Trustees of the RSL of Australia (Qld Branch) Charters Towers Sub-Branch v Chief Executive, Department of Natural Resources
[1999] QLC 124
•1 December 1999
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LAND COURT
BRISBANE
1 DECEMBER 1999
Re: AV99-1230 and AV99-1231
An appeal against an unimproved valuation -
Valuation of Land Act 1944 -
Local Government: Charters Towers
Trustees of the RSL of Australia (Qld Branch)
Charters Towers Sub-Branch
v.
Chief Executive, Department of Natural Resources
(Hearing at Charters Towers)
D E C I S I O N
This decision deals with appeals against the valuations of the Chief Executive under the provisions of the Valuation of Land Act 1944 on two adjoining properties located in Charters Towers. With the consent of the parties both appeals were heard together. One of these properties is the Charters Towers Returned Soldiers and Services Bowling Club (the Bowls Club) which the Chief Executive valued at a figure of $45,000. The appellant contends for a figure of $32,000. The second property owned by the Trustees of the RSL of Australia (Qld Branch) (the RSL Club) had a value of $75,000 placed upon it by the Chief Executive, whereas the appellant contends for a figure of $32,000 in this case also.
Elliott William Titley, the President of the RSL Club and a trustee with respect to each property, appeared for and gave evidence on behalf of the appellant, whilst Michael Gerard Stephensen, a registered valuer, gave evidence in support of the Chief Executive's valuation figures.
I will not set out the grounds of appeal in full, however, will record what I understand to be the significant grounds of appeal, given the manner in which the appellant's case was conducted. In the case of the Bowls Club appeal:
"1.The magnitude of the increase is disproportionate and exorbitant. There appears to be little realistic justification for the current increase of 40.63% ….
3.The development layout is such that the development dominates the site and leaves little scope for sub-division and subsequent sale of portions to permit the owners to realize the "value" assigned. Furthermore, the utilisation, a bowls club, would limit the potential for any residential sub-division, should such be possible."
The RSL Club:
"1.The magnitude of the increase (thought to be the highest in the City) is disproportionate and exorbitant. In the period 1988-1998 there were two increases, the first (1993) was 24.65% and the second (1995) was 19.4%. There appears to be little realistic justification for the current increase of 134.37%….
3.Valuation on the adjoining, similarly zoned land, was not increased at anywhere near the same rate.
4.The utilisation of the land and its development layout is such that the development dominates the site and leaves little scope for subdivision and subsequent sale of portions to permit the owners to realize the 'value' assigned. Any 'spare' land is suitable only as a buffer for adjoining residential land."
As to the ground of appeal numbered 3 in each case, I will point out now that s.3 of the Valuation of Land Act requires the Chief Executive and, in turn, this Court to place a value on the relevant land on the basis that the land is unimproved. Section 3(1) provides:
"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;
(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 will be convenient if I also set out at this point another provision of the Act which is relevant to the manner in which the Chief Executive has valued the lands, the subject of these appeals:
"3.(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that –
(a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and
(b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used;
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made."
The significance of s.3(4) is that whilst s.3(1) requires the valuing authority to disregard the value of the improvements on the land, ss.(4) provides that the use made of the improvements may be taken into account in establishing the value of the land. It is important to also note that whilst under a Town Plan the land may be zoned for particular purposes, a valuation does not slavishly adopt that zoning as if it represented the highest and best use of the land, but should take into account potentialities in the land, so long as they are a value, and in that respect the zoning of the land will usually be a factor to be taken into account in considering the potential of the land. For example, land zoned as "Residential" in the midst of a residential environment may, all other things being equal, have no greater potential than a use for residential purposes. Land, however, which is zoned "Residential" in the midst of a commercial environment may have the potentiality of being rezoned or made the subject of town planning consent which allows a commercial usage on the land. I mention this particular factor at this point, both with regard to the second ground of appeal set out above with respect to each case and also having regard to some issues that arise later in these reasons.
The Bowls Club land has an area of 1.006 ha and is situated 1.8 km north of the Charters Towers Central Business District on the western side of Prior Street at that street's intersection with Hicks Street. Charters Towers is located 135 km south-west of Townsville in North Queensland. The Bowls Club property has a 100-metre frontage to Hicks and Prior Streets, both streets being bitumen sealed. All of the usual Charters Towers urban services are available to the property.
