Bermingham v Chief Executive, Department of Natural Resources [1997] QLC 134

LAND COURT BRISBANE 5 September 1997 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Valuation Roll No 22331/10100 - Local Government: Gold Coast - Albert. (AV97-82). Michael G and Concesa Bermingham v. Chief Executive, Department of Natural Resources (Hearing at Coolangatta) D E C I S I O N Background: This matter relates to a property at 4 Medellin Place, Nerang, and described as Lot 1 on RP 842309, Parish of Nerang. The key issues relate to the comparison of sales of comparable properties, the percentage increase in valuations, the impact of an easement, and the lack of any meaningful reasons for the increase in the valuations. The subject is located approximately 1 kilometre north-west of the Nerang Post Office, and has good access to Medellin Place, which is a bitumen sealed two-lane carriageway with concrete kerbing and channelling. Services available include electricity, telephone, water, sewerage and garbage disposal. The subject is slightly elevated above road level, is mainly a level site with a slight crossfall from north to south. The subject faces south-east, and is zoned "Special Residential" under the Town Planning Scheme of the Gold Coast-Albert City Council of 1 February 1994, and effective at the date of valuation of 1 October 1996. The subject is used as a single residential dwelling, and has a stormwater drainage easement along the south-western (side), and north-western (rear) boundaries. This easement varies in width from approximately 3 metres on the south-western side, to about 4 metres across the rear of the lot. The Chief Executive, Department of Natural Resources, on 10 March 1997, issued a valuation at $43,500. Following an objection, the Chief Executive on 14 April 1997, confirmed the valuation at $43,500, following which the appellant appealed that decision claiming that the valuation should more properly be $39,500. Mr MG Bermingham appeared and gave evidence for the appellants, and Mr S Montgomery appeared for the respondent, calling evidence from Mr D Bale, a Departmental Registered Valuer. Mr Bale was not the valuer who determined the valuation, but was familiar with and supported the valuation. Evidence: [1997] QLC 134 -- 1 of 8 -- 2 The appellants argue that their claim is mainly based upon the percentage increase in the valuation, rather than upon the actual quantum of the valuation. Mr Bermingham argues that the percentage increase for the subject (10%) is out of line with the property market. From his investigations he claims that there has only been one recent sale of vacant land in the area, at 17 Bushmead Street, Nerang, which has subsequently been built upon. That is a 600 square metre standard "Residential A" lot, which allows greater flexibility in locating a dwelling. That sale was in fact sold initially on 24 January 1997, for $40,000, and again resold as a house and land package on 30 April 1997, with an estimated price for the land component at $57,000. He argues that the large increase in the value of the land in three months cast doubt upon the subsequent sale as a house-land package. Because of the paucity of sales of vacant land in their vicinity, the appellants have sought to examine the percentage changes in the sales of improved properties in the vicinity, from which they have determined the estimated value of the land components of the sales. The appellants adopted such a strategy after observing the information provided by the Chief Executive in his brochure which accompanied the notice of valuation forwarded this year to each owner. The appellants confirmed that this was the first occasion in which they had lodged a formal objection to the valuation, and subsequently appealed to the Court. In comparing the sales of improved properties over recent years, Mr Bermingham offers the following: Lot Date Price Date Price Change Lot 36 on RP 842309 1993 $124,500 1997 $105,000 16%(loss) Lot 29 Yarrayne Rd 1991 $141,000 1997 $110,000 22%(loss) Lot 35 Medellin Pl 1992 $102,900 1996 $107,500 5%(gain) From this, Mr Bermingham concurs with the verbal advice of real estate agents, vendors and purchasers in the area, that the market over recent years does not support the percentage increase in the valuation applied by the Chief Executive, and in fact values are in decline. Mr Bermingham also has difficulty in reconciling the variations in the estimated value of the subject with changes in the unimproved valuations determined by the Chief Executive. Date Value of Subject Unimproved Value 1992 $ 42,000 (sale) $ 33,000 1994 $ 50,000 (estimate) $ 39,500 1997 $ 45,000 (estimate) $ 43,500 -- 2 of 8 -- 3 In arriving at these estimated values of the subject, the appellants have relied on the advice of local real estate agents. In respect of the large increase ($17,000) in only three months for 17 Bushmead Street, he argues this is not supported by any other sales in the area. Mr Bermingham also claims that several "bargain" sales of homes occurred in Yarrayne Road during 1991 and 1992, when residents became aware that public housing was to be constructed in the Medellin Place estate. While he is aware of the stated position in respect of the policy of