Watson and Anor and Valuer*General

[2006] WASAT 224

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   DEVELOPMENT & RESOURCES

ACT: VALUATION OF LAND ACT 1978 (WA)

CITATION:   WATSON & ANOR and VALUER­GENERAL [2006] WASAT 224

MEMBER:   MR P McNAB (MEMBER)

HEARD:   DETERMINED ON THE PAPERS

DELIVERED          :   7 AUGUST 2006

FILE NO/S:   DR 368 of 2005

BETWEEN:   DONALD WATSON

TATIANA WATSON
Applicants

AND

VALUER­GENERAL
Respondent

Catchwords:

Valuation of land – Gross rental value – Retirement village – Land held as undivided share – Restrictions on sub-lease and disposal – Applicant did not call expert evidence – Hypothetical landlord and tenant to be assumed – Allowance for communal facilities – Use of term hereditament – Assumptions and approach of expert valuer – Application dismissed – Words and phrases "hereditament"

Legislation:

Valuation of Land Act 1978 (WA), s 4(1)

Result:

The application for review is dismissed
The decision under review is affirmed

Category:    B

Representation:

Counsel:

Applicants:     Self­represented

Respondent:     Mr M Palandri (Acting as Agent)

Solicitors:

Applicants:     Self-represented

Respondent:     Valuer General's Office

Case(s) referred to in decision(s):

Charles Nominees Pty Ltd v Valuer General (2000) 25 SR(WA) 297

Duffy v The Minister for Planning [2003] WASCA 294

JB Investments Pty Ltd and Valuer‑General [2006] WASAT 55

Port of London Authority v Orsett Union Assessment Committee[1920] AC 273

Rowles and Valuer‑General [2005] WASAT 325

Wines and The Valuer General [2005] WASAT 263

Case(s) also cited:

Nil

REASONS FOR DECISION OF THE TRIBUNAL: 

Summary of Tribunal's decision

1. This application for review concerned the proper approach to the valuation of a home in a retirement village.

2. The property was individually valued and the total valuations were aggregated to achieve a total Gross Rental Value.

3. The applicants, Mr and Mrs Watson, objected to the valuation, firstly because it failed to take into account the restrictions on sub‑leasing and the like imposed upon owners in the village, and secondly because the valuer included an amount representing the amenity of certain exclusive facilities, such as a swimming pool for which they paid a monthly fee.  The applicants also argued that the Valuer‑General had classified their home as an "hereditament".  They submitted that, their interest in land was not capable of such a classification.

4. The Tribunal reviewed the law and practice of valuation in this area and concluded that each of the grounds of objection was misconceived.

5. The application for review was therefore dismissed.

Introduction

1. This is the review of a determination of the Gross Rental Value (GRV) of certain land, namely a double storey home in a retirement village in the north of Perth.

2. The applicants are Mr and Mrs Watson (the applicants) who made objections to the Valuer‑General.  These objections were referred to the Tribunal in 2005 under the mechanism provided for by the Valuation of Land Act 1978 (WA) (VL Act).

Subject land

1. The subject land is Lot 1300 on Diagram 10061, located at 19 The Rise, Mindarie, in the City of Wanneroo (subject land).

2. The subject land is one of 70 units in the "Harbourside Retirement Village".  The subject property was, at the relevant date, a 3‑year‑old brick and iron double storey townhouse with an attached garage and ocean glimpses and comprises 160 square metres (with effectively eight rooms).

Methodology adopted by the Valuer‑General

1. The relevant date of valuation is 1 August 2004.

2. The GRV of the entire land (that is, the whole of the retirement village) was aggregated, resulting in an annual valuation of $530 816, of which $7904 represents the applicants' share also reflected, in effect, in their holding of a "purple title", namely an undivided share to that extent.

3. The essential methodology of the valuation was to disregard any of the numerous restrictions imposed upon the owner's ability to rent the land (such as a minimum age of 55 for tenants) or otherwise dispose of it: see cl 7.1 of the "Mindarie Scheme and Residency Deed".

4. The Tribunal pauses to observe here, that as a general proposition of law, there can be no doubt that such an approach in rating/tax valuation matters (that is, a hypothetical approach ignoring the realities of such restrictions) has been endorsed over time by the Courts.

5. This matter will be returned to below when the Tribunal considers the specific objections of the applicants.

6. Importantly, it is worth noting at this point that the applicants did not choose to call any expert valuation evidence of their own: cf Rowles and Valuer‑General [2005] WASAT 325 at [23] for the, in effect, prima facie evidentiary value of something expertly valued in such circumstances – which the subject land is.

The JB Investments case

1. This review was deferred pending delivery of reasons in JB Investments Pty Ltd and Valuer‑General [2006] WASAT 55 (3 March 2006).

2. That unanimous decision (of a three member Tribunal, including the President), is to some extent relevant here, as will appear below.

3. The JB Investments case was dealing with the GRV of a retirement village comprised of transportable homes with 99 year leases.  The approach to valuation adopted there is broadly applicable or comparable to the situation here.

4. JB Investments upheld the approach of the Valuer‑General (and the internal policies upon which administrative action was based) that the VL Act permitted, in the circumstances, the aggregation of the GRV of individual lots.  In other words, the individual properties are not to be valued as if in some way each is necessarily proportionate or relational to the GRV of the subject land when taken and valued as a whole.

