Land and Environment Court of New South Wales CITATION : Earl v Valuer General [2005] NSWLEC 532 APPLICATION Peter John Earl PARTIES : RESPONDENT Valuer General of NSW FILE NUMBER(S) : 30836 of 2003 CORAM: Murrell C KEY ISSUES: Valuation of Land :- Rural property - comparative sale LEGISLATION CITED: Valuation of Land Act 1916 DATES OF HEARING: 22/09/04, 15/10/04, 15/11/04, 23/05/05 DATE OF JUDGMENT: 10/07/2005 APPLICANT Mr F. Santisi, barrister instructed by Mr Palany of Palany and Partners LEGAL REPRESENTATIVES: RESPONDENT Mr S. Whyte, barrister instructed by Mr G. Demetriou, solicitor for Crown Solcitors JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Murrell C 7 October 2005 30836 of 2003 Peter John Earl v Valuer-General JUDGMENT 1 This judgment is for an appeal under s 37 of the Valuation of Land Act 1916 (the Act) in respect of the property known as 2414 Thunderbolts Way, Gloucester. The land is Lot 1 DP 528571 and Lot 64 DP 778073 Parish of Crosbie, County of Gloucester. The owner of the subject land, Mr Earl is contesting the land value should be $680,000 not $761,000 as at the base date 1 July 2002. 2 The subject land has an area of 723.8 ha and is located approximately 25 km north of the town of Gloucester and can be accessed via a tar sealed road to the boundary. Access to the property from this road, Thunderbolts Way, is via a gravel road and a concrete causeway on the subject property over the Manning River. The property has about 3 km of frontage to the Manning River and improvements to the property include a modest farm cottage, a large farm shed, and other sheds. The topography of the land varies from flat alluvial land near the river to steep mountainous timber ridges. 3 On behalf of the Valuer-General, evidence was given to the Court by Mr Andrew Hood and for the applicant Mr Robert Gould. Both experts are certified practising valuers and registered valuers. The Court also had the benefit of an extensive site inspection of the subject land and the comparable sales. The proceedings originally commenced as an on-site hearing, however, the matter was adjourned to allow the valuers to consider additional information and to provide a joint report to the Court. 4 The experts agree there is approximately 4 ha of clay loam creek arable alluvial land; 40 ha of broken creek flat/gullies and gentle sloping clay/loam soils cleared for pasture improvement; 56 ha of undulating to hilly clay/shale soils with parts suitable for cultivation. The only classifications not agreed to is Mr Gould considers 303 ha can be classified as undulating to hilly treated for grazing with some lantana regrowth and bracken fern on higher slopes whereas Mr Hood considers 323 ha falls into this classification and Mr Gould considers 320 ha is steep to mountainous timbered ridges whereas Hood considers 300 ha should be classified this way. 5 The property is zoned Part Rural (1)a and Part Environmental Protection (Scenic) 7(d) under the Gloucester Local Environmental Plan 2000. Clause 27 of the LEP contains the subdivision controls and in the case of land in Zone 1(a) and 7(d) 100 ha is the minimum lot size. Clause 29 allows for the erection of a dwelling where a lot has been created by subdivision in accordance with the plan and it has an area of not less than 100 ha. Under the LEP additional dwellings may be erected on each parcel only where the dwelling house will accommodate people employed on the land. 6 Gloucester Shire Council adopted a Flood Free Access Policy on 19 March 1997. This policy defines flood free access as approved by council "that can be trafficked by 2-wheel drive vehicles without disruption by flooding in all reasonable circumstances". The Policy requires the land the subject of a development application relating to subdivision or the erection of residential accommodation must be serviced by a flood free access. 7 There was no dispute between the parties that the implications of Council's Flood Free Policy for the land to be subdivided into 5 lots would require the construction of a bridge at the entrance to the subject property where there is currently a causeway. A 3-lot subdivision could possibly be approved without a bridge only if flood free access could be gained from an adjoining property. The applicant submitted that while there was a consent for a 5 lot subdivision at the time the property was purchased by the current owner in 1996, this was prior to the Flood Free Policy and the consent expired in 1998. 8 The property has an irrigation licence which is current to July 2006 for the purpose of irrigation about 6 ha of land. Sale 2 has a licence for 20 ha. 9 Under s 6A of the Valuation of Land Act and relevant section is: "1. The land value of land is the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements if any, thereon or appertaining thereto other than land improvements, and made or required by the owner or the owners predecessors entitled had not been made." 10 In terms of s 40(2) of the Act "on appeal to this Court the appellant has the onus of proving the appellant's case". 