Zitny v Department of Natural Resources and Mines
[2003] QLC 49
•18 July 2003
LAND COURT OF QUEENSLAND
CITATION: Zitny v Department of Natural Resources and Mines [2003] QLC 0049 PARTIES: Marie Zitny
(applicant)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO:
AV2002/0381
DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 18 July 2003 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Dr NG Divett ORDER: The appeal is dismissed, and the unimproved value of Lot 2 on RP 54118 as determined by the Chief Executive in the sum of One Hundred and Seventy-Five Thousand Dollars ($175,000) is affirmed. CATCHWORDS: Valuation – Sales – Use of scarce vacant sales – Impact of scarcity – Method of analysis – Use of improved sales – Valuation of Land Act 1944 APPEARANCES: Miss M Zitny appeared for the appellant
Mr A Cradick appeared for the respondent
Background:
This matter relates to land at 68 Baynes Street, Highgate Hill, and described as Lot 2 on RP 54118, Parish of South Brisbane. The subject land is an area of 397 m² and is located about 2 kilometres south-west of the Brisbane CBD. Baynes Street is bitumen sealed with concrete kerbing and channelling. The subject land is zoned as Low Medium Density Residential under the Brisbane City Plan 2000, effective at the date of valuation of 1 October 2001. The key issues are the nature of the land, relativity and comparison of sales.
On 25 February 2002 the Chief Executive issued a valuation of the subject land at $175,000. Following an objection the Chief Executive confirmed that figure on 25 June 2002. The appellant has now appealed claiming the unimproved value should more properly be $140,000.
Miss Marie Zitny appeared and gave evidence on her own behalf. Mr A Cradick, Senior Legal Officer appeared for the respondent, calling evidence from Arend Boudewyn Van Hees, the departmental valuer responsible for determining the valuation. By agreement with the parties, a joint site inspection was undertaken. This matter was heard concurrently with another appeal by the appellant on land at 18 Athlone Street, Woolloongabba (AV2002/0382). Some of that evidence, and reasons for judgment in that matter, are relevant in the current matter. Where appropriate my reasons outlined in that decision should be read in conjunction with this decision.
The Nature of the Land –
The subject land is a rectangular parcel, one lot removed from the corner of Baynes Street and Middle Street, and faces north. The land is level, slightly above Baynes Street, which tends to follow a natural depression in the local topography. Baynes Street is subject to local ponding of surface waters during extended periods of heavy rain fall. The subject land was subjected to flooding within 0.3 metres of the current floor level of the existing dwelling in 1974, and becomes soggy at times in heavy rains. It is agreed however that as a consequence of major flood mitigation works following the construction of the Wivenhoe Dam, and based upon the current level of technical advice supplied by the Council, that flood risk is now considerably reduced, and appears to attract little concern in the market place.
Because of its low lying nature there are no significant views from the subject land. However as Baynes Street rises to the east, lands in that area have views of the mountain ranges to the west. Miss Zitny argues that there is some intrusion of road noise from passing traffic over a traffic calming speed bump in front of the subject land. She notes that Baynes Street is an attractive route for rat running local traffic, which she sees as a disability to the land. In addition to those traffic problems she notes the presence of the close-by Musgrave Park hostel at the corner of Boundary Street and Baynes Street about 50 metres west of the subject land. There is also a halfway hostel for intellectually disadvantaged people in Hampstead Road to the east. She notes that while those residents from both hostels are generally pleasant, there are a few who create disturbance. However she concedes that similar types of personalities also exist in the wider community.
Miss Zitny notes that there is a distinct difference between small sub-market groupings in the general Highgate Hill area. She advises that in the generally lower socio-economic area of lower Baynes Street, near the subject land, the general community tends to reflect working class characteristics, and a strong cultural presence, where family connections often dictate the attractiveness of those areas. She argues that in some other areas, such as along Middle Street to the south, and easterly to the more elevated areas of Baynes Street, the newly settling owners tend to reflect an upwardly migrating socio-economic class of resident. She argues that those characteristics tend to reflect in the market prices for houses in that area.
