Cherrett v Chief Executive, Department of Natural Resources [2000] QLC 1

LAND COURT, BRISBANE 7 January 2000 Re: Appeal against Annual Valuation – Valuation of Land Act 1944 – City of Rockhampton. (AV98-559). Glen T Cherrett v. Chief Executive, Department of Natural Resources (Hearing at Rockhampton) D E C I S I O N This is an appeal by a landowner under s.55 of the Valuation of Land Act 1944 (the Act), against the unimproved value applied to his property by the Chief Executive, Department of Natural Resources, as at 1 October 1997. Background: Mr Cherrett is the owner of a property described as Lot 5 on Registered Plan 603223, Parish of Rockhampton, with an area of 2,023 square metres (the subject land). Under the provisions of s.37 of the Act, the respondent applied an unimproved value of $136,000 to that land as at 1 October 1997. Following an objection against that valuation, Mr Cherrett succeeded in having the unimproved value reduced to $121,000. Mr Cherrett was of the opinion that the unimproved value was still excessive and appealed to the Land Court against the respondent's decision upon his objection, advising that in his opinion the unimproved value should be $80,000. The subject land is situated at 29 Church Street, Rockhampton, about 2.8 kilometres south-west of Rockhampton Central Business District. Church Street is a fully bitumen sealed residential carriageway, with concrete kerbing and channelling providing single lane traffic flow in either direction. The street is sufficiently wide to allow parallel kerbside parking for vehicles. The intersection of Church Street and [2000] QLC 1 -- 1 of 9 -- 2 Gladstone Road (Bruce Highway), is approximately 150 metres to the east of the subject land. Reticulated town water and sewerage, overhead electricity and telephone services are connected to the property. There is a daily mail delivery service and a weekly garbage collection. A council bus service runs along nearby Upper Dawson Road. The subject land is a regular shaped, inside allotment, with a frontage of 40 metres and a depth of 51 metres. It is reasonably well elevated, with a gentle slope from west to east providing a good building contour. The property is adequately drained and, according to the Rockhampton City Council flood maps, is above the Q100 flood level. It is zoned "Residential B" and is improved with a semi-modern double storey multi-residential development comprising 8 units, constructed in 1982. The Grounds of the Appeal: Although somewhat more detailed, in essence the grounds of Mr Cherrett's appeal are as follows: 1. The improved value of the property has fallen substantially since it was purchased in 1993; 2. the income achievable from the units has decreased to such an extent that rental properties are no longer a good investment in Rockhampton; the unimproved value of multi-unit land in Rockhampton has fallen and as at the relevant date a hypothetical prudent purchaser would be able to purchase a similar block of land to build an equivalent block of units in Rockhampton for a price substantially below the unimproved value applied to the subject land; 3. an "arms length" offer was recently made to purchase the property for only $520,000; 4. a parcel of vacant land nearby was recently purchased by the Queensland Housing Commission for $ 72,500; although smaller than the subject property it has many attributes which make it a most desirable block for the construction of multiple dwellings. 5. A well-improved property with an in-ground swimming pool on 900 square metres of land situated on Upper Dawson Road was recently sold -- 2 of 9 -- 3 for $ 135,000, only slightly higher than the unimproved value applied to the subject land. The Case for the Appellant: Essentially, Mr Cherrett's case was that he purchased the subject property for $720,000 in 1993. The bank fully funded the purchase at the time. In November 1997 he decided to change financiers. His new bank revalued the property at only $560,000 and he believed that the summation of the valuation was: 8 units with twin garaging @ $60,000 = $480,000 Land = $ 80,000 In July 1999 he again refinanced the property. This time the bank carried out a valuation which he was advised was as follows: 8 units @ $65,000 = $520,000 Land = $ 80,000 He does not dispute either bank's valuation and has used them for his own purposes, e.g. insurance. When he purchased the property, each unit was tenanted at a weekly rent of $170. The maximum which he now receives is $140, while most units are rented at $120 when he is able to keep tenants. While the units are of a high standard, he considers that rental properties are no longer a good investment in Rockhampton because of the downturn in the city's local economy. He reasons that the land upon which the units are built is worth much less than it was when the property was returning higher rentals. He was of the opinion that at the date of valuation vacant land upon which an equivalent block of units could be built could be purchased for less than the unimproved value that had been applied by the respondent. In support of his contended valuation of $80,000, Mr Cherrett submitted the following: In about February1998 he received an "arms length" offer for the property of only $520,000. A vacant block of land on the corner of Penlington Street and Upper Dawson Road sold to the Queensland Housing Commission for $72,500 which, although smaller than his property, had many attributes which made it a most desirable block for the construction of a multiple dwelling. A well-improved property with an in-ground swimming pool on 900 square metres of land was recently sold on Upper Dawson Road for $135,000. -- 3 of 9 -- 4 Mr Cherrett thought that the latter price was indicative of the sale prices for properties in South Rockhampton. He reasoned that there was a lack of sales because people were not selling their homes in South Rockhampton as they could not recover the prices that they paid for them. He thought that the market in North Rockhampton would be only slightly better. Mr Cherrett was of the opinion that there was no enhancement in value of land zoned "Residential B" for potential for development of multi-unit dwellings. Two