Carter v Chief Executive, Department of Natural Resources [1999] QLC 120

LAND COURT BRISBANE 12 November 1999 Re: Appeal against an annual valuation Valuation of Land Act 1944 Valuation Roll No 1823 Local Government: BCC - Windsor (AV98-712) Wendy J and Hugh C Carter v. Chief Executive, Department of Natural Resources DECISION Background: This matter deals with a property at 44 Morris Street, Wooloowin and described as Lots 133 and 134 on RP 19118, Parish of Enoggera. The subject land has an area of 809 m², and is zoned as “Residential B-R3” in the Town Plan of the Brisbane City Council of 1987, and effected at the date of valuation of 1 October 1997. The key issues are the nature of the land, the impact of the parking of vehicles, noise from surrounding areas, and the comparison of sales. The subject land is located on the eastern side of Morris Street, which is an all-weather bitumen sealed roadway with concrete kerbing and channelling. All normal utility services are available. On 9 March 1998 the Chief Executive issued a valuation of the subject land at $133,000. Following an objection the Chief Executive confirmed that figure on 25 August 1998. The appellants have now appealed claiming the unimproved value should more properly be $100,000. With the consent of the parties a court supervised preliminary conference was held on 19 May 1999. Following that preliminary conference the Chief Executive (the respondent) issued a revised valuation of the subject [1999] QLC 120 -- 1 of 12 -- 2 property under section 68 of the Act on 15 June 1999 at $126,000. The figure of $126,000 is therefore now the quantum of the valuation now appealed. Mr HC Carter appeared and gave evidence for the appellants, also calling evidence from Ms Daphne Ellen Dunfphy, an experienced licensed real estate agent in the Wooloowin /Lutwyche area. Mr James T Houghton, the Departmental registered valuer responsible for determining the valuation appeared and gave evidence for the respondent. The evidence: (1) The history of the appeal - The subject land had apparently sold in 1993 for $220,000, prior to major refurbishment being undertaken. The appellants acquired the subject property for $310,000 in 1995, being attracted to the property principally by the features of the old four bedroom single level historic colonial dwelling erected upon the site. Apparently, one year after acquiring the property, the appellants, along with the entire neighbourhood, became aware of a proposal by the Queensland State Government to develop a by-pass road through the suburb, ostensibly to run parallel to the railway line, along Bridge Street, which is one section removed to the east of the subject land. The planning apparently had under consideration a proposal to redirect a side street, Merehaye Street, a small cul-de-sac off Bridge Street. To this end apparently a vacant lot to the south of the subject land (Lot 132), which is owned by the Department of Main Roads, was intended to be dedicated as new road on to Morris Street. The impact of such a proposal would have been to make the subject land a corner parcel. Following major public concern and demonstrations, the by-pass road was shelved by the Government, although there has been no attempt to sell off the several parcels in the area, which were acquired by the Department of Main Roads in conjunction with the by-pass road project. Such continuance to retain ownership of those parcels (including Lot 132) by the Government has left doubt and concern in the minds of some residents. Mr Carter argues such uncertainty must weigh in the mind of a prudent purchaser in that area. Following the above uncertainties the appellants have recently had a property appraisal undertaken by a Real Estate agent, which indicated that the improved property may be worth approximately $340,000. However Mr Carter argues that increase in value would not equate to the considerable costs that have been incurred by the -- 2 of 12 -- 3 appellants since acquiring the property in 1995. Those extra costs related to completing works on the dwelling that had been incomplete at the date of purchase. Mr Carter also advises that he had an earlier appraisal undertaken by a real estate agent about six months after the public disquiet about the freeway, which indicated that the market value could be less than what the appellants paid for the property in 1995, although there was no evidence of the actual quantum of the former appraisal. (2) The nature of the land – The subject land is in a topographically elevated position, above road level, and flood free. The land falls slightly from north east to south west, with a slight crossfall on the frontage to Morris Street, and with good drainage. It is agreed that on Morris Street itself there are good city views, but those views are obstructed by trees from the subject land, which has been considered as having no major views of the city. To the north and east of the subject land there is a school and preschool complex owned