Mr Van Hees partly agrees with that conclusion, but notes that often the lower prices for homes in the cultural areas reflect strong family ties and sales to family members. Mr Van Hees notes that historically the lands in Highgate Hill and West End tended to reflect migrant residents who settled in the less expensive areas after World War II. However with the increasing attractiveness of such close proximity to the CBD, the more affluent socially mobile groups are changing the community balance in the area. He argues that is resulting in increasing higher prices for properties.
Miss Zitny also provides a copy of a Courier Mail article suggesting that uncertainty is now being reflected in the market for small residential lots, as a result of possible moves by the Brisbane City Council to require enhanced streetscape restrictions. However that report reflects the situation at 29 March 2003, well after the relevant date of valuation at 1 October 2001, and provides little assistance in the current matter.
Relativity –
As discussed in Zitny v Chief Executive, Department of Natural Resources and Mines (AV2002/0382), Mr Van Hees also seeks relativity with several sales of improved lands, as supporting evidence for his direct comparisons of sales of vacant lands. Those comparisons reveal applied unimproved values of three parcels also in Baynes Street, in addition to a comparison with the sale of the subject land itself. A detailed explanation of those analyses is discussed later in paragraphs [17] to [20]. However a summary of those applied unimproved values reveals the following:
Sale Area Applied Unimproved Value Comparison 1 (32 Baynes Street) 410 m² $210,000 Superior 2 (21 Baynes Street) 336 m² $185,000 Superior 3 (16 Baynes Street) 524 m² $220,000 Superior Subject land 397 m² $175,000 -
In seeking comparisons it is agreed that Sales 1 to 3 are all at a higher elevation than the subject land, and have views to the mountains to the west. Miss Zitny argues that those sales are not directly comparable to the subject land, which has no views beyond Baynes Street. She also notes particularly that 21 Baynes Street is a recently renovated dwelling with a greatly superior presentation than the subject land. She argues that on that basis it is inappropriate to consider a similar level of depreciation applicable to those two existing dwellings.
Miss Zitny also seeks some relativity with lands at 93 Annerley Road, Woolloongabba, and also 146 Dornoch Terrace, Highgate Hill. She notes that the old dwellings on those two sales are more similar to the old dwelling on the subject land, compared to the three improved sales provided by the respondent at 16, 21 and 32 Baynes Street. However she provides no specific details of those other improved sales, and I get little assistance from those matters. In respect of the added value of the improvements on 21 Baynes Street, Miss Zitny challenges Mr Van Hees’ added value as discussed later. Mr Van Hees further notes that, other than minor adjustments to parcels in Baynes Street, the previous relativities had been basically maintained since the previous valuation.
Comparison of Sales –
To support her estimate of the unimproved value of the subject land Miss Zitny provides details of the sales of improved lands at:
· 37 Hove Street, Highgate Hill – sold June 2002 for $175,000
· 53 Baynes Street, Highgate Hill – sold April 2002 for $170,000
· 93 Annerley Road, Woolloongabba – sold June 2001 for $138,000
· 146 Dornoch Terrace, Highgate Hill – sold May 2001 for $250,000
· 61 Abingdon Street, Woolloongabba – sold March 2001 for $174,800
As noted Miss Zitny provides no specific details of any of those sales, and Mr Van Hees rejects the sale at 61 Abingdon Street as he believes that reflects a family sale, well out of line with the market. Miss Zitny also suggests that some larger parcels such as 37 Hove Street may be purchased for the development of two dwellings on the one parcel of land. To support that conclusion she provides photographs of the two new dwellings upon the parcel at 37 Hove Street, which are seen to be separate dwellings not connected physically. Mr Van Hees is not aware whether those two dwellings are in fact upon the one single parcel, and occupied by separate families, but notes that in such circumstances the Chief Executive would prepare separate valuations for each building under s.34(2) of the Act. (Exhibit 7, p.15, photograph 5).
