Bluepac Pty Ltd v Chief Executive, Department of Lands [1995] QLC 173

[1995] QLC 173 Re: V95-63 - LAND COURT BRISBANE 31 AUGUST 1995 An appeal against an unimproved valuation - Valuation of Land Act - Townsville City Council Bluepac Pt y Ltd v. Chief Executive, Department of Lands (Hearing at Townsville) DECISION Bluepac Pty Ltd is the registered proprietor of land at Picnic Bay on Magnetic Island, described as Lot 707 on Plan PB9385 and Lot 23 on Plan PB93815, Parish of Magnetic, County of Elphinstone, containing an aggregated area of 3,056m 2 • Lot 707 which contains an area of 2,044m 2 , is rectangular in shape with dimensions of 20.3 metres frontage to the Picnic Bay Mall, as part of the Esplanade, and depth of 103.5 metres running through to Picnic Street at the rear. Lot 23 which contains 1,012m 2 has frontage of 20.12 metres to Picnic Street and depth of 50.29 metres and adjoins the rear of Lot 707 on its western side. Lot 23 is encumbered by Easement A surveyed as a strip 6 metres wide containing an area of 302m 2, adjacent to the western boundary. The aggregated parcel is zoned "Tourist Facilities". As at 30th June, 1993, the unimproved value of the land was assessed by the Department of Lands, pursuant to the Valuation of Land Act, in the amount of $215,500. An appeal was lodged against that valuation, the appellant company's estimate of value in the Notice of Appeal being $100,000. Valuation evidence was led for the appellant through Mr I.D. Ivers, registered valuer, who is associated with a real estate agency conducted from premises at Picnic Bay. In Mr Ivers' opinion the unimproved value of the land at the relevant date was $160,000. He based that valuation on his opinion that the highest and best use of the land was, and remains, for future development with up to 16 residential units. His valuation reflects $10,000 for each of those unit sites, based on "comparable unit site values that have been achieved in the marketplace with consideration given to the inherent problems with the subject site" . -- 1 of 6 -- 2 Mr Ivers stated that Magnetic Island as a suburb of Townsville, is accessed by fast catamaran over Cleveland Bay, the Picnic Bay Jetty being about 150 metres from the subject property. The land is capable of being connected to town water, electricity and telephone. Sewerage is not available. The immediate Mall development is "mostly commercial shops with a set of old flats adjoining one boundary". Vehicular access to the Esplanade/Mall frontage is restricted to "service and/or emergency vehicles". Access from the bitumen strip sealed Picnic Street is described as being "only very fair" with the road shoulder forming a drain flooded during heavy rain. Mr Ivers described the land as reasonably level at the Mall frontage sloping "very steeply" towards its Picnic Street frontage which is well below the road level. He said that before any development could take place "extensive filling would be required to bring the level of the site up to that of Picnic Street". Mr Ivers stressed that the lack of sewerage was a significant impediment to development. With the requirement that septic effluent and stormwater drainage must be contained within the site, the density of permitted development could be as low as 50% of that which could be achieved on an otherwise comparable but sewered site. In his opinion there was no demand for commercial development. While he agreed that the arrival and departure of ferry transport created pedestrian traffic at Picnic Bay, in his opinion that traffic was all directed at leaving either by bus or boat. In his opinion the best use of the site in the foreseeable future was as -a low-key tourist resort of residential units. Even then, the site was not ideal because of its development problems and restricted views. Mr Ivers obtained his basis of valuation from consideration of six sales, comprising two vacant sites and a dwelling at Arcadia; a vacant site at Nelly Bay and two sites at Horseshoe Bay, one partly improved and the other lightly improved. The sales ranged in time from 1992 to 1995, and showed on Mr Ivers' analyses, unit site values ranging from a low of $8,076 to $16,666. In his opinion, none of the sites were inferior in terms of location, but mostly superior, at least for residential use. Mr D.A. Schy, registered valuer, gave valuation evidence for the Department of Lands. He had not been the valuer responsible for the original valuation in the amount of $215,500. In his opinion that valuation was too low and he led evidence to an increased valuation of $250,000. Counsel for the Department submitted that -- 2 of 6 -- 3 the Court should determine the matter by increasing the valuation based on Mr Schy's opinion and in terms of s.66 of the Valuation of Land Act. That section provides: "Upon an appeal under section 55 ttie Land Court or, upon the re- hearing of any such appeal, the Land Appeal Court may - (a) affirm the valuation appealed against; or (b) reduce or increase the amount of that valuation to the extent necessary in its opinion to determine the same correctly under, subject to and in accordance with this Act; II Mr Schy described the land as being "near level in nature but does suffer a gully influence along the Pacific (sic) street frontage". In his opinion the land "offers a prime site within the Picnic Bay area and with the added benefit of street-to-street frontage, bay views from the Mall frontage and appropriate as-of-right uses under the zoning existing at the date of valuation". As I understood his evidence, the highest and best use of the site would have included the potential for at least some commercial development. Under cross-examination Mr Schy agreed that commercial development was not "as of right" but required consent of Council. He did not disagree that the bay views . from the Mall frontage were from ground level only, being restricted above that by the adjacent canopy of Banyan trees, but which he saw as a feature of the Mall. He described the Mall as being "a fully paved closed roadway with a commercial influence on the northern side and beach esplanade on the other." He stated, "The Mall runs from Yule Street to Magnetic Street and is one of the major focal points of the island". Mr Schy based his valuation opinion firstly on relativity of values and secondly on sales evidence. He provided details of valuations applied to other lands in the immediate vicinity. There had been no increase applied to the valuation of properties "in the Picnic Bay area" for the 1993 revaluation period . The Mall frontage blocks of around 1,000m 2 without rear access had been valued in the range of $125 to $131 per m 2 . The double street frontage lots of generally the same area as Lot 707 (2,044m2) had been valued in the range of $98 per m2 . The smaller lots fronting Picnic Street backing onto the Mall frontage lots had been valued in the range of $65 per m2• It is clear that the Mall to Picnic Street double size lots had -- 3 of 6 -- .. 