Land and Environment Court of New South Wales CITATION : Knapp v Valuer General [2004] NSWLEC 684 APPLICANT Cecil James and Janice Lea Knapp PARTIES : RESPONDENT Valuer General FILE NUMBER(S) : 30559 of 2004 CORAM: Murrell C KEY ISSUES: Valuation of Land :- Valuation of Land contested by owner LEGISLATION CITED: Land and Valuation Act CASES CITED: DATES OF HEARING: 27/08/2004 DATE OF JUDGMENT: 12/17/2004 APPLICANT CJ & JL Knapp Litigant in Person LEGAL REPRESENTATIVES: RESPONDENT Mr A M Pickles, barrister Instructed by: A Gray Crown Solicitors JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Murrell C 16 December 2004 30559 of 2004 Cecil James and Janice Lea Knapp v Valuer General JUDGMENT 1 This judgment is for an appeal under s 37 of the Valuation of Land Act 1916 in respect of the land known as No. 13 Burke Parade, Gerroa. The owners of the subject land are contesting the valuation as at the base date of 1 July 2003. 2 The Valuer General placed a land value of $540, 000 on the subject site. The land value is assessed under s6(A1) of the Valuation of Land Act 1916 and as amended. This in effect is a capital sum, which the property would realise if offered for sale at the base date, assuming the improvements on the land had not been made. The applicants contend that the valuation should be $380,000. 3 The subject land is Lot A in DP 394436 parish of Broughton, County of Camden in the local government area of Kiama. The site is subject to a right of way of variable width as shown in figure 1. This ROW provides pedestrian access for the blocks of land at the rear of the subject property as a more direct means of access to the beach. The properties on this portion of Burke Parade are separated from the beach by the road, pavement and a public reserve that links to a pedestrian bridge that crosses the Crooked River to the beach area (refer to figure 2). 4 The subject site and the properties in the vicinity on Burke Parade are the closest residential properties to Seven Mile Beach. The larger portion of the land where the dwelling is erected is relatively flat topography at about level with the beachfront area. The rear portion of the site rises steeply with a rock cliff face and it is at this point where there is a timber stair case constructed on the row to provide access from the properties at the rear (that are elevated by some 5 m above the subject site) connecting with the access handle of 1.8 on the eastern boundary to the road and beach front. The applicant contends that this significantly burdens their property and the land value should reflect this and the privacy implications of the right of way. 5 The photographs at figure 3 show the stairs at the rear of the property that benefit the adjoining land and photo 1, taken standing on the rear access stairs, shows the subject property from the rear overlooking the dwelling on the subject land to the ocean beach. 6 Evidence, was given to the Court on behalf of the respondent by Mr G Brindley a registered valuer with the Department of Commerce, Property Valuation Services and he provided a statement of evidence with comparable land sales. The applicants were self represented and provided evidence to the proceedings for the Court's consideration. 7 The Court had the benefit of a site inspection and the comparable sales were also inspected. Figure 4 shows a map of the area with the subject property and the comparable land sales identified as Sale 1, 2, 3 and 4. Mr Brindley's report contains a table of adjustments for the subject property and the four sales for comparative purposes. 8 The survey of the land at figure 1 reveals that while the site has a frontage of 22 m to Burke Parade it is considerably narrower at the rear. The area of land within the right of way is some 25% of the total area. This access way benefits four residential properties at the rear as well as a conference centre for 50 people. 9 Mr Knapp tendered a geotechnical report from Cottier and Associates and this states that rock fall occurred from the cliff line within the rear of No. 13 in January 2002. Certain works to stabilise the cliff face were recommended and it is noted that the report states that "it is important that the cliff face conditions be monitored over time". However, as indicated by Sale No. 2 that is similarly affected, this would not make a significant difference to the valuation despite costs associated with such works. 10 Mr Knapp also tendered the respondent's valuation notices of the adjoining properties at No. 11 and 15. No. 11 is 670 sq m and has a land value as at 22 October 2003 of $562,000. This land has regular proportions of approximately 18 m wide by 37 m deep. The property to the east at No. 15 is 887 sq m with dimensions at the front boundary of about 40 m and the rear boundary 12 m and irregular in shape and as at 1 July 2003 it was valued at $529,000. Mr Knapp is of the opinion that there should be some equity in valuations and in his opinion his property has the burden of: the right of way; irregular in shape; and smaller than either of the adjoining properties. Therefore, in Mr Knapp's opinion, the valuation should reflect these constraints relative to the adjoining properties. 11 The applicants lodged an objection with the Department of Lands against the land value of $540,000, however, this was disallowed. In it's letter the Department advised the applicants that: The valuation represents the market level existing at the base date based on the analysis of vacant or improved sales which occurred on or about that date. The physical nature of your land and it's surrounding development have been taken into account in determining the land value. Land values represent the value of the land, excluding all structural improvements constructed by the owner or his predecessor in title, and ignoring the legal affect of all encumbrances: that is easements, rights of way, title covenants, caveats and restrictions as to user. However, the physical effects of works within the easement is considered. 