by the Holy Cross Catholic Church. Immediately to the north is a swimming pool complex, together with a major filtration system adjoining the subject land. To the north east of the subject there is a two storey classroom building which, because of its additional height, tends to intrude into the visual privacy of the subject at the rear of the dwelling. Immediately to the east of the subject land is a preschool and kindergarten building, and play area, which is enclosed by a high (1.8 m) timber paling fence. To the south of the subject land is a vacant parcel (Lot 132), owned by the Department of Main Roads, which is used regularly as a carpark for parents “picking up” and “dropping off” children to preschool, or to school, or as an overflow area at times when carparking is particularly heavy at the church due to some major function, carnival or concert, or a funeral at the church. The Holy Cross Church is a major church facility in that area, and is often the scene of public funerals for dignitaries. The impacts of all such activities is that carparking is regularly heavy in Morris Street, and entry and exit to the subject land can be impacted, although parking does fluctuate during the day. There is also some potential risk in colliding with children as they walk down the footpath. Of more recent times some sealed carparking has now been provided within the church grounds. Another consequence of all the activities at the church complex is that there is a considerable level of noise from the children, and the swimming pool filters, which impact the amenity of the subject land. Noise is also a problem from the movement of -- 3 of 12 -- 4 cars on Lot 132 to the south, and also with maintenance of Lot 132. The combined effect is that the subject land is seen to be unique by Mr Carter, in that it is surrounded on three sides by activities which extend beyond the norm of residential occupancy. For this reason Mr Carter argues that the unimproved value does not adequately reflect those disabilities. Mr Houghton argues that the subject land is in a nice residential locality, but he has made allowance for further reduction in the unimproved value from $133,000 to $126,000, to accommodate the impacts surrounding the subject. To support his conclusion Mr Houghton supplies photographs of some new quality multi-unit developments in Morris Street, opposite the subject land. (3) Method of valuation - Mr Houghton has assessed the subject under section 17 of the Act, which dictates that any potential higher use of the land is to be disregarded, and the land is to be valued as a single residential dwelling site. In his method of valuation, Mr Houghton has relied upon direct comparisons of comparable vacant lands in the locality. Ms Dunfphy concedes that if the subject land is to be considered as unimproved, without any of the existing improvements, then it would be appropriate to seek comparisons with sales of vacant lands in the area. She also concedes that when considering the value of the land content of a property, she has noticed that where a property is cleared, then it tends to have a higher value than one where the lot has a building. She attributes such variations to the cost of removing the building, council costs and costs of survey (transcript 3). Ms Dunfphy sold the subject land in 1993, and again to the appellants in 1995. It is Ms Dunfphy’s opinion, based entirely upon her experience of the market in the Wooloowin area, that the unimproved value of the subject land at the relevant date would have been about $110,000, considering its disabilities. She basis that view also upon the previous valuation which had been about $105,000. Ms Dunfphy believes that level of percentage increase (5%) would have been appropriate in the market conditions prevailing in 1996/97. Ms Dunfphy argues that the outstanding feature of the subject land is the quality of the historic dwelling upon it, not the intrinsic value of the land. However Ms Dunfphy provides no additional sales to substantiate her estimate of the unimproved value of the land, nor of how she estimated the impact of the physical disabilities of the subject land. -- 4 of 12 -- 5 Mr Carter argues that the actual percentage increase in the unimproved value of the subject from $102,000 (1996) to $126,000 (1997), or 24%, does not represent the change in the market then experienced. Mr Carter argues that there had been if anything, a slight reduction in the market due to the uncertainties of the by-pass road, and he concludes a value of $100,000. However Mr Carter provides no further evidence to support his conclusion, and concedes that if the proposed realignment of Merehaye Street did come to fruition, then he would expect a further reduction in the valuation to reflect those changes. Mr Houghton rejects any use of percentage changes for comparison purposes. (4) Comparison of sales - Mr Houghton supports his valuation with the following sales:  Sale 1 – (126 Stoneleigh Street, Lutwyche – Lot 15 on RP 19078) This is a 354 m² vacant parcel, zoned Residential B – 4, located about 500 metres south-west of the subject. The sale has a narrow frontage, is below road level, and falls towards the rear. It is located in an older locality with redevelopment for units occurring in the area. The sale is seen as inferior to the subject. The sale sold in April 1997 for $105,000, which after allowing for improvements was analysed at $103,000, and applied at $92,000.  