Scarlett v Department of Natural Resources and Water
[2007] QLC 44
•1 June 2007
LAND COURT OF QUEENSLAND
CITATION: Scarlett v Department of Natural Resources and Water [2007] QLC 0044 PARTIES: Kevin Donn Scarlett
(appellant)v. Chief Executive, Department of Natural Resources and Water
(respondent)FILE NO.: AV2005/0548 DIVISION: Land Court of Queensland PROCEEDING: Appeal against an annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 1 June 2007 DELIVERED AT: Brisbane HEARD AT: Bundaberg MEMBER Mrs CAC MacDonald ORDER: 1. The appeal is allowed.
2. The unimproved value of Lot 43 on Plan CK 2909 and Lot 13 on RP 222969, County of Cook, Parish of Isis, as at 1 October 2004 is determined at One Hundred and Twenty Thousand Dollars ($120,000).
CATCHWORDS: Valuation – unimproved value – effect on value of declaration under Vegetation Management Act – no provision in Act – need to ascertain market value from comparable sales.
Valuation – unimproved value – premium generally paid for small rural properties – not so if smaller viable area part of larger property affected by Vegetation Management declaration.
APPEARANCES: Mr KD Scarlett, the appellant
Mr K Fisher, Crown Law, for the respondent
Kevin Donn Scarlett is the owner of land situated at 731 Buxton Road, Isis Junction, about 15 kilometres due east of Childers. Mr Scarlett has appealed against the determination by the respondent, under the provisions of the Valuation of Land Act 1944, of the unimproved value of his land at $136,000 as at 1 October 2004. Mr Scarlett's estimate of the value of the land was $40,000.
The subject land, which comprises two lots valued together as one property, is used for cattle grazing. Of the total area of 1,383.545 ha, about 342 ha is level coastal forest and wallum country which is able to be cleared. The balance 1,041.545 ha is coastal forest and wallum country which has been declared protected from broad scale clearing under the provisions of the Vegetation Management Act 1999. The land is zoned Rural A under the relevant Isis Shire Planning Scheme. This zoning enables the property to be used for rural pursuits, residential dwelling and rural home industries.
Mr Scarlett's grounds of appeal were brief – "Vegetation Management Act – land clearing restrictions have not been taken into account". The major issue in the appeal, therefore, was the effect on the value of the subject land of the declaration under the Vegetation Management Act that 1,041.545 ha was protected from broad scale clearing. This is the first valuation of the subject land since that Act came into effect.
Mr Scarlett conducted the appeal and gave evidence in support of his grounds of appeal. In his opinion, the declared land was worth nothing, and he valued it at $1.00, because it was mainly wallum country with poor nutritional value which required clearing, planting with improved grasses and fertilising to enable it to be used successfully for grazing. The Vegetation Management Act prevented him doing this. Although there were approximately 20 ha of forest land suitable for grazing in the vicinity of the northern boundary of his property, he was unclear whether that land or any part of it was actually within his boundary, and thus part of the declared area, or whether it was unallocated State land forming the bed and banks of a creek.
Mr Scarlett had considered alternative uses for the protected land such as growing cut flowers, bee keeping and timber logging, but in his view the property was not suitable for any of those activities. Town planning restrictions prevented subdivision of the property for rural residential purposes and, therefore, he did not believe that the respondent's evidence that land in the vicinity had been subdivided into seven hectare parcels, which sold for $65,000 each, was relevant to his property. Moreover, under the Valuation of Land Act his property could not be valued for an alternative use. Mr Scarlett did concede under cross-examination that it would be possible to clear a home site of approximately 5 ha on the protected land, but he did not think that that would be of any value.
Mr Scarlett also acknowledged that best farming practice was to retain some country in an uncleared state. However, he said, a balance had to be maintained between cleared and uncleared land and his understanding was that the appropriate balance was that about 10% to 20% of a property should be left in its natural state. 75% of his land was unusable. The effect of the declaration under the Vegetation Management Act was that the remainder of his land, which was suitable for grazing cattle, was too small to be operated viably.
Mr Scarlett said that the declared land was not only unusable but it was also a burden because he had obligations to look after it for farm management purposes and also to pay rates on that part of the land.
Because Mr Scarlett considered that the declared land was of nominal value only, his estimate of the value of the subject land in his Notice of Appeal at $40,000 was a value attributed to the balance 342 ha. At the hearing, Mr Scarlett conceded that that land was worth $200 per hectare giving it a value of $68,400.
