Aquareef Pty Ltd v Chief Executive, Department of Lands [1996] QLC 58

1 LAND COURT BRISBANE 17 MAY 1996 Re: Appeal against Annual Valuation Valuation of Land Act 1944 Shire of Beaudesert (AV95-99). Aquareef Pty Ltd v. Chief Executive, Department of Lands (Hearing at Beaudesert) D E C I S I O N Aquareef Pty Ltd is the owner of land described as Lot 2 on Registered Plan 198190, Parish of Sarabah, County of Ward, containing an area of 61.9 hectares. As at 1 January 1995, the respondent determined the unimproved value of that land under the provisions of the Valuation of Land Act 1944 at $200,000. An objection against that valuation was disallowed and the owner appealed to the Land Court against the respondent's decision upon that objection, advising that its estimate of the unimproved is $100,000. The subject land is located approximately 4 kilometres south west of Canungra with narrow frontage to the Lamington National Park Road. The road is a double lane bitumen carriageway with table drains. Access is all weather, although local flooding can cut the road for short periods. Postal, electricity and telephone services are available on the road frontage of the property. The land is zoned "Rural" under the Town Planning Scheme for the Shire of Beaudesert. At the date of hearing it was not being used. The property is an irregular hatchet-shaped parcel which rises from a narrow road frontage of approximately 37 metres, along a narrow but widening hatchet handle through moderate to steep broken forest ridges and gullies for about 800 metres. It widens to the blade of the hatchet, where it is agreed that the best homesite is situated, before rising to steep rocky forest ridges at the rear. Good local mountain and valley views are available from the best homesite and from the higher land. Mr JH Knox, a chartered accountant and director of Aquareef Pty Ltd, appeared and gave evidence. He explained that he holds Powers of Attorney for the shareholders of the company, Mr and Mrs T Been. The property was purchased in 1989 for $187,500, sight unseen by the principals of the company, who are not residents of Australia. They purchased it on the advice of real estate agents at Surfers Paradise who recommended the purchase because of the [1996] QLC 58 -- 1 of 4 -- 2 impending acquisition by interests associated with Mr Mike Gore, of adjoining land on top of the ridge for development of a major resort. However, that did not eventuate and the property has been on the market for sale since 1991. Mr Knox went on to explain that the property was offered for sale originally at $190,000. However, that was found to be unrealistic. Local real estate agents were then directed to communicate any offers. In the past three years, the only offer received was for $155,000, on a 5% deposit, provided that the vendor finance the balance over ten years at 9% interest only. That offer was seriously considered by Mr Knox, but it was withdrawn when the prospective purchaser ascertained the cost of gaining access to the most suitable homesite on the land. The agents advised Mr Knox that the land will not sell at a price in excess of $100,000. Mr Knox described the property as rising quickly from a narrow road frontage, with very little flat ground, being substantially rugged and steep. He said that the only income obtained by the owner in the past seven years was minimal when it was used for agistment. However, that contract was not renewed as it was found to be unsuitable for cattle grazing and dangerous because of its steepness. Mr Knox produced a valuation report made by the valuation firm Herron Todd White of the Gold Coast, dated 1 June 1995, for an unimproved value of $120,000. It was explained to Mr Knox that the report and valuation would carry little weight as evidence as the maker of the report was not called to substantiate his valuation and to be cross-examined. However, from his knowledge of the land, Mr Knox was able to highlight certain passages of the report which he adopted as his own views. I quote the relevant parts adopted by Mr Knox: "The site comprises a small area of easy sloping useable land fronting Lamington-National Park Road with the balance of the property comprising moderate to steep broken forest ridges and gullies of limited use. The land has no permanent water supply, and due to its steepness, much of the site is inaccessible. Good elevated building sites are available on the property, however, access to these building sites is difficult and considerable expense would need to be outlayed to provide all weather, two wheel drive access plus connect electricity. After having regard to the awkward shape of the site, the steep terrain and there being no permanent water supply, we consider the subject property would have limited appeal in the market place. Local agents in the Canungra area report that there is limited demand for rural sites with no permanent water supply. " Mr Knox tendered a letter dated 4 November 1994, from Mr David Garwood, of real estate agents, Ray White Surfers Paradise, outlining the difficulties of marketing the subject land and stating that it is quite clear that they will not be able to sell the property at $190,000, which was his original expectation. -- 2 of 4 -- 3 Mr Knox expressed the opinion that a property is worth only what it can realise in the market place. He thought that the subject land has no attractive features and that was why the neighbours were not interested in purchasing it to add to their holdings. He had been advised that the cost of providing access to the most suitable building site would