Aronis v Chief Executive, Department of Natural Resources [1998] QLC 60

LAND COURT BRISBANE 29 May 1998 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 Valuation Roll No: 14498/50000 Local Government: BCC-Yeerongpilly (AV97-298). Theodora L and Maria Aronis v. Chief Executive, Department of Natural Resources D E C I S I O N Background: This matter relates to a property at 24 Selhurst Street, Coopers Plains, and described as Lot 2 on RP 213415, Parish of Yeerongpilly. The parcel is located approximately 12 kms radially south-east of the Brisbane GPO. The land is zoned "General Industry" under the Town Plan of the City of Brisbane of 13 June 1987, and effective at the date of valuation of 1 October 1996. The key issues are the nature of the land, percentage increases and relativity. On 17 March 1997, the Chief Executive issued a valuation of the subject at $245,000. Following an objection the Chief Executive confirmed that valuation on 29 July 1997. The appellants have appealed that figure claiming the valuation should more properly be $180,000. Mr P Aronis appeared and gave evidence for the appellants. Mr G Harper appeared for the respondent, calling evidence from Mr RP Cranstoun, the Departmental Registered Valuer responsible for determining the valuation. (1) The nature of the land - The subject is of regular shape, with low elevation, and falls slightly to the west. All services are available, and Selhurst Street is generally bitumen sealed outside the property with concrete kerbing and channelling on the southern side of the road. However, on the northern side of Selhurst Street opposite the subject there is only an earth drain and earth shoulders to the road pavement. The parcels to the north of the subject across Selhurst Street are smaller in area (about 1,000 square metres), are believed to be zoned as "Future Industry", and are presently occupied by a variety of purposes as: [1998] QLC 60 -- 1 of 7 -- 2 Parcel E - Lot 3 on RP 73007 (1,029m2) - small warehouse Parcel F - Lot 7 on RP 75036 (1,014m2) - East Coast Rentals Ptd Ltd accommodated in a converted dwelling Parcel G - Lot 8 on RP 75036 (1,014m2) - dwelling Mr Aronis argues that the standard of those buildings and occupation is not in keeping with the other general development in the area, and provides an inferior outlook from the subject. This he argues mitigates against the future use of the subject in that, if tenants have a choice between leasing the subject or an adjoining parcel with better outlook, then they will either choose the adjoining parcel or only pay less for the subject. Either way he claims the inferior outlook impacts the value of the subject. Mr Aronis also argues that the formed gravel shoulders to the northern side of Selhurst Street fronting those three parcels, inhibits vehicular access to the subject, in view of turning areas, etc. This he claims will not be overcome until the three parcels are re-developed and Council then requires upgrading of the road pavement and drainage. Meanwhile, in his view, the subject has some disadvantage to similar adjoining parcels. It is agreed by the parties that Selhurst Street connects through to Holt Street in the west, thus providing an alternative access to Beenleigh Road, which is a busy thoroughfare. Lensworth Street to the south of the subject does not connect through to the west. However Selhurst Street is only a formed earth track west of Lot 1 on RP 213415, which is one parcel removed to the west of the subject. The three parcels to the east of the subject in Selhurst Street are all newly fully developed industrial complexes with attractive appearances and outlooks across Selhurst Street. (2) Changes in the Valuation - The appellants argue that recent changes in the unimproved value of the subject have been out of line with surrounding properties. The general increase in values of the area was 19% last year, however, the subject increased by 40%. Mr Aronis supplied the following unimproved values for the subject: Date of Effect Unimproved Value Percentage Change 1 July 1991 $225,000 - 1 July 1992 $225,000 No Change 1 July 1993 $197,500 Decrease 13% 1 July 1994 $177,500 Decrease 10% 1 July 1995 $177,500 No Change 1 July 1997 $245,000 Increase 38% Mr Cranstoun argues that, when he undertook the annual valuation at 1 October 1996 (date of effect 1 July 1997), he found that the subject was considerably out of relativity with surrounding similar parcels compared on a per square metre basis. As he could find no logical reason for the difference in the lands, he then sought to bring the subject into correct relativity -- 2 of 7 -- 3 with those surrounding parcels. As a consequence of that adjustment, the subject which had been severely undervalued, in his opinion, then reflected a larger increase than the other parcels incurred as a result of a comprehensive analysis of comparable sales in the area. Mr Cranstoun argues that relativity is now correct, and the percentage increase in the unimproved value is not relevant. (3) Changes in Relativity - The appellants draw comparison with relativity on a per square metre basis between the subject and surrounding parcels as