5. Here, as has been mentioned, the applicants' home and land was individually valued and then aggregated.

6. Like JB Investments, the Valuer‑General here has employed the "valuer's art", as it has sometimes been called (see Duffy v The Minister for Planning [2003] WASCA 294 at [29] per McLure J), to compare other rental properties in the locality and to make individual allowance or adjustment for matters such as position and size and the like in the retirement village, as well considering questions of overall amenity in the area.

7. JB Investments also dealt briefly with what constitutes an "hereditament" – a matter raised by the applicants in their objection here.  That issue will also be returned to below.

8. The further hearing of the matter was adjourned until the parties could make submissions on JB Investments, a copy of which was provided to the parties.  These submissions were received in late April 2006.

The statutory framework

1. The statutory framework is referred to at [12] – [14] and [16] – [18] of JB Investments.  It is therefore unnecessary to reproduce those provisions here.

2. The relevant date of valuation, in relation to that statutory framework, is as has already been mentioned 1 August 2004.

3. The Tribunal turns to consider the grounds of the objection.

The grounds of objection

1. Three grounds of objection were specified by the applicants.

2. The first concerns whether the artificial (and necessarily limiting) restrictions ("contracted encumbrances" as they were referred to by the respondent) in relation to the leasing of, and related dealings in relation to the subject land, should be taken into account to reduce the GRV.  (As has been mentioned, the Valuer‑General disregards such matters in working out GRV).

3. The largely unstated premise of the valuation adopted in JB Investments – for this issue was not directly raised in that case – was the same as that adopted here, that is the usual practice of such valuations which proceed by way of disregarding artificial restrictions of the nature and type already indicated.

4. This approach is supported by abundant authority and it is sufficient to cite in this jurisdiction the former Land Valuation Tribunal of Western Australia in Charles Nominees Pty Ltd v Valuer General (2000) 25 SR(WA) 297, a GRV case, where the Tribunal referred to the "imaginary" tenant and the "imaginary" landlord in respect of premises "being [hypothetically assumed to be] vacant and available to be let" (at 297).

5. The Valuer‑General also refers to Port of London Authority v Orsett UnionAssessment Committee[1920] AC 273 cited in Widdicombe, D Ryde on Rating 13th ed Butterworths, London, 1976 at page 447 to similar effect.

6. What is being aimed at is a "true", notional or underlying valuation of the land and its relevant improvements through a process "manifestly recognised in the authorities as artificial" (cf Wines and The Valuer General [2005] WASAT 263 at [55] for a broadly analogous valuation context, where a similar point was made).

7. Thus, with respect to the applicants, there is no substance in the first ground of objection.

8. The second ground of objection relates to the allocation by the Valuer‑General of an additional $20 per week (some 15%) as a loading representing various communal facilities and services available for exclusive use for the residents, such as the bowling green and swimming pool.  The objection draws attention to the fact that a separate monthly fee is charged for these services.

9. The Valuer‑General submits that such services, if located near a hypothetical property, would ordinarily affect any corresponding valuation and accordingly a premium should be acknowledged for their availability.

10. The Valuer‑General also submits that the technical treatment in JB Investments of communal facilities (as to their replacement as capital infrastructure) as an outgoing on the landlord's part as necessary to maintain the value of the land (see [38]) is consistent with the approach taken here.

11. The Tribunal has already drawn attention to the prima facie evidentiary value of an expert valuer's views and evidence on an issue of this nature.  Thus, absent any expert evidence to the contrary – which is the case here – the Tribunal would be entitled to uphold that aspect of the valuation on that ground alone.

12. But, in any event, the hypothetical and artificial nature of the valuation to be made suggests, consistently with what is set out above, that no error is made by making an allowance for such communal facilities when determining a rental value that must necessarily have regard to a fair assessment of the entire amenity available to the "imaginary" tenant.

13. The Tribunal therefore rejects the applicants' contentions in relation to their second ground of objection.

14. The final ground of the applicants' objection is the rejection by them of any notion that their land could be regarded as an "hereditament", a term included in the wide definition of "land" found in s 4(1) of the VL Act. In a general way, "hereditament" was used in the correspondence or submissions or both of the Valuer‑General to indicate a unit of assessment. ("Hereditament" also appears in the full passage of Ryde on Rating referred to above.)

15. The essential argument of the applicants is that as some notion of inheritance of property is involved in the use of such a term, and as indicated above restrictions on the subject land mean that no such relationship between inheritance and disposition was ordinarily possible, it follows that no "hereditament" could be valued, as the Valuer‑General had purported to do.

16. The history, source and use of the term "hereditament" in valuation law and practice are discussed in JB Investments at [63]-[64].  The Tribunal there did not finally determine what the exact scope of an hereditament was under the law of this State, but hereditament as discussed and explained there bears no necessary relationship to its use in other branches of the law – a use deployed by the applicants here.

17. Thus, valuing parts of the land as here and as done in JB Investments for the purposes of aggregation – whether treating or classifying those parts as hereditaments or not – is a valid approach to determining the GRV.

18. This ground of objection must be dismissed.

Conclusion and orders

1. It follows that the objection referred to the Tribunal for a review of the valuation affecting the applicants must be dismissed as none of the grounds have been made out.  The Tribunal is otherwise satisfied that there is sufficient material before the Tribunal (material which was unchallenged) to sustain the valuation.

2. Accordingly, the Tribunal makes the following orders:

   1.The application for review is dismissed.

   2.The decision under review is affirmed.

   I certify that this and the preceding [46] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

   ___________________________________

   MR P McNAB, MEMBER