Tolstoff v Department of Natural Resources, Mines and Energy
[2004] QLC 50
•11 June 2004
LAND COURT OF QUEENSLAND
CITATION: Tolstoff v Department of Natural Resources, Mines and Energy [2004] QLC 0050 PARTIES: Victoria Tolstoff
(appellant)v. Chief Executive, Department of Natural Resources, Mines and Energy
(respondent)FILE NO: AV2003/0124 DIVISION: Land Court of Queensland PROCEEDING: An Appeal against an Annual Valuation in the Shire of Burnett DELIVERED ON: 11 June 2004 DELIVERED AT: Brisbane HEARD AT: Bundaberg MEMBER: Mr JJ Trickett, President ORDER: The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of the subject land as at 1 October 2002 is determined at One Hundred and Thirty Thousand Dollars ($130,000). CATCHWORDS: Unimproved Value - Oceanfront land at Bargara - Comparison with sales - Relativity - Method of development - Disabilities suffered by the land - Valuation of Land Act 1944 APPEARANCES: Mrs V Tolstoff appeared in person
Mr GJ Smith, Senior Legal Officer, Department of Natural Resources, Mines and Energy, for the respondent
This is an appeal by a landowner in the Shire of Burnett against the unimproved value applied to her land by the Chief Executive, Department of Natural Resources, Mines and Energy under the provisions of the Valuation of Land Act 1944 (the Act).
Background
Mrs Tolstoff is the owner of land described as Lot 1 on Registered Plan 140152, Parish of Barolin, with an area of 847 m² (the subject land). As at 1 October 2002, the respondent determined the unimproved value of that land at $140,000 under the provisions of s.37 of the Act. Following an objection by Mrs Tolstoff, the valuation was reduced to $135,000. Mrs Tolstoff has appealed against that valuation, advising that her estimate of the unimproved value is $113,750, based on a 30% increase over the previous valuation of $87,500. Her grounds of appeal are extensive, but essentially relate to the disabilities suffered by the subject land and the extent of the increase in the unimproved value.
The Locality
The subject land and the sale properties referred to by the valuer for the respondent, are situated in Woongarra Scenic Drive, commencing approximately 2 km south of the commercial centre of Bargara and continuing in a roughly southerly direction for a further 1.5 km. The allotments situated to the east of Woongarra Scenic Drive are oceanfront allotments.
The whole area is basaltic, with the oceanfront in the relevant area being all basalt rocks and boulders. The allotments themselves are also underlaid by basaltic boulders, the result of volcanic eruptions from a nearby formerly active volcano, known as "The Hummock".
Woongarra Scenic Drive rises gently from the vicinity of the subject land to its intersection with Wilfred Street, about 1.4 km to the south, the highest point on the road. The older development on Woongarra Scenic Drive extends from the subject land north to its intersection with Durdins Road. That part of the road comprises a narrow two-way bitumen strip, with no concrete kerbing and channelling and virtually no room for a footpath. The newer development on Woongarra Scenic Drive starts from the southern boundary of the subject land and extends to the south. That part of the road is wider and has concrete kerbing and channelling, a footpath and on-street parking.
The respondent's valuer gave evidence that during the construction of the newer part of the road, boulders and rocks were pushed onto the allotments fronting the ocean, which helped to establish an area of sound land on each of those allotments. It seems that during the construction of foundations for houses in the general area, large boulders have to be removed and disposed of. This has created a ready supply of large boulders in the area. There is also evidence that development of the oceanfront lots was undertaken by constructing boulder retaining walls up to 4 metres in height on the seaward boundary and then filling behind the wall. This process has allowed most of the area of those allotments to be used.
However, when the older section of Woongarra Scenic Drive was developed, it seems that there was neither the availability of boulders, nor the engineering technology to allow development to occur to that extent. Therefore, at least some of the older developed allotments, including the subject land, have not been able to utilise their full areas.
The Subject Land
The following details are taken from the statement of Mr LW Hoult, a registered valuer, who gave evidence on behalf of the respondent:
· The subject land is situated in Woongarra Scenic Drive, about 2.5 km south of the main commercial centre of the beachside town of Bargara.
· Watsons Road and Woongarra Scenic Drive form a T-junction adjacent to the subject property. This is a busy corner and access to and from the subject property would be at times difficult.
· Woongarra Scenic Drive is bitumen sealed. There is no kerbing and channelling in front of the subject land.
· From the southern boundary of the subject land the road widens and has concrete kerbing and channelling. All normal town services are available.