To support his valuation of the subject land Mr Van Hees provides the following sales of vacant land:
· Sale 1 – (41 Middle Street, Highgate Hill – Lot 2 on SP122978). This is 422 m² Low Medium Density Residential parcel located about 200 metres south of the subject land. The sale is regular in shape falling from the rear to Middle Street. This is the common sale with AV2002/0382, which was discussed in that matter at paragraph [17]. The sale is seen as superior to the subject land due to its higher elevation and partial City centre views. The sale sold in November 2000 for $229,000, was analysed at $229,000, and applied at $210,000.
· Sale 2 – (29 Whynot Street, West End - Lot 10 on SP 140925). This is a 528 m² Low Medium Density Residential parcel located about 300 metres west of the subject land. Whynot Street is narrow, and parking is restricted to the southern side only. However there are good City centre views and the sale is superior to the subject land due to its larger size and elevation and partial City centre views. The sale sold in July 2001 for $300,000, was analysed at $300,000, and applied at $285,000.
· Sale 3 – (Lot 73 Ryan Street, West End – Lot 73 on RP 10977). This is a 405 m² Character Residential parcel located about 1.3 kilometres south-west of the subject land. The sale is a rectangular parcel fronting Ryan Street which is a wide bitumen sealed road with superior access to the subject land. The land is above street level, but has only suburban views, except for some potential for minor glimpses of the Brisbane River through large trees to the south. The new owner of that sale confirmed that opinion during the site visit. The sale is superior to the subject land due to its nature, access and location. While Baynes Street is close to the coffee precinct along Boundary Road, the sale is located in Hill End which is a superior locality with more upmarket dwellings. The sale sold in August 2001 for $233,000, was analysed at $233,000, and applied at $220,000. Mr Van Hees advises that the Baynes Street area was first settled in the 1920s, while the Ryan Street area was first settled about 1880, and gained popularity about 1930s to 1940s.
To support his comparisons by the sales of vacant lands, Mr Van Hees also provides analyses of the following improved sales:
· Sale 1 – (32 Baynes Street, Highgate Hill – Lot 2 on RP 11748). This is a 410 m² parcel located about 200 metres east of the subject land, which sold in February 2001 for $273,000. The existing improvements were analysed at an added value of $50,000, as the old dwelling was extensively demolished, giving an analysed value for the land at $223,000, which was applied at $210,000.
· Sale 2 – (21 Baynes Street – Lot 13 on RP 11749). This is a 336 m² parcel located about 270 metres east of the subject land, which sold in September 2001 for $285,000. The existing improvements included a refurbished old dwelling which was analysed at a replacement cost of $135,000, and then depreciated by 40% to reflect its age and condition to $80,000, giving a land value of $205,000. That was applied at $185,000.
· Sale 3 – (16 Baynes Street – Lot 25 on RP 11749). This is a 524 m² parcel located about 300 metres east of the subject land, which sold in May 2001 for $278,000. The existing improvements were analysed at a replacement cost of $85,000, which was depreciated by 40% to reflect its condition giving an added value of $50,000, and a land value of $228,000. That was applied at $220,000.
· Sale 4 – (68 Baynes Street – Lot 2 on RP 54118). This is the sale of the subject land of area 397 m² which sold in February 2002 for $243,000. The existing improvements were analysed at a replacement cost of $85,000, then depreciated by 40% to give an added value of $50,000, and a land value of $193,000. That was applied at $175,000.
In explaining his method of analysis, Mr Van Hees followed a similar pattern as discussed previously in AV2002/0382, using Rawlinsons Guide to Building Costs, and his wide experience in the area. Miss Zitny questions that “character buildings” can be built at costs reflected by Mr Van Hees, but concedes that Rawlinsons is an accepted industry standard. Mr Van Hees advises that there were a number of improved sales in Middle Street and Jones Street, but he selected the four sales in Baynes Street as they reflected the locality of the subject land more closely.
