Crosby Nominees Pty Ltd v Department of Natural Resources and Mines [2007] QLC 63

LAND COURT OF QUEENSLAND CITATION: Crosby Nominees Pty Ltd v Department of Natural Resources and Mines [2007] QLC 63 PARTIES: Crosby Nominees Pty Ltd (appellant) v. Chief Executive, Department of Natural Resources and Mines (respondent) FILE NO.: AV2005/1297 DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 7 September 2007 DELIVERED AT: Brisbane HEARD AT: Caloundra MEMBER Mrs CAC MacDonald ORDER: 1. The appeal is dismissed. 2. The unimproved value of PTA Lot 171 on SP 102276 in the County of Canning, Parish of Mooloolah at One Hundred and Fifteen Thousand Dollars ($115,000) as at 1 October 2004 is affirmed. CATCHWORDS: Valuation – unimproved value – leasehold – value as fee simple – best evidence – sales preferred – analysis of sales – no deduction for GST - not an "improvement". APPEARANCES: Mr PV Crosby for the appellant Mr W Isdale, Crown Law, for the respondent -- 1 of 9 -- 2 Introduction [1] Crosby Nominees Pty Ltd (the appellant) is the lessee of land situated at 1-5 Main Street, Palmwoods where it conducts a rural and hardware business. The appellant has appealed against the determination by the Chief Executive, Department of Natural Resources and Mines (the respondent), under the provisions of the Valuation of Land Act 1944, of the unimproved value of the land at $115,000 as at 1 October 2004. The appellant contended that the land should be valued at $43,600. [2] Mr PV Crosby, a director of the appellant company, appeared on behalf of the appellant. Mr Crosby described Palmwoods as a railway town which has changed significantly from a rural centre to a lifestyle residential area close to the education facilities on the Sunshine Coast. There is limited employment available in the town and residents commute to their work by car or train. [3] The subject land is approximately 70 metres long by 6 metres wide and has an area of 370 m². The property is located on the eastern side of Main Street which is a bitumen sealed two-way carriageway. Mr Crosby said that the title Main Street is a misnomer as the major commercial precinct in Palmwoods is Margaret Street. The railway line lies immediately to the rear of the subject land, separated by a recently constructed fence on the boundary between the two areas. The land is designated Village Centre under the Maroochy Shire Council Town Plan 2000 and has approval for commercial use. [4] The appellant holds the property under a lease granted by the Commissioner of Railways. Mr Crosby said that the lease was terminable by 12 months notice by the lessor. However, the copy lease appended to Exhibit 1 provides that the tenancy is a yearly tenancy terminable at any time by either party giving three months notice in writing to the other. It is not clear whether that lease is current but in any event the difference is not material to this decision. [5] The grounds of appeal were - 1. The valuer erred in judgment, in law and in relativity. 2. The valuer did not take into account the fall in commercial zone pricing. 3. The valuer did not take into account the restrictive nature of the old railway buildings, the narrow physical shape of the site, nor the lack of buffers, nor the lack of footpath fronting a very busy road. 4. The valuer omitted to take into account that this portion no longer has its own rail service line nor the fact that goods no longer come to Palmwoods by rail. 5. The store has no rear goods entrance nor parking facilities. -- 2 of 9 -- 3 6. Similar commercial lots, yet better situated, and without the above impediments, of size 500 m² and bigger, and were only valued at $89,000. 7. Valuer did not check that this was a contaminated site. 8. Valuer, on my objection, now acknowledges "previously unrecorded disability with the land in question" yet the reduced value does not fully reflect this statement. [6] The factors adversely affecting the site were expanded on and added to by Mr Crosby in his evidence -  the site is long and narrow making the movement of people into and out of the premises hard to control;  the buildings are old and rambling and difficult to maintain;  the local authority has prohibited the erection of signs outside the buildings;  the site lacks a footpath and gutter and there is water inundation during storms;  there is no sound buffer between the railway line and the subject property with the result that the appellant's land is subject to the noise and smells of cattle trains and general rail traffic;  the site was contaminated under previous ownership by chemical spills;  Queensland Rail has dumped sleepers on its land at the back of the subject, with the result that the subject is riddled with white ants necessitating constant repairs to the buildings. Valuations [7] Ms JA Watts, a registered valuer employed by the respondent department, gave evidence on its behalf. Ms Watts did not make the valuation under appeal but said that she had inspected the sales and subject properties, agreed with the amount of the valuation and compiled a report valuing the subject at the same amount. [8] Ms Watts valued the subject property at $115,000 or $310.80/m² using the comparable sales method. She relied on the sales of three