· The subject allotment is fan shaped, with a 12.19 metre road frontage, widening to the rear to an ambulatory boundary fronting the ocean of about 30 metres at high tide mark. About 350 m² of the rear land has not been filled and is regularly inundated with seawater during king tides or in unfavourable weather conditions. The balance area has been filled behind a concrete retaining wall.
Mrs Tolstoff did not disagree with Mr Hoult's description of the land, but in her written statement she added that the 350 m² of unusable land is over 4 metres below the level of the filled land and consists entirely of rocks of various sizes. She describes it as useless for living or leisure purposes; inundation is common and often severe; constant maintenance and restoration is required because of subsidence around the dwelling.
Mrs Tolstoff explained the disadvantages of being in the older section of Woongarra Scenic Drive. In addition to the noise from the busy road and the danger accessing and leaving the property, there is virtually no footpath, making even pedestrian access difficult and on-street parking impossible, except directly in front of her garages.
When she bought the land in 1974 it was vacant, except for three garages which were built across the entire road frontage. The house was built in 1980. In order to build the house, a concrete wall up to 4 metres in height was constructed across the whole width of the allotment and then filled. There had been some sound land towards the road frontage, but not enough to accommodate the house. Any boulders which were dug out for the foundations were pushed over the front of the wall and a lower terrace was developed, with rocks concreted together and pavers put down, with steps from the upper level. All this was washed away by Cyclone Fran in 1992. In addition to the pandanus trees on the allotment, sheoaks and Norfolk Island pines have been thickly planted over the years as a barrier against the weather and in an attempt to bind the soil and rocks. However, this vegetation almost obliterates the view. Many of the trees have been lost in heavy weather and have had to be replaced.
According to Mrs Tolstoff, most of the usual advantages of an oceanfront allotment are not available. The foreshore comprises large boulders and rocks, not usable for swimming or boating; the nearest sandy beach is about 400 metres to the north. The view is obscured by the vegetation which is necessary for protection. However, Mrs Tolstoff conceded that the subject land does enjoy sea breezes.
Comparing her property with others in the area, Mrs Tolstoff stated:
"During heavy weather other properties have not been as severely affected as mine. Only a few large rocks protect my property compared to others in the vicinity, particularly the more desirable higher properties further south. Two adjoining properties on the southern side have low lawn terraces not affected by heavy weather or cyclones and these are comfortably used for leisure. My two filled, paved, rock and concreted terraces were completely eliminated during Cyclone Fran, including stair railings and some concrete steps."
She tendered photographs which depicted what she had described and other photographs showing the difficulties of access from Woongarra Scenic Drive.
Mr Hoult's Valuation Approach
Mr Hoult presented a different perspective from that portrayed by Mrs Tolstoff. To arrive at the unimproved value he had to envisage the allotment as it would have been in its unimproved state.
He reasoned that all allotments fronting the ocean along Woongarra Scenic Drive have suffered from erosion and have had to be filled over time. At the date of valuation, material was obtained from building sites and boulders have been dumped on the allotments free of charge, as a cheap means of disposal, while reclaiming and protecting the land from further ocean intrusion. The cost of placing boulders and filling ranged from $7,000 to $10,000 per allotment. He tendered photographs showing allotments that have been reclaimed in that manner.
Mr Hoult contended that if the subject land had been in its natural state at the date of valuation, it could have been developed in that way. He acknowledged that in 1980 development of the subject land could not have been undertaken in that manner. The engineering technology was not available at the time; furthermore, development was hampered because of the three garages along the road frontage. In keeping with other development in the older area, a retaining wall had been built to allow the construction of the dwelling and not, as with the later development, to utilise most or all of the land.
However, the provisions of the Act required that the land be valued as if the improvements on it did not exist. Mr Hoult reasoned that in its unimproved state the subject land could have been developed with a retaining wall at or near the seaward boundary then filled , allowing a much larger area of the land to be utilised.
Mr Hoult conceded that the subject land had access problems and explained that in valuing the land he had initially made an allowance of $5,000 for those difficulties. Following Mrs Tolstoff's objection to the valuation, he had made an additional allowance of $5,000.
Mr Hoult also conceded that the valuation of the subject land had increased by a greater percentage than the valuations of other lands in the area. He was of the opinion that the previous valuation of $87,500 was out of relativity with the valuations applied to other allotments. In applying the present valuation of $135,000, which he thought was in correct relativity with the valuations of other lands, the percentage increase was greater than other valuations in the vicinity.