Respondent's valuation
Although the valuation under appeal issued at $136,000, the respondent led evidence at the hearing to a value of $127,500. The effect of that evidence is that the valuation as issued at $136,000 does not have the benefit of s.33 of the Valuation of Land Act, that is it is not deemed to be correct.
Valuation evidence was given on behalf of the respondent by Mr MA Tapiolas, a senior valuer employed by the respondent Department. Mr Tapiolas valued the property as a rural grazing property, and applying s.17 of the Valuation of Land Act, he had disregarded any enhancement in value that the land might have for any potential alternative use.
Mr Tapiolas did not value the subject on the basis of its carrying capacity because the properties in the area were used for differing purposes and managed differently with the result that he considered that methodology to be unreliable, in the circumstances.
Relying on comparable sales evidence, Mr Tapiolas valued the property at $92/ha, which he apportioned as follows -
342 ha, able to be cleared, at $250/ha - $85,500
1,041.545 ha, declared protected, at $40/ha - $41,661
Total$127,161
Rounded to$127,500
Sales evidence
Mr Tapiolas said that the market evidence in the Isis Shire showed that there had been a rise in the value of grazing properties between the previous date of valuation, 1999, and the 2004 valuation. The average rise for such properties was 50%, but the increase for cleared wallum country was 100%.
Mr Tapiolas relied on sales of four properties in the vicinity of the subject to support his valuation. Each of those properties contained a component of country which had been declared protected under the Vegetation Management Act. However, Mr Tapiolas said, there were different classifications under that Act and the restrictions imposed on the landholder varied depending on the particular type of declaration applied to the land. For that reason his analyses of the sales showed varying rates per hectare for the protected lands on some of the properties.
Sales 1 and 2 are adjoining blocks of land located at Goodwood, approximately 8 kilometres north-east of the subject. Sale 1 has an area of 671 ha and is zoned Rural A. The property sold on 31 December 2002 for $820,000. Mr Tapiolas deducted $660,457 for improvements to reach an analysed unimproved value of $159,543 or $237/ha. He applied an unimproved value of $148,000 or $220/ha.
Mr Tapiolas described Sale 1 as comprising coastal forest and wallum country of which 5% (36.06 ha) was declared protected under the Vegetation Management Act. He classified the sale as follows –
634.94 ha coastal forest and wallum grazing at $230/ha - $146,036
36.06 ha declared protected at $50/ha - $1,803
Total$147,839
Adopted $148,000
Sale 2 comprises 624.03 ha of land zoned Rural. The property sold on 15 September 2003 for $1,200,000. Mr Tapiolas deducted $999,665 for improvements to reach an analysed unimproved value of $200,335 or $320/ha and applied an unimproved value of $140,000 or $225/ha.
Mr Tapiolas described the sale property as coastal forest and wallum country of which 2% (12.29 ha) was declared protected under the Vegetation Management Act. He classified the sale as follows -
611.74 ha coastal forest and wallum grazing at $230/ha - $140,700
12.29 ha declared protected at $50/ha - $614
Total$141,314
Adopted $140,000
Mr Tapiolas treated this sale as an adjoining owner's sale because Sale 1 had previously been purchased by the same person. He therefore applied a lower value (70% of the analysed value) to this sale than was indicated by his analysis of the sale figures.
Mr Tapiolas said that the subject and both Sales 1 and 2 have similar access, water and services and the coastal forest and wallum country on each were very similar. The sales were smaller than the subject but the sales have a larger proportion of land capable of being cleared. Mr Tapiolas considered that the sale properties were, overall, superior to the subject on a per hectare basis.
Mr Scarlett agreed that these two sales properties contained very similar type of country to his property. He therefore questioned the application of a rate of $250/ha to the unrestricted portion of his land as compared with $230/ha applied to the sales. Mr Tapiolas said that he had applied a size factor to the cleared area of the subject because it comprised 342 hectares only, as compared with the sizes of the cleared areas of the two sales. In his opinion, there was a market for small properties such as the subject's 342 hectares because of their value to surrounding landholders who could incorporate such parcels into a larger aggregation. He had applied a higher value to that part of the subject than the sales on the normal principle that smaller areas of land attract a higher rate per hectare than larger areas because there are more buyers in the market for smaller areas.
Mr Scarlett disagreed with the application of that reasoning to his cleared land because the area was too small to be grazed in an economically viable way. Further, he said, the smaller cleared area carried the burden of ownership of the large balance area which could never be used productively.
Counsel for the respondent suggested that an alternative method of comparison between these two sales and the subject was to compare the overall applied values in each of the sales, namely $220/ha and $225/ha, with the value applied to the subject which was $92/ha overall.