Government to integrate public and private housing developments, he claims the policy eventually has a negative impact upon values of property in the area. This, he claims, has occurred with the subject, and should be recognised when comparisons are drawn with adjoining areas. Mr Bermingham also claims that the area surrounding the subject (Sherwood Forest) has certain characteristics which needed to be recognised. The majority of lots in the older parts of the area are standard size building lots, while parcels in Medellin Place, including the subject, are mostly "Special Residential" lots. Access to the area is restricted and only via Yarrayne Road. The smaller size "Special Residential" lots have less flexibility to locate residences than the standard "Residential A" parcels, and both are also subject to special building constraints under the Albert-Gold Coast City Council's Development Control Plan 2 - Nerang Town Centre (Section 2.3.4). Under the Development Control Plan 2 Residential - Low Density may occur to a density of 10 dwellings per hectare (traditional detached residences); and 16 dwellings per hectare (single dwellings within a group title subdivision). Residential - Medium Density may occur to a density of 40 dwelling units per hectare (attached dwellings and apartment buildings to two stories); and 66 dwelling units per hectare (three storey height limit). The appellants also argue that the stormwater drainage easement provides a significant restriction upon the flexibility to locate a dwelling upon the subject. The current dwelling is a "cut-down" version of the Dove design, which is the smallest standard building design of a major public home building company, AV Jennings Homes. As a consequence of the impact of the easement, the dwelling is the smallest house in the street. While the subject has a wider frontage than other lots in Medellin Place, the triangular shape of the subject, and an area of only 416 square metres, result in a lot with reduced capacity to provide variable house locations. The easement is granted to the Council of the Shire of Albert and provides: •Free rights and liberty to construct and thereafter forever to use and maintain sewers, drains and pipelines •Not to be built upon or otherwise obstruct or interfere with the sewer, drains or pipelines, and •To bind all persons deriving title to the land, but not to render the grantor liable for any contribution towards the cost of maintenance and upkeep of the sewers, drains or -- 3 of 8 -- 4 pipelines. To support his valuation Mr Bale provided the following sales evidence of vacant lots: • Sale 1 - (3 Carine Court, Nerang - Lot 57 on RP 880362) This sale is located about 2.2 kms south-west of the subject, is rectangular in shape, and has an area of 600 square metres. It is above road level with a gentle crossfall from south-east to north-west. The north-western boundary adjoins a public pathway. The sale is zoned as "Residential A". The sale is superior to the subject in size, location and zoning, as it allows greater flexibility of housing options and the ability to be purchased as a vacant site only. The sale sold in July 1996 for $68,950, which after allowing for improvements provided an analysed unimproved value of $68,300, and an applied value of $63,000. •Sale 2 - (7 Oakdale Avenue, Nerang - Lot 55 on RP 880361) This sale is located almost adjoining Sale 1, is a regularly shaped lot, and has an area of 633 square metres. It is above road level and has a gentle crossfall from south-east to north-west. Part of the rear boundary adjoins a public pathway. The sale is zoned as "Residential A". The sale is superior to the subject in size, location, and zoning because it allows greater flexibility of housing options, and the ability to be purchased as a vacant site only. The sale sold in September 1996 for $69,950, which after allowing for improvements provided an analysed unimproved value of $69,300, and an applied value of $63,000. •Sale 3 - (5 Carine Court, Nerang - Lot 58 on RP 880362) This is located adjoining Sale 1, is rectangular in shape, and has an area of 600 square metres. The sale is zoned as "Residential A", is above road level, and has a gentle crossfall from south-east to north-west. The sale is superior to the subject in size, location, and zoning because it allows greater flexibility of housing options, and the ability to be purchased as a vacant site only. The sale sold in September 1996 for $68,950, which after allowing for improvements provided an analysed unimproved value of $68,300, and an applied value of $63,000. Mr Bale noted the presence of the stormwater drainage easement, but while allowing for it, saw only minimal impact upon the location of the dwelling in view of the width of the easement with a maximum of 4 metres, its location along the boundaries, and the normal building setbacks required by Council. The easement restricts the construction of any permanent fixtures within the defined area, but may be used for other purposes which do not restrict access for the Council. Finally in lodging their appeal to the Court the appellants are seeking some reasons why their objection to the valuation had been rejected. Mr Bermingham was unaware that a formal objection