Sale 2 – (34 Felix Street, Wooloowin – Lots 3 and 4 on RP 19383) This is an 809 m² improved property, located about 600 metres north west of the subject, and zoned Residential A and with an old derelict building which has since been removed, and a new detached dwelling has since been constructed. The sale is of medium topographical elevation and is at road level. The sale is seen to be in a generally poorer locality, and the sale would generally be seen as inferior to the subject. However, because of the disabilities of the subject land, considerable allowance has been afforded to the subject land. The sale sold in October 1997 for $165,000, which after allowing for removal of the derelict building, and clearing and improvements, was analysed at $161,500, and applied at $157,500.  Sale 3 – (55 Hunter Street, Wooloowin – Lot 1 on RP 43736) -- 5 of 12 -- 6 This was an improved parcel of area 607 m² containing an old dwelling since removed and a new dwelling constructed. The sale is located about 500 metres north east of the subject, and in a locality of mixed dwellings and units. The sale is seen as superior to the subject. The sale sold in January 1997 for $160,000, which after allowing for the sale of the old dwelling and improvements, was analysed at $150,000, and applied at $143,000. Ms Dunfphy argues that Sale 1 is in an area of Stoneleigh Street where lots generally have absolute views of the city from the rear of those properties. However she feels that Sale 1 may reflect a high price for that area, and any premium attached to that sale possibly reflects the presence of those excellent views. Ms Dunfphy had not however personally visited that sale, and was unable to discount Mr Houghton’s advice that views from Sale 1 were in fact obstructed by trees, and an intervening rise in a hill at Albion Road. On that basis, Mr Houghton had assessed Sale 1 as representing a property with similar restricted views as the subject land. Ms Dunfphy was also unaware of the presence of a concrete slab upon Sale 1 which needed to be removed prior to construction of the new dwelling. Mr Carter was familiar with Sale 1, and argues that it does have better than glimpses of views, but it is not uninterrupted views of the city. Mr Carter was unable to draw comparison between Sale 1 and the subject, because he believes those parcels are not comparable. In respect of Sale 2, Ms Dunfphy sees that sale as a premium sale, representing situations where properties are purchased, and later sold for removal or demolished, in order to erect a new dwelling. She acknowledges the shortage of supply of vacant lots in that area which has led to such actions by developers. Ms Dunfphy believes that such transactions do not represent an average sale, and demonstrate premium prices for select lots, but concedes that there has been an increase in sales for that purpose. Ms Dunfphy agrees the views and traffic flows in Felix Street are comparable to Morris Street. Ms Dunfphy also agrees that there are old flats in the area of Felix Street, and concedes that generally speaking, ignoring the detriments of the subject land, the subject would be superior to Sale 2. Mr Carter believes that Sale 2 is really an anomaly in that area, and it should not be used for comparison purposes. Mr Houghton chose to use Sale 2 for the court hearing, as it tended to have the same area and the same frontage, even though it was located in a poorer area. -- 6 of 12 -- 7 In the matter of Sale 3 Mr Carter queries why that sale had not been disclosed as part of the Freedom of Information (FOI) request in respect of the sales considered by the respondent. Mr Houghton confirms that Sale 3 was in fact part of some 30 to 40 sales in the area considered when he analysed the market to determine the unimproved value at the relevant date. In respect of views from Sale 3, Ms Dunfphy argues that properties in Hunter Street tend to have views across to the D’Aguilar Range. Mr Houghton argues that because of the topography of Hunter Street, as it approaches Lisson Grove, the road falls away. As a result of that loss of elevation, and existing two storey properties opposite across Hunter Street, views from Sale 3 are restricted, comparably to the subject land. Ms Dunfphy agrees that the area of Hunter Street is nearer to Clayfield, and that Sale 3 area is superior to the subject land. On balance the appellants argue that the three sales supplied are not representative sales of the market, and, because of the unique locational problems of the subject