Rongotai Investments Ltd v Wellington City Council
[2022] NZHC 1667
•19 July 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-44 CIV-2020-485-45
[2022] NZHC 1667
IN THE MATTER OF An appeal against the 2015 decision of the Land Valuation Tribunal at Wellington BETWEEN
RONGOTAI INVESTMENTS LTD and RONGOTAI ESTATES LTD
Appellants
AND
WELLINGTON CITY COUNCIL
First Respondent
2468 LTD, NZ CASH FLOW CONTROL LTD, WELLINGTON INTERNATIONAL AIRPORT LTD, ROGER BLAYLOCK AND YVONNE KEREKES AND BUNNINGS LTD
Second Respondents
AND
THE VALUER-GENERAL
Intervenor (in the 2007 Appeal)
Hearing: 1 June to 10 June 2021 and 20 to 23 September 2021 Counsel:
G Allan, T Mijatov and M Robertson for Rongotai Parties H L Higbee for Wellington City Council
L McEntegart and E H Wiessing for Bunnings Ltd K Sullivan and S Gazley for Other Lessees
S P Connolly and K Gaskell for the Valuer-General
Judgment:
19 July 2022
RESERVED JUDGMENT OF CULL J and MEMBER V M WINIATA
[2015 Rating Valuation Appeal]
AThe appeal is allowed.
RONGOTAI INVESTMENTS LTD and RONGOTAI ESTATES LTD v WELLINGTON CITY COUNCIL and
ORS [2022] NZHC 1667 [19 July 2022] [2015 Rating Valuation Appeal]
B The Tribunal’s decision is set aside.
CThe modal land rate for the 2015 revision is $920/m2.
DThe values of the subject properties for the 2015 rating year are set out at
[118] of this judgment.
EThe rating value of $920/m2 is applied to the individual certificates of title for the Bunnings’ sites, reflecting the summation of the values of the individual records of title in each.
Table of Contents
Para No.
The Tribunal’s 2015 decision[7]
Grounds of Appeal[9]
The mathematical error[10]
Approach on appeal [11]
Issue One: Did the Tribunal err in summarising the expert valuers’ evidence? [13] Issue Two: Did the Tribunal err by taking its 2012 revaluation as a starting point and adjusting for market movement from 2012–2015?[18] Issue Three: Did the Tribunal err in its assessment of “highest and best use”? [28] Issue Four: Did the Tribunal err in including “old sales” and excluding a post- dated sale in its basket of comparables?[39]
Parties’ positions[40]
Post-dated sales[43]
Pengelly properties[55]
Substantial adjustments[61]
Double counted negative adjustments[63]
Assessing the modal rate [67]
The sales[67]
The modal rate[69]
Assessment of land values [85]
Issue Five: Did the Tribunal err by fixing the roll value to the rating unit, not the individual certificates of title, thereby failing to reflect the sum of the value of each
title?[90]
The Tribunal’s decision[91]
The rating unit[97]
Discussion[101]
Summary of land values [114]
Conclusion[116]
Result[121]
Costs[124]
Leave[127]
[1] This is an appeal against the decision of the Land Valuation Tribunal (the Tribunal) which determined the 2015 rating year objections over 25 properties (the 2015 decision).1 These properties were on Kingsford Smith Street, Tirangi Road and McGregor Street in the Rongotai area of Wellington, which were subject to the roll valuations assessed by Quotable Value New Zealand Ltd (QV) as at 1 September 2015. We refer to those 25 properties as the “subject properties.” A map setting out the location of the subject property sites subject to the objections is attached as Annexure A to this decision.
[2] The Tribunal heard the 2015 rating year objections between 25 and 28 November 2019. The parties to the 2015 rating year objections were the owners of the subject properties whom we refer to as Rongotai;2 and the following lessees of the subject properties, 2468 Ltd (2468), Bunnings Ltd (Bunnings), NZ Cash Flow Control Ltd (NZCFC), the trustees of the R Blaylock and Y Kerekes Family Trust (the Family Trust), and Wellington International Airport Ltd (the Airport).3
[3] The agreed background facts, with the details of the Rongotai area and the description of the assessment of rates with the applicable principles on rating valuations, have been fully described and set out in the 2007 appeal judgment, which was issued at the same time as this judgment.4 With all four appeals against the Tribunal’s decisions being heard together, this decision should be read alongside the 2007 decision as it concerns the same freehold interests, the same location in Wellington, and largely the same lessee’s interests, with some differences in the leasehold parties’ involvement in the respective appeals.
[4] On 20 January 2020, the Tribunal issued its decision in respect of the 2015 rating year objections.5 On 3 February 2020, Rongotai and the Airport appealed the 2015
1 Rongotai Investments Ltd v Wellington City Council [2020] NZLVT 001 [the 2015 decision].
2 “Rongotai” in this decision refers to the Rongotai Investments Ltd and Rongotai Estates Ltd, the appellants in this proceeding.
3 The Airport purchased the leasehold interest of 2468 at 102 Tirangi Road, and it took assignment of the 2015 objection by 2468.
4 Rongotai Investments Ltd v Wellington City Council [2022] NZHC 1665 [2007 Rating Valuation Appeal].
5 The 2015 decision, above n 1.
decision to the High Court. Subsequently, Bunnings, NZCFC and the Family Trust cross- appealed the decision.
[5] As the Tribunal noted, Rongotai has consistently sought an increase in the valuation of the Rongotai area rating valuations, while leaseholders (including NZCFC, the Family Trust, 2468, the Airport and Bunnings) have either supported the roll valuations or sought lower valuations than the Wellington City Council amended roll value.6
[6] We set out in summary form the Tribunal’s decision and our revaluations in respect of the 2007 and 2012 rating objections.
(a)2007 revaluation: The Tribunal adopted the 2007 roll value,
discounted it by 5% for Glasgow leases, resulting in its assessment of $945/m2 for 102 Tirangi Road and 22 Kingsford Smith Street as a rateable modal value.7
We overturned the Tribunal’s 2007 decision. We assessed two rates, one for 102 Tirangi Road at
$1,100/m2 and one for 22 Kingsford Smith Street at
$1,000/m2.8
(b)2012 revaluation: The Tribunal confirmed the 2012 QV roll valuation
modal rate of $673/m2 for 17 subject properties with one exception, which the Tribunal found was an anomaly.9
We overturned the Tribunal’s decision and held that the 2012 modal rate was $780/m2.10
6 At [3].
7 NZ Cash Flow Control Ltd v Wellington City Council [2019] NZLVT 078 [the 2007 decision].
8 The 2007 appeal judgment, above n 4.
9 Rongotai Investments Ltd v Wellington City Council [2019] NZLVT 108 [the 2012 decision]. 5–11 Kingsford Smith Street was the anomaly, which the Tribunal valued at $375,000.
10 Rongotai Investments Ltd v Wellington City Council [2022] NZHC 1666 [2012 Rating Valuation Appeal].
The Tribunal’s 2015 decision
[7] The Tribunal upheld the 2015 QV roll value of the modal site at $854m2. The Tribunal adopted a rectangular inside lot of 1,932m2 on Kingsford Smith Street as the modal site, as used by the valuers. In undertaking its analysis, the Tribunal looked at the range of values assessed by the valuers, who considered the highest and best use for properties, and compared the sales both before and after 2015. The Tribunal determined that from an analysis of comparable sales, a value for the modal site was in the range of
$870–$880/m2.11 The Tribunal then considered market movement since the 2012 revaluation. The Tribunal noted that in 2012, the modal site had an assessed value of
$700–$708/m2 but if it was adjusted for market movement (time) by 15–20% it gave a
range of $805/m2 to $850/m2.12 As the 2015 roll value of the modal site was close to the above range at $854/m2, the Tribunal was not persuaded that the objectors had proved that the roll value for the modal site was wrong.13
[8] The Tribunal adopted the roll value for the modal site at $854/m2 and applied the adjustments as agreed by the valuers during conferencing to derive a value for each of the sites under objection, in a schedule attached to its decision. The Tribunal also allowed an adjustment for the Bunnings rating units.
Grounds of Appeal
[9] After considering all parties’ submissions, the following five issues require determination:
(a)Did the Tribunal err in summarising the expert valuers’ evidence?
(b)Did the Tribunal err by taking its 2012 revaluation as a starting point and adjusting for market movement from 2012–2015?
(c)Did the Tribunal err in its assessment of highest and best use by taking into account permitted activities only?