The Bowls Club land has a regular shape, is a corner lot and has an easterly aspect. It slopes gently away from Prior Street. The land has some views to the west and has been cut and filled to form the level ground required for the bowling green, though in accordance with s.3(1) of the Valuation of Land Act, must be viewed in an unimproved state. The land is zoned "Public Purpose" under the Town Plan for the City of Charters Towers gazetted on 10 December 1998 and under the Strategic Plan is designated "Open "Space". The land is currently used as a bowling green and clubhouse.
The RSL Club land has an area of 1.016 ha and is situated on the western side of Prior Street at its intersection with Hewett Street. It has a 100-metre frontage to both of those streets which are bitumen sealed. The land is elevated, has a regular shape, an easterly aspect and gently slopes away from Prior Street. The land has some views to the west. There has been minor cut and fill to form the level pad for the clubhouse, however again, those improvements need to be disregarded for the purpose of a statutory valuation under the Act. The land is currently used as a Returned Services Leagues Club which has a club liquor licence, 16 gaming machines, a bar operation, restaurant and function rooms. The other general attributes of the Bowls Club land referred to earlier also apply to the RSL Club land (situation, services and zoning). Both parcels of land are, according to Mr Stephensen, in an area of Charters Towers which is sought after for residential purposes.
Mr Titley was particularly concerned about the changes in valuation relationship between the two parcels following the 1998 valuation. He provided a chart which showed that in the 1988-89 valuation year each parcel had a value of $21,500 and the values ran at that level until the 1993-94 year when both were increased to $26,800, or an increase of 25%. In the 1995-96 year each increased in value by 19% to $32,000, then at the present relevant date the Bowls Club land increased in value by 41%, whilst the RSL Club land increased in value by 134%.
I can immediately understand Mr Titley's concern and those of his fellow members at the changing relationship between the values placed on each parcel of land, as well as the level of values recently applied. I will put the second issue aside for the moment, however, and will concentrate on the issue of value relationship. In respect of this matter there are two things that I will say. First, there is a requirement imposed upon the Chief Executive and, in turn, on this Court in the case of an appeal to value land as at the specified date, according to the evidence which supports a value at that date. Past valuations which may have been assembled in a range of ways, having regard to evidence and opinions obtained at those earlier dates, cannot logically apply to the value at a certain later date. It may well be the case that those earlier values were struck on incorrect bases or by a wrong application of principle or valuation method or, indeed, that they were justified in accordance with the best valuation evidence available at the time. Such an inquiry into the past, however, is of no benefit for it is contemporary evidence which is relevant and that, of course, is a principle which would be known to all of those who become involved in real estate purchase from time to time. The second point that I would make is that there is a difference in use with regard to each of the parcels of land the subject of these appeals. Mr Titley acknowledged that such a difference did exist, though it was his view that the difference was not as great as the Chief Executive's values on the parcels of land implied. There is in my view, however, a substantial difference in the use of each parcel of land. Whilst the Bowls Club enjoys a club liquor licence, that land is largely used for recreational or sporting purposes. The intensity of the usage on the RSL Club land, however, is such that it elevates the use of that land to a higher or commercial level. Now these differences in uses may have existed at each relevant valuation date referred to earlier. Be that as it may, I should approach the matter based only on the evidence presented to me and I conclude, that usage on the RSL Club land is more intensive and of a more commercial nature than that on the Bowls Club land and that such a differential in usage can give rise to a differential in value.
I will now turn to consider the valuation of the Bowls Club and will first deal with the valuation presented by Mr Stephensen. He said that the Bowls Club land had been valued having regard to sales of nearby residential and rural residential lands, which I will come to shortly. He then took into consideration the prospect of rezoning the subject land. He made inquiries of the Charters Towers City Council and was given advice to the effect that an application for consent to allow a single dwelling unit on the Bowls Club land would probably be successful having regard to the fact that residential uses adjoin the site. He was advised that each application is assessed on its own merits and that a consent use would not necessarily be automatic so, on this basis, he discounted the residential value on the basis of the risk of such consent not being forthcoming. He gave no evidence as to the level of discount, however, it seems to me that the risk would have been minimal.