The Basis for the Valuation
Mr Hoult supported the valuation of $135,000 by direct comparison with four sales of basically vacant land, three of which are oceanfront allotments in Woongarra Scenic Drive, the other being one street removed from the oceanfront.
Sale 1 is an oceanfront allotment of 809 m², situated about 1.2 km south of the subject land, which sold in December 2001 for $148,000. Mr Hoult analysed that sale by deducting fill to the value of $8,000, to arrive at an unimproved value of $140,000, which was applied as the respondent's unimproved value as at 1 October 2002.
Mr Hoult described the sale allotment as being slightly superior to the subject property. He reasoned that it has a wider road frontage and does not suffer the traffic problems, but it has a narrower ocean frontage. It is in the newer developed area, but is further from Bargara and the main swimming beach. It is also smaller. It has been reclaimed by extensive boulder and earth fill. A gravel pad for a new dwelling was required as the existing fill was unsuitable.
Mrs Tolstoff saw the sale allotment quite differently. She thought it was much superior to the subject land. She described it as a rectangular block with far superior access, fronting a wide road, with footpath and on-street parking. It was, she said, greatly elevated with a better aspect and it had almost double the usable area. Furthermore, there was an unmade esplanade fronting the ocean and she contended that the boulders of the retaining wall are on the esplanade and thereby increase the usable area, whereas the frontage of the fan-shaped subject land cannot be used. Although it is further from Bargara, she made the point that "if you have to use the car, it does not matter that you have to drive an extra kilometre." The subject land is not within reasonable walking distance of the commercial area of Bargara.
The sale allotment actually sold three times: first in April 1999 for $130,000, second in December 2001 for $148,000 and third in June 2002 for $225,000. Although the third sale occurred prior to the date of valuation, Mr Hoult explained that he relied on the second sale in December 2001 rather than the later sale, because he did not know whether that was just a high sale, or the beginning of a trend.
Under cross-examination, Mr Hoult agreed that Sale 1 is higher in elevation than the subject land, "but not much higher". He did not think there was a greater extent of basalt boulders and rocks between the ocean and the boundary of the sale land and the extent of boulders and rocks on the oceanfront of the subject land. However, the boundary of the subject land is at high water mark. Mrs Tolstoff contended that Sale 1 has a greater degree of protection from the sea. Mr Hoult did not agree. He was of the opinion that a property with an ambulatory boundary is worth more than one with an esplanade in front of it.
Sale 2 is also an oceanfront allotment of 1,094 m², situated two allotments to the south of Sale 1. That allotment sold in January 2002 for $175,000. Mr Hoult analysed that sale by deducting $10,000 for the fill on that land at the date of sale, to arrive at an unimproved value of $165,000. As at 1 October 2002, the respondent's unimproved value applied to that land was $155,000.
Mr Hoult regarded that sale as superior to the subject land. Although it has a similar fan shape, it is larger and has a wider frontage. It was reclaimed by extensive boulder and earth fill. It has all the other attributes of Sale 1.
Mrs Tolstoff considered that allotment to be much superior to the subject land. She described it as being in one of the most elevated areas of Bargara, with every metre usable and safe. It also fronts an unmade esplanade along the oceanfront. Not only is it larger, it has vastly superior views, access and parking.
Sale 3 is also a beachfront property. It is an irregular shaped allotment of 1,444 m², situated about 300 metres north of the subject land. It sold in June 2000 for $260,000. Mr Hoult attributed a value of $3,000 to clearing, so that the sale analysed to an unimproved value of $257,000. As at 1 October 2002, the respondent's applied unimproved value was $250,000.
Mr Hoult described that allotment as vastly superior to the subject land. Not only is it larger and with a better shape, it fronts a sandy beach rather than a rocky beach. It is closer to Bargara and the main beaches. Like the other allotments in Woongarra Scenic Drive, it has been reclaimed by a boulder retaining wall and fill. Since the sale, the purchasers have obtained approval for construction of a duplex dwelling.
Mrs Tolstoff regarded that allotment as not comparable to the subject land. It is much larger, has approval for multi-residential development, fronts a sandy beach and is close to Bargara.
Sale 4 is a regularly shaped rectangular allotment of 911 m² in Shady Grove Street, which is one street to the west of Woongarra Scenic Drive, about 500 metres north of the subject land. That allotment sold in April 2002 for $110,000, the only improvement being clearing, to which Mr Hoult attributed a value of $3,000, so that the sale analysed to an unimproved value of $107,000. As at 1 October 2002, the unimproved value applied to that allotment by the respondent was $85,000.