allotments zoned "Residential A" (Lots 16 and 22), each with an area of 1,012 square metres, at the rear of his property had been valued by the respondent at $40,000. He reasoned that the subject land should therefore be valued at no more than $80,000. The Case for the Respondent: Valuation evidence for the respondent was given by Mr AW White, a registered valuer employed by the Department of Natural Resources. In defence of the respondent's unimproved value of $121,000 Mr White relied on five sales of allotments zoned "Residential B", situated in South Rockhampton. Sale 1 is situated in Bolsover Street, has an area of 1,012 square metres and sold in December 1996 for $75,000. That sale was analysed to show an unimproved value of $72,500 ($73 per square metre) and as at 1 October 1997 an unimproved value of $58,000 ($57 per square metre) was applied by the respondent to the property. In comparing the sale to the subject property Mr White said that it had similar access and services, was superior in building contour, but was smaller and inferior in location. As reflected by the rate per square metre applied, Mr White considered the property to be inferior to the subject land on a rate per square metre basis. Mr White commented that the sale property was purchased by an adjoining owner to extend existing multi-unit development. He considered that it was a high sale, it was to an adjoining owner for a specific purpose, and this is reflected in the difference between the analysed rate per square metre and the value applied. Although closer to the City Centre, Mr White thought that the location of the sale was inferior to that of the subject land, because it was in a commercial/service industry part of town, with road noise from the highway. Mr White's Sale No 2 is situated in Upper Dawson Road, has an area of 885 square metres and sold in April 1997 for $72,500. That sale was analysed to show an unimproved value of $70,150 ($79 per square metre) and as at 1 October 1997, an -- 4 of 9 -- 5 unimproved value of $58,000 ($66 per square metre) was applied by the respondent to that property. In comparing the sale to the subject land, Mr White said that it had similar access and services, had superior building contour, but was inferior in location and size. Overall, he considered it to be similar to the subject land on a per square metre basis. He disagreed with Mr Cherrett that it enjoyed a superior position being on Upper Dawson Road. It was only a couple of hundred metres from the subject land and he considered it to be in a very similar sort of location. The purchaser has constructed two units upon that property since purchasing it. That property was purchased by the Queensland Housing Commission and Mr White regarded it as a high sale. He said that the "popular opinion" was that the Housing Commission tended to pay a bit more than market value for the land. Mr White's Sale 3 is situated in Fitzroy Street, has an area of 930 square metres and was sold in August 1997 for $66,000. That sale was analysed to show an unimproved value of $63,500 ($68 per square metre) and, as at 1 October 1997, an unimproved value of $59,000 ($63 per square metre) was applied by the respondent to that property. In comparing it with the subject land, Mr White said that it had similar location, building contour and services, superior access, but was smaller. He regarded it as similar to the subject land on a per square metre basis. He considered that sale to be a basic sale, by which I understood him to mean that it was a sale upon which he could rely as providing a sound basis for his valuation. That property was also purchased by the Queensland Housing Commission, but Mr White did not explain why it was not also regarded as being a high sale. Perhaps the difference in the rates per square metre reflected by the analyses of Sale 2 and Sale 3 are indicative of the excessive price paid for Sale 2. The applied values indicate that Mr White thought that the properties are similar on a per square metre basis. Mr White's Sale 4 is situated at 76 Denison Street, has an area of 800 square metres and sold in August 1997 for $70,000. That sale was analysed to show an unimproved value of $68,750 ($86 per square metre) and as at 1 October 1997 an unimproved value of only $43,000 ($54 per square metre) was applied by the respondent to that property. Sale 5 is situated at 86 Denison Street, has an area of 1012 square metres and sold in July 1997 for $55,000. That sale analysed to show an unimproved value of $54,000 ($53 per square metre) and as at 1 October 1997 an unimproved value of -- 5 of 9 -- 6 $52,000 ($51 per square metre) was applied by the respondent to that property. In comparing Sales 4 and 5 with the subject land, Mr White commented that they have similar access and services, are superior in building contour, but inferior in size. He regards them both as being vastly inferior to the subject property because, while close to the CBD, they are located on Denison Street through which runs the main northern railway line, with consequent noise. In his opinion it was not a particularly attractive part of town, being a very old area, parts of which suffer from localised flooding. Again, each of those properties sold to the Queensland Housing Commission. While Mr White regarded Sale 4 as being a high sale, he regarded Sale 5 as being a basic sale. Once again he did not explain why Sale 5 did not fit into the category of being a property for which the Queensland Housing Commission paid in excess of market value. However, the prices paid for the two properties indicate that substantially more per square metre was paid for Sale 4 than for Sale 5, but the values applied show that Mr White considers them to be reasonably similar on a rate per square metre basis. Mr White realised there was a large disparity between the area of the subject land and the areas of each of the sales. Mr Cherrett had asserted that there should be some economy of scale allowed for in the valuations of larger properties and that a lesser rate per square metre should be applied to the subject land than was applied to the sales. As there were no sales of larger "Residential B" zoned allotments for the 1997 