properties, one being vacant land, the second lightly improved and the third an improved property. Ms Watts also gave evidence of the unimproved value of four properties located in the vicinity of the subject. [9] There are two buildings on the subject site. Although Ms Watts was mistaken in her understanding that only one of those buildings was located on the subject, I am satisfied that that error has not affected her valuation as the valuation was based on the correct area of land, 370 m². -- 3 of 9 -- 4 [10] Mr Crosby estimated the unimproved value of the subject property to be $43,600 as at the date of valuation. He established that value by comparison with the unimproved values attributed by the respondent to two properties in the vicinity of the subject - 15 Main Street at $95,000 and 17 Main Street at $89,000. [11] Mr Crosby's estimate of the unimproved value at $43,600 is lower than the unimproved value of the subject property as at 1 October 2002, $57,000. He considered that to be justified because, although the market had risen in some areas, he said that the value of the subject had not increased in that period. Moreover, after the previous valuation of $57,000 had been struck, a loop line that the appellant had used to transport stock to its premises had closed, which detrimentally affected the value of the property. In addition, a fence had been constructed by Queensland Rail on the boundary at the back of the appellant's property which curtailed the ability to store stock in that area. Valuation Methodology [12] Section 13 of the Act provides that the chief executive must decide the unimproved value of the land to be valued for the Acts under which local authorities are established. Section 3(1)(b) defines "unimproved value" to mean, in part, - 3 Meaning of unimproved value (1) For the purposes of this Act— unimproved value of land means— … (b) in relation to improved land—the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist." [13] The subject land is improved land. It is to be valued, therefore, on the assumption that the improvements do not exist. This means that those grounds of appeal and evidence which referred to the disadvantages of the buildings on the site cannot be taken into account in determining the unimproved value of the subject land. Thus the fact that the buildings are old, rambling, difficult to maintain and have no goods entrance is not relevant to the valuation under appeal. [14] Mr Crosby submitted that Ms Watts had failed to allow for the fact that the appellant did not own the subject land but was a tenant under a tenancy which could be terminated by 12 months notice. [15] The effect of ss.14(1), (2) and (5)(c) of the Act is that the subject land is to be valued as if the land were granted in fee simple but taking into account any restrictions or limitations -- 4 of 9 -- 5 on the use of the land contained in the lease. Ms Watts has, accordingly, properly valued the land as if it were held in fee simple by the appellant. Sales Evidence [16] As mentioned above, Ms Watts valued the subject using the comparable sales method. In Grahn v The Valuer-General (1992) 14 QLCR 327, the Land Appeal Court said (at 328) that the best basis for the assessment of unimproved value under the Act is the use of sales of vacant or lightly improved parcels of land. There were no comparable sales of unimproved land in Palmwoods so Ms Watts relied on the sale of a lightly improved property in Nambour, a vacant property in Woombye and an improved property in Palmwoods. [17] Sale No. 1 is a 1623 m² property designated Town Centre Frame and located in Mitchell Street, Nambour. The property sold on 3 August 2004 for $540,000. Ms Watts analysed the sale to $480,900 ($296 m²) by allowing $10,000 for the removal of a dwelling and $49,091 for GST. The allowance for GST is misconceived as GST is not an improvement within the definition of "improvements" in s.6 of the Act. The sale should, therefore, be analysed to $530,000 or $327/m². [18] Ms Watts described the sale property as a corner block having good access to and rising gently to moderately from two street frontages. She said that the property had comparable zoning to the subject but was larger and in a better location being in the fringe commercial area of Nambour. The sale is located close to the rail line and would suffer some flow on effect from rail noise. The subject has better exposure to passing traffic being located on the main street of Palmwoods. Overall, Ms Watts considered the sale to be superior to the subject. [19] Mr Crosby did not consider that this sale should have been used in the valuation because the sale property is in Nambour, the headquarters of the Maroochy Shire, and is centrally located adjacent to an accountant's office, across the road from the main shire office and the main library for the Sunshine Coast, and close to the new police station and court building. The sale property is 1,623 m² in a premium location, he said, and was not comparable to the subject property in Palmwoods with all its limiting factors. [20] Sale No. 2 is a 1012 m² property which is designated Village Centre and situated at Blackall Street, Woombye. The property sold on 2 January 2004 for $244,000 which should