Aninuma Pty Ltd v Chief Executive, Department of Natural Resources [1997] QLC 190

LAND COURT BRISBANE 3 December 1997 Re: Determination of Unimproved Value - Local Authority: Gold Coast (AV96-342). Aninuma Pty Ltd v. Chief Executive, Department of Natural Resources D E C I S I O N This appeal lies against the determination by the respondent Chief Executive, Department of Natural Resources, of an unimproved value of $750,000 ($25 per square metre) for a 3 hectare parcel of land situated in Habana Street (corner Millaroo Drive), Gaven. The land is more particularly described as Lot 1 on RP 156889, Parish of Barrow, County of Ward. The land is zoned "Rural" under the former Albert Shire Council Town Planning Scheme which was gazetted on 24 February 1995. The relevant date for the determination of the unimproved value is 1 January 1996, and the appellant company contends within the notice of appeal for an unimproved value of $400,000 ($13.30 per square metre). While the land is zoned "Rural", it is located within an industrial estate. On both the Strategic Plan - Preferred Dominant Land Use and the Albert Corridor Development Control Plan No. 5 for the Albert Shire Council Town Planning Scheme, the subject land and the surrounding area is designated "Industrial". The land is improved with a single storey brick and cliplock constructed building which is used for industrial purposes. Practising Registered Valuer Bryan Boyd Kelaher was called in evidence by the appellant in support of the unimproved value of $400,000. Mr Kelaher says his unimproved value of the land is $14 per square metre, and I calculate this to equate a value of $420,000. Mr Kelaher describes the nature of the land as being level, and level with the street with a gully to the rear which he believes will eventually have to be piped. Mr Kelaher says the land has restricted access to the Bruce Highway (Gaven Way) with ingress and egress being left turns only. He says there is a substantial cliff on the Highway frontage and that at the date of valuation the Department of Transport had plans to resume a strip of land about 50 metres wide from the full frontage of the land, taking the new western boundary close to the western side of the building erected upon it. Mr Kelaher outlined the history of the ownership of the subject property which, for [1997] QLC 190 -- 1 of 8 -- 2 many years, was owned and operated by a company called Laser Electronics Pty Ltd. He says that from 1 May 1993, the property was leased to Aninuma Pty Ltd (a company owned by Mr P Buckler) for 16 months at a rental of $3,750 per calendar month. But this was not the rental set for the duration of the lease. A copy of the lease document is in evidence (Exhibit 5). The rent for the first four months of the lease was indeed $3,750 per month payable in full (15,000) at the commencement of the lease, but for the next six months it was set at $5,000 per month and for the last six month period $9,166 per month. Pursuant to Clause 14 of the Lease Agreement, the appellant Aninuma Pty Ltd exercised an option to purchase the subject property on 30 November 1994, for $775,000. It is to be noted that the sale price was established at the date of the signing of the lease, viz. 1 May 1993. It is this sale which provides Mr Kelaher with his principal basis of valuation, as he contends, quite properly in normal circumstances, that the sale of the subject property always provides the best basis for its valuation. Mr Kelaher values the improvements on the subject land at sale date at $360,000. He describes the factory building as then being a fairly new single storey building with a concrete floor and with a floor area of 1774 square metres. He values the structural improvements at $360,000 ($200 per square metre). It has a ceiling height which Mr Kelaher describes as being about one metre below average. Mr Kelaher analyses the subject sale then to show an unimproved value of $415,000 - or $14 per square metre. Mr Kelaher says that the industrial land value pattern in the Gold Coast Region is very different from elsewhere in that the Gold Coast area is a "service town" and most industry is associated with servicing. As a result, in the accepted sense of the word, Mr Kelaher believes there is practically no industrial/commercial/manufacturing in the subject area. He points out that the most suitable "industrial" areas are at Burleigh Junction/West Burleigh Heads, Bundall, Southport and Tweed Heads. It is in the Burleigh area where Mr Kelaher called upon sales in support of his valuation of the subject land based on the analysis of the subject sale. He says it is necessary to go to Burleigh as he could not find nearby comparable sales, although he does say that there are sales of small areas of land with superior zonings, filled, developed and with headworks charges paid but he considers these sales have little applicability. Details of the sales selected by Mr Kelaher in support of his valuation are: Sale No 2 - Lot 25 on RP 880056 - 3.835 ha - Dickfos to Coachtrans Bus Pty Ltd in October 1995 for $1,300,000 ($33.90 per square metre) - analysed unimproved value $23.50 per square metre - situation 137 Reedy Creek Road (Burleigh Connection Road) - Zoning "General Industry". Mr Kelaher describes this site as being elevated in its unimproved state with good access and services. It has had about 25,000 cubic metres of rock cutting/fill done at date of sale and there was an additional 180,000 