Miss Zitny is particularly familiar with the sale at 21 Baynes Street, as she personally inspected that property both internally and externally prior to the sale. She questions how such a renovated dwelling could be seen to reflect a depreciation rate of 40%, similar to that applied to the subject dwelling, which is in a far inferior condition. It is her opinion that the dwelling on 21 Baynes Street would have costs about $175,000 to build rather than $135,000 applied by Mr Van Hees.
Mr Van Hees concedes that his inspection at 21 Baynes Street was from the street, but argues that it is a similar vintage cottage as the subject dwelling, although it has been maintained in better condition, and had been recently repainted. He was not sure whether the repainting had occurred prior to sale, but he argues that difference in added value of $80,000 for 21 Baynes Street, and $50,000 for the subject dwelling, reflects the better quality of the former in the market place.
In respect of the added value of the dwelling on 32 Baynes Street, which had been extensively demolished, Mr Van Hees advises that was a substantially larger dwelling, being of two levels. However he concedes that his analysed added value may have been slightly high at 32 Baynes Street, and he suggests a figure of $40,000 might be more applicable. He notes that such variations are often difficult to quantify with any exactitude, which is always a problem when analysing highly improved sales. However that would only tend to make the analysed value of that land higher than $223,000. He also observes that a relevant depreciation factor to apply depends upon the experience of the observer.
Mr Van Hees observes that since the recent decision of the High Court in Maurici, parties are now seeking guidance in respect of the appropriate approach to be adopted in fully analysing improved sales. He notes that a comprehensive analysis of an improved sale would require a full internal inspection of private dwellings, a freedom currently not available to appellants in similar matters as the current appeal.
In seeking fairness and equity in such matters, while the appellants would be restricted in any attempt to fully analyse a private residence that has been sold, or for which relativity was being compared, that restriction is not incumbent upon the Chief Executive. I note that under ss.36(5) and 6 of the Valuation of Land Act, the Chief Executive has powers to obtain information and access as follows:
“36.(5) The chief executive, or any other officer authorised by the chief executive in that behalf, shall at all times have full and free access to all lands, buildings, places, books, documents, and other papers, and to all registers of deeds or documents of title, for the purpose of valuing or inspecting any land improvements to land, stock, plant, chattels, and personal property, or any of them, or of ascertaining the ownership of any of them, and for any of those purposes may make extracts from or copies of any such books, documents, or papers.
(6) The owner or occupier of any land, the manager of any business or undertaking carried on any land, and any architect, contractor or other person engaged in or in connection with the planning, construction, alteration, renovation or repair of any structure on any land shall answer any questions put to him or her by the chief executive or any officer authorised by the chief executive, and generally shall afford all necessary information to enable a correct valuation to be made.”
However, while such powers do exist for the Chief Executive, implementation of a major number of thorough valuations of improved sales evidence, or relativity comparisons, is likely to require major resources not necessarily available. That is a matter for consideration by the Chief Executive. I note for instance that Maurici has now attracted major debate in the valuation profession, where its impacts are being widely contemplated. A recent article on such outcomes in “Taxable Land Valuation: by Andrew Robbins (a lawyer) in the Australian Property Journal, volume 37, No. 6 May 2003, at p. 432, addressed those issues. A summary of the Maurici decision was also provided at p.436 of that journal.
Robbins speculates that “improvements usually add value in excess of cost or they are not made” (p. 435). But that conclusion ignores the idea of a prudent purchaser who is likely to ask the question – why pay more for something that I can have done myself at less cost than is now being asked? Robbins notes that Callinan J said in Boland v Yates that value added by improvements will often be more than cost, and will sometimes be less. (Boland v Yates Pastoral Corporation [1999] 74 ALJR 209, at p.279). To conclude that the added value of improvements will always exceed their cost draws a long bow as a general theory. In Boland and Yates Callinan J was discussing the matter of any “special value” that might have applied to an owner as part of a compensation claim.
