Collins Foods International Pty Ltd v Chief Executive, Department of Lands [1993] QLC 149

LAND COURT BRISBANE 26TH NOVEMBER, 1993 Re: Appeal against Annual Valuation - Valuation of Land Act 1944 - Shire of Johnstone (AV93-34 7) Collins Foods International Ptv . Ltd. v. Chief Executive . De p artment of Lands (Hearing at lnnisfail) DECISION Collins Foods International Pty Ltd is the owner of land described as Lot 111 on Plan 12817, Parish of Johnstone, County of Nares, containing an area of 1,315.2 sq. metres. In accordance with the provisions of Section 16B of the Valuation of Land Act 1944, the Valuer-General determined the unimproved value of this land as at 31st March, 1992 at $118,000. The owner objected to this valuation and by letter dated 31st May, 1993, it was advised that its objection had been disallowed and the valuation remained at $118,000. The owner then appealed to the Land Court against this decision advising that its estimate of the unimproved value is $105,000. The grounds of appeal are extensive, allowing the owner to argue a wide variety of matters on the appeal. Between the date of valuation and the date of hearing of this matter, the Lands Legislation Amendment Act 1992 substituted the position of Chief Executive, Department of Lands, for the former statutory office of Valuer-General. Therefore, it is appropriate that the Chief Executive be the Respondent in this matter in place of the former Valuer-General. [1993] QLC 149 -- 1 of 9 -- 2 The subject land is situated on the corner of Edith Street and Charles Street, approximately 800 metres west of the lnnisfail Post Office. Both streets are bitumen sealed with concrete kerbing and channelling. According to the Departmental report tendered on behalf of the Chief Executive, the subject land is a level irregular shaped corner allotment at road level. The site has adequate local drainage and electricity, telephone, reticulated water and sewerage services are connected to the property. The land is zoned "General Business" under the town planning scheme for the Shire of Johnstone. It is used for commercial purposes, being developed with a Kentucky Fried Chicken takeaway food/restaurant. Mr N V Teves, registered valuer in private practice in Cairns, appeared and gave evidence on behalf of the appellant company. Mr Teves considered that the unimproved value of the subject land at the relevant date is $105,000. He said that the land is situated on the left-hand side of the main road from lnnisfail proceeding north. It was therefore a good location for the Kentucky Fried Chicken outlet. Mr Teves relied upon the sale of a property situated at the corner of Edith Street and Glady Street, one block removed from the subject land. This property, comprising an area of 2,409 sq. metres, sold on 13th May, 1991 for $365,000. Situated on the land at the time of sale was a car yard and a retail shop which were both let and a shed which was one-third let. Unfortunately Mr Teves was not able to measure the shed as it had been demolished since the sale and another structure now occupied by Plains Video was on the site. However, he had discussed the matter with both parties to the transaction and, although it was not possible to obtain rental details, he considered that the potential annual rent from -- 2 of 9 -- 3 the structures on the site was between $40,000 and $45,000 based on existing rents in lnnisfail at the time. Mr Teves' analysis of this sale is as follows: Sale Price $365,000.00 Less Improvements - Shed 350m2 at $200 per m2 $87,500.00 Less 20 per cent depreciation S 17 , 500.00 $70,000.00 Shop 120m 2 at $600 per m2 $72,000.00 Car Yard Office 20m2 at $500 per m2 $10,000.00 Gravel Floodlights S20 , 000.00 $102,000.00 Less 20 per cent depreciation s 20 , 400.00 S81 , 600.00 s 1s1 1 600.oo Land Value at $88.58 per m2 Less Value of Leases $40,000 per annum - net approximately This is a rate per sq. metre of $80.28. $213,400.00 s 20 , 000.00 $193,400.00 =========== Mr Teves comments that the sale property consists of three surveyed allotments and not one, as is the subject land, and that the sale is situated closer to the Central Business District of lnnisfail. For these reasons he has adopted a rate of $80 per sq. metre for the 1,315 sq. metres of the subject land which gives an unimproved value of $105,200 and he adopts $105,000. Mr Teves said that in his analysis of the sale he has deducted $20,000 for the tenancies that existed at the date of sale. He is convinced that someone purchasing a property which had an existing tenant would pay something over and above that which he would pay if there was no tenant. Although he considered that the total rent of