa”.”
While I am aware that, for many purposes, fixed improvements are regarded as forming part of the land, the effect of s.3(1)(b) of the Act, is that for the purposes of a valuation made under the Act, the land is to be valued as if the improvements did not exist. If it is assumed that the improvements do not exist, then I do not consider that any increased costs of maintaining those improvements should be taken into account in determining the unimproved value of the land. Nothing was said by the Land Appeal Court in any of the cases discussed above which indicates that the Court would have allowed a discount for any increased costs of maintaining the improvements on a heritage listed property. In all of those cases, the Court expressly recognised the requirement in s.3(1)(b) of the Act that the improvements must be assumed not to exist and held that what must be determined is the effect of the restrictions on the value of the land. In Roberts, the Land Appeal Court recognized (at 192) that the loss in value to a heritage listed improved property should be apportioned between the land and the improvements. In my opinion, therefore, it follows that the appropriate way to apportion the loss in value flowing from the heritage listing between the land and the improvements is to draw a distinction between the effect of the restrictions on the use of the land and their effect on the use of the improvements.
The increased costs of maintenance claimed in this case were for cleaning, gardening, water rates, insurance, security, repairs and maintenance, electricity, pest control and painting. All of the increased costs of maintenance claimed by the appellants, including those attributable to the garden, relate to the improvements on the subject land. For the reasons set out above, I do not allow any discount for those costs.
That is not to say that the appellants are not entitled to any discount in respect of the heritage listing. I do not accept the submission by Counsel for the respondent that the evidence in this case has established that the unimproved value of the appellants’ property is not adversely affected by the statutory restrictions. If the appellants were to carry out development work without permission of the Heritage Council, they could be convicted of an offence and fined under s.33 of the Queensland Heritage Act. They could also be ordered to make good any damage caused (s.65). Further, the Minister has power to impose a non-development order for a period up to 10 years, which order attaches to the land and is binding on successors in title (s.66). I consider that these restrictions would have an adverse impact on the unimproved value of the land, but I am faced with the same situation as that dealt with by the Land Appeal Court in Roberts, namely that there is no direct evidence establishing the market impact of the restrictions.
There are only four privately owned heritage listed residences in the Townsville area, of which the subject is one. Mr Noakes gave evidence as to the sales of two heritage listed residential properties, “Rosebank” and “Wolverton”, which occurred after the valuation date. Mr Noakes was not relying on the sales to establish the market value of the subject land, but to establish that there is a market for heritage listed residential properties and, by comparison with the prices obtained for similar, non-heritage listed properties, to establish that the price for which the listed properties were sold was not affected by the statutory restrictions.
Mr Noakes came to the conclusion, in relation to the sale of “Rosebank”, that there was no sale with which he could make a meaningful comparison, because of the size and location of “Rosebank”. There were several sales which he considered to be comparable to “Wolverton”. The sales were of “Queenslanders” in various states of repair. However there were very few details of these sales given in evidence. Mr Noakes said that there appeared to be a general desire by purchasers to renovate, restore and conserve these properties to maintain their “heritage” appearance. He also said that the sale price of “Wolverton” did not appear to have suffered by virtue of the heritage listing.
As Mr Noakes said, this exercise is inconclusive. While I accept that there appears to be some desire by purchasers of Queensland style houses in the Townsville area to preserve and restore them, such purchasers remain free to demolish or to renovate their homes in any way they think fit. The appellants have lost that freedom, and it is the effect of that loss which is to be assessed.
Counsel for the respondent also tendered material such as newspaper articles and advertisements which suggested that heritage listing was a positive advantage to a house owner. However, that material stopped short of demonstrating the impact of heritage listing on the market value of the land.
There remains the question of what discount should be allowed to the appellants to compensate them for their loss of control over the use of their land. The Land Appeal Court in Roberts allowed a 10% discount, in the absence of market evidence as to the impact of the restrictions on the unimproved value of the land, saying that the impact on the land value fell within the lower spectrum of probable effect. This was because, the Court said (at 192), the nature of the dwelling was in keeping with the acceptable development of the site, if its potential were limited to exclusive use as a single dwelling house in accordance with s.17 of the Act.
In this case there is, similarly, no market evidence as to the effects of the heritage listing. Apart from the evidence discussed above, there was one significant additional fact established in this case, as compared with the findings in Roberts at first instance (1997), and in the Land Appeal Court. That was that the appellants would have “unsurpassed views” if they were able to build a two storey house on their land. I consider that the loss of the freedom to take advantage of that feature of the land must be taken into account in determining the impact of the statutory restrictions. There is no direct evidence as to the market value of “unsurpassed views” in Melton Hill. However, it appears from the extensive sales evidence available from Yarrawonga, that particularly spectacular views add a premium of approximately 45% to the value of land. Thus Mr Evans’ Sales Nos. 2 and 3 were approximately $100,000 higher than his next highest sale, Sale No. 1. In other respects, Sales Nos. 1 and 2 are similar. It should be noted also that Sale 1 is not bereft of views. Mr Evans described these views as expansive, but not having the 270° degree panorama available from Sales 2 and 3.
My understanding of the evidence concerning the potential views available from the appellants’ land is that, even if a two storey house were constructed there, the views would not be as expansive as those from Mr Evans’ Sales 2 and 3. Moreover, unlike those properties, there is some likelihood that the views from a two storey house on the subject land might be obstructed if a 3 storey apartment building were constructed on the other side of Cleveland Terrace from the appellants’ house. It is also the case that the current building takes some advantage of this aspect of the site in that there are some views available from the appellants’ house, across Cleveland Bay, although the views are to some extent obstructed by trees in Mitchell Street.
In addition, the appellants also suffer from the other constraints imposed by the heritage legislation in the use of their land e.g. the need to seek permission from the Heritage Council to develop the land by renovating, altering or adding to the building, or by excavating or changing the landscape in any way which would have the effect of substantially altering the appearance of the place. This is a case where the evidence does not establish the market impact of the restrictions. However, the evidence does indicate that the effect of the appellants’ loss of control over the use of their land is higher up the scale than was considered to be the case when the matter was dealt with by the Land Appeal Court in Roberts. Doing the best I can, I consider that a discount of 20% would allow for the appellants’ loss of control over the use of the site, including, in particular, their inability to redevelop the land with a residence which would take full advantage of the view.
Conclusion
The final calculations are:
Unimproved value of the land leaving aside the effects $300,000
of the heritage listing
Less 20% for loss of control over use of land $60,000
resulting from the heritage listing
$240,000
ORDERS
(i)The appeal is allowed.
(ii)The unimproved value of Lot 1 on RP 722451 and Lot 2 on RP 701633, County of Elphinstone, Parish of Coonambelah as at 1 October 1999 is determined at Two Hundred and Forty Thousand Dollars ($240,000).
CAC MacDONALD
MEMBER OF THE LAND COURT
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