Valuation of land - Rural land - Build­up blocks - Whether to value as if contiguous

State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA)

State Administrative Tribunal Act 2004 (WA), s 167

Valuation of Land Act 1978 (WA), s 4(1), s 24

Appeal by Valuer-General from a decision of the Land Court - Shire of Banana (1969) 36 CLLR 178

Colonial Sugar Refining Co Ltd v Valuer General (1970) Q CLLR 176

Gilbert (Valuation Officer) v S Hickinbottom & Sons Ltd [1956] 2 Q B 40

Harris v Minister for Public Works [1912] 12 SR (NSW) 149

Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78; [2001] 51 NSWLR 673

PT Ltd v Valuer-General (2002) 29 SR WA 330

R v Port of London Authority; Ex parte Kynoch Ltd [1919] 1 KB 176

Vanu Pty Ltd v Valuer-General (1993) 11 SR (WA) 80

1 This is an application for review to the Tribunal from an assessed unimproved value of a property at Hatch Road in Oakabella Estate, Northampton.

2 The unimproved value of the subject land was assessed at $69 500 as at 1 August 2003, effective from 1 July 2004. This equates to a value of $610.18 per hectare.

3 The applicant objected to the assessed unimproved value by an objection to valuation made to the respondent dated 25 October 2004, received on 29 October 2004. The objection was disallowed on 23 November 2004, and on 4 December 2004 the applicant wrote to the respondent requesting that the matter be referred to the then Land Valuation Tribunal as a form of appeal.

4 The matter was referred to the then Land Valuation Tribunal on 13 December 2004.

5 The Land Valuation Tribunal was abolished by the commencement of the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) on 1 January 2005, and from this date on, the jurisdiction of the abolished Land Valuation Tribunal was transferred to the State Administrative Tribunal, pursuant to s 167 of the State Administrative Tribunal Act 2004 (WA).

6 The subject land is the whole of the land contained in Certificate of Title Volume 921 Folio 21, known as Lot 34 of Deposited Plan 232355.

7 The registered proprietors of the subject land are Michael Harold Flanigan and Yvonne May Flanigan.

8 The subject land is 113.9 hectares in size, and is situated on Hatch Road, approximately 35 kilometres north of Geraldton and 20 kilometres south of Northampton, in the Shire of Northampton.

9 The land is zoned Rural under the Northampton Town Planning Scheme No 6, which was gazetted on 9 January 1996.

10 According to Mr John Clark, a valuer for the respondent who gave evidence at the hearing, from his understanding the land is undulating, and comprises approximately 70 hectares of loamy soils used for cereal cropping and grazing. Approximately 43.9 hectares of gullies are present on the land and could provide some light grazing but have been fenced off for conservation purposes. The predominant land use in the area is sheep and cattle grazing, with cereal cropping on the better soil types.

11 The applicant is also the owner of other land, used in his farming operations, which is approximately 1.2 kilometres from the subject land.

(a) that the land should have been valued as a contiguous lot to the rest of the applicant's landholdings, located approximately 1.2 kilometres from the subject land; and

13 The applicant wishes the subject land to be valued with the rest of its landholdings as the respondent imposes a higher unimproved lot value on smaller lots in the area.

14 The respondent contends that s 24 of the Valuation of Land Act 1978 (WA) ("the Act") gives the Valuer-General discretion to determine the value of land by either grouping separate lots together, or valuing each lot separately.

15 The first thing that should be said is that there is no presumption in the Act that land be valued on a lot by lot basis, and therefore the respondent's contention is inaccurate. The Act does not discuss the valuation of "lots", rather, the term "land" is used.

16 The term "land" is defined in the Act to mean:

"lands, tenements and heriditaments, and any improvements to land, and includes any interest in land."

17 There is no reference in the definition of "land" to a lot.

18 Section 24(1) then sets out the way in which the Valuer-General may assign value to "land":

"(1) Subject to sections 62 and 63 of the Strata Titles Act 1985, the Valuer-General may, in his discretion, assign to any land to be valued a valuation obtained -

(a) by aggregating the valuations he would have assigned to any parts of which the land is comprised had he been separately valuing each such part; or

(b) by apportioning to the land such part as he considers appropriate of the valuation he would have assigned had he been valuing that land conjointly with any other land,

but nothing in this subsection limits the means by which the Valuer-General may otherwise make a valuation of the land."

19 Section 24(1)(a), therefore seems to allow the valuation of each "part" of the "land" to be added to together. The Act does not provide a definition of the term "part". It would appear however, from s 24(1)(a) that the Valuer General, and therefore the Tribunal could value separately "parts" of the same land, where it was possible to separate (either by use, topography, cadastral boundaries, or in some other way) different "parts" of the same land.