11 The experts considered two comparable sales in their respective analyses. And I must have regard to the comparable sales method as the best means to ascertain land value. This approach allows for variables such as the date of sale, topography and land classifications to be factored in to allow the necessary adjustments when compared with the property under appeal. Valuation is not a science nor does it purport to be. But at the end of the day I must base my assessment on the evidence to the Court of the comparable sales provided. The site inspection also assists the Court to understand the various characteristics of the two sales compared to the subject land under appeal. 12 The following provides a description of the two properties referred to by both experts as the comparative sales although the experts agreed that Sale 1 represents the best available market evidence. Sale 1 1595 Curricabark Road – area – 850 ha Contract date 4 September 2001 Purchase price $!,085,000 Deduced land value experts agree $760,000 Location – on a gravel road about 16 km (5 km tarsealed) from Thunderbolts Way Sale 2 Curricabark Road, Curricabark Area 289 ha Contract date – 10 September 2002 Purchase Price $415,000 Deduced land value - Since the sale a small rural block has subsequently been sold and the property enjoys an approval of March 2004 for a further 2 lot subdivision. Deduced land value – Mr Hood provides a figure of $375,000 and Mr Gould $347,000. 13 The maps at Figs. 1, 2 and 3 show the boundaries of the three properties and the topography. It can been seen that the area in general can be described as mountainous terrain with alluvial flats of varying widths along the Manning River and its tributaries, with extensive areas surrounding the properties of State Forests, Nature Reserves and National Parks. 14 Clearly a larger number of sales as close as possible to the base date of the valuation with the same characteristics such as topography, access, pasture land, irrigated areas, and development consents, is a more desirable situation than exists for the current appeal. A greater number of sales would also allow the various factors to be more accurately analysed to apportion appropriate values for the different variables. 15 It was submitted on behalf of the applicant that an approved subdivision and subdivision potential of land (and the works required in order for a subdivision to take place) are factors that cannot be ignored. The respondent on the other hand does not attribute value to an approved subdivision or subdivision potential for rural properties. During the proceedings there was discussion about whether an easement or access could be provided over the adjoining property to the subject property to provide 'flood free access'. Mr Hood in his report points out that this would allow for a 3-lot subdivision, however, to obtain such an easement requires negotiation with the adjoining owner or an easement granted by a court and even then the practicality in terms of steepness and usability was unclear from the evidence. It was agreed however, that for a 5-lot subdivision it would be necessary to construct a bridge, which would be at considerable expense. 16 Mr Hood disagreed with Mr Gould and does not consider that an allowance or variable for subdivision potential should be factored into the comparative sale. From the evidence in my assessment of the comparative sales subdivision consents, and to a lesser extent subdivision potential, are matters that should be factored into the analysis. Clearly more sales would provide a greater comparative analysis to determine this element of value. In this regard I agree with Mr Gould's evidence and at Appendix A I have allowed 20% in sale 2 for the subdivision consent and 10% for the subdivision potential of sale 1 as flood free access is currently available and minor expenditure would be required for internal roads. 17 In Mr Gould's analysis of the 1996 sale of the subject land he has a deduced land value with the approved subdivision of 700,000 - that is, allowing 150,000 for improvements to be deducted from the sale price. Mr Hood also notes that the property was purchased in 1996 for $850,000 and his analysis of the sale shows a deduced land value of $725,000 or $1,000 per ha overall. He notes that "value levels for large properties in the area remained static for several years from 1996 but increased by up to 20% to the base of July 2002 following strong demand for all forms of rural property but particularly for those with river frontage". 