cubic metres of decomposed granite sold off prior to the sale. -- 2 of 8 -- 3 In its physical state at the date of sale, the land is described by Mr Kelaher as being a perfectly level block of raw industrial land with outstanding visibility and in a central position. As such Mr Kelaher sees his Sale No. 2 land to be much superior to the subject land due to its location and zoning. The sale land was to be used as a bus depot. Mr Kelaher analysed the sale by deducting from the sale price an allowance of $2 per cubic metre for the 180,000 cubic metres of decomposed granite sold off and 25,000 cubic metres of rock excavation ($400,000). Another sale introduced by Mr Kelaher (No. 3) is that of Lot 1 on RP 160543 containing an area of 21.26 hectares and which was sold by Novawin Pty Ltd to Phoenix Development Pty Ltd on 2 February 1995 for $2,100,000 ($9.90 per square metre). This sale was analysed by Mr Kelaher to show an unimproved value of $9.50 per square metre. It is situated in Reedy Creek Road (Burleigh connection road) in Burleigh Central Estate. It is zoned Commercial/Industrial with a small part Residential A and Public Open Space. Mr Kelaher describes this sale land as being mostly slightly elevated to flat with some slopes on the eastern side. It is now fully developed. There are 69 industrial blocks while some high land on the block has been developed as a small residential estate and buffer to the centre of a major industrial area. Mr Kelaher describes this sale land as being in an outstanding central position for industrial purposes. No headworks charges were paid at date of sale. Mr Kelaher referred to another sale (No. 4) on the Pacific Highway at West Burleigh. It is of Lot 2 on RP 188929 containing 18 hectares of vacant land which sold on 31 January 1997, for $2,750,000 ($15.30 per square metre). Mr Kelaher's analysis of this sale, after allowing $200,000 for cut and fill and $750,000 for headworks charges which had to be paid on rezoning, shows an unimproved value of $1,800,000 - or $10 per square metre. He says this land is ideal industrial land with a 400 metre frontage to the Pacific Highway with good visibility and being centrally located. The land was sold subject to rezoning to "Industrial". Mr Kelaher referred in evidence to one further sale at Yatala but I do not find it helpful as a basis of valuation for the subject land. Mr Kelaher commented in evidence that the building on the subject land is not akin to an industrial shed (as it was described in evidence by the respondent), and that it has been upgraded almost to commercial standard. He valued the building having regard to Corbould's Building Cost Guide. Mr Kelaher regards the subject industrial area to be much inferior to other industrial areas on the Gold Coast particularly in comparison with the Burleigh area. Mr Kelaher says the demand for industrial land in the subject estate is practically non-existent, and only three blocks have been sold in the last 8-10 years. Mr Kelaher explained that he made an allowance for headwork charges contributions in the analysis of his Sale No 4 so as to bring the sale land back to being comparable with the subject land as it is zoned "Rural" and headworks charges would have to be paid upon any rezoning of it to "Industrial". -- 3 of 8 -- 4 The respondent called in evidence Registered Valuer Rebecca Anne Bayntun who is not the original valuer but was called upon to support the valuation under appeal. Ms Bayntun described the nature of the subject land as being a large rectangular parcel of gently undulating land with a small dry gully severing it. Ms Bayntun says that the land has been filled and levelled to a minor extent on the south-west boundary where the building upon it is located. She suggests that the land will not require extensive earthworks to further develop it into industrial lots which she sees as being its highest and best use (the subdivision into four lots). Ms Bayntun told us that the land has good exposure from the north-bound lanes of the Pacific Highway. Ms Bayntun relies upon three sales of Commercial/Industry zoned land in support of the valuation of the subject land. Brief details are: Sale No. 1 - Lots 2 and 4 on RP 811202, Parish of Barrow - 8694 square metres - Greenary Developments Pty Ltd and Ranga Investments Pty Ltd to Stegbar Pty Ltd on 6 August 1993 for $700,000 - Analysed unimproved value $640,000 ($73 per square metre) - Situation Kingston Drive, Gaven - Zoning "Commercial Industry". Ms Bayntun describes this property as being located in the Gaven Industrial Estate (the subject estate) on the eastern side of the Pacific Highway. Earthworks have been carried out on the site with cut from the southern boundary to fill the northern boundary to form a level building site. The land is regularly shaped comprising two separate lots which have since been resurveyed into a single parcel. Ms Bayntun says the land has good exposure from the Pacific Highway in both directions and has two road frontages. Access to the site from the Pacific Highway is available to south-bound traffic only. For north-bound traffic, the Helensvale/Gaven overpass is located to the north of the sale land. Ms Bayntun considers this sale land to be directly comparable with the subject land in location and access but she considers it is superior pro rata to the subject land due to the zoning, exposure to the Pacific Highway and size, being only 8694m2 compared with 3ha area of the