Now I understand that whilst Mr Stephensen described his approach in his written valuation in the manner that I have set out above, I understand from the evidence overall that in the final result his valuation took into account the added advantage that the land would have for use as a bowls club site. I gathered this from his reference to another bowls club as a relativity valuation and which I will mention shortly; because he said that he had regard to the use of the land as a bowls club in conducting his valuation; and because the sales to which he referred would not, in my view, support a residential valuation of $45,000. I will now set out this sales evidence.
His Sale No. 1 at 47 Hewett Street took place in July 1999. The land has an area of 978 m² and sold for $30,000, a price which Mr Stephensen analysed to a figure of $29,400 after deducting clearing and fencing improvements. He said that the sale property is similar in location and topography to the Bowls Club land, but much smaller in size and overall is inferior.
His second sale at Deighton Street involved a property of 1,461 m², which sold in February 1997 for $31,000. Mr Stephensen deducted clearing and fencing improvements to deduce an analysed sale price of $30,000. The Sale 2 property is of almost level topography and is located approximately 430 metres south-east of the Bowls Club land. The sale land is superior in location, inferior in size, but similar in all other respects to the Bowls Club land, according to Mr Stephensen. Overall he placed the sale as being inferior. When I consider the analysed sale prices of Sales 1 and 2, I gain the impression that differential in size is not a significant determination of value in the case of such residential lands. Mr Stephensen's third sale would appear to support that conclusion.
That third sale is located at 13 Range Road and has an area of 1.478 ha. The sale took place in June 1997 for a price of $35,000, which was analysed to an unimproved figure of $33,500 by Mr Stephensen. He said that the sale land is elevated with good views, but with very poor gravelly soil. It is slightly superior in size to the Bowls Club land, but inferior in location and services and is, in the net result, inferior overall.
Based on that sales evidence and having regard to the need to obtain consent use on the Bowls Club land to a residential usage, I would have thought that a value of the Bowls Club land purely as residential land and without a bowls club usage, would have been something short of $40,000. When I take into account, however, the added value of the bowls club usage, having regard to Mr Stephensen's opinion on that matter, I think that he was justified in drawing a conclusion that the value of that land is $45,000.
Mr Stephensen made reference to the valuations placed by the Chief Executive on the Civic Club at 36 Ryan Street, Charters Towers, and the Charters Towers Bowls Club at 68 Mary Street. In the case of the Civic Club, which has an area of only 771 m², a value of $23,000 or $29.83 per m² was applied, though Mr Stephensen fairly pointed out that the club there is licensed and has six gaming machines. The Charters Towers Bowls Club has an area of 2,964 m² and was valued at $40,000 or $13.49 per m². That club is close to the city centre, but being a small site experiences parking problems. It appears that parking on the subject land is sometimes difficult and the RSL Club land is used for this purpose, however, that is not a matter of concern to me because the critical point is that the Bowls Club land under appeal has a substantially greater area than the Charters Towers Bowls Club land, thus in an unimproved state has the potential for design and development in a manner that would allow parking facilities to be developed on the site to a standard greater than that of the Charters Towers Bowls Club site. Whilst the relativity between valuations would not be sufficient to determine the issue, it is clear to me that the relationship between the values placed on these two properties is consistent with the figure Mr Stephensen has applied to the Bowls Club land under appeal.
As I have indicated earlier, Mr Stephensen took account of the commercial nature of the usage on the RSL Club land in valuing that site but, interestingly, did not refer to any commercial sales in striking his value. He referred to some residential sales, which I will come to shortly, then added in an allowance for the nature of the use of the land being valued. That method is sometimes referred to as the "bottom-up" method and is one frequently encountered in this jurisdiction.
The first two sales to which Mr Stephensen referred in valuing the RSL Club land were the same as Sales 1 and 2 in the case of the Bowls Club land. The best that one can say about these sales is that they indicate that the value of the RSL Club land ought to be substantially higher than the analysed figures of $29,400 and $30,000 shown by those sales, however, the sales cannot be employed reliably to indicate a value.
Mr Stephensen's third sale, however, is of greater interest. That property sold in April 1997 for a price of $75,000. It comprises an area of 1.288 ha at Gordon Street, Charters Towers, and was analysed by Mr Stephensen to an unimproved figure of $73,000 after deducting an allowance for clearing and cut and fill. The land was purchased for the purpose of subdivisional development and was analysed to a figure of $5.66 per m² by Mr Stephensen. He said that the sale property is of near level topography with limited views, is slightly superior in size to the RSL Club land, but inferior in location. The land to be valued is a little more elevated and has slightly better views and overall, according to Mr Stephensen, would be superior to the Sale 3 land as residential land and of greater superiority when one had regard to the commercial usage on the RSL Club land.