11 The 2015 decision, above n 1, at [59].
12 At [70]–[71] and [98].
13 At [99].
(d)Did the Tribunal err in excluding a post-dated sale in its basket of comparables?
(e)Did the Tribunal err by fixing the roll value to the rating unit, not the individual certificates of title, thereby failing to reflect the sum of the value of each title?
The mathematical error
[10] There was a further issue raised by Rongotai at the 2018 hearing that in conducting their valuation, the valuers had made a mathematical error in the calculation of their adjustments in 2012, 2015, 2018, by subtracting rather than dividing a percentage figure from the comparator sale figures. The Tribunal did not grant leave for the evidence on this issue to be adduced. We have addressed this issue on appeal by way of a separate hearing and judgment, declining that ground of appeal.14
Approach on appeal
[11] Under s 26(1) of the Land Valuation Proceedings Act 1948, Tribunal decisions may be appealed to the High Court. Such appeals are by way of rehearing. Parties adopted the test in Austin, Nichols & Co Inc v Stichting Lodestar, that:15
[5] The appeal Court may or may not find the reasoning of the tribunal persuasive in its own terms. The tribunal may have had a particular advantage (such as technical expertise or the opportunity to assess the credibility of witnesses, where such assessment is important). In such a case the appeal Court may rightly hesitate to conclude that findings of fact or fact and degree are wrong.
… An appeal Court makes no error in approach simply because it pays little explicit attention to the reasons of the Court or tribunal appealed from, if it comes to a different reasoned result. On general appeal, the appeal Court has the responsibility of arriving at its own assessment of the merits of the case.
[12] Thus, if the appellate court’s opinion is different from the conclusion of the Tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.16
14 Rongotai Investments Ltd v Wellington City Council [2022] NZHC 1664 (Mathematical calculation issue].
15 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16] (footnotes omitted).
16 At [16].
Issue One: Did the Tribunal err in summarising the expert valuers’ evidence?
[13] The Tribunal heard evidence from five expert valuers on the 2015 roll valuation. In providing their valuation evidence, all of the valuers analysed the sale comparators to establish a value of a rectangular inside lot of 1,932/m2 on Kingsford Smith Street. The Tribunal confirmed that this became known as the exemplar or modal site.17 As the Tribunal noted, having arrived at a value for that site, each valuer established values for the 25 subject properties under objection, adjusting for factors such as location, views, corner influence and shape.18
[14] For the 2015 objection hearing, each of the valuers reached their respective modal rates as follows:
Mr Veale $750/m2
Mr Blucher $775/m2
Ms Watson $850/m2
Mr Butchers $1,075/m2
Mr Horsley $1,100/m2
[15] The Tribunal summarised the valuers’ evidence on the appropriate 2015 modal rate as ranging from $650/m2 to $1,100/m2.19 The Tribunal did so in making its comparison with the valuers’ ranges in the previous years of 2007 and 2012.20 However, the Tribunal made a mistake. As noted above, the valuers’ range was $750/m2 to
$1,100/m,2 with Mr Veale having the lowest rate of $750/m2 and Mr Horsley having the highest rate of $1,100/m.2
[16] We note first that an average of the five valuers’ rates with the correct lower end rate of $750/m2 is $910/m2, compared to the average with the Tribunal’s incorrect lower end rate of $650/m2, which is $890/m2. This results in an increase of 2% of the average (being the difference between $910/m2 and $890/m2). If the 2% correction is applied to the adopted Tribunal rate of $854/m2, this would increase the rate to $870/m2.
17 The 2015 decision, above n 1, at [34].
18 At [35].
19 At [13].
20 At [13]: In 2007 being $800/m2 to $1,250/m2 ($950/m2 adopted by the Land Valuation Tribunal); and in 2012, $623/m2 to $950/m2 ($673/m2 adopted by the Tribunal).
[17] We conclude that the Tribunal has erred in its summary of the experts’ values which ultimately affected the adopted Tribunal rate of $854/m2. Before reaching our assessment of the appropriate modal rate, we consider the other factors below.
Issue Two: Did the Tribunal err by taking its 2012 revaluation as a starting point and adjusting for market movement from 2012–2015?
[18] The Tribunal concluded there was strong movement in the Rongotai market with an increase of between 10% and 15% between 2012 and 2015 assessed values. In addition, the Tribunal inferred a trend from the post-dated sales, of an additional 5%, which would have resulted in a 20% adjustment.21 The Tribunal concluded that it could “safely allow” an increase of 15% above the 2012 modal rate of $708/m2 adopted by the Tribunal in its 2012 decision.22
[19] By using the 2012 modal rate and then adjusting it for market movement, the Tribunal employed a technique called “indexing.” Indexing is a mass appraisal technique where the current values of rating units are multiplied by a market analysed factor to establish initial proposed values.23
[20] Rongotai submits that the Tribunal should not have taken its 2012 valuation as a starting point for the 2015 valuation and assessing market movement from 2012 to 2015. The error, they say, is that the Tribunal has assumed the correctness of its 2012 valuation.
[21] The lessees disagree. Both Bunnings and the lessees submit that there is no reason for the Tribunal to disregard its earlier valuations, because they are valuations determined after a full market analysis and fixed the district roll values. Counsel for the lessees submit it was clear that the Tribunal also determined the valuation based on sales comparison, which it found was supported by the market movement. Counsel for Bunnings submits that the Tribunal did not take its earlier valuations as a starting point but rather, re-stated that as the “starting point.” There must be a reason for the Tribunal to depart from the roll valuation and Counsel submits that the Tribunal correctly tested its
21 The 2015 decision, above n 1, at [70].
22 At [70].
23 Toitū te whenua | Land Information New Zealand Rating Revaluation Handbook – LINZG30700 (31 March 2011) at 70.
final outcome by examining “actual sales data” against previous rating valuations by the application of market movement to the previous assessment.
[22] All parties, including the lessees and Bunnings on their cross-appeal, take issue with the percentage market movement adjustment adopted by the Tribunal.
[23] We deal with this in short order. In our view, indexing can be an acceptable method or guide to assist the valuer in assessing a value but should not be the only or predominant method. As the LINZ Rating Revaluation Handbook (the Handbook) advises, indexing:24
…should only be used at an initial stage in applying the proposed values. Indexing usually requires follow up inspections… [w]here the market has changed substantially since the last revaluation, further review and refinement of the initial indexes at a sub-category level may be required.
[24] Indexing is typically a technique used for mass appraisals such as for periodic rateable valuations, where a physical inspection and property specific sales analysis is simply unfeasible and unviable for every property subject to be rated in New Zealand. For example, the Handbook indicates indexing is most suitable for residential and lifestyle properties that are homogenous in nature.25 We question its appropriateness in situations such as this, where QV has undertaken a targeted revaluation of specific subject properties.
[25] In any event, we uphold the submission from the Rongotai parties that if indexing is to be used as a method, the previous land value upon which the indexing is applied must be correct. Otherwise, the error becomes amplified over successive revision dates. As we have overturned the 2012 modal rate reached by the Tribunal,26 the error previously made was amplified in their percentage adjustment for market movement.
[26] As the Tribunal recorded in its 2007 decision, the experts agreed that the best approach to arrive at appropriate assessments was the comparable sales method,27 which
24 At 70.
25 At 71.
26 2012 Rating Valuation Appeal, above n 10.
27 The 2007 decision, above n 7, at [31].
was followed by the valuers and the Tribunal in all of its other decisions for the 2007, 2015, and 2018 objections.
[27] In this case, all parties have agreed that the sales comparison approach is the appropriate methodology here. We proceed on the basis that the sales comparison approach is the appropriate methodology to be used and disregard the indexing approach due to its limited utility in the current exercise. This is consistent with our approach to the valuation of the subject properties in each appeal. We put the indexing approach to the side and proceed on the basis of the sales comparison approach.
Issue Three: Did the Tribunal err in its assessment of “highest and best use”?
[28] As part of its revaluation assessment, the Tribunal considered the highest and best use of the Rongotai subject properties was retail and commercial use, not residential use. In doing so, the Tribunal rejected the evidence of the Rongotai valuers that the market trend in Rongotai was for residential use.
[29] The Tribunal’s assessment of highest and best use of property at Rongotai was potentially relevant to its initial assessment of the characteristics of the subject properties from which comparable properties were then selected. The Tribunal recorded that all valuers accepted that the definition of highest and best use is:28
The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible and which results in the highest value of the property being valued.