subject land. Sale 2 - Lot 3 on RP 892950, Parish of Nerang - 1.61ha - Coolong Pty Ltd to Ashton Manufacturing Pty Ltd on 22 September 1995 for $1,300,000 - Analysed unimproved value $1,100,000 ($70 per square metre)-Situation Jade Drive, Nerang -Zoning "Commercial/Industry". Ms Bayntun describes Jade Drive as an industrial standard bitumen road with concrete kerbing and channelling. She regards the access as being good and describes the sale site as being a levelled, cleared, irregularly shaped allotment. Ms Bayntun tells us that the earthworks carried out on the property include an extensive amount of cut from a rock-face on the northern boundary to fill other areas of the same industrial development. Ms Bayntun considers the sale property to be superior to the subject land on a pro rata and overall basis. She points out that -- 4 of 8 -- 5 the sale property is located in a superior industrial area, with better access. It is also smaller than the subject land and is already zoned "Commercial/Industry". But Ms Bayntun suggests that the subject land has superior exposure to the Pacific Highway. Sale No. 3 - Lot 1 on RP 811202, Parish of Barrow - 3889 square metres - Greenary Developments Pty Ltd and Ranga Investments Pty Ltd to Waterview Nominees Pty Ltd on 2 July 1996, for $350,000 - Analysed unimproved value $323,750 ($83.25 per square metre) - Situation Millaroo Drive, Gaven - Zoning "Commercial/Industry". Ms Bayntun told us that earthworks had been carried out on this site with cut from the southern boundary to fill the northern boundary to form a level building site. It is a regularly shaped property and is positioned slightly above the road level. There is a drainage easement which runs along the northern boundary where, she says, an open drain is located. Again Ms Bayntun suggests that access from the Pacific Highway is to south-bound traffic only with north-bound traffic using the Helensvale/Gaven Overpass. Ms Bayntun describes the exposure from the Pacific Highway to be limited. She points out that this sale land is again within the same industrial area as is the subject land and she considers it is directly comparable in location and access but superior to the subject land on a pro rata basis due to its size compared with the 3 hectare area of the subject land. Ms Bayntun's attention was drawn during her evidence to the fact that the drainage easement in Sale No 3 does not carry an open drain - but an underground pipe-drain. Taking into account the value of the pipes (at $110 per metre), she has adjusted her analysed unimproved value for that sale to $79 per square metre. It is to be observed that this adjusted analysed value is still well above the applied unimproved value ($56.50 per square metre) to that sale site. Ms Bayntun has not analysed the sale of the subject property to provide her with the basis for its valuation. She has not done so because it is a sale of an improved property with what she says is a building which has a fairly low value - in her opinion much below Mr Kelaher's valuation of it. In addition Ms Bayntun sees the sale price of the subject property to be out of line with other sales in the area. Ms Bayntun explained to the Court that the valuation of the subject land has taken into account the rezoning costs (headworks charges of $77,000 per hectare). She says rezoning would be fairly easy to obtain as the surrounding properties are mainly zoned "Industrial". Mr Kelaher was called upon to comment upon the sales relied upon by Ms Bayntun. He says that an allowance of $77,000 per hectare should be made against the sale prices for headworks charges which would have been paid for the rezoning of the sale lands to make the -- 5 of 8 -- 6 deduced unimproved values comparable with that of the subject land which is zoned "Rural". He also offered some criticism of the allowances made by Ms Bayntun for cut and fill. Ms Bayntun believes that Mr Kelaher has used development costs for the sale estate (Gaven Forest Industrial Estate - Stage 1) which he obtained from O'Shea and Partners (Consulting Civil and Structural Engineers) and which included costs which are external to the sale sites - for example, for roadworks, external drainage and water and sewerage reticulation. I agree with this criticism as the costs of development not on the sale lands are not to be allowed for as an improvement upon or appurtenant to those lands. But Ms Bayntun did concede that her analysis of her Sale No 1 land did not make sufficient allowance for earthworks, and that the analysed unimproved value should be reduced to $69 per square metre. Now some criticism of Ms Bayntun's valuation of the subject land was directed to her suggestion that the land is situated only 1.15 kms from the Helensvale Railway Station and 1.1 kms from the local shopping centre. She says these distances are "as the crow flies" and not road distances which are further. But nothing turns upon this. Now I agree with Ms Bayntun's suggestion that the analysed unimproved value derived by Mr Kelaher from the subject property sale results in an out-of-line valuation of it at $14 per square metre. There is simply no other properly-applied sales evidence which would support a valuation of the subject land at that level. I say properly applied because I cannot agree that Mr Kelaher's application of his analysed unimproved value derived from his Sale No 2 has been made on a proper basis. What he has done is to notionally restore