form was available, and had lodged his objection in the form of a letter outlining his concerns. He was therefore unaware that the formal objection form included instructions where an objection conference was requested by the owner. Mr Bermingham felt that a written advice of the reasons for objection was warranted in view of the Government's desire to improve customer service for service delivery. -- 4 of 8 -- 5 Decision: In considering the comparison of sales I note that Mr Bale has adopted the principle of using sales of comparable vacant sites where they occur in the vicinity. I note also that Mr Bermingham feels that due to a paucity of sales of vacant lots, the appellants were required to depend upon analysed sales of improved properties. In this matter it has long been held by the Courts that the preferred method of comparison is to use the sales of vacant, or near vacant, lands where they occur. I note for instance in PH Clough v. The Valuer-General - (1981-82) (LAC) 8 QLCR 70 at p.76: "It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements. " However, in respect of the use of appropriate sales for comparison it is important to ensure that the sales are soundly based. See R and MM Barnwell v. The Valuer-General (1989) 13 QLCR 13, 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. " While the method adopted by Mr Bale is seen as the preferred approach, it is important to consider also the relationship between the sales and the subject. Firstly I note that while the respondent has supplied three sales, they are virtually all in one small area, and either contiguous or nearly so. All three sales have a different zoning ("Residential A"), all are larger, and all are seen as superior to the subject. The comparison between "Residential A" and "Special Residential" needs to be made with consideration of the conditions relative to the permitted use of land under Section 4.0 of the Town Plan. 4.3.1.1The Residential A Zone is intended primarily to accommodate low density residential development, to the general exclusion of other types of land use. Permitted developments without the consent of Council including display home, dwelling house and park. Minimum area of lot is 600 m2, but development may also be permitted subject to conditions if the lot has an area between 600 m2 and 450 m2. 4.6.1.1The Special Residential Zone caters for specific residential developments, which are not readily accommodated in the other residential zones. Rezoning to Special Residential Zone will be approved only where a Plan of Development is approved. Development of the site is required to be in accordance with the approved Plan of Development unless an amendment to the Plan of -- 5 of 8 -- 6 Development is approved. Permitted developments without the consent of Council include residential purposes specified on a Plan of Development, including carpark, caretaker's residence, catering business, child care centre, display home, general store, public recreation, public utility and surgery. In isolation the three sales, while providing some comparison with the subject as a house site, do not define the quantum of the subject. The sales of vacant land provided by the appellants include the sales of 17 Bushmead Street at $40,000 (January 1997) and $57,000 (30 April 1997). In considering the January 1997 sale I note that Mr Bale made enquiries with the vendor (Mr Craig) who, while feeling that $40,000 was a fair price, had been seeking to sell that land for an extended period of 3-4 years during which time the lot was on the market. In Mr Bale's opinion this would have tended to suggest that Mr Craig was other than a "not unwilling vendor" as defined by the High Court of Australia in Spencer v. The Commonwealth of Australia (1907) 5 CLR 418, where Griffith C.J. said at page 432: "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 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. " In analysing the April sale at $57,000 Mr Bale also spoke to the purchaser of the house and land package for 17 Bushmead Street (Mr Argles), who also thought that the land component at $57,000 was a fair price. In view of this latter sale Mr Bale felt that the $40,000 sale was a low price and out of line with the market as reflected in the later sale at $57,000. However 17 Bushmead Street also has an area of 600 square metres, and is zoned as "Residential A" similar to Sales 1 to 3, and is seen as superior to the subject. In seeking a direct comparison with the subject Mr Bale claims that there is no "arms length" sales of vacant "Special Residential" parcels in the vicinity, other than the sale of the subject in 1992 at $40,000. He considers that the subject is at the lower end of the market in that area. Because other sales of "Special Residential" lots in the area are all house and land packages, Mr Bale disregarded them as improved properties. In the matter of whether the presence of public housing has an impact upon the value of private homes, I note that the appellants have provided no quantification of that contention. While it may be a view held by some owners, this Court has no evidence of sales which would -- 6 of 8 -- 7 support such a conclusion. It is also worth speculating that there are both