[30] The Tribunal emphasised the words “legally permissible” and concluded that only permitted activities under the District Plan should be considered when undertaking rating valuations.29 On this basis, the Tribunal valued the properties on the highest best use which was permitted in the area, “namely retail and commercial.”30
[31] Rongotai submit that the Tribunal erred in disqualifying residential use as a potential “best use” on the basis that this was a discretionary or restricted discretionary
28 The 2015 decision, above n 1, at [20].
29 At [22].
30 At [27].
activity for which a resource consent is required. Further, Rongotai say the Tribunal wrongly characterised its submissions as favouring residential as the highest and best use.
[32] The lessees by way of cross-appeal, submit that the Rongotai properties were still a “relatively derelict wasteland” and strongly opposed residential use being included in assessment of highest and best use of the Rongotai properties.
[33] The issue for this Court is whether the Tribunal has wrongly constrained the phrase “legally permissible” to permitted use only under the District Plan and erred by limiting its consideration of comparable sales for rating valuation purposes to “permitted use” only.
[34] First, we note that the phrase “legally permissible” is not the only phraseology of the International Valuation Standards. Those Standards describe the highest and best use as that it “must be physically possible (where applicable), financially feasible, legally allowed and result in the highest value.”31
[35] The Tribunal has construed “legally permissible” as relating to permitted use only. We are of the view that the International Valuation Standards terminology of “legally allowed” gives a larger and more liberal interpretation to ”legally permissible”. Plainly, “legally allowed” use within the District Plan encompasses permitted uses as well as discretionary uses or restricted discretionary uses with consent. These are still legally permissible, albeit that resource consent needs to be obtained for discretionary activity. Although the Tribunal was correct to state that residential use is not a permitted activity as of right, it cannot be overlooked that the grant of resource consent may allow residential use. We consider therefore, that the Tribunal constrained the meaning of “legally permissible.”
[36] However, in selecting its comparable sales for the 2015 rating year, the Tribunal selected five out of six comparable sales in the “centre zone,” which allows for commercial activities and residential developments as permitted activities.32 The Tribunal noted that centre zone was superior to business one (where the subject properties
31 International Valuation Standards Council International Valuation Standards 2017 (31 January 2022) at [140.2] (emphasis added).
32 At [39] (emphasis added).
are located) because of its permitted uses. The Tribunal concluded that a 10% adjustment between business one and centre zone properties was appropriate, to recognise the superiority of the centre zone.33 Within the Rongotai area, there are a mix of commercial, retail and residential properties. The Tribunal noted that the business one sites, where residential development had been granted, were in localities where there was an established residential neighbourhood, with services such as schools, retail activity, banks and supermarkets and adjoining residential development.34 We do not disagree with the Tribunal’s assessment.
[37] We consider that, despite its finding that residential use should not be considered, the Tribunal effectively incorporated the option of residential use as part of its valuation assessment by using comparative properties in the centre zone, where residential use is permitted. To acknowledge the benefit of the centre zone, allowing residential development as a permitted activity, compared to the business one zone (where resource consents are required for residential use), the Tribunal then made a 10% adjustment between the business one zone and the centre zone.
[38] In Te Whaiti Nui a Toi Trust v Whakatane District Council, the High Court held that “an informed judgment is what is required” rather than a restricted view of the market trends and data.35 We find that the Tribunal did in effect make an informed judgment about the highest and best use of properties in Rongotai, by undertaking its selection of comparable sales including those in a zone with permitted residential use and adjusting them appropriately for the business one zoning in Rongotai, despite its constrained view of “legally permissible.”
Issue Four: Did the Tribunal err in including “old sales” and excluding a post-dated sale in its basket of comparables?
[39] The Tribunal considered the following six sales to be the most relevant comparable sales with adjustments, where appropriate, for deferred settlement, holding
33 At [41].
34 At [41].
35 Te Whaiti Nui A Toi Trust v Whakatane District Council [2011] NZAR 286 (HC) at [31]–[32], citing
Fletcher Challenge Forests Ltd v Valuer-General CA119/97, 29 September 1997 at 8 per Tipping J.
costs, demolition costs, location, corner influence, double or three road frontages, zoning, size and time.36 The Tribunal’s adjusted rates for these comparables were as follows:37
(i)2–4 Onepu Road - adjusted rate $832/m2
(ii)Rugby/Belfast/Tasman Street - adjusted rate $1,015/m2
(iii)224–234 Riddiford Street - adjusted rate $769/m2
(iv)94 Tirangi Road and
8 Kingsford Smith Street
[the Pengelly properties] - adjusted rate $743/m2
(v)122 Churchill Drive - adjusted rate $868/m2
(vi)194 Adelaide Road - adjusted rate $1,020/m2
Parties’ positions
[40] Rongotai submits that the Tribunal has erred in four key respects in its selection and subsequent adjustment of the comparators:
(a)First, the Tribunal excluded from its consideration any post-dated sales more than four months after the relevant valuation date and therefore excluded a highly comparable sale, being 36 Tacy Street.
(b)Second, the Tribunal placed an over-reliance on the Pengelly sale, when it was too old, being 35 months prior to the valuation date and an outlier in respect of its sale price.
(c)Third, the Tribunal’s assessment of comparable sales was unreasonable because those sales required substantial adjustments, in some cases up to 40%.
(d)Lastly, the adjustments were unreasonable because the Tribunal double- counted negative adjustments for three of the properties.38
[41] The lessees and Bunnings cross-appealed. For the Airport, Mr Sullivan submits that the Tribunal erred in inferring a trend of 5% uplift of the 2015 rating value for events
36 The 2015 decision, above n 1, at [42]–[61].
37 At [58].
38 Being 2–4 Onepu Road, Ruby/Belfast/Tasman Street and 224–234 Riddiford Street.
that occurred after September 2015 and was therefore retrospective. For the other lessees, Mr Sullivan submits that the Tribunal erred by setting a valuation beyond the market movement. In his submission, the Tribunal chose a modal value rate of $854/m2 based predominantly on its view of comparator sales and future trends. He submits that the evidence was overwhelmingly in favour of a modal valuation at $800/m2 or below and the Tribunal erred in failing to adopt this. Bunnings cross-appealed on the Tribunal’s upward adjustment for the Pengelly sale for which, it submits, there was no evidence of how they got the adjustment for time at 10%.
[42]We deal first with the issue of post-dated sales.
Post-dated sales
[43] The Tribunal observed that with the paucity of sales within the Rongotai area, the parties have had to rely on sales from other areas and upon sales which occurred after the revaluation date of 1 September 2015.39 These are referred to as “post-dated” sales. The Tribunal recorded that all valuers were agreed that the market had moved significantly in 2016 through to the 2018 revaluation.40 On that basis, the Tribunal accepted that despite the dispute among the parties about their inclusion as comparable sales, “the prospect of increase after the relevant date might be relevant if it influenced the value a reasonable buyer might offer on the relevant date.”41
[44] Having acknowledged all valuers had considered post-dated sales evidence, the Tribunal then decided, on the basis of unnamed previous authorities, that the Courts have held “that post-date evidence can be considered, but primarily to confirm market movement.”42 Thus, it found what needs to be considered is the information that would have been available to a well-informed valuer, standing on the site being valued as at that date.43
[45] For those reasons, the Tribunal held that the 10% to 20% uplift in the 2016 – 2018 period would not have been anticipated by a reasonable purchaser and excluded sales
39 At [17].
40 At [17].
41 At [17] (emphasis added).
42 At [62].
43 At [62].
beyond December 2015.44 The Tribunal agreed with the evidence of Messrs Blucher and Veale,45 that limited weight should be placed on post-dated evidence if they occurred after December 2015 and that post-dated evidence carries little weight and should be treated with caution.46
[46] This led to the Tribunal’s exclusion of 36 Tacy Street in their assessment of comparables, being a post-dated sale sold in May 2016, eight months after the valuation date. We note that all five valuers included 36 Tacy Street in their assessment of comparable sales.
[47] We consider the Tribunal has erred by excluding Tacy Street as a post-dated sale beyond December 2015. The rationale for viewing post-dated sales as irrelevant is that a hypothetical purchaser and seller would not have been aware of that sale at the date of valuation. However, the Courts have not precluded such consideration where a post-dated sale is particularly relevant. Counsel referred to a number of authorities on the relevance of post-dated sales.47 As early as 1956, the Land Valuation Court in Poverty Bay Catchment Board v Forge took into account two post-dated sales which were three weeks and “nearly two months later” than the valuation date for assessing compensation for statutory land acquisition.48 The Court reinforced the proposition that:49
A valuer now valuing the property is entitled to have regard to all relevant facts within his knowledge, including information as to sales subsequent to the specified date for valuation, but should use that information only for the purpose of determining the market value of the land at that date.