4 been given no discount on account of size. On the basis of relativity, Mr Schy's valuation was as follows: Mall Street Frontage (Pt Lot 707) 1032m2 @ $128/m2 Picnic Street Frontage (Bal. Lot 707) 1012m2 @ $65/m2 Lot 23 - 1012m2 @ $65/m2 Total Alternatively: (Using the adjoining Lot 705 for comparison with Lot 707) Lot 707 2,044m2 @ $98.82/m2 Lot 23 Total $132,096 $65,780 $65,780 $263,266 (sic) $201,988 $65,000 $266,988 Adopting a rounded $265,000 as the sum total of the valuations of the two lots Mr Schy then allowed a 5% deduction "to offset the detractions of any gully influence, size or bulk allowance" and further rounded the result to his valuation figure of $250,000. Although Mr Schy in cross-examination suggested that the 5% allowance would also include the effect of the easement encumbrance on Lot 23, it seems clear to me that the easement had not been a consideration, at least of any significance, before the case came to the Court. The second approach was to consider the sales evidence. A schedule of three sales in Picnic Bay was tendered with Mr Schy's report, then details of another sale at Horseshoe Bay, all of which were seen to generally support the level of the existing applied unimproved valuations. Mr Schy drew particular attention to the sale of Lot 6 P93815, containing 1,072m 2 , fronting the Mall, adjoining the subject Lot 707 to the west and backing on to Lot 23. Indeed the easement over Lot 23 was in' favour of the sale land for access purposes. The vendor in the sale was the appellant company here. The land accommodated a "1950's style" two-storeyed building of four flats. The property sold on 19th April, 1993, for $220,000. The purchaser has since renovated the flats. A "rough" analysis by Mr Schy indicated to him an unimproved land content of $164,000 when the applied unimproved valuation was $136,000. -- 4 of 6 -- 5 Mr Ivers did not agree with Mr Schy's opinion as to the added value of the old flats. In his opinion the sale would have shown a land value of only $80,000 if the easement access had not been provided. While I am not convinced by Mr Ivers' opinions as to that sale, he raises an interesting point as to the value of rear access. If Mr Schy's analysis was correct, and in fairness he intended it to be nothing more than "rough" and if the "land-locked" site was worth the applied value (which was in relativity with other land-locked sites fronting the Mall) then it could be argued on that sales evidence that rear access added 20% to the value of a land-locked Mall frontage site. Mr Ivers suggested $20,000 which would be about 15% of the applied value and probably that estimate is not unrealistic. Nevertheless it seems to me that there are considerations relative to rear access which should be taken into consideration in the valuation of the Mall to Picnic Street double lots. I am prepared to accept that the valuation of Lot 707 on a strict relativity basis is iri the broad region of $200,000 including the rear access. I am not convinced that· as part of an aggregation, when rear access already exists, the added value of Lot 23 encumbered by an easement over about 30% of its width, is $50,000 as, in effect, Mr Schy has found. It also seems clear that the additional land should add more than the $15,500 which is represented by the existing valuation. Doing the best I can on the evidence as it stands, I have come to the conclusion that, on a strict relativity basis, the value of the subject aggregation should not exceed $235,000. Some argument took place as to the effect of the easement on Lot 23. As an individual site, the effect could be one of some significance, but in my opinion not to the degree that the encumbered land possessed no value. It would without doubt however, constrain the development potential of the individual site. The effect is seen to be less significant on the aggregation as a whole, as it is unlikely that the intensity of permitted development would be reduced by the existence of the easement. By the same token, the added value of Lot 23 to Lot 707 and as part of the aggregation should certainly be less than the pro-rata value of the Picnic Street frontage of Lot 707. Relativity is seen to be an acceptable basis of valuation for revenue gathering purposes in the situation where sales evidence is not strong and where the -- 5 of 6 -- ... 6 valuations with which comparisons are made have not been shown to be fundamentally wrong. Mr Ivers' valuation is based on the opinion that the subject land has no commercial use potential. There is no doubt that he has the hands-on experience of dealing with Magnetic Island real estate. Nevertheless, I am not convinced that experienced and prudent persons either buying or selling real estate such as the subject would exclude from their considerations the reality of a commercially orientated location. That in itself may detract from the desirability of the residential potential as Mr Ivers suggests, but I do not accept that the site would be marketed on the basis of it being nothing more than an inferior residential site. Particularly in light of the sale of Lot 6, I am unable to accept that Mr Ivers' valuation is realistic even if there had been a demonstrated lack of demand at the date of valuation. It seems that it is therefore a reasonable conclusion to find that the valuation appealed against is wrong, but because it is too low, as Mr Schy suggests, and not because it is too high. Technically the appeal must be allowed in terms of s.66 of the Act, in order that the valuation be determined correctly. The appeal is allowed, the determination of the chief executive set aside, and the unimproved value of the aggregation as at 30th June, 1993, is determined in the higher amount of two hundred and thirty-five thousand dollars ($235,000). RE WENCK MEMBER OF THE LAND COURT -- 6 of 6 --