Faust v Minister for Lands [1994] QLC 8

LAND COURT BRISBANE 8TH APRIL, 1994. Re: Determination of Rent - Third Rental Period - Special Lease No. 05/36345 Lessees: Thomas Paul Faust and Carmel Mary Faust (Hearing at Proserpine) D E C I S I O N In this case the Crown is seeking an annual rent of $2,400 for the third rental period of Special Lease No. 05/36345 which commenced on 24th February, 1992. The rent for the second period of the lease was $700 per annum. Special Lease No. 05/36345 is in respect of the land described as Lot 138 on Plan HR209, Parish of Conway, County of Herbert, containing an area of 100.846 hectares. It is located approximately 10 kilometres east of Proserpine. Access by road is approximately 21 kilometres and comprises bitumen sealed road except for the last 3 kilometres, which is formed gravel road and rough unformed track through a Council reserve. Access is described as poor. Special Lease No. 05/36345 was granted for a term of thirty years from 24th February, 1972, for manufacturing, residential, industrial or business purposes. One of the conditions of the lease is that there will be no further access to the leased land provided by the Crown or the Local Authority. The land is zoned "Rural A" under the town planning scheme for the Shire of Whitsunday and is vacant. One of the lessees, Mr Thomas Paul Faust, gave evidence. Mr Faust, who owns land to the west of this land, said that he and his wife acquired the lease some 20 years ago to secure the eastern boundary of the land upon which they live and for limited agricultural pursuits. However, it was not until about three years later when they engaged a surveyor to ascertain various boundaries, that they realised how rough [1994] QLC 8 -- 1 of 7 -- 2 the area really is. Some years later they engaged a firm of earthmoving contractors to clear a few acres for horticultural pursuits. However, these contractors doubted very much whether they could grow anything there. Mr Faust described the land thus: " On the southern side it's an extremely steep and rocky and heavily wooded area. It drops into a very deep area and then into a central, more of a plateau which is only a limited area, where we did have some Bowen mangoes growing at one stage. That's the area that has been cleared and on the northern end of it, it's very heavily wooded with light rain forest and scrub and in places it's low lying and quite wet." He went on to say there were no flat areas as such on the property. Mr Faust explained that there were two accesses to the land. The gazetted access is on the northern side of the block, from Saltwater Creek Road. It consists of a gravel road for some distance and then a rough bush track to the boundary. The other access is through a Council quarry reserve with the permission of the Council. This is a four-wheel drive access only, but it is the one to the more readily accessible area of the property where the clearing was carried out. Mr Faust explained that the only horticultural activity undertaken out on the land was the planting of 200 Bowen mango trees about 15 years ago in the cleared area. However, a bush fire destroyed all these trees. The only other use that was made of the area was for limited cattle grazing, but Mr Faust said it is not really grazing country. He estimates that a little under 50 per cent of the area is covered by rain forest. Asked about his long-term plans for the site, Mr Faust said that the lessees have in mind building a house at some future time in the area where the mango trees were planted. They have already made application to the MEB to get power to the house site but this has not yet been costed. Valuation evidence on behalf of the lessees was given by Mr. B J Conroy, registered valuer in private practice at Airlie Beach, who tendered a report and valuation which showed that he arrived at an unimproved value for the land of $40,000. Mr Conroy went on to say that if he was required to arrive at the rent for the -- 2 of 7 -- 3 land as a percentage of the unimproved value, he would apply 3 per cent of that value, so that the rent should be $1,200 per annum. However, if he was not so restricted, he thought that a rent of $1,000 per annum would be more appropriate. Mr Conroy describes the land as comprising the top of a mountain, very steep, broken by steep gullies, ravines, very heavily timbered and in all he considered it to be rough, unavailable country. He said that even the area of cleared land had now been totally overgrown and if it had not been pointed out where the mango trees had been, he would never have recognised it as once cleared land. It is obvious that Mr Conroy did not think much of the property. Apart from his description of the land, he considered that access was poor and that it would cost approximately $250,000 to construct 1 kilometre of all-weather gravel road through the Council reserve to gain access to the proposed house site. Mr Conroy stressed that this was for an all-weather road, with culverts and proper drainage, which he considered would be necessary if the land was to be used as a rural residential site. However, he did not see this as the highest and best use of the land in the short term. He thought that a more appropriate highest and best use was for limited horticultural pursuits, which would not require a road of that standard. He had not endeavoured to cost the provision of other services, such as electricity. Mr Conroy agreed that the subject land did have ruggedly attractive rain forest, ridges and valleys, but he said that there was no point in owning land with such features if you could not walk through them and enjoy them. Although there were other parcels in the vicinity that were used for rural homesite purposes, they had better access and were located closer to Council maintained roads and services. In arriving at his unimproved valuation of $40,000, Mr Conroy had regard to two sales situated some distance from the subject land. Mr Conroy's Sale No. 1 is in respect of an area of 25.06 hectares, situated in Dinnie Road, approximately 10.5 kilometres north of Proserpine. This land sold in July 1992 for $60,000. Mr Conroy said that this land is zoned "Rural" with power and telephone available. It comprises -- 3 of 7 -- 4 sloping to steep, heavily timbered forest country, which is mostly semi-available to unavailable and could be used only as a house site. He considers this property to be far superior to the subject land. Mr Conroy's Sale No. 2 is in respect of an area of 72.79 hectares, situated in Patullo Road, approximately 15 