18 At the same time Mr Hood does not adjust Sale No. 1 to the base date of the property under appeal. Mr Gould on the other hand notes that the contract date was 9 months prior to the base date valuation of the property under appeal. In my analysis at Appendix A for sale 1 I consider it appropriate to increase the contract price by 5% to allow for the time difference. Sale No. 1 should be adjusted in terms of the 9 months from the contract date to the base date for the subject property. I have adopted Mr Hood's evidence of a 20% rise and for the nine month period this approximates to 5%. 19 For Sale No. 1 the experts agree that the deduced land value is $760,000 after deducting the improvement from the sale price of $1,000,085.00. Both the subject property and Sale No. 1 have 4 ha of alluvial flats and 40 ha of creek flat. Mr Gould states that the lower slopes are slightly steeper but the land is more suitable for a future low cost subdivision than the subject property. In my assessment of the evidence the subject land has less steep land than sale 1 and 15% is factored in for this and the land classifications. 20 Mr Hood considers that the subject property is superior in terms of its location and access because the land is served by a tared road, whereas Sale No. 1 relies on approximately 10 km of gravel road to the property boundary and is further from town. Mr Gould disagrees that this would affect the value of rural properties. I have concluded that there should be a slight allowance made of 5% for both sales 1 and 2. 21 I have made these adjustments on the basis of the site inspection and evidence of the experts and with the benefit of the topographic map. With these adjustments Sale No. 1 compared to the subject property provides a value of $744,440 as at the base date of 1 July 2002. 22 For Sale No. 2 if I take the agreed deduced land value of $375,000 and factoring in the land classifications and topography agreed. That is: 40 ha good arable river frontage land and lower clay/shale soils; 160 ha undulating to hilly clay/shale slopes adjoining the Manning River; and 90 ha of steep to mountainous timbered ridges. I have concluded the percentages of land in the various categories and the topography does not require an adjustment compared to the subject land. 23 An adjustment needs to be made for the location/access for the property being slightly less desirable compared to the subject property. The subdivision approved for Sale 2 land prior to the sale should be factored in and I agree with Mr Gould that a 20% adjustment should be made when compared to the subject property. 24 The experts agreed that as a property becomes larger the price per hectare diminishes, and to allow for an adjustment of sale 2 with an area of 289 ha compared to 724 ha I have adjusted the per ha value by 10%. With the overall adjustments Sale No. 2 provides a quantum of approximately $720,000 for the subject property. 25 While the comparative sales must be used to determine the valuation of the subject property at the same time it is an interesting exercise to consider that the subject property was purchased in August 1996 for $850,000. If one takes Mr Hood's estimate of improvements of $125,000 and relying on the fact that he said that rural property prices remained static for several years (several years – the dictionary definition being more than 2 or 3) but then there was an increase to the base date of 20%. If there is also an adjustment to allow for the fact at the time of purchase there was an approval for a 5-lot subdivision and having regard to the other sales allowing say a 20% factor for the subdivision consent may not be unreasonable. This exercise, however, does not substitute for the comparative sales analysis. 26 The experts agreed that sale 1 represents the better comparison with the subject property and therefore I have given greater weight to this sale. Based on my assessment I conclude that the land value for the subject property as of the base date of 1 July 2002 should be $735,000.00. 27 Therefore the orders of the Court are: 1. The appeal in respect of the property known as 2414 Thunderbolts Way, Gloucester, is upheld. 2. The valuation of $761,000 for the above property as at the base date of 1 July 2002 is adjusted to $735,000. 3. The exhibits are returned. _______________________ J S Murrell Commissioner of the Court rjs/ljr ANNEXURE A Variables & Adjustments Compared to subject property Sale 1 Sale 2 Contract Date 4/9/01 10/09/02 and $1,085,000 $415,000 Sale Price Value of Improvements $325,000 $40,000 Deduced Land Value $760,000 $375,000 Adjustment to base date +5% - of 1/7/02 Location and Road Access +5% +5% Topography and land +15% 0% classification Subdivision and or -10% -20% potential Overall Adjustments +15% -15% Value of property $874,000 $318,750 Per Hectare $1,028 $1,103 Adjustment for size Nil -10% Per hectare $1,028 $993 Value of subject property guided by sales _____________ _____________ $744,440 $718,930 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.