In the Robbins article the author contemplates the possibility of valuers providing a “healthy discount for scarcity”, although he provides no basis on how that scarcity should be measured. Robbins also raises the issue of whether Maurici may lead to the rejection of sales where demolition has occurred subsequent to the sale. However any prudent use of such an approach would always confirm that the resulting adopted value, including demolition costs, is in line with other market evidence. On that basis I believe that his reading of Maurici on that issue has no firm basis, but highlights the level of speculation currently pervading the property industry after Maurici.
In respect of comparisons between the applied added values at 16 Baynes Street and the subject land, both dwellings were old and in need of major maintenance. Mr Van Hees argues that the replacement cost and depreciation rates are very comparable on those properties. Miss Zitny does not disagree.
In applying the unimproved value of $175,000 to the subject land, Mr Van Hees advises that had been made using both the sales of the vacant lands, and also an overall appraisal of all of the improved sales in the area. He further advises that the sale of the subject land had not been known to the Chief Executive at that time as it was a late sale, but it subsequently confirmed the earlier decision.
Decision:
Before considering the sales evidence I note Miss Zitny’s concern that some larger parcels may have the potential for two dwellings to be constructed, thus providing an unfair comparison as a single dwelling site as applied to the subject land. While there was no conclusive evidence supplied in respect of the sale of land at 37 Hove Street, I note Mr Van Hees’ advice that separate valuations are likely to be provided for those two dwellings in spite of their presence upon only one single title. I note that power is conveyed to the Chief Executive under s.34(2) of the Act, which states:
“Lands to be included in 1 valuation
34.(2) However, any such parcels of land shall be valued separately if buildings are erected thereon which are obviously adapted to separate occupation and which may respectively be lawfully held under separate ownerships.
That power was accepted by the Land Appeal Court, when it considered the actions of the Valuer-General (now Chief Executive), to create parcels as he saw fit for the more effective administration of the Valuation of Land Act in Valuer-General v Reinke (1969) 36 CLLR 178. That was later followed by the Land Appeal Court in Gibson Investments Pty Ltd v Valuer-General (1978) 5 QLCR 223, at 227.
For the reasons explained in AV2002/0382, the use of comparisons with sales of vacant lands is a preferred method of determining unimproved value, where they are available, and reasonably comparable. In the current matter Mr Van Hees has compared those three sales of vacant lands, making allowances for the respective features of each sale. He acknowledges that there are City centre views from both 41 Middle Street and 29 Whynot Street, and he has discounted the subject land for its lack of any such views. The applied value of 41 Middle Street ($210,000) and 29 Whynot Street ($285,000), reflects those superior views, compared to the subject land at $175,000. In respect of the Sale 3 (Ryan Street), I agree with the appellant that is a superior locality, and I feel the applied value of that sale at $220,000 reflects that feature. On those comparisons there is nothing to discredit Mr Van Hees’ application of the subject land.
If I turn then to relativity with the three improved sales in Baynes Street, I find that, while there may be some room for variation in respect of the analysis of the sale at 21 Baynes Street, that would not upset those comparisons. Each of those three sales are superior to the subject land, because of their higher elevation and better views. Sale 2 (21 Baynes Street) at $185,000 is also smaller than the subject land.