that sale site to its unimproved state (by making an allowance for rock excavation and the removal of the decomposed granite). In this state the sale site would have been akin to a ridge and not at all comparable with the relatively level subject land. It would make a better sale comparison in its actual physical state at the sale date as a relatively level block, with a sale price of $1,300,000 reflecting a value in that state of $33.90 per square metre. But although there are major differences in the size of all the sales evidence blocks (except for Mr Kelaher's Sale No 2 - Mr Kelaher's Sales Nos 3 and 4 are so large that they are really not comparable) I really prefer the use of the sales evidence relied upon by Ms Bayntun particularly her Sales Nos 1 and 3, since as they are in the immediate subject area. But Mr Kelaher's Sale No 2 deserves consideration because it is comparable in size with the subject land but overall superior pro rata (at $33 per m2) is its physical state at date of sale. But before bringing this decision to finality I should comment that Mr Kelaher is in error in deducting the headworks charges paid for the rezoning of the sale lands from the sale prices to derive his analysed unimproved value. Paid headworks charges are not an improvement under the provisions of the Valuation of Land Act 1944. Improvements are required to be, in relation to land, thereon or appertaining thereto (vide section 6(1) of the Act). Headworks charges are not improvements on land. The payment of headworks charges upon the rezoning of land have the -- 6 of 8 -- 7 effect of increasing the unimproved value of the land - not reducing the unimproved value of the land. But this is not to say that the requirement that headworks charges are to paid is not a factor effecting the valuation of land which has not been rezoned - for example the subject property - in comparison with rezoned sales evidence. Ms Bayntun expressed the view that there is some demand for industrial land in the subject area, and she points to her Sales Nos 1 and 3 in support of this contention. But I am not so sure that the demand is sufficiently strong to warrant the Chief Executive's approach to the subject valuation - on the basis of potential for subdivision into four industrial lots. Ms Bayntun told us of her approach to the valuation of the subject land. If rezoning had been effected, then she would add the headworks charges paid in connection therewith to the unimproved value - resulting in its increase by $231,000 by my calculations. Ms Bayntun agrees with the suggestion by the appellant that an allowance should be made in the valuation of the subject land for the prospect of a resumption for the widening of the Pacific Highway but says it is very hard to quantify. But any such allowance is fettered by the provision of Section 14(2)(c) of the Valuation of Land Act which provides that, for the purpose of deciding the unimproved value of land (whether freehold or land held from the Crown for an estate of leasehold) the use of which is restricted or limited for that the appropriate Local Government has given due notice of the realignment of any road whereupon that land abuts, the unimproved value or, as the case requires, the enhancement in the unimproved value shall be ascertained without regard to that restriction, limitation, or, as the case may be, other covenant or condition. Dominic Thomas Treston, a senior valuer in the employ of the Department of Natural Resources was called in evidence to provide us with the history of the site development on Mr Kelaher's Sale No.2. He said the sale land was initially a fairly undulating site but at date of sale was level due to previous quarrying and earthworks. He makes allowance in his analysis of the sale for the disposal of the decomposed granite and deduces an unimproved value of $1,195,706 - or $31.40 per square metre - after the quarrying took place. As he suggests that the levelling of the site did not cost the vendor the amount Mr Kelaher has put in his analysis. I am not satisfied that the value of the subject land, as rezoned "Industrial" land, would be as high as $981,000 inclusive of a sum of $231,000 for headworks contribution in the event of its rezoning to Commercial/Industry. This equates $32.70 per square metre as rezoned. I feel an unimproved value of $27.50 per square metre as rezoned is more in line with the sales evidence especially taking into account the size of the subject land in comparison with Ms Bayntun's Sales Nos 1 and 3. I am not influenced in this decision by Mr Kelaher's analysis of the sale of the subject property. It is well recognised that the analyses of highly improved sales, even though in this case it is of the subject property, is not a reliable basis for valuation when the task at hand is to -- 7 of 8 -- 8 assess unimproved values, especially when vacant or lightly improved sales evidence is available. I come to this finding notwithstanding that there is no persuasive evidence that the subject sale took place in circumstances (under lease agreement) which would suggest that the sale price was at other than market value. In the result, the appeal is allowed, the determination of the Chief Executive is set aside and the unimproved value of Lot 1 on RP 156889, Parish of Barrow, after making an allowance for the cost of rezoning ($231,000), is $20 per square metre or six hundred thousand dollars ($600,000). Member of the Land Court -- 8 of 8 --