exceed $100,000. That seemed to be the main deterrent to potential purchasers as every effort had been made to sell at any price over the last five years, without success. Evidence for the respondent was given by Mr DA Routh, a registered valuer employed by the Department of Lands. In support of his valuation of $200,000, Mr Routh relied upon two sales. Mr Routh's Sale No. 1 is situated in Toe Holt Road, has an area of 37.43 hectares, is zoned "Rural", and sold in October 1994, for $95,000. As at the relevant date, the respondent had applied an unimproved value of $100,000 to that property. Mr Routh described the sale property as steep, timbered forest, situated further from Canungra than the subject land, with very poor access. It is smaller than the subject land and has no services. A limited building site is available close to the road. Overall he considered it to be inferior to the subject property. Mr Routh's Sale No. 2 is situated in Upper Coomera Road, has an area of 19.57 hectares, is zoned "Rural", and sold in October 1994, for $125,000. That sale was analysed to show an unimproved value of $116,000. As at the relevant date, the respondent had applied an unimproved value of $78,500 under the concessional provisions of s.17 of the Valuation of Land Act, as land used for purposes of “farming”. Mr Routh described that property as having easy moderate slopes, mainly cleared at the front, rising to steeper at the rear. It is smaller than the subject land and not as well located. Its access is similar to the subject land and several homesites are readily available. Mr Routh said that he had included that sale because of its awkward shape. Mr Routh said he valued the subject land as a rural homesite, well situated within four kilometres of Canungra, with all rural services. However, he conceded that it has an awkward shape and has no subdivisional potential. He thought that its best features were its size and its steepness, which he thought would be attractive to a purchaser who wanted privacy. Mr Routh agreed with Mr Knox about the steepness of the internal access, but he could not estimate the cost of constructing that access. He did not believe the narrow frontage is much of a detriment, although he agreed that because of the frontage and the steepness, the land has no subdivisional potential. Having regard to the evidence in this case, it is clear that no regard can be had to the fact that the subject property was purchased in 1989, for $187,500. It was purchased by overseas purchasers, sight unseen, on the recommendation of a real estate agent, for purposes of speculation in anticipation of development of nearby land. The purchase has proved to be imprudent. It is also clear that there is little attractive about the subject land. It has a narrow road frontage, an awkward shape and no subdivisional potential. Construction of access to -- 3 of 4 -- 4 the best homesite on the property would be difficult and expensive. It has proved to be difficult to sell. Mr Routh approached the valuation by reasoning that the land is well located with good road access and would be attractive to a potential purchaser wishing to enjoy seclusion and rural views. However, the evidence given by Mr Knox was to the effect that the property had been on the market for some five years and had attracted no reasonable offer. The only offer that was made for $155,000 required such generous terms that the cash equivalent was much less than this figure. In any case, it seems that the offer was withdrawn because of the cost that would be involved in constructing the internal access. Mr Routh made the point that as a valuer he must rely upon sales in the area. He therefore has had no regard to the difficulty experienced in marketing the property. However, the sales upon which he relied are simply not directly comparable with the subject land and it is difficult to see how they support his valuation of $200,000. There is no doubt that concluded sales are the best evidence of value of a property as at the date of valuation. However, the test propounded by the High Court in the case of Spencer v. The Commonwealth (1905) 7 CLR, 418, does not, in my opinion prevent a valuer, in the absence of reasonably comparable sales, from having regard to other factors. I accept the evidence that the land has been for sale for five years, without success. After considering all the evidence, I have come to the conclusion that the steepness of the property and the cost that would be involved in constructing internal access to the homesite, would deter a prudent purchaser from paying $200,000 for the property. The difficulty is, in the absence of sales, to arrive at an unimproved value which is reasonable in the circumstances. Mr Routh placed considerable emphasis on the size of the property compared with the sales. However, it is well established that in valuing rural residential sites the most valuable attribute is the housesite area itself, with less emphasis on the balance area. Considered from that perspective in comparison with the sales, the subject land may well be little more valuable than Sale No. 2, which analysed to show an unimproved value of $116,000. After weighing what evidence is available, I have come to the conclusion that an unimproved value of $130,000 as at the date of valuation is not unreasonable. Accordingly, the appeal is allowed, the valuation of the Chief Executive is set aside, and the unimproved value of the subject land is determined at One Hundred and Thirty Thousand Dollars ($130,000). JJ TRICKETT PRESIDENT OF THE LAND COURT -- 4 of 4 --