be analysed to $241/m². [21] Ms Watts said that this sale was similar to the subject in zoning and was also close to the rail line. The sale had good access and exposure to the main street of Woombye. It is larger than the subject and is fairly narrow, with a moderate slope from road level down -- 5 of 9 -- 6 to the rear boundary such that Ms Watts considered that the topography would make construction difficult. In her opinion, the sale is slightly inferior to the subject. [22] Mr Crosby said that this site is far superior to the subject because of the sale's location in the hub of Woombye with good street parking available. [23] Sale No. 3 is a 531 m² property designated Village Centre and situated at Margaret Street, Palmwoods. The property sold on 4 July 2005 for $470,000. Ms Watts deducted $210,000 for the value of the improvements and $45,000 for GST. As explained above, there should be no allowance for GST so that the analysed sale price becomes $260,000 or $490/m². [24] The sale property is improved with a commercial building which is used as a post office and real estate agency. Ms Watts described the property as generally level and situated above road level with good access from Margaret Street. The sale is slightly larger than the subject property and, in Ms Watt's opinion, the sale is, overall, superior to the subject. [25] Mr Crosby considered that the sale was infinitely superior to the subject because the sale is situated on the main street of Palmwoods on a well drained site in the centre of town with a macadam footpath and parking available for two cars beside the building. Conclusions re sales evidence [26] Mr Crosby challenged the relevance of all of the respondent's sales evidence on the basis that the sales properties were not comparable with the subject. [27] Ms Watt's sales evidence is the only sales evidence available as to the unimproved value of the subject land. Although that evidence related to two sales which are located outside Palmwoods and a third sale of an improved property in Palmwoods, I do not consider that the sales properties are so different from the subject that they should be rejected for the purposes of the valuation. Consequently, I consider that the evidence of the sales should be used in the valuation of the subject property with appropriate adjustments to allow for the differences in the properties. [28] Moreover, s. 33 of the Act provides that - "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." [29] The effect of s.33 is that the appellant bears the onus of proof of establishing that the respondent's valuation is incorrect. The appellant has produced no sales evidence to demonstrate that the respondent's determination was wrong and that its own estimate is correct. It has failed therefore to discharge the onus of proof (Grahn at 329). [30] The valuation under appeal is $115,000 or $310/m² for an area of 370 m². The analysed sales show - -- 6 of 9 -- 7 Nambour (1623 m²) - $327/m² Woombye (1012 m²) - $241/m² Palmwoods (531 m²) - $490/m² The Nambour and Woombye properties are substantially larger than the subject. Mr Crosby regarded the larger area as one factor indicating that those properties were superior to the subject. However, Ms Watts' evidence was that a smaller commercial property achieves a higher rate per square metre than is achieved by a similar but larger property. The superior location and shape of the Nambour and Woombye sales, as compared with the subject, is therefore to be offset against the lower rate per square metre that will be paid for a larger property. Similarly, in comparing the Palmwoods sale with the subject the superiority of the sale property will be offset to some extent, on a rate per square metre basis, by the larger size of the sale. I consider that the rate per square metre applied to the subject, $310/m², is consistent with the sales evidence, given the differences in size, quality and location of the various sales. [31] Mr Crosby also contended that there had been an insufficient deduction made for the defects of the subject property. [32] The valuation of the subject property as at 1 October 2004 originally issued at $157,500, and was reduced by 27% to $115,000 (the valuation under appeal) after objection by the appellant. Ms Watts said that the reduction had been made to allow for the defects in the subject property, as compared with the sales, which had been brought to her attention by Mr Crosby in the objection process. The allowance was given for the narrow physical shape of the block, the lack of a footpath, the restricted nature of the site and the chemical contamination on the site. She had not made any allowance for white ant infestation as the appellant had only mentioned that approximately a week before the hearing. [33] Although Mr Crosby considered that insufficient allowance had been made by the respondent for the defects in the subject property as compared with the sales, he brought no evidence to establish what might be a sufficient allowance nor to support his valuation of $43,600. Again, therefore, the appellant has not discharged the onus of proof in relation to those matters. The white ant infestation was not raised by the appellant in its grounds of appeal. The effect of