[48] A similar sentiment is echoed in other cases. The Privy Council considered that “a Tribunal is not required to close its mind to transactions subsequent to the [valuation] date” particularly where a post-dated sale may be “the only figure available at the date of assessment of the value of adjacent land.”50 The English and Scottish Courts have held that it is wrong to disregard post-dated sales evidence where it is available and where post-dated sales evidence is the best available evidence of value, including where there
44 At [68].
45 At [65].
46 At [65].
47 Belhaven Brewery Co Ltd v Assessor for Ayrshire Valuation Joint Board [2014] CSIH 89 at [14].
48 Poverty Bay Catchment Board v Forge [1956] NZLR 811 (HC).
49 At 812–813.
50 Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 (PC) at 436.
have been significant changes in general levels of rental or turnover.51 However, there is a limit to the use of post-dated sales evidence. Sales occurring seven years after the relevant date of valuation assessment have been ruled inadmissible.52 Adjustments to their values are also appropriate to reflect the post-dated nature of the sale.
[49] We are of the view that post-dated sales, where particularly relevant, should and can be taken into account. As the authorities emphasise, a valuer is entitled to have regard to all relevant facts, including sales subsequent to the valuation date. Post-dated sales are of particular relevance here, where, as the Tribunal records, there is a paucity of comparable sales in the Rongotai area for this period.53
[50] We turn then to 36 Tacy Street. 36 Tacy Street is 2983m2, situated in an area with a mix of commercial and residential properties, flat in contour, zoned business one and is adjacent to a Placemakers store and Evans Bay Intermediate School. At the time of sale it contained a two storey commercial building. Post-purchase, the buildings have been demolished and 28 townhouses constructed.
[51] We consider that 36 Tacy Street should have been included in the basket of comparables because it is in the same zone as the Rongotai properties (zoned business one) and it is in the commercial/retail area. Despite some caution from some of the valuers regarding the post-dated nature of the sale, the valuers clearly considered this property to be highly comparable as regards to its physical characteristics; requiring minimal adjustments for location, shape and size.54 Although it is eight months post the valuation date, we do not think this is excessive, given that there are limited comparable sales in the Rongotai area at the valuation date. It gives a reasonable picture of the marketplace as at 1 September 2015 of potential future development within a commercial and business zone. It has been subsequently developed into residential use.
[52] We find that the Tribunal erred in excluding 36 Tacy Street and finding that post- dated sales beyond fixed time frames were irrelevant. Relevant post-dated sales can and
51 Segama NV v Penny Le Roy Ltd [1984] 1 EGLR 109 (QB) at 112.
52 Riddiford v Attorney-General HC Wellington CIV-2006-485-833, 31 March 2008.
53 The 2015 decision, above n 1, at [17] and [19].
54 The valuers’ net adjustments for 36 Tacy Street range from 0% (Mr Horsley) to -20% (Mr Blucher).
should be included with an appropriate adjustment made for time, to accommodate market movement.
[53]We then consider the appropriate adjustments then for 36 Tacy Street:
(a)Size: The valuers agreed that a 5% upward adjustment was appropriate for size, given Tacy Street is a larger property than the modal site. We also adopt a 5% upward adjustment for size. However, the valuers differed as to the appropriate adjustments for location, shape and time. We note that Mr Blucher also applied a 5% downward adjustment to Tacy Street for views. No other experts considered this to be appropriate and we agree.
(b)Location: Discounts for location ranged from -5% to -12.5%. We adopt a downward adjustment of 10% for location.
(c)Shape: Three of the valuers considered a downward adjustment of 5% for shape was appropriate. Two considered a downward adjustment of 7.5%. We accept the majority experts’ view and consider a 5% adjustment for shape to be appropriate.
(d)Time: The valuers also differed as to the appropriate time adjustment. We agree with Ms Watson and Mr Blucher that a downward adjustment of 10% for time is appropriate in the circumstances.
[54] The adjusted rate for 36 Tacy Street is therefore the adjusted sale rate (after allowing for demolition costs and offsetting the deferred settlement) of $1229/m2 less 10% (comprising adjustments for location -10%; shape -5%; and size +5%) and time adjusted by 10% downwards. This rate is $995/m2.
Pengelly properties
[55] We then turn to Rongotai’s submission regarding the relevance of the Pengelly properties. These properties sold in October 2012 and were used by the Tribunal as a comparator in its 2012 decision.55
[56] We consider the Tribunal was correct to include the Pengelly sale as a comparable sale. While an older sale and a low sale at the time, for which adjustments are necessary, this sale is directly comparable to the subject properties. The sale comprised two flat rectangular shaped sites with individual titles and land areas of 2000m2 and 2023m2. It is situated amongst the subject properties and directly compatible in location, zoning, shape, size, and contour.
[57] In reaching its adjusted rate for Pengelly properties, the Tribunal made a time adjustment of 10% to reach a rate of $675/m2, which they describe as the “rate applied in 2012”.56 However, the Tribunal is mistaken. The rate of $675/m2 was not the rate applied in their 2012 decision as it relied on the unadjusted rate of $615/m2 for the Pengelly sale when deciding on the appropriate modal rate.57 The $675/m2 rate referred to in its 2015 decision reflects the “reasonable adjustment” the Tribunal would have made for the Pengelly properties being a low sale, when it said in the 2012 decision:58
…a reasonable adjustment of even 10% upwards for a low sale (being a generous allowance for the issues earlier identified) would yield a figure around $675/m2.
[58] As we have overturned the Tribunals 2012 rate for the Pengelly properties,59 we do not take this any further, but note the mistake.
[59] This Court has reached an adjusted rate for the Pengelly sale for the 2015 revaluation by taking the adjusted rate for this sale as assessed by this Court for the 2012 revaluation (being $708/m2) and making a 10% time adjustment, being the Tribunal’s percentage adjustment which we consider reasonable.60 Thus, the adjusted rate for the
55 The 2012 decision, above n 9, at [7]–[8]; and Rongotai Investments Ltd v Wellington City Council
[2019] NZLVT 093.
56 The 2015 decision, above n 1, at [51].
57 The 2012 decision, above n 9, at [52].
58 At [46].
59 2012 Rating Valuation Appeal, above n 10, at [72]–[75].
60 We note that the valuers all made time adjustments in the range of 9%–12.5% for the Pengelly sale.
Pengelly properties in 2015 is $779/m2. Although an older sale, we consider it is the best comparable in all other aspects.
[60] Rongotai also submit that if the Pengelly properties were to be included as a comparable, a further adjustment for market change is necessary. We do not accept this submission. Market movement is accounted for in the time adjustment applied. Any further market adjustment would, in our opinion, amount to double counting.
Substantial adjustments
[61] Rongotai raises concerns with the substantial adjustments made in relation to 2–4 Onepu Road and 224–234 Riddiford Street. The Tribunal adjusted each property downwards by 40% for location, corner influence/frontage, zoning and size. Rongotai contend that these adjustments are inappropriate and raise queries as to the comparability of these sales to the modal site.
[62] We do not accept this submission. There was a paucity of comparable sales in the Rongotai area. While it would be preferable for comparables to require fewer and less significant adjustments, that was not the case here. Significant adjustments were made by all valuers, with the exception of Mr Horsley, to several of the comparable properties.61 Despite these adjustments, the expert valuers still considered these properties to be relevant comparators. We see no reason to interfere with the Tribunal’s adjusted rates on this basis.
Double counted negative adjustments
[63] Rongotai suggests that adjustments made for both location and zoning amount to double counting, given that there is “significant overlap” between these considerations. Rongotai refers to the evidence of the expert valuers indicating this overlap. In particular, we note that Mr Horsley specifically observes that in his opinion some valuers were double counting through significant location and zoning adjustments for
61 Ms Watson: -37.5% (2–4 Onepu Road), -32.5% (Rugby/Belfast/Tasman Street), and -47.5% (224–234 Riddiford Street); Mr Veale: -42.5% (2–4 Onepu Road), -37.5% (Rugby/Belfast/Tasman Street), - 47.5% (224–234 Riddiford Street), and -37.5% (194 Adelaide Road); Mr Butchers: -30% (2–4 Onepu Road); and Mr Blucher: -45% (Rugby/Belfast/Tasman Street), -47.5% (224–234 Riddiford Street), - 40% (194 Adelaide Road).