land, provide no reliable comparison. Mr Houghton acknowledges that the sales are not perfectly comparable, but using the sales available in the marketplace, and using his experience as a valuer, he has done the best he could do in allowing for any difference in the properties. Mr Carter argues that the three sales provide an inadequate sample size with little mathematical significance. Decision: (i) The history of the appeal - I turn first to the history of the public disquiet in the area during 1996/97, and agree that such uncertainties were likely to have been a matter taken into consideration by potential purchasers in the marketplace at the relevant date. However, as noted by the High Court in the decision of Spencer v Commonwealth of Australia (1907) 5 CLR 418 at 432 per Griffiths CJ: “In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e. whether there was in fact on that day a willing buyer, but by inquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’ It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current -- 7 of 12 -- 8 opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.” The best evidence of the value of the subject land, and any uncertainty as a result of the by-pass road, would be to assess what the marketplace would pay for it at that time. Mr Houghton has sought therefore to go to the sales of comparable lands to determine his estimate of value. In using the basis of sales of vacant or likely improved properties, when determining unimproved value, I note Mr Houghton has followed precedents established by the Courts. I note for instance the Land Appeal Court found in NR and PG Tow v The Valuer General (1978) 5 QLCR 378, at 381: “Courts of the highest authority have laid down that the best test of value is to be found in the sales of comparable properties, preferably unimproved, on the open market round about the relevant date of valuation and between prudent and willing, but not over-anxious parties.” That principle was also followed in R and MM Barnwell v The Valuer General (1990-91) 13 QLCR 13, at p. 17: “The Valuer-General in this case has used the sales of unimproved or lightly improved properties as a valuation basis and it is clear he has not erred in principle in valuing the subject land on the basis of such sales analyses. Nor has it been shown that the Valuer-General made any serious error of fact.” The principle was also followed in PH Clough v The Valuer General (1981-82) 8 QLCR 70 at 76. However Mr Carter argues that the sales adopted bear no direct relationship with the subject land, which has the particular disabilities of proximity to noise, traffic and lack of privacy from the surrounding properties. While Mr Houghton acknowledges that there are differences between the properties, he has used his experience and skills as a valuer to allow for those differences. Such a principle was followed by the Land Appeal Court in King Ranch Pastoral Co Pty Ltd v The Valuer General 35 CLLR 255, at 259 where the Court found: -- 8 of 12 -- 9 “In not attempting to do this, Mr Walker adopted a method of valuing based on knowledge and experience rather than one lacking precedent and authority.” This was further clarified in the wording of the minority decision of that case, where the learned Member noted at page 262: “In Bingham v Cumberland County Council (1954) 20 LGRA 1 at p. 18-19, Sugerman J says: ‘In the absence of sufficient guidance to be had from sales, the valuer may find himself in a position resembling that to which Lord Romer referred in the Raja case (1939) AC at pp. 312 and 313, in which he will have no market value to guide him, and he will have to ascertain as best he may from the material before him what a willing vendor might reasonably expect to obtain from a willing purchaser for the land.’ The valuer in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience in other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant.” That was also followed by the Land Appeal Court in H and E Grahn v The Valuer General (AV89-246-247) 13 December 1990 unreported at page 5: “A proper valuation calls for an exercise in balancing all the respective advantages and disadvantages inherent in or pertaining to a lot.” (ii) The nature of the land - There is no real disagreement between the parties that the subject land does have certain disabilities as a result of its location surrounded by the swimming pool, the classroom, the preschool, and the carparking on Lot 132. The only difference lies in the level of impact incurred. I have no doubt that if the subject land had been located in a standard residential situation, surrounded by normal private residences, its unimproved value would have been higher. The question is has Mr Houghton provided a reasonable allowance for those distinctive disabilities? (iii) The method of valuation - The evidence supports the method adopted by Mr Houghton, which follows principles adopted by the Courts. Ms Dunfphy’s conclusions based only upon her opinions and