Cairns Plywoods Pty Ltd v Minister for Lands [1992] QLC 338

LAND COURT, BRISBANE. 29th May, 1992. Re: Determination of Rent - Second Rental Period Special Lease No. 01/43682. Lessee: Cairns Plywoods Pty Ltd (Hearing at Atherton) DECISION For the second rental period of ten years of the abovementioned special lease which commenced on 1st March, 1991, the Crown is seeking a rent of $3,000 per annum. The rent for the first ten year period was $180 per annum. The lessee has requested that this matter be referred to the Land Court for hearing and determination and has advised that its estimate of the rent that should be charged should be based on an unimproved value of $58,000. This special lease is in respect of the land contained in Lot 532 on Plan NR5527 in the Parish of East Barron, containing an area of 4426 square metres. The land is situated in the town of Yungaburra and access is obtained by means of the main Atherton to Gordonvale Road. It also has frontages to Eacham Road and Fig Street. It is located about 220 metres east of the Yungaburra Post Office. Electricity and water reticulation services are available. This special lease was granted for a term of 30 years from 1st March, 1981, for Manufacturing, Industrial, Residential or Business Purposes. It is presently used for the storage of timber in connection with the lessee's sawmilling business. The land is described in the report of Mr R.G. Moroney, valuer for the Crown, as "Level land with red volcanic soils, scrub timbers". It is zoned General Business under the Eacham Shire Council Town Plan and Mr Moroney considers that its best use [1992] QLC 338 -- 1 of 6 -- 2 would be for commercial purposes. Mr J.C. Rankine appeared and gave evidence on behalf of the lessee company. Mr Rankine tendered a written submission upon which he elaborated. He expressed concern at the extent of the increase in rent which he considered to be well above what could be justified. He explained how the subject land was being used and conceded that its highest and best use would be as the site for a general store or shops. However, he indicated that the block suffered from some significant disabilities which he listed as follows: (a) With major street intersections at two corners, access for any usage involving reasonable traffic flows (ie shopping centre) will be quite restrictive. (b) The block requires full survey before use for any other purpose than at present. (c) Because of the adjacent park it was obvious that any proposal for use other than those which do not require council consent would be most unlikely to succeed. (d) While the block is well drained, significant engineering and costs will have to be incurred to eliminate the open drain adjoining the connecting road and preventing the overflowing on to the block which now occurs in heavy downpours. (e) There is no channel or kerbing adjacent to the block and this will have to be installed prior to any other use than to which it is presently being used." Mr Rankine then set out three comparative properties which he said should be considered. The first of these, Lot 9 on RP 703885 with an area of 1012 square metres, situated in Eacham Road, sold on 3rd January, 1990, for $45,000. This sale was also used by Mr Moroney as a basis. The second property Lot 10 on RP 703885, adjoining that allotment, with an area of 794 square metres, with a steel -- 2 of 6 -- 3 framed metal clad shed of approximately 200 square metres, sold on 31st January, 1989, for $65,000. Mr Rankine, who is an engineer, considered that this shed had a value of $28,000, leaving a land value of $37,000. The third comparison was a site of 8597 square metres zoned Commercial, facing the Atherton to Gordonvale Highway. However, was a listing for sale with an asking price of $150,000, rather than a completed sale. Mr Rankine went on to say that there was not a strong demand for shops in the vicinity at the relevant date. He also said that the value should be significantly discounted because it is not in an established shopping/tourist bus area and because of the extensive kerbing and drainage rectification required. Under cross- examination by Mr Goodman-Jones for the Crown, Mr Rankine indicated that his first comparison property had been sold for tourist shopping purposes and was located in a part of the town with built in clientele as it was next to the supermarket. He admitted that it did not have the same exposure to the highway as the subject land, but he considered this was not a disadvantage, as access could not be gained from the highway and would have to be by one of the side streets. It also emerged that in his analysis of his second comparison property, Mr Rankine relied on Rawlinsons Australian Construction Handbook as a basis for arriving at his value of the shed. Mr Robert Grant Moroney, registered valuer employed by the Department of Lands, gave