Dempster & Ors v Minister for Lands [1993] QLC 48

,, " ·' \: J LAND COURT, BRISBANE. 26th February, 1993. Re: Determination of Rent - Second Rental Period - Special Lease No. 31/48692 - Lessees: C.N., Q.E., J.A. Dempster and K. Kinbacher (Hearing at Maryborough) DECISION The Minister has referred to the Court the matter of the determination of the rent to be charged for the second rental period of this lease. The rental period commenced on 1st August, 1991 and (consequent upon amendment to the Land Act 1962 by the Lands Legislation Amendment Act 1991) will now continue up to 1st July, 1993. An amended basis for the assessment of rent will apply from 1st July, 1993 . The Special Lease issued in pursuance of the provisions of s. 203(a) of the Land Act 1962, commenced on 1st August, 1986 and is for a period of 20 years. The land which is leased is described as Lot 46 on Plan MCH5105, County of March, Parish of South Head, containing an area of about 4.96 hectares (exclusive of esplanade). The lease was granted for the purpose of Residential use. The leased land comprises an island of the Moonboom group, north-easterly of the Township of Maaroom in the Great Sandy Strait. The rent sought by the Crown is the sum of $1950 per annum. The lessees contend that the rent paid during the first period - ie $200 per annum - should [1993] QLC 48 -- 1 of 6 -- - Page 2 - continue. The lessees' case was presented by Mr C. Neil Dempster, who gave evidence. He also called his father Mr R. Dempster. Firstly Mr C.N. Dempster explained that his father, Mr Kinbacher and himself were members of the Australian National Sportsfishing Association. His father was also a member of the Queensland Recreational Fishing Council and has had a long and close involvement with matters associated with recreational fishing in Queensland. While the purpose of the lease was for residential use, Mr Dempster said that the useable area of the lease was confined to a relatively small area near the northern tip, where, on spring tides, even that area was barely above water (30 cm). The balance of the lease was fringed with mangroves and subject to tidal influence. A small fishing shack is sited on the northern tip, constructed on a slab base. During times of tidal surge that slightly elevated area can be inundated, with water then entering the shack. Over the years the northern tip has been subject to tidal erosion, regardless of the remedial measures which have been taken. Mr Dempster states that access to the island from the mainland (Maaroom) is subject to tidal flows as ·is the final access point to the shack. It is submitted that not only are the physical qualities of the land so poor as to restrict any substantial building activity, the major sandfly and mosquito problem precludes permanent habitation. Consequently, as was the intention of the lessees in originally obtaining the lease, the use of the island is seen to be limited to the provision of a land base for local recreational fishing activities with the shack used for short periods (up to three days). Evidence was given as to the painstaking efforts necessary to comply with one of the conditions of the lease requiring the clearing of groundsel and -- 2 of 6 -- - Page 3 - maintaining the leased land free from groundsel. Mr R. Dempster's evidence related primarily to the history of the lease. The current lease was a renewal of an original lease granted 111any years ago. Mr Dempster confirmed the disabilities of the lease including inundation of the land, erosion, access, sandfly and mosquito problem and the unsuitability of the land for permanent habitation. The Crown report and valuation for determination of rent was prepared by Mr C.I. Hurman, a registered valuer employed by the Department of Lands. His report contained the comment that the purpose of the lease was for "weekend/holiday fishing purposes" and that the use of the land was so restricted. He agreed with counsel for the Crown however, that the actual purpose was for "residential" use. Nevertheless he saw the best use (if held in fee-simple) being as a weekend/holiday fishing retreat. He agreed generally with the disabilities of the island as described by the lessees. In his opinion about 4000 square metres of the lease at the northern tip could be seen as useable, while the balance area had no real influence on its value. He agreed that the island was not one suitable for full time residential occupation although he felt that, if for no other reason than it was an individual island, the lease would experience demand in the market place. Mr Hurman gave evidence that, to his personal knowledge, there was continual public enquiry as to the availability of island property in the Straits locality for residential leasing. The policy of the Government was not to issue further similar leases in the locality. His local experience indicated to him that a number of waterfront mainland properties suffered some of the disabilities such as tidal influence and sandfly /mosquito infestation, although not to the same extent as the -- 3 of 6 -- - Page 4 - subject lease. Mr Hurman had approached the assessment on the basis that a fair rent would equate 3% of the unimproved value of the land (on a fee:.simple basis). His investigations revealed no sales of freehold islands at or about the relevant date. He obtained a basis from a mainland sale (a Great Sandy Straits waterfront lot of 797 m 2 at Poona), a sale of a 3537 square metre site with good ocean views at Orchid Beach on Fraser Island and a sale of a 607 square metre site wlth no water views at Eurong, also on Fraser Island. These sites had sold for $50,000 on 13.9.91; $115,000 on 12.3.91 and $90 ,000 on 17 .9.91 respectively. Doing the best he could with the evidence available, which Mr Hurman agreed was not directly comparable, he assessed the unimproved value of the leased land, on a freehold basis, in the amount of $65,000. The assessed rent on the 3% basis then became $1950 per annum. Mr Hurman had been responsible for the valuation of the land for rating purposes, and that valuation, effective from 30.6.91, was also $65,000. Mr Hurman has support in adopting a rental based on 3% of the unimproved value for special leases issued for various purposes, as such percentage has been submitted by the Crown and adopted on many occasions by the Land Court. Nevertheless, adoption of a percentage rental is an arbitrary calculation in the absence of specific market support. The Land Court is instructed as to the manner in which it will determine rent by the legislation relevant as at the commencement of the second rent period. Section 204(5B)(c) of the Land Act 1962 stated: "The Court shall determine the annual rent at such sum as it -- 4 of 6 -- - Page 5 - 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." While there is criticism by the lessees as to the basis and resultant assessment of the unimproved value of the land, that assessment has been carried out by an expert in the valuation field, doing the best he could in the absence of directly comparable evidence. While some doubts must exist as to the level of value found, bearing in mind the limited potential of the land, there is no better evidence before the Court. Any criticism that a freehold basis of assessment of unimproved value being adopted is not sustainable. This is no more than a process in deciding the quantum of rent which would meet the market orientated requirements of the relevant legislation. The question which now needs to be decided is whether or not 3% of that unimproved value assessment could be achieved in the market place for the relevant period. Mr O'Connor, counsel for the Crown, submitted that the disabilities of the land as well as its market feature of island location, have been considered in the assessment of unimproved value. He says it would be akin to "double-dipping" if some further allowance was to be made through reduction of a somewhat well- established and accepted percentage rental for special leases, including those used for residential purposes. There is substance in this argument, yet I am not convinced that the limited residential potential of this and similar "island" leases places the rental assessment on the same basis as other leasehold lands affording permanent residency potential. There is then the admittedly weak evidence available in support of the Crown assessment of unimproved value. -- 5 of 6 -- - Page 6 - While it is clear that the disabilities of the land have been accurately described by the lessees, they are unable to prove their contention as to fair rent, regardless of their qualifications as bona fide and experienced persons with regard to this particular lease. I will however, provide them with what I see as the benefit of doubt and determine the rent to be charged for the second period of Special Lease 31 / 48692 in the amount of $1300 per annum. (R.E. Wenck) Member of the Land Court. -- 6 of 6 --