12 The above advice was in response to the applicants letter of objection where it is stated: The property is severely disadvantaged by the extensive right of way in which it is burdened. ...Although originally instituted for the use of six properties seems to be used by a large number of people. The official users of right of way are able to grant permission to anyone to use it and we have no control over it. The rear section of the right of way has a path descending from higher ground, which enables all users to look into our property unrestricted. There is absolutely no privacy. ... We will also note that the area available on which to place a dwelling, after allowing for setback and clearances from the boundaries is severely restricted. As well, the irregular shape restricts the size and type of dwelling which maybe built. ... With the small usable area of land, the extreme lack of privacy of the land and the inability to have free and non restricted use of one third of our land, we believe a more realistic valuation would be $380,000. 13 The analysis carried out by Mr Brindley in his comparative sales table places the subject property with a land value $570,000. However, the respondent does not contend this to be the value for the purposes of the base date, but maintains the valuation should be $540,000. 14 The subject property together with the comparative properties (sales 1 -4 inclusive) are all zoned residential 2(a) under the Kiama Local Environmental Plan 1996 and dwelling houses amongst other uses are permitted with development consent. And for sites 600 sq m and larger detached dual occupancies are permissible, and for properties 450 sq m attached dual occupancies are permissible. Mr Brindley however, commented that the permissibility of dual occupancy development on a parcel of land is not reflected in the market paying a premium in his experience. In his table he provides an adjustment for size from minus 10 to minus 25% for land size but he stated the market does not show a set percentage and it is not a mathematical exercise as each parcel is capable of accommodating a dwelling house. 15 With respect to proximity to the beach and water Mr Brindley is of the opinion that the market pays a premium for properties within close proximity to the beach such as the subject property. When he was questioned as to the respondent's valuations for the adjoining properties he stated they are not relevant in terms in determining the value for the subject property but rather the comparative sales provide the relevant bench-mark as the adjoining properties maybe incorrectly valued. 16 It is often difficult for objectors to their valuations to understand why the valuations of adjoining properties are not relevant to the exercise of determining the land value in an appeal situation. On the face of it, it is understandable that objectors may regard this as inequitable and inconsistent. However valuations that are appealed to the Court come under greater scrutiny than providing across the board valuations for the thousands of properties in the State. 17 Section 40(2) provides "on an appeal, the appellant has the onus of proving the appellants case". The percentage rise in the subject property between the base date valuation, as in this case, may appear astronomical. However, the percentage rise in itself is not a reason to vary the valuation on appeal and any variation must be based on comparative land sales of vacant land or the value of improved properties discounted for the improvements to assess land value. 18 It is recognised that the concept of land value is artificial and often there appears to be no objective reason as to why the property market varies from one suburb or locality to another. It is also recognised that no two properties are exactly alike and therefore allowances for specific locational criteria must be taken into consideration. At the same time it is also recognised that the best comparison is a sale within close proximity to the subject property and as close as possible to the base date of the valuation. It is also recognised that more than one sale is preferable over relying on a single sale, especially where the individual circumstances of that sale may not be known. 19 With respect to sale one this is six properties to the north-west of the subject property on a corner and it is considerably larger being 727 sq m, that is 30% larger than the subject site. Mr Brindley is of the opinion that this sale assists in determining the value of the subject property as although being larger and having inferior views of the beach front area and water it has the same zoning and is very close to the subject parcel. From the site inspection these factors were borne out as well as the fact that a dual occupancy building is situated on the land and the property enjoys greater privacy in the rear yard as well as having vehicular access from two streets. Mr Brindley adjusted the contract sale price of 14 December 2002 to the base date of 1 July 2003 and allowed for a 20% increase because in this period of time the market for properties in Gerroa was very buoyant. 20 In my assessment compared to the subject property I consider the physical disposition of No.1 Burke Parade provides for greater privacy in the rear yard and indeed a usable rear yard, as opposed to the subject property and therefore I have factored in an allowance of 10% for comparison to the subject site whereas Mr Brindley did not provide any adjustments. I note that Mr Brindley however, has factored in 25% in favour of this property as an adjustment for its larger size. The subject site has a slightly more direct relationship with the ocean and beach than No.1 and Mr Bringley has provided for 5% variation for this factor which in some respects may be understated. The ability to develop the property as a dual occupancy is a factor of the size of No.1 Burke Parade and an adjustment of 25% has been made which appears reasonable although a slightly higher adjustment could be factored in. In my overall analysis factoring in for privacy impacts the adjustments provide a comparable land value of $552,600 rather than $614,000. 21 Sale No.2 is the next most comparable in terms of location given its location on the same flat area of land with no other houses opposite to the reserve and beach area. Although the location of this property is slightly inferior in terms of being further away from the beachfront area. It is also noted that it is significantly smaller than the subject site by approximately 40%. Mr Brindley did not make an adjustment for the difference in area due to the physical effect of the right of way which I noted is separately fenced off on the subject property. The contract sale price on 25 February 2004 is seven to eight months in advance from the base date valuation and Mr Brindley adjusted the price back by 30% given a most significant rise in the market during this period. He considered it to be 10% inferior in terms of location and views and on balance this seems reasonable as where the property has less of a direct relationship with the beach it also has less traffic. If I allow 5% for the fact that the property was owned by a well known film director prior to sale this then gives a comparative land value of $535,800 as opposed to $564,000. 