20 Section 24(1)(b) provides for the opposite of s 24(1)(a). It allows for a valuation of the whole of the land to be undertaken, and then a portion of the valuation to be apportioned to each part of the land, as if the valuation had occurred at the same time as valuing other land. Put another way, it allows the valuation of parts of land together, rather than using the method prescribed in s 24(1)(a).

21 In the decision of Vanu Pty Ltd v Valuer-General (1993) 11 SR (WA) 80 at 88, the Land Valuation Tribunal gave the following explanation for s 24(1):

"Section 24(1) of the Act makes it clear that in assigning a value to any land the respondent has more than one approach which he may adopt. Either the respondent may aggregate separate parts of the land in question had he been separately valuing those component parts or alternatively he may apportion to the separate parts the value he would have assigned had he valued them conjointly. The provision goes on to state that whichever method the respondent adopts it does not fetter the discretion which is otherwise available to him in valuing the land."

22 The question in this case is how separate can these parts of the land be and still be valued together.

23 To guide the exercise of discretionary power provided in s 24, the Valuer-General relies upon Valuer-General's Office Valuation Policy 4.3.10 - Group Valuations - Unimproved Values in Rural Areas ("the policy"). The policy came into force on 14 November 2003.

24 This policy provides:

"Contiguous rural land held in the same ownership used and occupied as one property and which would normally be expected to sell as one holding, is to be valued as a single valuation entity.

Individual values will apply to land except where it can be demonstrated that:

• The lots are used and occupied as one holding and would normally be expected to sell as one holding.

• The current contiguity and use will continue into the foreseeable future.

• The basis of valuation is confirmed by sales evidence."

25 The policy also provides a definition of "contiguous":

(b) Where locations or lots are separated by a road, drain or watercourse reserve, they may be deemed contiguous.

(c) In exceptional circumstances, properties, even though their boundaries do not strictly adjoin, may be deemed by the Valuer General to be contiguous. In such cases, the matter should be referred to the Valuer General or appropriate Chief Valuer, who may be guided by advice provided by the local government."

26 The respondent provided the Tribunal with its reasons for why its policy should be applied, citing relevant case law.

27 The policy does appear to be based on proper valuation principles, and is therefore lawful. The policy itself states that it is based on the legal precedent derived from the decisions of Gilbert (Valuation Officer) v S Hickinbottom & Sons Ltd [1956] 2 Q B 40, and Colonial Sugar Refining Co Ltd v Valuer General (1970) Q CLLR 176.

28 The policy does not purport to inflexibly guide the exercise of discretion without the merits of the particular case: R v Port of London Authority; Ex parte Kynoch Ltd [1919] 1 KB 176.

29 The respondent did not provide the Tribunal with any information regarding whether the policy had been consistently applied. It was therefore difficult to determine what weight the policy should be given by the Tribunal in its determination.

30 Notwithstanding this, the Tribunal finds that weight should be accorded to the policy as it is based on the principles laid down by common law.

31 These two cases, and the policy itself, provide direction in two ways, and are discussed below.

32 The decision of Gilbert (Valuation Officer) v S Hickinbottom & Sons Ltd (supra) suggests that there must be a relationship of function between the two parcels of land to be valued. In Gilbert, Denning LJ sets out the circumstances where land, although physically separated might be valued together:

"There are exceptional cases where two properties, separated by a road, may be treated as one single hereditament for rating purposes. That may happen when a nobleman's park, or a farm (when agricultural land was rated), or a golf course, is bisected by a public road. In such cases the two properties on either side of the road are so essentially one whole - by which I mean, so essential in use the one to another - that they should be regarded as one single hereditament."

33 This passage was cited with agreement in the Land Valuation Tribunal decision of PT Ltd v Valuer-General (2002) 29 SR WA 330 at 365.

34 The policy reflects the concept in Gilbert (Valuation Officer) v S Hickinbottom & Sons Ltd (supra) by requiring land proposed to be valued together to be used and expected to sell as one holding.

35 In this case, the applicant wanted the subject land to be valued with his other two lots. Mr Flanigan gave evidence that the subject lot was purchased in 2000 "to enhance our productivity". At the hearing Mr Flanigan advised that the subject land is used for coarse grains, and for sheep grazing, in a rotation system. The lot is in pasture every third year. In the other years, barley and oats are sown to provide course grains for sheep grazing. Mr Flanigan moves his farm equipment to the subject land from his other land holdings, and sometimes moves livestock for sheep dipping, shearing and the like.

36 While it is accepted the subject land probably does enhance the viability of the applicant's farming venture, it is not, in my view, so essential to the rest of the farming venture to render it useless without the subject land. It is unlikely that the land would be sold as a single land holding with the other lots.