follows: Parcel UCV Area Rate/m2 (1) 18 Selhurst Street $275,000 2982m2 $92.22 (Lot 3 on RP 213415) (2) Selhurst Street (2 lots to east) $280,000 3000m2 $93.33 (BUP 9334) (3) 6 Selhurst Street $197,500 2293m2 $86.13 (Lot 7 on RP 885321) (4) 25 Lensworth Street $265,000 2854m2 $92.85 (Lot 9 on RP 213415) (5) 30 Lensworth Street Not supplied 4649m2 $57.00 (Lot 11 on RP 213418) (6) Lots 1 & 10 on RP 213415 $460,000 5294m2 $86.89 (fronting Selhurst & Lensworth Street to west of subject) (7) 24 Selhurst Street (subject) $245,000 2640m2 $92.80 (Lot 2 on RP 213415) While Mr Aronis accepts that there is now some consistency between Parcels 1, 2, 4 and 7, he notes the inconsistency with Parcels 3 and 5. He also argues that the special impacts upon the subject discussed earlier were not allowed for in merely bringing the subject into line relativity wise as has occurred. Mr Cranstoun explained that the reduced unimproved rate per square metre of Parcel 5 (30 Lensworth Street) related to the larger size of parcel 5, and the impact of a large drain at the rear, which is covered by an easement. As the easement area is also below the building regulation height, that part of Parcel 5, which is not useable anyhow, was not valued. But even allowing for that area of the easement, the balance of Parcel 5 is still larger than the subject, and would accordingly be valued at a lower rate per square metre. Based upon the restricted area of parcel 5, the rate per square metre is more than $57 and is in line with other larger parcels nearby. -- 3 of 7 -- 4 In respect of the improved value of Parcel 3 (6 Selhurst Street), Mr Cranstoun explained that that parcel has an access easement along its eastern and northern boundaries. The easement varies from 6 metres to 3 metres in width, and provides access to the five small residential parcels fronting Beenleigh Road to the east. Houses built upon two of those parcels partially restrict exposure of 6 Selhurst Street to passing traffic along Beenleigh Road, although there is some direct exposure to traffic from the junction of Selhurst Street and Beenleigh Road. No 6 Selhurst Street is also an irregular-shaped parcel which also affects its relativity. In determining the unimproved value of 6 Selhurst Street, Mr Cranstoun has valued the unencumbered area of the parcel at a similar rate per square metre ($90) and valued the area impacted by the easement at only $45 per square metre, which is his normal practice. Mr Aronis had some difficulty accepting such an approach as he saw the easement as a possible asset to the owner as it was likely to be generating some income. There was no challenge that the current rates per square metre for surrounding parcels were not correct in comparison to sales evidence in the area. The only matter in dispute was the relativity between the subject and those parcels. There had been an overall increase of 20% for all surrounding parcels as borne out by the comparison of comparable sales in the area. Decision: (1)Changes in the Valuation - I turn first to the percentage changes in the valuation which, in the appellants' opinion, do not reflect a fair and reasonable increase compared to the surrounding parcels. I note that the subject has incurred a comparatively large increase (40%) compared to its neighbours' 19%. However I note that such a differential has only occurred because the respondent sought to bring the subject into relativity with surrounding parcels. While I am aware that such inconsistency would be of concern to the appellants, it does not in fact demonstrate conclusively that an error has been made in the valuation process. Such rises may, at best, be an indicator to the owners that they should investigate the valuation further, but there may be other reasons why a valuation may appear to rise out of line with the overall statistical percentage. This matter has been considered many times by the courts, and I note from precedents that a large increase in itself has been taken to not demonstrate some error in the valuation. I note, for example, in the decision of the Land Appeal Court in NR and PG Tow v. The Valuer-General (1978) 5 QLCR 378, at page 381: "It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation. " That matter was also considered in CH and BD Henricks v. The Valuer-General (1983) 9 QLCR 59 wherein the Full Court of Queensland, Macrossan J (CJ) said at p.63: "The appellants also relied upon a schedule, Exhibit 4 in the Land -- 4 of 7 -- 5 Appeal Court, which shows 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 same 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. In the current matter if the decision by the respondent to bring the subject into line can be supported, then the differential in changes is not relevant. (2) Relativity - In considering the matter of relativity I note that, while the maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (if not ideal) sales evidence. (WM and TJ Fischer v. The Valuer-General (1983) 9 QLCR 44 at 46). I note also that if possible the Chief Executive should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error. (R and MM Barnwell v. The Valuer-General (1989) 13 QLCR 