Land and Environment Court of New South Wales CITATION : Forest Rise Living Pty Ltd v Valuer General [2008] NSWLEC 1117 APPLICANT Forest Rise Living Pty Ltd PARTIES : RESPONDENT Valuer General FILE NUMBER(S) : 31140 of 2007 CORAM: Parker AC KEY ISSUES: Valuation of Land :- Land Value LEGISLATION CITED: Valuation of Land Act 1916 Land and Environment Court Act 1979 CASES CITED: Forest Rise Living v Valuer General [2007] NSWLEC 305 DATES OF HEARING: 10th June 2008 DATE OF JUDGMENT: 15 July 2008 APPLICANT Mr A Abbott, representative of Applicant LEGAL REPRESENTATIVES: RESPONDENT Ms A Pearman, Barrister Instructed by Mr P Rankins, Solicitor of Valuer General JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Parker AC 15 July 2008 31140 of 2007 Forest Rise Living Pty Ltd v Valuer General JUDGMENT 1 This is an appeal by Mr Abbott on behalf of Forest Rise Living Pty Ltd (the Applicant), under Section 37 of the Valuation of Land Act 1916 (the Act), against the land value assessed by the Valuer General (the Respondent) in respect of the property known as 238 Wells Street, Spingfield (the subject property). Background 2 The land value of the subject property at 1 July 2006 (the base date), was assessed by the Valuer General at $1,100,000 and by Mr Abbott at $750,000. 3 The matter was the subject of mediation under Section 34 of the Land and Environment Court Act 1979 but the parties were unable to reach agreement. The parties consented to my disposing of the proceedings with a further hearing under Section 34(3)(b)(ii) of the Land and Environment Court Act 1979. The parties consented to my having regard to all matters considered in the mediation conference. 4 The matter was the subject of an on site inspection on 10th June 2008, followed by a hearing at Gosford Court House. 5 Mr Abbott appeared as the representative for Forest Rise Living Pty Ltd. 6 Ms Pearman, Barrister, represented the Valuer General, instructed by Mr Rankins, Solicitor of the Valuer General. 7 Section 40(2) of the Act states: "On an appeal, the appellant has the onus of proving the appellant's case." 8 The land value of the subject property at 1 July 2005 was previously determined by the Land & Environment Court to be $1,310,000 (Forest Rise Living v Valuer General [2007] NSWLEC 305). The subject property 9 The subject property is located on the corner of Wells Street and Noorumba Road in an area of mixed rural residential and residential subdivision properties. 10 It is a generally regularly shaped, sloping block, having an area of 8,475 sqm, with frontages to both Wells Street and Noorumba Road. Improvements comprise a brick and tile dwelling with garage beneath, with the highest and best use of the site being for residential subdivision. 11 The subject property comprises Lot 40 in Deposited Plan 1062987. The issues 12 The following issues are considered to be of significance in determining the land value of the subject property: a. that the subject property is burdened by water flow from higher blocks, requiring the creation of a detention tank in the event of subdivision; b. that the subject property is burdened by the requirement to create a fire reserve in the event of subdivision; c. that the creation of a detention tank and fire reserve impact on the potential number of residential blocks that may be created in the event of subdivision; d. that the nature of such impact cannot be known other than through formal application for subdivision; and e. that property market conditions deteriorated in the period leading to the base date. The evidence 13 Mr Abbott tendered as evidence a statement dated 5th June 2008 by Mr Myers, a real estate agent, expressing an opinion that the value of the subject property was between $700,000 and $750,000 as at the base date. 14 Mr Bryer, a Registered Valuer, tendered as evidence an undated statement and gave expert evidence on behalf of the Valuer General. Mr Bryer concluded that the value of the subject property was $1,100,000 as at the base date. 15 Mr Abbott submitted one comparable sale and Mr Bryer three comparable sales. 16 Mr Abbott submitted a comparable sale at Lot 1, 45 Warrawee Road, Springfield, which was inspected externally. 17 Mr Bryer submitted comparable sales at 75-77 Deane Street and 11 Monarchy Way, Narara and 168 Avoca Drive, Kincumber, which were inspected externally. Consideration of the evidence 18 I note that 75-77 Deane Street and 11 Monarchy Way, Narara comprise residential subdivision properties relatively close to the subject property. 19 Accordingly, I consider 75-77 Deane Street and 11 Monarchy Way, Narara to be directly relevant comparable sales. 