the property would have been up to $45,000 per annum if fully -- 3 of 9 -- 4 tenanted, as the property was only partly tenanted he thought $20,000 was appropriate. Mr Teves explained that he had valued the sale property in the past and had measured the improvements at that time. He therefore did not remeasure the improvements when analysing the sale. In any case, the shed was removed when he inspected the property. Mr Teves said that he thought it was more appropriate to value these properties at a rate per sq. metre of area rather than a rate per metre frontage. He said that size was important rather than frontage in a town like lnnisfail. He also thought that situation on a corner was important. Mr S A Cross, registered valuer employed by the Department of Lands, gave evidence on behalf of the Chief Executive. Mr Cross said that he arrived at his valuation of $i iB,000 by adopting a rate per metre frontage method. He adopted a rate of $4,300 per metre for the 25.; 5 metres of frontage and then added ; O per cent for corner influence. This gave him a total of $i iB,960 and Mr Cross adopted $i iB,000 as the valuation. Mr Cross said that there were only two sales of land in the commercial area of lnnisfail at the relevant period. One of the sales analysed to support the Department's ; 990 application of value, while the other sale reflected a 30 per cent reduction. However, the second sale was from one of the Emanuel Group of companies. Mr Cross, after investigation, considered that there was a strong likelihood that this sale was a low sale because of the financial situation of the Emanuel Group. He therefore placed little emphasis on this sale and relied more strongly on the other sale. -- 4 of 9 -- 5 Sales after the date of valuation indicate that the market level was rising and, while they cannot be taken into account for the 1992 valuation, they indicated to him that the higher level should be adopted rather than the lower level of the Emanuel sale. The sale which shows a reduction in values was between Leominor Pty Ltd (one of the Emanuel Group) to Buljubasich and is situated in Owen Street, with rear access to a lane. This property has an area of 2,092 sq. metres, zoned "General Business" and sold on 8th November, 1991, for $280,000. It was improved with a shop and warehouse and Mr Cross analysed this sale to show an unimproved value of $58,000. However, the 1990 valuation was $83,000 and because of the background of this sale Mr Cross decided to apply the present figure of $83,000 in the 1992 valuation. Mr Cross's other sale was the sale used by Mr Teves as his basis of valuation. However, Mr Cross analysed this sale to show an unimproved value of $240,000. As the 1990 valuation was $244,500, Mr Cross again applied that unimproved value in the 1992 valuation. Details of Mr. Cross's analysis are as follows: Sale Price Less Improvements - Shed Concrete Gravel Takeaway Food Store 253 sq. metres at $440 per sq. metre Concrete area 36 sq. metres at $100 per sq. metre Office Building 10.9 sq. metres at $440 per sq. metre $8,500.00 $2,500.00 $ 1,000.00 $111,320.00 $3,600.00 $4 , 796.00 $119,716.00 $365,000.00 5 12 , 000.00 $353,000.00 -- 5 of 9 -- Plus fees 8 per cent Plus Rates (6 months development period) Land Tax (6 months development period) Plus Interest on development Half (11 per cent for 6 months development period) Less Depreciation 25 per cent Plus Clearing Less Interest on Land (6 months at 11 per cent) 6 $1,755.00 S 485.00 S9 , 577.oo $129,293.00 s 2 , 240.00 $131,533.00 5 3 , 617.00 $135,150.00 S 33 , 787.oo $101,363.00 S l , 000.00 $ 102 , 363.00 $250,637.00 s 12 , 41a.oo $238,219.00 Mr Cross has adopted, $240,000, to show a rate of $4,700 per metre frontage. It is quite impossible to reconcile the differences between Mr. Cross's analysis of this sale and that of Mr Teves. Mr Cross said that this sale was transacted nearly 10 months before the date of valuation and there had been some alteration to the site when he had inspected it. However, he had discussed the sale and improvements thereon with Mr and Mrs Lang, the purchasers of the property. They told him that they placed no value on the shed which had been valued by Mr Teves at $70,000 and which had been removed before either valuer analysed the sale. Mr Cross said the area of the food store structure was 253 sq. metres and he had applied the appropriate rate per sq. metre. He gave evidence that he and -- 6 of 9 -- 7 his senior valuer physically measured this building earlier this year. Mr Cross said the only tenants in occupation at the time were those in the panel beater's premises, the food shop and car yard. There had been no tenants, as far