The Impact of Maurici
While the respondent may seek guidance of this Court in respect of how the directions of the High Court in Maurici might be implemented, that is not a matter for this Court to direct. Indeed the findings of the High Court itself were not of a directive nature in respect of such matters. What the High Court did say was that in relying only upon a limited number of scarce non-representative sales of vacant lands, the valuer had been unduly selective. The Court went on to say at paragraph [18]:
“In valuing the land, the respondents valuer, to use the language of the Privy Council in Melwood, ‘ignored a principle of assessment of [value]’, the principle being, that sales to be treated as comparable sales need to be truly comparable; or, to put it another way, in valuing the land the respondent’s valuer did not proceed rationally, in that he was unreasonably selective in ultimately confining himself to two sales of scarce vacant land for the purposes of the comparison. The respondent could not, and did not suggest that he would be performing his statutory duty if he made other than a fair estimate of the value of the subject land. A fair estimate could only be made here on the basis of a fair, that is to say, a reasonably representative group of comparable sales. A group of comparable sales cannot be representative if it does not go beyond sales of scarce vacant land. That is not to say that sales of comparable vacant land may not provide useful evidence of value. But as J F N Murray observes in Principles and Practice of Valuation (4th edition) 1969 at 120, in discussing valuations under federal land tax legislation of land in its notionally unimproved state, ‘sale evidence [must be] relevant and sufficient in volume’ (emphasis added). … So too, sales relied on, such as of scarce vacant land, are likely to be to a special and different class of buyer from buyers of improved land. As Waddell J said in Sher v The Commissioner for Main Roads (1975) 24 The Valuer 150 at 151, sales of properties of a different character are likely to attract a different class of buyer and are unlikely to provide a reliable indication of value.”
The High Court then provides guidance which might lead parties to a logical method of presentation, when, speaking about how a valuer should approach the task, it said at paragraph [21]:
“He should have had regard to all of the relevant facts including the scarcity of vacant land, the possibility of a particular and limited class of persons in the market for it, the scarcity or otherwise of improved land, the added value of the improvements to comparable lands, and in particular, truly comparable sales, which ideally would include like land similarly improved to the subject land. And whilst it is true that s.6A is intended to apply to each valuation made under it, its statutory operation in relation to all valuations, that is, all pieces of land to be valued, is another factor which cannot be ignored, and required that a scarcity of vacant sites not be the determinant factor in valuations made under the Act.”
(Section 6A of the Valuation of Land Act of New South Wales is comparable to s.3 of the Valuation of Land Act 1944 in Queensland.)
In the current matter Mr Van Hees has carefully provided the broad approach now required when sales of vacant lands may be challenged, as non-comparable, or reflecting an abnormal level of scarcity. He has moderated his vacant sales approach, with an analysis of comparable improved sales. He has provided evidence of the details of his analyses of those improvements, and how he has determined their depreciated value, if applicable. The source of that detail was specified in accepted industry standards. While documented evidence of those standards was not provided to the Court, they were not seriously challenged.
The matter of the level of “scarcity” in a market, in my opinion, is also to be tested by the guidance of Maurici when selecting appropriate comparable improved sales. For example, if it is agreed that a scarcity factor is evident in the market for the few remaining sales of vacant lands, then any lightly improved sales are likely to also contain some element of that scarcity factor. For instance it is now becoming relatively common in certain areas, for improved lands, with a lesser level of improvements and dwellings, to be subject to subsequent demolition to obtain a cleared site for new development purposes.
Presumably the likelihood of such write-off in value of an existing dwelling reduces as the added value of that dwelling increases. At the top end of the market an improved price for a dwelling may outweigh the attractiveness of the scarce land. On that basis, when selecting comparable improved sales for comparison purposes, the relative level of scarcity inherent in both the sale and the subject land, would be equal, when “truly comparable sales are used. That would ideally be when lands similarly improved as the subject land” are adopted. Mr Van Hees has adopted that approach in the subject matter.
Summary:
In summarising this matter I find that the evidence of the vacant land sales has not been discredited, as either in error or an inappropriate approach. The supporting analysis of improved sales, including the subject land, indicates that the determined unimproved value of $175,000 from the sales of vacant lands is not inconsistent. I am reminded of the decision of the High Court in Brisbane City Council v The Valuer-General (1977-78) 140 CLR 41, where Gibbs J found at 56:
“In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle or made a serious error of fact, the presumption created by section 13(7) is rebutted.”
Section 13(7) as it then was is now s.33, which states:
“33. Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered.”
Conclusion:
Having considered the whole of the evidence I am not persuaded that the appellant has proved her case. The appeal is dismissed, and the unimproved value of Lot 2 on RP 54118 as determined by the Chief Executive in the sum of One Hundred and Seventy-Five Thousand Dollars ($175,000) is affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
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