Rugby/Belfast/Tasman Street. Accordingly, Rongotai submits that in making large adjustments for both location and zoning, the Tribunal overstates the differences between the comparators and the modal site. Rongotai specifically notes three properties where it contends adjustments amount to double counting:
(a)2–4 Onepu Road: 15% downward adjustment for location; and 10% downward adjustment for zoning;
(b)Rugby/Belfast/Tasman Street: 25% downward adjustment for location; and a 10% downward adjustment for zoning; and
(c)224–234 Riddiford Street: 10% downward adjustment for location; and a 10% downward adjustment for zoning.
[64] We do not accept that the Tribunal “double counted” these adjustments. Location and zoning are distinct adjustments. The “location” of a property refers to characteristics such as physical proximity to other properties, attractions or repulsions, infrastructure, and services (or lack thereof). “Zoning” on the other hand refers to the uses or restrictions that apply to a property. It is possible for two properties to be in the same location but have different zoning, and similarly, two properties may be in the same zone, but different locations. Given the distinct considerations relevant to location and zoning assessments, it is appropriate for adjustments to be made for both.
[65] Ms Watson, Mr Veale and Mr Blucher made significant adjustments for both location and zoning in relation to these properties:
(a)2–4 Onepu Road: adjustments of 12.5%–15% for location and 10% for zoning.
(b)Rugby/Belfast/Tasman Street: adjustments of 25% for location and 10%– 15% for zoning.
(c)224–234 Riddiford Street: adjustments of 10%–15% for location and 10– 15% for zoning.
[66] It is clearly an accepted practice to make significant adjustments for location and zoning, as three of the valuers did. We see no error in the Tribunal accepting their evidence and following their approach.
Assessing the modal rate
The sales
[67] We have reviewed and analysed the comparable sales and conclude that the following seven sales are the most comparable:
(a)2–4 Onepu Road;
(b)Rugby/Belfast/Tasman Street;
(c)224–234 Riddiford Street;
(d)94 Tirangi Road and 8 Kingsford Smith Street (the Pengelly properties);
(e)122 Churchill Drive;
(f) 194 Adelaide Road; and
(g) 36 Tacy Street.
[68] We have already set out our reasons as to why we consider Pengelly properties and 36 Tacy Street to be appropriate comparable sales. No further analysis is necessary in relation to the remaining five comparable sales. They were accepted as relevant comparators by the Tribunal and this was not contested by the parties on appeal. We accept the relevance of these sales.
The modal rate
[69] We see no reason to interfere with the Tribunal’s adjusted rates for all but two of the comparator properties. The Tribunal has clearly set out the adjustments it has made for each property and we consider the adjusted rates reached by the Tribunal to be both reasonable and in the range of the valuers’ expert evidence. However, there are two exceptions, being the Pengelly sale and 122 Churchill Drive.
[70] In our 2012 appeal judgment, we considered that the Tribunal erred in the adjusted rate reached for the Pengelly sale. This erroneous rate was used by the Tribunal in its 2015 decision with a 10% upward adjustment for time. As noted at [56], we use the rate for the Pengelly sale as adjusted by us in our 2012 appeal judgment, with a further adjustment of 10% for time to reach $779/m2.
[71]We also consider that the Tribunal’s adjusted rate for 122 Churchill Drive of
$868/m2 was made in error. This rate is significantly lower than that of all five valuers, who valued 122 Churchill Drive between $1,005/m2 and $1,141/m2. There appear to be two reasons for this.
[72] First, it appears the Tribunal has made a mathematical error in applying its adjustments to 122 Churchill Drive. The adjustments were:62
-10% for location;
-10% for centre zone;
+15% for size; and
+10% for time.
[73] Applying these adjustments, in our view the Tribunal should have reached an adjusted rate of $955/m2. This is calculated as follows:
Adjusted sale price rate after an
allowance for demolition costs
$914/m2 Less 10% for superior location
$91.40/m
Less 10% for superior zoning
$91.40/m2
Plus 15% for larger size
$137.10/m2
Adjusted sale price rate (before time adjustment)
$868.30/m2 ($868/m2)
Plus 10% time adjustment
$86.83/m2
Adjusted sale price rate (after time adjustment)
$954.60/m2 ($955/m2)
62 The 2015 decision, above n 1, at [53]–[54].
[74] In reaching the $868/m2 rate for Churchill Drive, it appears the Tribunal has failed to make the further time adjustment in their calculations. This calculation error may have had a significant bearing on the Tribunal’s adopted 2015 modal rate of $854/m2.
[75] Second, the Tribunal considered 122 Churchill Drive to be in a “superior locality” and made a negative 10% adjustment for location.63 This is inconsistent with the majority of the valuers (Mr Veale being the exception)64 who considered 122 Churchill Drive to be in an inferior location and made upward adjustments between 2.5% and 6.5% accordingly. We agree with the majority of the valuers and consider an upward adjustment of 5% for location appropriate.
[76] We consider that the adjustments made by the Tribunal to Churchill Drive for zoning, size and time were appropriate and in line with the expert valuers’ evidence. We do not disturb these on appeal.
[77] Therefore, the correct adjusted rate for 122 Churchill Drive is the adjusted sale rate (after allowing for demolition costs) of $914/m2 with a total upward adjustment of 10% (+5% for location, +15% for size and -10% for zoning), plus a 10% time adjustment. Thus, the adjusted rate for 122 Churchill Drive is $1,106/m2.
[78] We have already noted that we consider the Tribunal erred in excluding 36 Tacy Street as a comparable sale and apply our analysed rate of $995/m2 to the property.
[79] We use the following adjusted rates for the comparable sales to assess our modal rate:
Comparable Adjusted Rates
$/m2
(i) 2 – 4 Onepu Road $832/m2 Unchanged from Tribunals rate (ii) Rugby / Belfast / Tasman Street $1015/m2 Unchanged from Tribunals rate (iii) 224 – 234 Riddiford Street $769/m2 Unchanged from Tribunals rate
63 At [53].
64 Mr Veale considered a downward adjustment of 5% appropriate to account for location.
(iv) 194 Adelaide Road $1020/m2 Unchanged from Tribunals
rate
(v) Pengelly properties $779/m2 Analysed rate by this Court (vi) 122 Churchill Drive $1106/m2 Corrected rate by this Court (vii) 36 Tacy Street $995/m2 Analysed rate by this Court Mean $930/m2 Median $995/m2
[80] We note the Tribunal said Rugby/Belfast/Tasman Street should be treated with caution, given the property was sold to a special purchaser to become an Embassy and is a significantly larger site.65 If excluded from the basket of comparable sales, the average and median across the remaining six comparables would be $920/m2 and $910/m2 respectively. We bear this in mind in our assessment.
[81] In making our assessment, we also place greater weight on the Pengelly properties and 36 Tacy Street. We consider these sales to be the best available comparators for reasons detailed above. The average of those two sales alone is $890/m2, $40 lower than the average of all comparables taken together.
[82]We have also given consideration to the modal rates reached by each valuer below:
Mr Veale $750/m2 Mr Blucher $775/m2 Ms Watson $850/m2 Mr Butchers $1,075/m2 Mr Horsley $1,100/m2
As noted earlier,66 the average of the valuers’ rates is $910/m2.
[83] Taking into account both the inclusion and exclusion of Rugby/Belfast/Tasman Street and weighting downwards to appropriately recognise the Pengelly properties and 36 Tacy Street as the best comparators, we consider a modal rate of $920/m2 is appropriate for the 2015 valuation. We note this rate is also consistent with the valuers’ evidence.
65 The 2015 decision, above n 1, at [47].
66 Above at [15].
[84]We adopt a modal rate of $920/m2 for the 2015 revision.
Assessment of land values
[85] We have assessed the 2015 land values for the 25 subject properties, comprising 34 certificates of title, applying the adjusted modal rate of $920/m2.
a) The first step involves a calculation of the unadjusted land value for each subject property being the product of the land area multiplied by the modal rate of $920/m2.
For example: 114–118 Tirangi Road with a land area of 1932m2 x modal rate ($920/m2) = unadjusted land value $1,780,000 rounded.
b) The second step involves a calculation of the adjusted modal rate for each subject property after applying the agreed adjustments to the modal rate where required and apply the adjusted rate to the subject property land area, to arrive at the adjusted land value.
For example: 114–118 Tirangi Road with a land area of 1932m2 x adjusted modal rate ($966/m2) = adjusted land value ($1,870,000) rounded.