Mr Hoult described that allotment as being far inferior to the subject land. Although it is closer to Bargara and the main beach, it is not an oceanfront allotment, has a dirt access road and is low lying at the front.
Mrs Tolstoff regards that allotment as not comparable to the subject land as there is no similarity between them. It is in a short cul-de-sac with no through traffic and only minutes' walk to the main swimming beach at Bargara.
To illustrate how the subject land could have been developed if it was unimproved, Mr Hoult produced photographs of the development of Lot 3 on RP 113120, four allotments to the south of the subject land. That allotment of 612 m² sold on 1 March 2003 for $350,000. A series of photographs show how boulders were placed over the eroded area on the site, which was then filled and levelled to produce a most attractive allotment.
The Relevant Legislation
The responsibilities of the respondent in valuing the subject land are set out in the provisions of the Act. The respondent is required to make annually, or periodically, a valuation of all land in a local government area: s.37. For the purposes of the Act, the valuation of each parcel of land is to be the "unimproved value" of that land, which is defined to mean 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 the improvements on that land did not exist: s.3(1).
The Act thus requires the respondent to ascertain the unimproved market value of each parcel of land as at the date of valuation, assuming that there were no improvements on the land, but also assuming the existence of all present facilities and amenities external to the land, such as roads, power and other services.
The concept of market value was defined by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. In that case the High Court found that the test for the market value of land is determined by the price that a willing but not over-anxious buyer would pay to a willing but not over-anxious seller, both of whom are aware of all the circumstances which might affect the value of the land, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding facilities, the then present demand for land and the likelihood of a rise or fall in the value of the property. (See Griffith CJ at 432 and Isaacs J at 441.)
It has been well established that unimproved market value is ascertained by reference to prices that have been paid for similar parcels of unimproved land. Pike J said in Waterhouse v Valuer-General (1927) 8 LGR (NSW) 137 at 139 that:
"Land in my opinion differs in no way from any other commodity. It certainly is more difficult to ascertain the market value of it, but - as with other commodities - the best way to ascertain the market price is by finding what lands comparable to the subject land were bringing in the market on the relevant date - and that is evidenced by sales."
It is clear from the Spencer case that in fixing the market price for land, the willing seller and willing buyer of that land would be well aware of the highest and best legal and probable use of the land, and fix a price accordingly, not being restricted to the present use of the land. The highest and best use of the land is the most advantageous use of the subject land, having regard to planning and all other relevant factors affecting its value and future potential as at the date of valuation. Therefore, in the case of the subject land although certain improvements have been made on that land, the land must be valued as if those improvements did not exist. In other words, the land must be envisaged as it was in its unimproved state and the valuer must then consider what is the highest and best use of that land and how that could be brought about.
In the present case, there was no argument that the highest and best use of all the oceanfront lots on Woongarra Scenic Drive is for single residential purposes. What is in issue is the extent to which each parcel of land could attain a maximum usable area.
However, it must be understood that in certain circumstances the provisions of the Act interfere the operation of the concept of highest and best use. While as a general rule the Act requires that land is valued at its highest and best use, where land is used for purposes of a single dwelling house or for purposes of farming, any enhancement in that value because the land has been subdivided by survey, or has a potential use for a higher purpose, shall be disregarded: s.17(1).
In the present case, s.17 was applied by the valuer in valuing the three adjoining parcels of land situated just to the south of the subject land. He explained that at the date of valuation, as those three parcels were being used as the site for a single dwelling house, s.17 of the Act required him to ignore that they existed as three separate allotments and to value the property as one large allotment.
The Issues
In this case, while there is little disagreement about the facts, there is general disagreement about how they affect the unimproved value of the land. First, there is general agreement about the disabilities suffered by the subject land. There is no dispute that access to and from the land is difficult and dangerous at certain times. Mr Hoult contends that he has made sufficient allowance for that access disability. Mrs Tolstoff disagrees.
There is no evidence to indicate just how much those access disabilities would affect the price that would be paid by a prudent purchaser of the subject land. The sales evidence is not sufficient to reflect that sensitivity. In the circumstances, I am satisfied that Mr Hoult has recognised the problem and has made an allowance for it.
Second, there is no dispute between the parties about the extent of the usable area. However, Mr Hoult contends that if the land was unimproved at the date of valuation, with modern engineering technology and the availability of boulders at virtually no cost, the subject land could have been developed in such a way that a much greater usable area could have been obtained. Mrs Tolstoff takes issue with that, contending that simply throwing more boulders onto the site would not have solved the problem.