evidence for the Crown. Mr Moroney submitted a report and basis of valuation in which he indicated that he had arrived at the recommended rent of $3,000 per annum by applying 3% of the unimproved capital value of the subject land which he assessed at $100,000. He arrived at this figure by having regard to two sales, the first being the first comparison property relied on by Mr Rankine, -- 3 of 6 -- 4 which Mr Moroney analysed to an unimproved value of $43,800 or $43.28 per square metre. The second basic sale is in respect of industrial land in the town of Malanda, with an area of 3833 square metres which sold on 15th December, 1989, for $41,000 and Mr Moroney analysed this sale to show $39,500 unimproved, or $10.30 per square metre. Mr Moroney's report contained the following paragraph: II The lessee owns adjacent freehold land totalling 28.96 hectares which was used for sawmilling operations. In about 1988, the sawmill (on the adjacent land) was badly damaged by fire. Since that time, the subject land has been used for storage of timber already processed of other Tableland mills operated by the lessee. 11 Mr Moroney said that he considered that the subject land could be put to more advantageous uses and that it was not developed to its full potential. In valuing the land he said that he had looked at the town plan and looked at what was permitted under the terms of the lease and compared the two. He thought that the subject land could be best used for commercial purposes, particularly as it had three street frontages and exposure to the highway for advertising, if not for access, purposes. In comparing his Sale No.1 with the subject land, Mr Moroney said it was only about one quarter the size, but had the same zoning. He considered that it was inferior in location as it did not have the same access and exposure advantages. In respect of his Sale No.2, the industrial land at Malanda, Mr Moroney said that he included this property as a basis to indicate what industrial land of approximately the same area as the subject land was selling for in the area. He thought that land zoned general industry was inferior to land zoned Commercial -- 4 of 6 -- 5 and that the sale had no exposure and no frontage. Mr Rankine felt that this sale was too far'removed from Yungaburra to form a reliable basis. Mr Moroney conceded that if a commercial enterprise such as a hardware store was to be built on the subject land, substantial upgrading of drainage would have to be undertaken. He was unsure, however, whether the council would require upgrading of the whole area if a shop was to be constructed in one corner. The evidence in this case indicates that the subject land is a large but well situated commercially zoned allotment in the town of Yungaburra, with good access and exposure to a main -highway. After considering the sales used by the parties I have rejected the third comparison property relied on by Mr Rankine as it did not amount to more than an asking price and evidence emerged that the owners were now asking $120,000. I also find no real assistance in Sale No.2 relied on by Mr Moroney. This leaves the sale of Lot 9 relied on by both parties and the sale of Lot 10, used by Mr Rankine. If I accept Mr Moroney's analysis of the sale of Lot 9 and Mr Rankine's analysis of Lot 10, the unimproved values per square metre are $43.28 and $4~.60 respectively. The subject land is approximately four times larger than Lot 9 and even larger than Lot 10. Even if the rate per square metre is discounted by 50% for the difference in the area between the sales and the subject land, the end result of, say $22.00 to $23.00 per square metre, is very close to the unimproved value for the subject assessed by Mr Moroney of $22.50 per square metre. It is clear that -the subject land is not used at present for its highest and best use and it is understandable that the lessee company is concerned at the incrase in rent. However, it is a fundamental principle of valuation that land must be valued -- 5 of 6 -- 6 at its highest and best use (unless the relevant statute provides otherwise). Section 204 (5B)(c) of the Land Act provides as follows: II 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. II In the absence of evidence of market rents in the area, I consider that an experienced and bona fide person would be willing to pay an annual rent based on 3% of the unimproved value of the land. In the circumstances, I am satisfied that such a person would not discount the rate per square metre by more than 50% from that disclosed by the twp sales because of the area differences. Therefore I consider that the unimproved value of $100,000 assessed by Mr Moroney is reasonable. Accordingly, the rent for the second rental period of Special Lease No. 01/43682 is determined at the sum of $3,000 per annum. (signed) J.J. Trickett Member of the Land Court. -- 6 of 6 --