20 I note that Lot 1, 45 Warrawee Road, Springfield comprises a single dwelling site, rather than a potential residential subdivision, being considerably smaller than the subject property. 21 I note that 168 Avoca Drive, Kincumber is considerably smaller than and distant from the subject property. 22 Accordingly, I consider Lot 1, 45 Warrawee Road, Springfield and 168 Avoca Drive, Kincumber to be indirectly relevant comparable sales. 23 The directly relevant comparable sale at 75-77 Deane Street, Narara, submitted by Mr Bryer, comprises 8,094sqm land area having sold for $650,000 with a contract date of December 2005 equating to an average of $80 psm land value. 75-77 Deane Street, Narara is partially subject to water affectation, through flooding, but is not subject to bush fire affectation. Allowing for flood affectation, the developable site area is smaller than the subject property and for which Mr Bryer attributed $150 psm land value, having sold approximately six months before the date of valuation. 24 The directly relevant comparable sale at 11 Monarchy Way, Narara, submitted by Mr Bryer, comprises 13,100sqm land area having sold for $1,000,000 with a contract date of May 2005 equating to an average of $76 psm land value. 11 Monarchy Way, Narara is partially subject to water affectation, through flooding, and is subject to bush fire affectation. Allowing for flood affectation, the developable site area is slightly larger than the subject property and for which Mr Bryer attributed $97 psm land value, having sold approximately one year before the date of valuation. Findings 25 I consider that the comparable sales of 75-77 Deane Street and 11 Monarchy Way, Narara to be highly informative for the valuation of the subject property. 26 I note that Mr Bryer made explicit adjustment to the comparable sales evidence, based on his professional judgment, for the impact of flooding (being a form of water flow burdening the land), improvements, the passage of time, location/views, dimensions, size, topography, DA and development costs. 27 This approach accords with accepted valuation practice and enables valuers to have evidentiary comparable values which, following adjustment, account for the various differences with the subject property. 28 Because properties are rarely identical, adjustment for differences is obviously necessary but caution is required through making as few adjustments as possible to ensure the reliability of the comparable sale when related to the subject property. Particular caution is required where large adjustments are required. 29 Mr Bryer analysed the comparable sales to provide the following adjusted land values as at the base date: 75-77 Deane Street $150 psm 11 Monarchy Way $115 psm 30 Having regard to the analysis of comparable sales evidence, Mr Bryer concluded that the value of the subject property was $130 psm, equating to $1,100,000. 31 I note that Mr Bryer did not make explicit adjustment for the creation of a water detention tank. 32 I note that 75-77 Deane Street is not burdened by the requirement to create a fire reserve but that, like the subject property, 11 Monarchy Way is burdened by the requirement to create a fire reserve. 33 I note that the value of the subject property of $1,100,000 as at the base date is below the value of $1,310,000 as at July 2005 determined previously by the Land & Environment Court, consistent with a deterioration in market conditions in the period leading to the base date. 34 I consider that Mr Bryer presented an explicable approach to the valuation of the subject property through the application of comparable sales evidence. 35 Mr Abbott did not appear to explicitly address the impact of the various issues on the analysis of the comparable sales evidence for application to the subject property. 36 I note that Mr Abbott and Mr Myers verbally proposed a residual development approach to the valuation of the subject property, but did not support this highly sensitive method of valuation with written scenarios or by appropriate expert evidence for all of the key variables. 37 I consider that Mr Abbott did not present an explicable approach to the valuation of the subject property through the application of comparable sales evidence. 38 Having regard to the evidence tendered, the cross examination of Mr Bryer and the summation presented, I consider Mr Abbott did not prove his case as required by Section 40(2) of the Act. Orders 39 The orders of the Court: 1. The appeal is dismissed. 2. The land value of $1,100,000 as at the base date of 1st July 2006 for the property at 238 Wells Street, Spingfield is confirmed. 3. No order is made as to costs. 4. The exhibits are returned. ___________________ Dr David Parker Acting 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.