s.45(4) of the Act is that the appellant is limited to the grounds of appeal and therefore this is not a matter that I can take into account. [34] Mr Crosby also submitted that the respondent had failed to take into account the adverse impact on the value of the subject property of the construction of the rear fence, and the removal of the loop line from behind the appellant's property which had been useful for transporting bulk stock deliveries to the business. -- 7 of 9 -- 8 [35] Ms Watts valued the subject property by comparison with sales of similar properties. That methodology requires that the subject be compared, as it stood at the date of valuation but assuming it to be unimproved, with the sales properties. There was, therefore, no need for Ms Watts to make any allowances for the impact of the removal of the loop line and the construction of the fence because they were not disadvantages suffered by the subject as compared with the sales. Relativity Evidence [36] Ms Watts compared the unimproved value of the subject land with that of four comparable properties in the vicinity of the subject and was satisfied that the values were in relativity. She said that the first three properties are in a superior location to the subject only in that the rail line is not located at the rear. Brief details of the four valuations, as provided by Ms Watts are - 22 Main Street (387 m²) – unimproved value $143,000 or $370/m². The property is affected by an easement on its side boundary but is comparable with the subject in size and parking restrictions. It is superior to the subject. 8 Main Street (281 m²) – unimproved value $92,000 or $327/m². This property has good parking at the front, narrow street frontage and no rear access. It is superior to the subject. 10 Main Street (506 m²) – unimproved value $167,000 or $331/m². Ms Watts said that this property is slightly larger than the subject, has good parking and is a well located corner block. 1-9 Main Street (719 m²) – unimproved value $195,000 or $271/m². Ms Watts said that this property was in a comparable location with the subject with the rear boundary adjoining the railway line. Overall she considered this property to be superior to the subject as it has rear access from the road reserve on the southern boundary. The reason that the rate per square metre was lower for this property was that it is larger than the subject. [37] Mr Crosby considered that the properties relied on by Ms Watts in her relativity exercise were far superior to the subject. No. 10 Main Street had the advantage of bordering a type of mall with an environment of pleasant shopping and parking, no through traffic and well away from the impact of the railway line. 1-9 Main Street is the site of the IGA Supermarket. Mr Crosby said that it is a superior site to the subject with ample parking available and further from the railway line. [38] I do not consider that Mr Crosby's evidence has established that there is a lack of relativity between the subject property and the four properties described by Ms Watts. The rates per square metre attributed to the first three properties, as compared with that shown in the subject valuation, are consistent with the evidence that those properties are superior to the subject. The fourth property is almost twice the size of the subject. The -- 8 of 9 -- 9 evidence previously referred to indicates that a lower rate per square metre is normally paid for a larger commercial property. On that basis, a rate of $271/m² for the IGA site is consistent with the valuation of the subject at $310/m², even allowing for the superior features of the IGA site. [39] Mr Crosby also referred to the unimproved values of two other properties in support of his valuation, No. 15 Main Street (532 m²) valued at $95,000 ($178/m²) and No. 17 Main Street (506 m²) valued at $89,000 ($175/m²). Both were superior to the subject, he said, being larger in area, with better parking available, and without the limitations of the subject land in that they are not long and narrow and are further removed than the subject from the noise and smells emanating from the railway line. [40] As noted above at [16], the best basis for the assessment of unimproved value under the Act is the use of sales of vacant or lightly improved parcels of land (Grahn at 328). When there are sufficient comparable sales, therefore, it is not appropriate to value land by comparison with the unimproved values of properties as determined by the respondent department. In any event, as with other aspects of this appeal, I consider that Mr Crosby's relativity evidence was insufficient to discharge the onus of proof that is on the appellant to establish that there was any error in the valuation of the subject land. Conclusion [41] Having considered the evidence as a whole, I have concluded that the appellant has not discharged the onus of proving that the valuation under appeal is incorrect. That valuation is, therefore, affirmed. Orders 1. The appeal is dismissed. 2. The unimproved value of PTA Lot 171 on SP 102276 in the County of Canning, Parish of Mooloolah at One Hundred and Fifteen Thousand Dollars ($115,000) as at 1 October 2004 is affirmed. CAC MacDONALD MEMBER OF THE LAND COURT -- 9 of 9 --