In circumstances where the proportions of land able to be cleared on the sales are dramatically different from those on the subject, I do not consider that it is valid to attempt to compare those properties on an average rate per hectare basis.
Sale 3 is a 981.04 ha property, with a Rural zoning, located approximately 21 kilometres south west of Childers. The property sold on 27 February 2004 for $400,000. Mr Tapiolas deducted $213,837 for the improvements on the land which led to an analysed unimproved value of $186,163 ($190/ha). He applied an unimproved value of $175,000 ($180/ha).
Mr Tapiolas described the sale property as comprising 448.84 ha of fair forest grazing. The balance of 532.2 ha (54%) was declared protected under the Vegetation Management Act. He classified the sale as follows -
448.84 ha of fair forest grazing at $300/ha - $134,652
532.20 ha, declared protected, at $75/ha - $39,915
Total$174,567
Adopted$175,000
Mr Tapiolas said that the protected country in this sale had been declared "endangered" which was a less restrictive category than that imposed on the subject because the "endangered" category enabled the owner to undertake forest management practices and logging. The declared country could also be grazed because it was superior to wallum country and did not require any development to enable grazing to be carried out successfully. For that reason he had valued the protected land on the sale at $75/ha as compared with the $50/ha applied in Sales 1 and 2 and the $40/ha applied to the subject.
Mr Tapiolas said that he considered that, overall, the sale property was superior to the subject on a rate per hectare basis. The sale had a greater proportion of area unaffected by the vegetation management legislation and was in a superior location. It also appears, from Mr Scarlett's evidence, that the nature of the country, namely fair forest grazing country is inherently superior to wallum country.
Sale 4 is a 259.08 ha property which is zoned Rural and located about 25 kilometres south-west of Childers. The property sold on 21 May 2004 for $310,000. Mr Tapiolas deducted $221,272 for improvements which led to an analysed unimproved value of $88,728 ($342/ha). Mr Tapiolas applied an unimproved value of $80,000 ($308/ha).
Mr Tapiolas described the property as comprising 177.88 ha of fair forest grazing with the balance of 81.2 ha (31%) declared protected under the Vegetation Management Act. He classified the sale as follows -
177.88 ha, forest grazing at $400/ha - $71,152
81.2 ha, declared protected, at $110/ha - $8,932
Total- $80,084
Adopted $80,000
Mr Tapiolas explained his valuation of the protected portion of the sale at $110/ha on the basis that 26.1 ha of that area was declared "not of concern" which is a less restricted class than that applied to the subject or the other sales.
In comparing the subject with the sale, Mr Tapiolas said that the subject had superior location and access. The sale was smaller and had a greater proportion of area unaffected by the vegetation management legislation. Overall, he considered that the sale property was superior to the subject on a rate per hectare basis.
Valuation of "protected" land
As set out above, Mr Scarlett considered that the protected area was a burden to his property. Mr Tapiolas' opinion was that that area was not useless because Mr Scarlett could maintain existing improvements on that land, such as fence lines, without applying for permission. He could also undertake other activities on that land, with departmental permission, such as fire management, essential management, and dam construction. There was also evidence that a home site could be cleared and developed on the protected land.
Mr Tapiolas said that he had selected Sales 1 and 2 for the valuation because they were the only sales of wallum country in the Isis area where the properties had been purchased by a grazier rather than a developer. He had also looked at the values applied in the Maryborough area and tried to strike a relativity between the Maryborough and Isis wallum areas. Mr Tapiolas considered that Sales 1 and 2 best demonstrated the value of cleared coastal forest and wallum country. He had classified those sales to a rate of $230/ha for the wallum country and a rate of $50/ha (which became $40/ha in the case of the subject) for the protected land which he regarded as a nominal value.
The evidence was that there were no sales, in the area, of properties comprising protected areas of wallum country only. Mr Tapiolas therefore relied primarily on Sale 3 to justify the rate of $40/ha applied to the protected area of the subject land. About 54% of Sale 3 was affected by the Vegetation Management Act, a higher proportion than any of the other sales, and consequently Mr Tapiolas considered that this sale provided a basis for deciding the rates to be applied to areas affected by the vegetation management legislation. Analysis of other sales such as Sale 4 and comparison with Sales 1 and 2 lead him to apportion $300/ha to the fair forest grazing country on Sale 3, and, consequently, to attribute $75/ha to the protected area of Sale 3. The protected area of the subject had limited grazing value and no timber value, as compared with the protected area on Sale 3, which lead to Mr Tapiolas applying $40/ha to that part of the subject. He had also applied that value, which he regarded as nominal, to other similar properties in the area.