[86] The Tribunal agreed with the adjustment percentages reached by the valuers at their Valuers’ Conference, set out in the 2015 decision as follows:67
(a) + 5% - for sites fronting Tirangi Road;
(b) + 10% - for corner influence;
(c) - 5% - for shape allowance for 13 Kingsford Smith Street;
(d) + 10 % - for double frontage, if applicable to rating valuation;
(e) 0% - for height variations.
[87] We note the Tribunal also considered the sites at 142 Tirangi Road and 68–72 Kingsford Smith Street to have residential potential and made an adjustment accordingly, although it is not clearly specified.68
67 The 2015 decision, above n 1, at [74].
68 At [75].
[88] Fourteen of the 25 properties required the modal rate to be adjusted because of one or more of the above adjustments differentiating that property from the modal site. The adjustments (if any) we have made to the properties are in accordance with the valuers’ agreed adjustments:
(a)Four properties front Tirangi Road and are corner sites:
(i)94 Tirangi Road
(ii)102–106 Tirangi Road
(iii)132–136 Tirangi Road
(iv)138 Tirangi Road
The modal rate is therefore adjusted upwards by a total of 15% (5% for Tirangi Road exposure and 10% for corner influence). The adjusted modal rate is $1,058/m2 for these properties.
(b)Two properties front Tirangi Road and have double frontage:
(i)108–112 Tirangi Road
25–27 Kingsford Smith Street
(ii)126–130 Tirangi Road
35–29 Kingsford Smith Street 41–45 Kingsford Smith Street
The modal rate is therefore adjusted upwards by a total of 15% (5% for Tirangi Road exposure and 10% for double frontage). The adjusted modal rate is $1,058/m2 for these properties.
(c)Three properties front Tirangi Road:
(i)113 – 117 Tirangi Road
(ii)114 –118 Tirangi Road
(iii)120–124 Tirangi Road
The modal rate is adjusted 5% upwards to account for Tirangi Road exposure. The adjusted modal rate is $966/m2 for these properties.
(d)Two properties are corner sites:
(i)47–51 Kingsford Smith Street
(ii)53 Kingsford Smith Street
The modal rate is adjusted upwards 10% for the corner influence. The adjusted modal rate for this property is $1,012/m2.
(e)13 Kingsford Smith Street is a corner site and is of irregular shape. The modal rate is adjusted upwards by 10% for corner influence and downward 5% for shape (a total adjustment of 5% upwards). The adjusted modal rate for this property is $966/m2.
(f)68–70 Kingsford Smith Street 72–74 Kingsford Smith Street
This property fronts Lyall Parade. The modal rate is adjusted upwards by a total of 30% (20% for Lyall Bay frontage which is considered a superior location for exposure compared to Tirangi Road and 10% for greater residential potential). The adjusted modal rate for this property is
$1,196/m2.
(g)Two properties are more than 50% smaller than the typical modal size, each being under 1000m2. The unadjusted modal rate for these properties is therefore $1,100/m2, being 20% higher than the modal rate of $920/m2 for a modal site of 2000m2. Further adjustments are made to each property as necessary, as listed below:
(i)142 Tirangi Road (907m2) fronts Lyall Parade and is a corner site. The modal rate is adjusted upward by a total of 30% (20% for Lyall Parade location and 10% for corner influence). The adjusted modal rate is $1,430/m2.
(ii)7 McGregor Street (933m2) is similar to the typical modal lot, except for its size. The unadjusted modal rate of $1,100/m2 remains unchanged.
[89] The table below shows the above properties land values based on the modal rate and the adjusted modal rate:
Property Land Area m2 Modal Rate
$/m2
Unadjusted Land Value (rounded) Valuation Court Adjusted Modal Rate
$/m2
Valuation Court Adjusted Land Value
(rounded)
1 94 Tirangi Rd 2000 $920 $1,840,000 $1,058 $2,120,000 2 102–106 Tirangi Rd 1881 $920 $1,730,000 $1,058 $1,990,000 3 108–112 Tirangi Rd 25–27 Kingsford Smith St 3864
$920 $3,550,000 $1,058 $4,090,000 4 113 Tirangi Rd
117 Tirangi Rd
4323
$920 $3,980,000 $966 $4,180,000 5 114–118 Tirangi Rd 1932 $920 $1,780,000 $966 $1,870,000 6 120–124 Tirangi Rd 1932 $920 $1,780,000 $966 $1,870,000 7 126–130 Tirangi Rd
35–39 Kingsford Smith St 41–45 Kingsford Smith St
5796
$920 $5,330,000 $1,058 $6,130,000 8 132–136 Tirangi Rd 1909 $920 $1,760,000 $1,058 $2,020,000 9 138 Tirangi Rd 1231 $920 $1,130,000 $1,058 $1,300,000 10 142 Tirangi Rd 907 $1,100 $1,000,000 $1,430 $1,300,000 11 7 McGregor St 933 $1,100 $1,030,000 $1,100 $1,030,000 12 8 Kingsford Smith St 2023 $920 $1,860,000 $920 $1,860,000 13 13 Kingsford Smith St 1489 $920 $1,370,000 $966 $1,440,000 14 14–18 Kingsford Smith St 2009 $920 $1,850,000 $920 $1,850,000 15 20 Kingsford Smith St 3970 $920 $3,650,000 $920 $3,650,000 16 22 Kingsford Smith St 2098 $920 $1,930,000 $920 $1,930,000 17 24 Kingsford Smith St 2169 $920 $2,000,000 $920 $2,000,000 18 28–30 Kingsford Smith St 32–34 Kingsford Smith St 4338
$920 $3,990,000 $920 $3,990,000 19 29–33 Kingsford Smith St 1932 $920 $1,780,000 $920 $1,780,000 20 36–54 Kingsford Smith St 10285 $920 $9,460,000 $920 $9,460,000 21 47–51 Kingsford Smith St 1909 $920 $1,760,000 $1,012 $1,930,000 22 53 Kingsford Smith St 1101 $920 $1,010,000 $1,012 $1,110,000 23 56–58 Kingsford Smith St 2223 $920 $2,050,000 $920 $2,050,000 24 60–62 Kingsford Smith St 64–66 Kingsford Smith St 4446
$920 $4,090,000 $920 $4,090,000 25 68–70 Kingsford Smith St
72–74 Kingsford Smith St
5003
$920 $4,600,000 $1,196 $5,980,000
| Total Land Value of properties (Unadjusted Modal Rate) | $ 66,310,000 |
| Total Land Value of properties (Adjusted Modal Rate) | $71,020,000 |
Issue Five: Did the Tribunal err by fixing the roll value to the rating unit, not the individual certificates of title, thereby failing to reflect the sum of the value of each title?
[90] The last issue is whether the roll value should be fixed to the rating unit or the individual certificate of title. This issue arises from the calculation on the Bunnings’ sites.
The Tribunal’s decision
[91]The Tribunal described the sites as follows:
[83] Currently, the Bunnings site is in three single ratings units, although it constitutes something in the order of 8 titles. Not all the titles are owned by the same parties, but they break essentially into three groups:
(a)24 Kingsford Smith Street is 2169m2 and is in a single certificate of title.
(b)28-34 Kingsford Smith Street is in multiple titles and is some 4338m2. One of the valuers has allowed for the size of that site as a single unit, while others have valued it on the basis of each individual title;
(c)36-56 Kingsford Smith Street is 10,285m2 in total for the rating unit, but again has in the order of five or six certificates of title. Again, only Mr Veale has allowed a discount for the size of the site as a single rating unit where other parties have valued the individual certificates of title.
[92] The Tribunal then described how the Bunnings properties are rated as three rating units:
[84] The Bunnings properties are rated as three rating units on the basis that each of the three ratings units is:
(a)Owned by the same person or persons;
(b)Is used jointly as a single unit;
(c)The sites are contiguous.
[93] The Tribunal framed the issue as to whether or not, in a rating valuation, the roll value should be on each certificate of title, rather than each rating unit.69 For QV, Mr Nagel argued that as the land is to be valued as if vacant (disregarding the presence of the Bunnings buildings), given there are no improvements on the land, the land is to be valued on the basis of the certificates of title.70 Mr Nagel relied on the Land Valuation Tribunal
69 The 2015 decision, above n 1, at [84].
70 At [85].
decision of Hume v North Shore City Council which held that “each lot must be valued independently.”71
[94] The Tribunal referred to s 9(1) of the Rating Valuations Act 1998 (RVA) which requires every “rating unit” to be revalued:
(1) A territorial authority must revise its district valuation roll at intervals of not more than 3 years by revaluing every rating unit within its district to ensure that the roll represents values current as at the date of the revaluation.