From the evidence presented, I have no doubt that when the land was developed in 1980, the best practice then available was adopted. At that time, there was not the ready availability of boulders. From the evidence of the development of other allotments, particularly the development of Lot 3, just to the south of the subject land, I am satisfied that if the subject land was in its unimproved state at the date of valuation similar methods could have been adopted and a greater area of usable land could have been achieved.
Mrs Tolstoff contends that even a boulder retaining wall would not have prevented the damage from the ocean during Cyclone Fran. It seems that her property suffered more damage than the neighbouring properties to the north and south, which had been developed in a somewhat similar manner. However, the use of boulder retaining walls seems to have been common practice in the area and no evidence has been produced of damage to such walls by Cyclone Fran.
Another major concern to Mrs Tolstoff was the percentage increase in valuation of the subject land compared with those of other allotments. There is no doubt that the subject land increased by a greater percentage than the other lands in the area. Mr Hoult explained how this occurred. He also said that he did not value the lands in the area by simply increasing the previous valuations by a percentage, but compared each parcel of land directly with the sales. That resulted in a greater increase in the valuation of the subject land.
While it is understandable that Mrs Tolstoff should be concerned about the extent of the increase, that is not a valid test of whether the respondent's unimproved value is correct. That can only be demonstrated by a comparison with sales at or near the date of valuation.
Before turning to that comparison, I will deal with the relativity of values, which was another concern of Mrs Tolstoff, in particular, how three parcels of land could be valued at only $205,000, which she calculated was a valuation of just over $68,300 for each lot. However, as discussed earlier those allotments were valued as one parcel under the concessional provisions of s.17 of the Act, as they were being used for the purposes of a single dwelling house. Subsequent to the valuation, Lot 3 was sold and a separate valuation of $130,000 was attributed to that allotment. The remaining two parcels are valued under s.17 at $185,000.
I turn now to the comparison with the sales. Mrs Tolstoff considered that neither Sale 3 nor Sale 4 was a valid comparison as they were not comparable in any way with the subject land. However, while not directly comparable, they are sales of allotments on and near the oceanfront and together with the other sales, form a pattern from which the valuer can derive valuations for other lands in the area. However, because Sales 1 and 2 are more comparable, I will confine my discussion to those two properties.
Mrs Tolstoff contends that both Sale 1 and Sale 2 are much superior to the subject land. There is no doubt in their developed state that this is so, but when both sales and subject land are considered in their natural state and regard is had to the potential of each property, in my view, the difference between them narrows. However, I am still concerned about two aspects of the comparisons. Mr Hoult concedes that both Sale 1 and Sale 2 are higher in elevation than the subject land, although he does not think they are much higher. However, in my view, the fact that they are higher, combined with the unmade esplanade between high water mark and the boundaries of the two sale properties, would give them a greater degree of protection from the ocean in the case of cyclones or rough weather. Furthermore, it has been demonstrated just how much of those lands can be made usable, while there is the element of doubt as to just how much of the subject land could have been made usable. While the fan shape and longer ocean frontage are a distinct advantage in the case of Sale 2, I have some doubts as to whether the shape is such a positive attribute in the case of the subject land. I also have doubts as to whether a boulder wall could be placed directly on the boundary of the subject land. While events subsequent to the date of valuation have indicated how much of Lot 3 can be made usable, it has a narrower ocean frontage and a smaller area. The subject land has a wider ocean frontage and it would be more costly and difficult to build a boulder wall across the entire width of that frontage and to fill behind that wall. How much of the 847 m² could have been made usable is open to conjecture.
It seems that in future valuations of this area, a somewhat different approach will have to be adopted to the valuation of these oceanfront allotments. Mr Hoult had been advised by a local civil engineering contractor that from about 1 March 2003 (after the date of valuation), the requirements for filling those allotments required engineering plans, incorporating measures to prevent soil eroding. Permits from various Government departments and the Council are required. Costs may now be from $20,000 to $25,000 per allotment.
Taking into account the uncertainties, I have come to the conclusion that a further allowance should be made to the valuation. Mr Hoult has made an allowance for access and, in the absence of any evidence to the contrary, I will accept that. However, I have no doubt that the subject land is inferior to the allotment immediately to the south, although it has a smaller area. It is valued at $140,000.
After considering all these factors, and giving the appellant the benefit of those doubts, I have come to the conclusion that the valuation of the subject land should be the same as the valuation applied to Lot 3, at $130,000.
Order
The appeal is allowed, the valuation of the Chief Executive is set aside and the unimproved value of the subject land as at 1 October 2002 is determined at One Hundred and Thirty Thousand Dollars ($130,000).
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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