Conclusions
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 defines "unimproved value" to mean -
(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.
It is well recognized that the effect of s.3(1) is that it is the market value of the fee simple of the unimproved land which is to be determined and that market value is the price which a willing purchaser would at the date in question have had to pay a vendor not unwilling, but not anxious to sell (Stubberfield v The Valuer-General [1991] 1 QdR 278 at 283).
Mr Scarlett's complaints are that the protected area of his property cannot be used productively and that the balance of his land that can be cleared is too small to operate viably for cattle grazing. There is no express provision in the Valuation of Land Act stating how the impact of a declaration under the Vegetation Management Act is to be taken into account in valuing land. The general principle to be applied, therefore, is that the market value of the unimproved subject land is to be determined.
The evidence shows that the value of Mr Scarlett's property has been adversely affected by the declaration under the Vegetation Management Act that some 1,042 ha are protected from broad scale clearing. However, the effect of the declaration on the value of the land cannot be assumed. What has to be ascertained is the market value of the subject property with all its advantages and disadvantages.
In my opinion, Mr Tapiolas has adopted the correct approach to the valuation by valuing the two lots together as one property under s.17, classifying the subject property into two sections – 342 ha able to be cleared and 1,042 ha declared protected – and then valuing each section by analysing and applying sales of comparable properties.
Although Mr Scarlett considered that the cleared area of his property was too small to be operated viably, I have accepted Mr Tapiolas' expert opinion that there was a market for such parcels in that surrounding landholders could purchase and incorporate them into larger aggregations.
The parties are agreed that the quality of the areas of cleared wallum country on Sales 1 and 2 is very similar to that on the subject. Mr Tapiolas has apportioned the analysed sales prices on those sales to a figure of $230/ha for the cleared coastal forest and wallum country. Mr Scarlett was unable to point to any sales evidence supporting his assessment of $200/ha for that land. I have accepted Mr Tapiolas' analysis of Sales 1 and 2 and therefore I consider that $230/ha represents a base for valuing the cleared area of Mr Scarlett's land. Although Sale 2 was a sale to an adjoining owner, I consider that Mr Tapiolas has allowed for any effect on the price of Sale 2 by applying the sale at $230/ha or 70% of the analysed sale price, which is the same rate as Sale 1.
However, Mr Tapiolas valued the cleared area of the subject at $250/ha having, as explained above, applied a size factor to the subject because its cleared area was smaller than that of the sales.
While I accept that as a general rule smaller rural properties attract a higher rate per hectare, I do not consider that that rule should be automatically applied in a case such as this, in the absence of specific sales evidence supporting its application. The subject land has been valued as one property under s.34 of the Act. It thus has a total area of some 1,384 ha. Although the apportionment has been carried out by classifying the land into two sections, it should be remembered that the property as a whole is to be valued. The area of cleared land is comparatively small but if the property were to be sold, the larger protected area would be included with the smaller area. Given the limitations on the use of the protected area, I am not satisfied that a reasonable purchaser would pay a premium to obtain the cleared area. I consider therefore that the 342 ha should be valued at $230/ha as established by Sales 1 and 2.
Although there are extensive restrictions on the use of the protected area of the subject, I do not accept that that part of the land is useless and of no value. Mr Scarlett did not produce any sales evidence to support his opinion that that land was worth nothing. The only other evidence as to the value of the protected area was given by Mr Tapiolas who valued it at $40/ha, which he described as a nominal rate. While there were no sales of properties comprising protected wallum country only, I consider that Mr Tapiolas' Sale 3 establishes a base for the value of protected fair forest grazing country where a substantial portion (54%) of the sale was declared protected. Mr Tapiolas apportioned that sale price to $75/ha for the protected area. The evidence was that fair forest grazing country is inherently superior to wallum country and that the type of declaration affecting Sale 3 was less restricted than that affecting the subject. In those circumstances, I consider that Mr Tapiolas' valuation of the protected area of the subject at $40/ha was justified and I have accepted his valuation of the protected area.
The value of the subject property is, therefore –
342 ha, able to be cleared, at $230/ha $78,660
1041.545 ha, declared protected, at $40/ha $41,661
Total$120,321
Rounded to$120,000
Orders
1. The appeal is allowed.
2. The unimproved value of Lot 43 on Plan CK 2909 and Lot 13 on RP 222969, County of Cook, Parish of Isis, as at 1 October 2004 is determined at One Hundred and Twenty Thousand Dollars ($120,000).
MEMBER OF THE LAND COURT
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