kilometres north-west of Proserpine and 23 kilometres west of Airlie Beach. This land sold in September 1992 for $65,000 and was improved at the time with some fencing. Mr Conroy analysed the sale to show $61,500. This land is described as comprising moderately timbered, undulating forest country in the south, rising to higher timbered ridges in the north. Mr Conroy considers this sale also to be superior to the subject land. Mr Conroy said that there was only a small area that could be developed for horticultural purposes. The balance area was worth something as a buffer area and certainly had some value. However, although he agreed it was a ruggedly attractive isolated site, he thought that such features were only marketable if a purchaser could enjoy them. Evidence for the Crown was given by Mr S J Whitfield, registered valuer employed by the Department of Lands. Mr Whitfield arrived at a rent of $2,400 per annum by applying 3 per cent of the unimproved value which he assessed at $80,000. He did not disagree with the descriptions of the land given by Mr Faust and Mr Conroy, although he thought that an appropriate access could be gained to the north-eastern part of the property at a cost of no more than $25,000. Such cost had been provided to Mr Whitfield following enquiries of the Council officers and he presumed that it included culverts over a number of gullies on the surveyed access. Mr Whitfield saw the ruggedness and isolation of the site and its proportion of rain forest as marketable features and felt that it would be a very attractive proposition as a rural homesite. The rainforest, in particular, he felt was of immense added value to the house-site area. Mr Whitfield arrived at his unimproved value of $80,000 by reference to sales of -- 4 of 7 -- 5 two parcels of land in the immediate vicinity of the subject land. Mr Whitfield's Sale No. 1 is of an area of only 5.347 hectares which sold in April 1992 for $50,000. The sale had improvements, including clearing, a bore, a shed, fencing and a road, and Mr Whitfield analysed the sale to show an unimproved value of $40,500. The sale has direct easy access and although the subject land is much larger, the sale has power and telephone available. He considers it to be inferior to the subject land. Mr Whitfield's Sale No. 2 is of an even smaller area of only 2.001 hectares which sold in January 1992 for $42,000. This sale was improved with a shed, clearing, fencing and a bore and Mr Whitfield analysed it to show an unimproved value of $37,000. This sale also has direct easy access and Mr Whitfield said that although the subject land is larger, the sale has power and telephone available. He considers the sale to be inferior. Mr Whitfield explained that he had used these two small sales as he had endeavoured to find sales as close as possible to the subject land. He was critical of Mr Conroy going some 10 to 16 kilometres away for his sales. The subject land had about 6 hectares of available land for a rural homesite and he had tried to find sales to justify a valuation as a rural homesite, and make allowance for the added value of the rainforest in the rugged terrain. The two valuers obviously see this parcel of land very differently. Mr Conroy sees it as an isolated, rugged site with poor access and little potential in the near future for rural homesite purposes. Its only use would be for limited horticultural purposes to his way of thinking. On the other hand, Mr Whitfield sees it was a ruggedly attractive site whose saleable features are its rainforest and topography and its remoteness. However, Mr Whitfield's difficulty is that he can produce no sales or other evidence to indicate that rainforest and ruggedness are selling features which would offset the very real problems suffered by the subject land. With regard to sales evidence, I am more inclined to favour the sales used by Mr Conroy than those used by Mr Whitfield. Certainly it is an advantage to have sales -- 5 of 7 -- 6 in close proximity to the subject land, but the fundamental principle of valuation is to compare like with like. Because of their size, better access and services, I find little assistance in the sales used by Mr Whitfield. Although more remote, the sales used by Mr Conroy are closer to the size of the subject land, although they have better access. Indeed, access is the worst feature of the subject land. Its surveyed access is to the north-eastern corner, which is so rugged as to be virtually inaccessible to the homesite area. Access is presently available to this area by means of a rough four-wheel drive track through a quarry reserve, with the permission of the Council. Mr Conroy said this access could be upgraded at enormous expense, but in my view no prudent purchaser would undertake such work on an access which could be denied at the discretion of the Council. Without access, the subject land has little short-term potential as a rural homesite. I agree with Mr Conroy that the attractive features of the land are saleable only if they can be enjoyed. On the other hand, in the longer term there seems to be a potential for use as a rural homesite. This is borne out by Mr Faust's evidence that the lessees are considering building a house on the land. However, the cost of regularising and constructing the access and of providing power and other services is not known. The Court's duty in determining the rent in this case is set out in s.204(5B)(c) of the Land Act 1962, which provides: "The Court shall determine the annual rent at such sum as it considers an experienced and bona fide person would be willing to pay as annual rent for the land comprised in the lease during the rental period in question, having regard to the use to which the land may be put in accordance with the purpose for which the lease was granted and under the terms and conditions of the lease." Unlike earlier legislation, the Court is not required to apply any percentage of unimproved value in arriving at the rent. However, on appropriate occasions the Court has found it convenient to do so, particularly in the absence of market rental -- 6 of 7 -- 7 evidence. In this case, because of the access uncertainty and the limited use to which the land can be put, I think that a prudent person would have particular regard to the condition in the lease referring to access and would be prepared to pay no more than $2,000 per annum as rent. Accordingly, the rent for the third rental period of Special Lease No. 05/36345 is determined at $2,000 per annum. J J TRICKETT MEMBER OF THE LAND COURT -- 7 of 7 --