as he could ascertain, in the shed. The panel beater paid $150 per week and the food store tenant paid $16,900 per annum. However, it emerged in evidence that one of the buildings had been previously measured by the senior valuer on an earlier occasion and it was not measured this time. Mr Cross did not agree with the allowance for tenancies made by Mr Teves. He said that he felt this was covered to a large extent by the interest which he had allowed on development. He said there was no evidence in lnnisfail that a purchaser would pay more for a tenanted property than one which was vacant. Mr Cross said that he thought the method of valuation per metre frontage was more appropriate than the rate per square metre method adopted by Mr. Teves. He also explained his allowance for corner influence. When challenged by Mr Teves, Mr Cross said that his information about the Emanuel property came from the general talk in the real estate industry. He was not personally aware of any of the financial difficulties of the Emanuel Group and did not know, as suggested by Mr Teves, that their financial difficulties occurred well after the date of this sale. Mr Cross did not agree with the suggestion that the market for such land had decreased since 1987-88 when the company first purchased that land. Mr Cross was challenged about the information which he received from the Langs, the purchasers of the sale which both valuers used as a basis, after the shed had been demolished and the building now leased by Plains Video had been -- 7 of 9 -- 8 erected. He said that he got the impression from them that the shed was of no value and that it was not rented at the time of sale. The sale used by both valuers occurred in May 1991 and Mr Cross said that between that date and the date of valuation, 31st March, 1992, he believed there had been no substantial movement in the market for such properties in lnnisfail. In this case the difference between the two valuers depends very largely on their approach to the common sale on the corner of Edith and Charles Street for $365,000. While I am not entirely satisfied with the analysis of either valuer, I must accept the measurements of the buildings made by Mr Cross as he has sworn that he and his senior valuer actually measured the buildings, whereas Mr Teves has relied on measurements that he took on another occasion. Whether there had been alterations to the buildings between Mr Teves' measurement and the date of sale, it is impossible to tell. However, the measurements by Mr Cross occurred at a time closer to the sale than those made by Mr Teves. On the other hand, there is the problem that Mr Cross was not able to measure the shed to which Mr Teves attributes a value of $70,000. This is the most fundamental difference between the two valuers. Therefore, although I prefer the approach adopted by Mr Cross, I am not prepared to accept either of the analyses as a true indication of the unimproved value of the subject land as at the relevant date. Nor am I prepared to accept totally the analysis by Mr Cross of the second sale situated on the corner of Edith and Glady Streets. Mr Cross said that he did not place much reliance on this sale as it was a sale made under unusual -- 8 of 9 -- • I 9 circumstances, while Mr Teves did not rely on the sale at all. Even if I was to accept Mr Cross's analysis of the common sale, I think that he should have allowed something for the fact that the premises, particularly the takeaway food store, was tenanted. Although he said there is no evidence in lnnisfail that a property which is tenanted would sell for more than a property which was vacant at the date of the sale, I think that the conclusion could be drawn that such a property would be more attractive and would therefore attract a higher price in the market. However, my difficulty is to know just how much extra such a property would attract, particularly as the sale was only partially tenanted at the time and there is a dispute as to whether there was any tenancy of the shed. However, the conclusion can be drawn that if Mr Cross had allowed an amount for the tenancy in the sale, he would have arrived at an even lower analysed unimproved value. Although the evidence is far from satisfactory, I propose to adopt a rate of $4,000 per metre frontage for the 25.15 metres of the subject land, which equals $100,600, and to adopt 10 per cent corner influence of $10,060. This gives a total of $110,660, which I round off to $110,000. Therefore, the appeal is allowed and the valuation of the Chief Executive is set aside and the unimproved value is determined at $110,000. J J TRICKETT MEMBER OF THE LAND COURT -- 9 of 9 --