valuation, Mr White referred to the sales that were used for the earlier 1993 valuation, where there was evidence of sales of larger "Residential B" zoned properties. In particular, he referred to three sales, the smallest of which (923 square metres) was situated at 20 Church Street and which showed $73 per square metre. A larger property of 1,366 square metres situated in Ross Street, analysed to show an unimproved value of $73 per square metre, while an even larger property of 2,081 square metres, situated at 36 Penlington Street, analysed to show $76 per square metre. At the time of the 1993 valuation, the respondent had applied unimproved values of $67 per square metre, $55 per square metre and $65 per square metre respectively, to each of those three properties. At that time an unimproved value of $67 per square metre had been applied to the subject land. From that evidence, Mr White concluded that the sales showed that the "Residential B" zoned properties were purchased on a per square metre basis, rather than on any other basis. -- 6 of 9 -- 7 One other possible method of valuation of "Residential B" properties would be on a per unit potential basis, rather on an area basis. However, Mr White said that since the introduction of the Integrated Planning Act 1997, it was now no longer possible to accurately estimate how many units the Council would approve on a particular property until the Council had considered a development application and made its decision. While he could make an informed estimate that four units could be built on Sale 1, and two units each on Sales 2, 3 and 4, while on Sale 5 three units may be able to be developed, he was not certain that such developments would be approved by the Council. The subject land has an unimproved value of $121,000 and is developed with eight units. That shows a per unit unimproved value of $15,125. If Mr White's estimates are correct, Sale 1 (four units) is valued at $58,000, or $14,500 per unit; Sale 2 (two units) is valued at $29,000 per unit; Sale 3 (two units) is valued at $29,500 per unit; Sale 4 (two units) is valued at $21,500 per unit; and Sale 5 (three units) is valued at $17,333 per unit. Apart from indicating that the subject land is not overvalued on a per unit basis, that analysis is not particularly helpful. It is understandable that Mr White preferred to value the "Residential B" zoned land on an area basis. Although the sales for the 1997 valuation were all smaller than the subject land, there had been earlier evidence to show such land appeared to be bought and sold on a rate per square metre for properties ranging in area from 923 square metres to 2081 square metres. There was no evidence to indicate that such reasoning should not apply in this case. Conclusion: Mr Cherrett's case was based on his contention that there had been a reduction in values since he purchased the subject land. He sought to prove his case by referring to the diminished earning capacity of his units, supported by bank valuations of the improved property. Mr White thought that the reduction in earning capacity was the result of supply and demand, with newer units available for little additional rent. Mr Cherrett was offered only $520,000 for the units in early 1998, but obviously did not accept the offer. That offer alone provides no evidence of value. The valuations by the banks for finance purposes provide no evidence of unimproved value. There was no evidence called in support of those valuations, -- 7 of 9 -- 8 which may have been made in-house by bank officials and not by registered valuers. They were valuations of the improved property for specific purposes. The other sales referred to by Mr Cherrett were of little assistance to his case. The only unimproved sale was Mr White's Sale 2, which he considered to support the respondent's applied value. The improved sale on Upper Dawson Road was of no assistance in determining the unimproved value of "Residential B" zoned land. The Act requires that the unimproved value of land be ascertained as if the improvements on the land did not exist (s.3(1)(b)). It is well established that the best basis for the assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land: Grahn v. The Valuer-General (1992-93) 14 QLCR 327 at 328. Burden of Proof: The appellant bears the burden of proving his grounds of appeal (s.45(4) of the Act), otherwise the presumption created by s.33 of the Act is that the valuation of the Chief Executive is correct. To succeed, therefore, the appellant must show that in making the valuation. the respondent acted upon a wrong principle, or made a serious error of fact, or that the valuation was made by a method fundamentally erroneous (Brisbane City Council v. The Valuer-General (1978) 140 CLR 41 at 56). After considering the evidence, it cannot be said that the respondent acted upon a wrong principle. The principle adopted by Mr White was direct comparison with sales of comparable land. The appellant raised several issues in argument against those sales, but at the end of the day he has not demonstrated that Mr White acted upon a wrong principle. Nor can it be said that the respondent made a serious error of fact. Indeed, there were virtually no issues of fact in dispute. Mr Cherrett accepted the facts relied on by the respondent, except for one or two differences in comparison of sales and subject land. Neither can it be said that the respondent adopted a method of valuation fundamentally erroneous. The method of valuation was direct comparison and it has not been shown that those comparisons were in error. Therefore, despite some misgivings that I have that the Queensland Housing Commission was a party to each of the sales relied on by the respondent, there is no evidence to indicate that the adjustments made by Mr White had not taken care of any -- 8 of 9 -- 9 departures from market value. In the absence of any evidence rebutting the presumption of correctness, I must find that the appellant has not discharged the onus of proof cast upon him by s.33 of the Act. Therefore the appeal must fail. Order: The appeal is dismissed and the valuation of the respondent is affirmed. (JJ Trickett) President of the Land Court -- 9 of 9 --