[95] Noting that usually the rating unit is the certificate of title, the Tribunal recorded its understanding that “the purpose of the rating review is not to rate individual certificates of title, but rating units,” so that “the value must be undertaken in respect of the rating units, not the underlying certificates of title”.72 Although QV in undertaking the 2015 roll valuation had valued the certificates of title separately, as did all the valuers apart from Mr Veale, the Tribunal recorded that the “three rating units had been accepted and established by the Council over the Bunnings leasehold land.”73 The Tribunal then decided that the value therefore must be undertaken in respect of the rating units, not the underlying certificates of title.
[96] This affected 36–54 Kingsford Smith Street and 28–34 Kingsford Smith Street, being the two discrete Bunnings “sites” with multiple certificates of title. The Tribunal valued the sites as two rating units and, as suggested by Mr Veale for Bunnings, made downward adjustments for the size of the composite Bunnings’ sites. The Tribunal noted that the other valuers at the hearing, when asked, agreed that if multiple titles were to be valued as one rating unit, then those adjustments as proposed by Mr Veale would have been appropriate. Adopting those adjustments, the Tribunal adjusted 28 Kingsford Smith Street downwards by 7.5% because the site was 4,000m2. In relation to 36-54 Kingsford Smith Street, the Tribunal made a downward adjustment of 15% because the site contained 10,285m2.
71 Hume v North Shore City Council Land Valuation Tribunal Auckland LVP 85/00 at [14].
72 The 2015 decision, above n 1, at [87]–[88]. The Tribunal noted that in Hume the values were fixed to the titles each of a house and tennis court on a separate title and a vacant lot and departed from that approach.
73 At [87].
The rating unit
[97] All land is rateable unless a statute provides that it is non rateable.74 Rates are assessed in respect of a “rating unit”75 and the ratepayer for a rating unit is liable to pay the rates that are due on the unit.76 It is necessary, therefore, to identify the relevant rating unit, the ratepayer for that rating unit and, where the rates are assessed by reference to rateable value, the rateable value of the rating unit.
[98] A rating unit is defined under ss 5B and 5C of the RVA. Where land has a record of title, the rating unit is the land comprised in the record of title,77 namely, the certificate of title. For leasehold estates recorded in a certificate of title under s 12 of the Land Transfer Act 2017, leasehold records are excluded from the definition of “record of title” in s 5A of the RVA. They are not a separate rating unit over and above the freehold title.
[99] It is plain from s 5B that land comprised in a record of title constitutes a rating unit. However, this does not provide guidance on how contiguous titles owned or occupied by the same person are to be valued. The Valuer-General may make rules regarding a rating unit under the RVA for the purpose of determining that land comprised of two or more records of title constitutes a single rating unit,78 or that the land comprised in part of a record of title constitutes a rating unit.79 Once the rating unit is identified, the land within the rating unit is then valued.
[100] Consequently, the Valuer-General has issued the Rating Valuation Rules 2008 (the Rules). Rule 2.4.1.2 provides that:
Two or more certificates of title
Two or more certificates of title constitute a single rating unit where the land is owned by the same person or persons, is used jointly as a single unit, and is contiguous or separated only by a road, railway, drain, water race, river or stream, and:
(a) a substantial improvement straddles certificate of title boundaries, or
74 Local Government (Rating) Act 2002, s 7.
75 Section 43.
76 Section 12.
77 Rating Valuations Act 1998, s 5B.
78 Sections 5B(2)(a) and 3(a).
79 Sections 5B(2)(b) and 3(b).
(b) certificates of title are legally required to be alienated together, or
(c) in the case of a large holding such as a reserve, airport, port, or rail yard, it is unreasonable to treat each separate certificate of title as a rating unit, or
(d) the land is used as one farming operation and it is likely that the certificates of title will be alienated as only one farming operation.
Discussion
[101] The parties disagree on whether the value of the property is to attach to the titles in aggregate or to a composite rating unit, as a block. Rongotai submits that it is correct to value the “rating unit” but the legal definition of “rating unit” is met when it reflects the sum of the value of each certificate of title. Bunnings submit that the Tribunal was correct to value the multiple titles of each site as a “rating unit” and depending on the size and shape of the multiple titles, to adjust the value by reference to comparable evidence, as the Tribunal did.
[102] In reaching its decision, the Tribunal did not consider the applicability of the Valuer-General’s Rules to the Bunnings’ sites or whether the improvements on various parts of the sites meant that the land was used “jointly as a single unit” or that there were” substantial” improvements, particularly in respect of one of the titles. Ms Watson for QV considered that her figures were not far off those of Mr Veale’s, but emphasised that valuers have to look at what is the highest and best use of the land and whether “the single section on its own [is] the highest and best use”.
[103] The Tribunal did not have regard to Ms Watson’s evidence as to whether a single title on its own was the highest and best use compared to the combination of titles in a single block and nor was it a feature of the valuers’ evidence.
[104] We turn then to consider what comprises the “rating units” for the Bunnings’ sites. It is plain that the legal definition of “rating unit” does not answer the question of the rating unit’s value. Nor does the Rule assist in whether deductions should be made for multiple certificates of title in a rating unit in order to assess the ultimate land value of the rating unit.
[105] In giving guidelines to the exceptions to that Rule, the LINZ Rating Revaluations Handbook (the Handbook) mirrors Rule 2.4.1.2 and sets out the exceptions to the rating unit compliance, namely, whether individual rating units should be entered in the district valuation roll as more than one rating unit: where a substantial improvement straddles certificate of title boundaries; where certificates of title are legally required to be alienated together; or titles are used as one farming operation.80
[106] In their respective tables, Ms Watson and Mr Veale show the properties and the valuation reference numbers grouped into three units, for the Bunnings properties, as follows:
24–26 Kingsford Smith Street Valn Ref 17110/52820 28–34 Kingsford Smith Street Valn Ref 17110/52821 36–54 Kingsford Smith Street Valn Ref 17110/52814
[107] Ms Watson also records the “Total Value for Rating Unit” in her table and Mr Veale refers to the properties as “rating units”. Ms Watson explained that no size adjustment was made for rating units with two or more records of title when valuing land according to the RVA definition. In her evidence, she notes the QV position that:
The rating units with multiple Titles and building over the boundaries – QV have undertaken the assessment of land value by valuing each Record of Title individually and adopting a summation approach to arrive at a total land value for the single rating unit. Individual titles remain a saleable entity independent of the rating unit.
[108] Ms Watson’s approach is consistent with the fact that all valuers, except Mr Veale, valued each of the certificates of title within the Bunnings’ sites individually and adopted a summation approach to arrive at a total land value for each of the single rating units.
[109] From the evidence before the Tribunal and the computer freehold register descriptions provided by Mr Veale and Ms Watson, it appears that the Bunnings’ sites have been grouped by valuation references as three separate “rating units”,81 as the Tribunal records. We are unsure whether they are actually entered on the District
80 Toitū te whenua | Land Information New Zealand, above n 23, at 15.
81 In accordance with s 14 of the RVA. See also Toitū te whenua | Land Information New Zealand, above n 23, at 11.
Valuation Roll as three rating units but, in any event, that fact is not determinative in this decision.
[110] Although other adjustments are made by the Tribunal in terms of the agreed valuers’ adjustments for location and other physical characteristics, we consider the Tribunal erred in making a 15% and 7.5% rating unit deduction adjustment for each of the Bunnings’ sites. Because the Tribunal noted that the sites were 4,000m2 and 10,285m2, it appears that those deductions were made because of the size of the respective sites.
[111] We consider there is no basis for making a deduction in the land value for the size of the Bunnings’ sites for two reasons. First, the composite sites were not valued as “blocks” of land. They were valued as individual titles and were compared with the modal site, namely a typical inside lot on Kingsford Smith Street, not comparable blocks of land.
[112] Secondly, in the earlier part of its decision, the Tribunal expressed its scepticism of valuers making any downward adjustment in the value of larger sites, because it considered parties may pay a premium for such sites. The Tribunal, therefore, did not agree with the valuers putting an emphasis on small sites as having greater value than larger ones, when, in the Tribunal’s view, the “larger areas” meant that “substantial purchasers may pay a higher price per square metre.”82 We find the Tribunal’s approach, therefore, to its downward adjustment for the size of the Bunnings’ sites was inconsistent with its earlier statement.