13. I note also that in that matter the Land Appeal Court noted at page 16: "We are conscious that it is desirable that valuations made for the purposes of the Valuation of Land Act of comparable lands should bear proper relativity, one to the other, if the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis. " In the current matter Mr Cranstoun has argued that his reason for changing the valuation was because he could see no reason why the subject was apparently out of line. In comparing the nature of the land and its services, locality, and comparison to other sales, he believes there is no reason why the subject should be accorded a lower value than surrounding parcels. The importance of maintaining and relying upon relativity was also discussed in TF and SA Shepherdson v. The Valuer-General [1992-93] 14 QLCR 83. In the current matter, there apparently was no indication on the departmental file relating to reasons for the previous successful objection by the appellants in 1993, which resulted in a reduction of $20,000 in the valuation in 1993. There is no doubt that Mr Cranstoun has a responsibility to ensure that errors in -- 5 of 7 -- 6 valuations are corrected under Section 28(1)(h), which states: "28.(1) No alteration shall be made in the valuation of any parcel of land during the period during which any general valuation or annual valuation relating to the area in question is in force or, in the case of a general valuation or an annual valuation which has not come into force, during the period between the issuing of an annual valuation notice under part 4, or a notice of valuation under part 6, and the date of the valuation coming into force - (h)unless the valuation is affected by error or omission which the chief executive considers it necessary to correct; " However the authorities stated above note that he shall only do so where he has supportive evidence to substantiate such changes. The absence of any previous reason upon the departmental file supporting the $20,000 does not prove anything. The key therefore is whether Mr Cranstoun, in his expert opinion, has considered all of the relevant factors impacting the subject. (3) The Nature of the Land - In seeking comparisons between the subject and the surrounding parcels I note that the differences with 6 Selhurst Street and 30 Lensworth Street have already been explained. The real test is the comparison with 18 Selhurst Street ($92.22 per m2), Selhurst Street - BUP 9334 ($93.33 per m2), 25 Lensworth Street ($92.85 per m2) and the subject ($92.80 per m2). The only real differences lie in the outlook towards the street frontage, and the condition of the roadway fronting the parcels. Mr Cranstoun concedes that there is some difference in respect of a full width bitumen roadway in front of the subject, and the view to the north of the subject over lesser quality properties. However he sees those differences as providing little difference to the valuation of the subject. He concedes that, subject to other market availabilities, the subject could suffer some marketing disability compared to the surrounding parcels in respect of the above factors. On balance, in the context of an annual valuation, and until those two factors were rectified by subsequent redevelopment works, there would appear to be some reason for providing an allowance in the valuation of the subject. That perhaps was the reason behind the reduction in 1993. In comparing the subject with 16 Selhurst Street, I agree with Mr Cranstoun that the impact of the access easement would reduce the unimproved value of that parcel. An easement in perpetuity is an encumbrance upon the title, and therefore a restriction upon the highest and best use of the land. The method of assessing the unimproved value by Mr Cranstoun would appear to be reasonable. -- 6 of 7 -- 7 Summary: Under Section 33 of the Valuation of Land Act I note that the valuation is deemed to be correct unless proved to the contrary. I note also that direction is given in Brisbane City Council v. Valuer-General (1977-78) 140 CLR 41, where the High Court of Australia found that unless it can be demonstrated that the Chief Executive, in making a valuation, has acted on a wrong principle or made a serious error of fact, then the valuation is deemed correct. In the current matter I believe Mr Cranstoun has not adequately compared the disabilities of the subject. I believe Mr Cranstoun was correct in seeking to correct what appeared to be an error in the former valuation of the subject. However, in amending the unimproved value I believe he has tended to down-play the impact of the disabilities in relation to access and outlook. In the absence of any evidence as to what level of value that should reduce the valuation, I will adopt the figure of $20,000 previously accorded the land in 1993. Conclusion: Having considered the whole of the evidence I am persuaded that the appellants have partly proved their case. The unimproved value of the Chief Executive is set aside, and the unimproved value of Lot 2 on RP 213415 is determined at Two hundred and twenty-five thousand dollars ($225,000). Member of the Land Court -- 7 of 7 --