experience, without further evidence to support it, must be afforded less weight in my conclusions. Likewise with Mr Carter’s conclusion that the market has -- 9 of 12 -- 10 declined slightly. In the end it is the weight of evidence to which I must direct my attention. In the matter of the percentage changes in the valuations, while I note those conclusions were made by Ms Dunfphy and Mr Carter only in comparing their concluded values, such changes bear no relationship to any estimate of the unimproved value. Such an approach was followed by the Land Appeal Court in NR and PG Tow v The Valuer General (supra) at page 381; and also discussed in the Full Court of Queensland in C and BD Henricks v The Valuer General (1983) 9 QLCR 59, where Macrossan J (CJ) said at p. 63: “The appellants also relied upon a schedule, exhibit 4 in the Land Appeal Court, which showed percentage increases in the value applied by the Valuer-General to a number of selected parcels of land from the date of the preceding valuation up to the March 1979 valuation date. The percentage increase shown in the selected cases was in each instance considerably less than the increase applied to the subject land as between the two valuation dates. The weakness in such a selective comparison is obvious as there could be any number of reasons why blocks in the sale valuation area should increase at different rates over a period of five years.” As the Full Court said there could be many reasons why parcels of land can increase at different percentage rates over a period of time. The real test is not the percentage increase in the unimproved values, but a comparison of the subject with sales of comparable sites in the vicinity of the subject at the time of the valuation. (iv) The comparison of sales - That then leads to the comparable sales supplied by Mr Houghton. I note that there was no alternative sales evidence supplied by the appellants. On the analysis supplied I find that none of the three sales have any outstanding views for which premiums are regularly paid. Any obstructed view at Sales 1, 2 and 3 are comparable to the subject land. The following summarises the comparisons with the subject: Sale Area Applied Unimproved Value Comparison 1. 354 m² $92,000 Inferior 2. 809 m² $157,500 Superior 3. 607 m² $143,000 Superior -- 10 of 12 -- 11 I note that it is Ms Dunfphy’s opinion that unimproved properties which are purchased, and then have a building removed or demolished, provide a premium price for a vacant land purchase. While it may seem unusual to the appellants, in fact such occurrences are becoming increasingly common in areas where redevelopment has commenced to flourish. There has been a trend over recent years, as a consequence of moves by local governments to encourage people to relocate back towards the City centre, and for inner suburbs such as Wooloowin to experience a rejuvenation. As a consequence of those moves, people now seek sites to relocate, often where there is little vacant lands available upon which to build. As a result of that scarcity of supply of vacant lands, the price of those lots has risen in accordance with the principle of supply and demand. Such a trend then makes existing improved lots a more economic solution, even allowing for either the demolition of the old building, or its sale for removal. If the building can be removed the new owner may recover part of his costs. If demolition is necessary then those costs become a further cost to be paid in order to acquire a vacant site upon which to build. In the case of Mr Houghton’s Sales 2 and 3, he has allowed for removal costs of both old dwellings, thus reducing the analysed value of the sale price for the vacant land. I see no reason to discredit those sales as reasonable prices for the eventual vacant building sites. On that basis, and on the evidence supplied, I believe that the subject land value would fall between $92,000 and $143,000. Allowing for its larger area than Sale 1, and the better location of the subject, I believe the subject would be nearer Sale 3 than Sale 1. That then leaves the allowance to be made for the special disabilities of the subject land. While Mr Carter has identified those disabilities, he has not effectively sought to quantify them. Mr Houghton has used his experience to arrive at the further reduction of $7,000 to an unimproved value of $126,000. In concluding if that amount is appropriate, I am reminded that under section 33 of the Act, the valuation by the Chief Executive is deemed to be correct unless it is proven to the contrary, or unless the Chief Executive has used an incorrect principle, or made a serious error of fact. (See Brisbane City Council v Valuer General (1977-78) 140 CLR 41, per Gibbs J at p. 56.) -- 11 of 12 -- 12 Conclusion: Having considered the whole of the evidence I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the unimproved value as determined by the Chief Executive in the sum of $126,000 is affirmed. N G DIVETT MEMBER -- 12 of 12 --