22 Sale No. 3 at 145 Headland Drive, Gerroa is an elevated parcel of land and the contract price as at 3 July 2003 was $447,500 and at that time the only improvements were a boundary fence. This property is located on the south eastern headland of Gerroa with ocean views over other dwellings but not direct access to a beach. This site is the same size as the subject land however an adjustment of 10% has been made because of the physical effect of the right of way on the subject land. Mr Brindley made an adjustment of 35% because of the inferior location and views compared with the subject land and as such arrived at a comparable land value of $558,750. It is difficult to compare this property given the marked characteristics of one being on a headland and the other in close proximity to the beachfront as can be seen from figure 4. The beachfront locations are in relatively short supply compared to the headland. It seems reasonable in my assessment that while there maybe an increased adjustment of 20% because of the size of No. 3 compared to the subject land with the physical effect of the row, at the same time an adjustment of +40% for the location and views seems reasonable providing a total adjustment of 20%. This gives a comparable land value of $536,400. 23 Sale No. 4 is No. 7 Headland Drive, Gerroa and the contract date is the 5 July 2003 with a sale price of $560,000 with the improvements, that is the weather board cottage on the subject site was considered to be worth $60,000. This site is on the low side of the road looking toward the south over Crooked River and the beach, once again in an elevated position on the ridge. The adjustments include a 20% reduction in terms of the land size having regard to the right of way on the subject property, 10% for the steeper topography and the adjustment of 25% for location and views being inferior to the subject land giving a total adjustment figure of +15% and a comparative land value of $575,000. Once again this property has many different characteristics to the subject land and it could be argued that the adjustment for location and views should be less say 20% given the wide expansive views enjoyed from this elevated property. It could also be argued that a greater adjustment of 25% be given for the larger size of the useable land. This provides a comparative land value figure of $550,000 in my assessment. 24 From the site inspection sales 1 and 2 are more comparable in sharing more similar characteristics to the subject site than sales 3 and 4. Nonetheless sales 3 and 4 are similar to the base date valuation and they assist in providing a check for properties in the township of Gerroa. 25 In terms of the correct method to value the land the Court must disregard the blot on the title in terms of the right of way, but at the same time any physical affect on the land resulting in the exercise of legal rights held by others, can be reflected in the valuation. This allows for the physical effect of visual overlooking to be considered but not the legal encumbrance of the right of way. 26 Mr Pickles made the submission that the question of equity and the valuation of adjoining properties are not relevant considerations and this has been held in valuation cases. In this regard he referred the Court to the matter of Bruce Kevin Coram v The City of Springvale in County Court of Victoria 1962. In this case it was argued by the appellant that the valuation should be fair and equal and the decision states: in my view there is a third important qualification that the assessment authority should not sacrifice correctness to ensure uniformity, but if possible, obtain uniformity by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error. 27 Therefore whilst the applicant in these proceedings may find it difficult to look at the adjoining properties and their respective valuations compared to his property, with the right of way and the physical effects on privacy intrusion. At the same time the Court cannot ignore valuation practice of determining the value of land on appeal on the basis of comparative sales. The fact that the adjoining properties may have certain valuations may seem unfair but to allow this appeal on the basis of comparison with the adjoining properties would be in error. The comparable sales method provide the best means to ascertain movement in the market as opposed to looking at valuations in the same street. If the latter was used even though it may appear to be equitable on the surface, it would only serve to reinforce inaccuracies and would not provide the opportunity for appropriate adjustments that respond to the market. 28 The Court may find that valuations from time to time are overstated or understated but this must be based on the evidence before it in terms of comparable land sales and an analysis in terms of adjustments made for various factors such as views, proximity to the beach, size of the land and less concrete variable such as physical effects. Valuation is not a science nor does it purport to be. At the end of the day I must base my analysis on the evidence of the sales with the benefit of a site inspection and I have concluded that the $540,000 as at the base date of 1 July 2003 is supported by the evidence. In my assessment I have attributed more weight to the physical effect of the right of way and the privacy impacts and this reduces the valuers figure of $570,000 and confirms $540,000 for the subject land having regard to the comparable sales. 29 Therefore in accordance with my reasons above the Orders of the Court are: 1. The appeal in respect of the valuation for the property known as 13 Burke Parade, Gerroa is dismissed. 2. The valuation of $540,000 as at the base date of 1 July 2003 is confirmed. 3. The exhibits are returned. ____________________________ J S Murrell Commissioner of the Court ljr 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. 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