[113] We conclude that the modal rate of $920/m2 should apply to each of the subject properties titles, with a summation of the values of the individual titles for the composite Bunnings’ sites.
Summary of land values
[114] We now apply the modal rate of $920/m2 to the land value, with adjustments to each of the subject properties, together with a comparison of the Tribunal’s values. The table below shows:
82 The 2015 decision, above n 1, at [32].
a) The Tribunal’s concluded land values for each of the subject lots is shown in the first column of Annexure A of the 2015 decision.
b) The second column shows the adjusted land values by this Court.
[115] Our overall adjusted land values for the 25 properties is 12% higher than the total land value of the Tribunal’s adopted land values in Schedule A of the 2015 decision. We cannot explain how the Tribunal arrived at their land values for each rating unit as shown in Schedule A of the 2015 decision, as there is no clear detail on the step between applying the modal rate to each subject lot with adjustments as agreed by the valuers. The adjusted land values for 2015 are as follows.
Property Tribunal Land Value (rounded) Valuation Court’s Adjusted
Land Value (rounded)
1 94 Tirangi Rd $ 1,964,000 $ 2,120,000 2 102–106 Tirangi Rd $ 1,875,000 $ 1,990,000 3 108–112 Tirangi Rd 25–27 Kingsford Smith St $ 3,400,000
$ 4,090,000
4 113 Tirangi Rd
117 Tirangi Rd
$ 4,000,000
$ 4,180,000
5 114–118 Tirangi Rd $ 1,732,000 $ 1,870,000 6 120–124 Tirangi Rd $ 1,732,000 $ 1,870,000 7 126–130 Tirangi Rd 35–39 Kingsford Smith St 41–45 Kingsford Smith St $ 5,200,000
$ 6,130,000
8 132–136 Tirangi Rd $ 1,875,000 $2,020,000 9 138 Tirangi Rd $ 1,450,000 $ 1,300,000 10 142 Tirangi Rd $ 1,800,000 $ 1,300,000 11 7 McGregor St $ 950,000 $ 1,030,000 12 8 Kingsford Smith St $ 1,728,000 $ 1,860,000 13 13 Kingsford Smith St $ 1,366,000 $ 1,440,000 14 14–18 Kingsford Smith St $ 1,620,000 $ 1,850,000 15 20 Kingsford Smith St $ 3,000,000 $ 3,650,000 16 22 Kingsford Smith St $ 1,660,000 $ 1,930,000 17 24 Kingsford Smith St $ 1,760,000 $ 2,000,000 18 28–30 Kingsford Smith St 32–34 Kingsford Smith St $ 3,400,000
$ 3,990,000
19 29–33 Kingsford Smith St $ 1,650,000 $ 1,780,000 20 36–54 Kingsford Smith St $ 7,467,000 $ 9,460,000 21 47–51 Kingsford Smith St $ 1,800,000 $ 1,930,000 22 53 Kingsford Smith St $ 1,150,000 $ 1,100,000 23 56–58 Kingsford Smith St $ 1,800,000 $ 2,050,000 24 60–62 Kingsford Smith St 64–66 Kingsford Smith St $ 3,500,000
$ 4,090,000
25 68–70 Kingsford Smith St
72–74 Kingsford Smith St
$ 5,500,000
$ 5,980,000
Conclusion
[116]In conclusion therefore, we find that the Tribunal erred in its 2015 decision by:
(1)adopting an average land value modal rate of $854/m2;
(2)indexing the 2015 value from the Tribunal’s 2012 adopted modal rate with adjustments rather than undertaking a fresh assessment;
(3)undertaking its assessment of comparable sales, by excluding a relevant and recent post-dated sale;
(4)making deductions to the value of the Bunnings’ sites as rating units because of their size.
[117] We find the modal rate, representative of a rectangular inside lot of 1,932m2 on Kingsford Smith Street for the 2015 rating year, is $920/m2.
[118] The summary of adjusted land values of the subject properties for 2015 is set out below:
Property Valuation Court’s Adjusted Land Value (rounded) 1 94 Tirangi Rd $ 2,120,000 2 102–106 Tirangi Rd $ 1,990,000 3 108–112 Tirangi Rd 25–27 Kingsford Smith St $ 4,090,000
4 113 Tirangi Rd
117 Tirangi Rd
$ 4,180,000
5 114–118 Tirangi Rd $ 1,870,000 6 120–124 Tirangi Rd $ 1,870,000 7 126–130 Tirangi Rd 35–39 Kingsford Smith St
41–45 Kingsford Smith St
$ 6,130,000
8 132–136 Tirangi Rd $2,020,000 9 138 Tirangi Rd $ 1,300,000 10 142 Tirangi Rd $ 1,300,000 11 7 McGregor St $ 1,030,000 12 8 Kingsford Smith St $ 1,860,000 13 13 Kingsford Smith St $ 1,440,000 14 14–18 Kingsford Smith St $ 1,850,000 15 20 Kingsford Smith St $ 3,650,000 16 22 Kingsford Smith St $ 1,930,000 17 24 Kingsford Smith St $ 2,000,000
18 28–30 Kingsford Smith St 32–34 Kingsford Smith St $ 3,990,000
19 29–33 Kingsford Smith St $ 1,780,000 20 36–54 Kingsford Smith St $ 9,460,000 21 47–51 Kingsford Smith St $ 1,930,000 22 53 Kingsford Smith St $ 1,100,000 23 56–58 Kingsford Smith St $ 2,050,000 24 60–62 Kingsford Smith St 64–66 Kingsford Smith St $ 4,090,000
25 68–70 Kingsford Smith St
72–74 Kingsford Smith St
$ 5,980,000
[119] For completeness, we have annexed to this judgment as Annexure B a summary of our values, showing the modal rate of $920/m2, the unadjusted land value, the adjustments applied to the modal rate, and the resulting land values for the 2015 rating revaluation.
[120] The rate of $920/m2 should be applied to the individual certificates of title for the Bunnings’ sites reflecting the summation of the values of the individual records of title in each.
Result
[121]The appeal is allowed.
[122]The decision of the Land Valuation Tribunal is set aside.
[123] The values of the 25 subject properties under appeal for the 2015 rating year are altered in accordance with [118] of this judgment.
Costs
[124] The parties seek clarification on the ability of the Tribunal to award costs under the Rating Valuations Act 1998 (RVA). The Tribunal reserved the matter of costs in each of the 2007, 2012, 2015 and 2018 objections.83 The Tribunal noted that the extent to which the Tribunal can award costs on rating valuation cases is unclear, and suggested
83 In both 2007 and 2012, the Tribunal invited Counsel to submit applications for costs. However, in both the 2015 decision and the 2018 decision, the Tribunal recognised costs under the RVA as “problematic” and sought to defer the issue of a costs award to this Court.
this question should be referred to the High Court for consideration on the appeals, before being remitted back to the Tribunal for arguments as to quantum.
[125] We have not heard full argument by Counsel on the cost jurisdiction in the Tribunal. We observe that the language of s 38(4) of the RVA is prescriptive and clear, providing a narrow ambit under which costs can be awarded. However, this is merely an observation. We consider that determination of this matter should await full argument.
[126] We have discussed the issue of costs generally and in this jurisdiction more fully in our 2012 appeal judgment.84 Under s 37A of the LVPA this Court may award costs on appeal. We indicated that this may be a case where costs lie where they fall. However, if any of the parties seek costs, Counsel are to file memoranda of no more than five pages as to whether they wish to be heard on the costs issue within 20 days of the date of this decision. Further directions will then follow.
Leave
[127] Leave is granted to Counsel to raise any errors or slips made in this Court’s calculations when applying this Court’s modal rate and adjustments to the subject properties.
……………………………………
Cull J and Member VM Winiata
Solicitors:
Morrison Kent, Wellington, for Rongotai Investments Ltd and Rongotai Estates Ltd Simpson Grierson, Wellington, for Bunnings Ltd
Solicitors for Other Lessees:
Lane Neave, Christchurch, for Wellington International Airport Ltd and 2468 Ltd PCW Law, Auckland, for NZ Cash Flow Control Ltd
Hughes Robertson, Wellington for R Blaylock & Y Kerekes and Wild Bay Property Ltd
84 2012 Rating Valuation Appeal, above n 10, at [111]–[121].
Annexure A
Rongotai area map showing subject site area for all decisions
Annexure B
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