good and bad residents in both public and private homes, and any broad correlation, without proof, does not assist me in this matter. I am also aware that when valuing properties under the Valuation of Land Act, the Chief Executive takes no notice of the ownership of the properties. I turn now to the matter of the percentage increase in valuations. I can appreciate the difficulties of the appellants in understanding what would appear to be some inconsistency between the market for developed homesites and the unimproved value of the subject. However, I note from precedent in other courts, that a large increase in itself is not evidence of some error in the valuations. I note, for example, in the decision of NR and PG Tow v. The Valuer-General (1978)(LAC) 5 QLCR 378, the Land Appeal Court said 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. " Clearly what is important is to ensure that any comparison of sales of comparable parcels is appropriate. In comparing also the apparent variation between the estimated value of the subject with its unimproved value, over the period 1992 to 1997, I note that the values adopted were provided by the real estate agent at the request of the appellants. In the end any such comparison has little support, as the only real test of values of the subject is what it would bring if offered for sale. Also, in comparing changes in the value of improved properties it is often not understood that variations in value include changes in both the value of the land and the improvements. This was identified in O'Brien Nominee Pty Ltd v. The Valuer-General (1979) (LAC) 6 QLCR 280, where the Land Appeal Court said at p.284: "In such circumstances it is unrealistic to conclude that land, the commodity basic to the enterprise, has a minus or nominal value. It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements. The question facing valuers in analysing improved sales in these circumstances is what value is fairly to be attributed to the improvements?" In the matter of the impact of the stormwater drainage easement, clearly the width of the easement at 3 metres requires a greater clearance from the site boundary to that normally required for building purposes (1.5 metres). The comment from Mr Bale that "given that the easements run along the boundaries to a width of up to 4 metres they only minimally affect the construction of a dwelling on the site in view normal building setbacks and the shape of the site," would appear to not fully appreciate the impact of the restrictions. The "as constructed plan" provided by the appellants demonstrates to the contrary that the easement has a significant impact upon the flexibility to locate the dwelling, and has resulted in significant modifications to the builders basic design in order to fit upon the subject. I would tend to agree with the appellants in this matter. -- 7 of 8 -- 8 Finally I note the concern of the appellants in not receiving feedback in respect of why their objection was refused by the Chief Executive. I note also that the Departmental objection form provides information to objectors about how to achieve a conference to discuss the issue. In this matter it is unfortunate that the appellants were not aware of the existence of the objection form, which in hindsight perhaps would have avoided the need for an appeal to this Court. The Chief Executive, as part of his moves to improve client service, has sought to provide access to information to all objectors who wish to avail themselves of that service. In view of the approximate 1.3 million valuations across the State, and the possible 8,000 to 10,000 objections which may eventuate from an annual valuation, I believe there is a limit to the level of feedback that can be provided. Perhaps, however, where objectors lodge their objection other than upon a formal form, some consideration may be given to contacting the unsuccessful objector. Where a form is used the responsibility clearly lies with the objector. Summary: While I have some concerns that the comparison of sales supplied by the respondent are all superior to the subject, have a different zoning, and are larger in size, I note that the appellants have only provided the two sales of vacant land at 17 Bushmead Street as a comparison. I agree with Mr Bale that the sale of that property in January 1997 ($40,000) possibly reflected an anxious vendor, and I also note that the resale of that parcel in April 1997 was in fact after the date of issue of the valuation on 10 March 1997, and therefore outside the relevant time period. In any event Mr Bale has given the appellants major consideration in applying his valuation near the lower figure. Under the Valuation of Land Act, the onus under Section 33 is upon the appellants to prove their case. In this matter I am not convinced that they have satisfactorily demonstrated that the Chief Executive has made a fundamental error in his determination of the valuation. Conclusion: After having considered the whole of the evidence, the appeal is dismissed and the unimproved value of Lot 1 on RP 842309, as determined by the Chief Executive, Department of Natural Resources, in the sum of $43,500 is confirmed. (NG Divett) Member of the Land Court -- 8 of 8 --