Mr Titley was aware of the sale and thought it relevant to both appeals. He did not take into account any clearing and levelling of the sale land, so his analysis came to a figure of $5.82 per m². Mr Stephensen's analysis is to be preferred and in any event, it favours the appellant. Mr Titley said that whilst the sale land was zoned "Public Purpose" at the sale date, he was of the view that the purchaser would have anticipated a rezoning to allow residential development. That zoning did, in fact, eventuate and subdivision of the land has taken place.
Mr Titley did not offer a comparison between this Sale 3 land and the RSL Club land, nor did he compare it with the Bowls Club land. He appeared to suggest that an average value struck by considering this Sale 3 land and another sale which I will introduce shortly, should be relied upon in increasing the value of the subject properties under appeal. Such an approach cannot, however, be employed for two reasons: first, a value of land ought to be struck by comparing reliable and comparable sales with the land in question, not by the production of some sort of statistical analysis having regard to a range of sales. Second, my concern in these cases is not with the determination of a level of increase in value, but with the actual value that ought to apply as at 1 October 1998. Let me, however, introduce Mr Titley's second sale.
That sale is also located in Gordon Street and involved the sale of an area of 1.7468 ha at $51,700 or $2.95 per m². The zoning and development history of that land from the date of sale is similar to Mr Stephensen's Sale 3. Mr Stephensen knew of Mr Titley's second sale and gave evidence that he was aware that a real estate agent other than the selling agent was in possession of an offer for purchase in the amount of $100,000, but was not able to communicate that offer prior to the vendor entering into the contract at the figure of $51,700. That particular fact alerted Mr Stephensen to be cautious about the sale. In addition, however, he noted that two of the subdivision blocks produced following development have sold at prices of $25,000 each, indicating to him that the purchase price of $51,700 was a very good price for the purchaser.
Whilst it would have been preferable to have evidence of the asking price of this sale land, the evidence certainly points to the need to treat this sale with caution.
Mr Stephensen also referred to valuations by the Chief Executive in support of the value of $75,000 he placed on the RSL Club land:
| Address | Area (sq.m.) | Unimproved value | Rate per sq.m. | Comment |
| 217 Gill Street Charters Towers | 2,719 | $60,000 | $22.07 | City fringe hotel. |
| 32 Mill Street Charters Towers | 2,774 | $42,000 | $15.14 | Suburban hotel. |
| 19 Mosman Street Charters Towers | 2,348 | $65,000 | $27.68 | City fringe hotel. |
| 1 Mosman Street Charters Towers | 4,071 | $70,000 | $17.19 | City fringe hotel. |
| 151 Mosman Street Charters Towers | 2,024 | $60,000 | $29.64 | City fringe hotel. |
I was not presented with any comparison between these relativity properties and the RSL Club land and in those circumstances I will place less reliance on them than the limited reliance which would usually be placed on such valuations.
The difficulty I have with respect to the valuation placed on the RSL Club land is that I am not confident that the premium added to the bare residential value of that site for the commercial class of usage on the site is reasonable and equitable. Without a "ceiling" in the employment of the "bottom-up" method of valuation, there is a large scope for judgment by the valuing authority and guidance as to the exercise of that judgment is limited. In these circumstances and having regard to the level of differential between the residential value and the value placed on the RSL Club land by Mr Stephensen, I intend to reduce the commercial premium and strike a value of $6.50 per m² on the RSL Club land. In so doing, I have taken into account that the liquor licence which applies to that land is not an open licence which allows all-comers, therefore, the land does not have all of the commercial attributes of premises such as a hotel. A value of $6.50 per m² calculates to a figure of $65,390, which I will round down to a value of $65,000.
Accordingly, in the case of Appeal AV99-1230 concerning the RSL Club land, the appeal is allowed, the value of the Chief Executive is set aside and the valuation of the land is determined at Sixty-five Thousand Dollars ($65,000). In the case of Appeal AV99-1231 – the Bowls Club, the appeal is disallowed.
RP SCOTT
MEMBER OF THE LAND COURT
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