37 The decision of Gilbert (Valuation Officer) v S Hickinbottom & Sons Ltd (supra) suggests that there must be a limitation on the physical situation of the parcels to be valued. The question of how far apart two parcels of land could be and still be valued together, was discussed in obiter in the Colonial Sugar (supra) decision, citing a previous decision of the Queensland Land Appeal Court in Appeal by Valuer-General from a decision of the Land Court - Shire of Banana (1969) 36 CLLR 178 at 182, which noted that a limitation must be placed on the physical situation of the parts of the land to be valued together. It should be noted that s 34 of the Valuation of Land Act 1944 (QLD) now expressly allows the valuation of non-contiguous farming land where the land is worked as one holding, and owned by one person.

38 The respondent has imposed a limitation on the physical situation in its policy, while still allowing discretion to be exercised to allow the valuation of non-contiguous parcels in certain circumstances. This is done in the policy by way of the definition of "contiguous" to allow land where the boundaries "do not strictly adjoin" to be considered to be contiguous.

39 Mr Clark, in his oral evidence, noted the type of situations where the respondent's discretion may be exercised to allow land that was not contiguous to be valued together. As an example, Mr Clark referred to a situation where two parcels of land were 800 metres apart, where there was a well on one property which pumped water to the main property, and where the land had changed hands together on two previous occasions. This is the type of situation where a valuation of both lots together would be contemplated.

40 Mr Flanigan points out that in an open market, it is not always possible to expand farming operations by purchasing contiguous lots, and therefore it is necessary to purchase what is available, even if it is some distance away from the main farm. The Tribunal understands farmers' predicament in this regard. However, short of a provision similar to that in the Queensland Land Valuation Act 1944 (QLD), there is little that can be done in the situation.

41 For these reasons, the Tribunal dismisses the applicant's first argument that the land should be valued together with the rest of its landholdings, which are 1.2 kilometres away.

42 The Act, in s 4(1), provides a definition of "unimproved value". For the purpose of this appeal, the definition in s 4(1)(b)(vii)(I) is relevant:

"the capital amount that an estate in fee simple in the land not including improvements might reasonably be expected to realize upon sale."

43 "Improvements" are also defined in s 4(1), as:

"In relation to land means the value of all works actually effected to land, whether above or below the surface, and includes fixtures, but does not include:

(a) machinery, whether fixed to the land or not; or

(b) any below ground works used in the extraction of minerals or petroleum."

44 Therefore, the unimproved value land is calculated on the basis of it being notionally in its natural state, but regard is still given to its location, and any infrastructure or public utility to which the land may take benefit. Accordingly the subject land it to be "valued as vacant, but located in the neighbourhood as it exists in the real world": Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78; [2001] 51 NSWLR 673, at 682 per Handley J A.

45 In order to properly determine the unimproved value of land, the "direct comparison" method of valuation, otherwise known as "market comparison" is used in cases where there is directly comparable sales evidence available, or where small adjustments can be made to deal with any differences between the comparable property, and the property the subject of the valuation. It is considered that this method of valuation is the most reliable guide to market values: Harris v Minister for Public Works [1912] 12 SR (NSW) 149, at 156.

46 Mr Clark noted that the subject lot was a smaller property near a regional centre (Geraldton). It was his view that a particular set of factors influences the value of such properties, and included the location of the land, the size of the land (on the basis that the smaller properties have a higher value per hectare), soil type, ocean frontage and views. These types of blocks, the Tribunal was told, are often referred to as 'lifestyle blocks', in that, of themselves, they could not be put in to active viable agricultural production. No evidence was provided by either party as to whether the land enjoyed any views or other aesthetic features which would lend itself to being used as a lifestyle lot.

47 Mr Clark produced valuation evidence to the Tribunal. The Tribunal disregards entirely the evidence provided in relation to:

(a) Lot 1448 on Plan 248641, with an assessed unimproved value of $4031 per hectare, being a 25 hectare lot located 5 kilometres from Dongara; and

(b) Lot 48 on Diagram 28492, with an assessed unimproved value of $22 346 per hectare, being a 4.9 hectares lot located on the outskirts of Geraldton.

48 The reason for disregarding these valuations is that they are located in much closer proximity to other attractors - in the case of the land near Dongara, the land is significantly closer to Perth, and close to the established seaside villages of Dongara and Port Denison. In the case of the land on the outskirts of Geraldton, as the land is only 4.9 hectares in area, it is possibly more accurately characterised as being of a rural residential nature.

49 Another sale referred to by Mr Clark related to land located on the Coronation Beach Road, which provides direct access to the beach. Lots 50 and 51 on Plan 20176, with an area of 71 hectares, were sold for $150 000, which equated to an assessed unimproved value of $1492 per hectare. Again, the factors at play in relation to this lot are likely to be different from the subject land, particularly because of its proximity and access to Coronation Beach, a renowned water sports beach, and the fact it is closer to Geraldton.

50 Of the other values provided by Mr Clark, those referred to in paras (42), (43), (44), (47) and (48) of Mr Clark's witness statement are most relevant. These can be summarised as follows:

(a) Lot 56 on Plan 21322, Lot 52 on Plan 20176, Lot 53 on Plan 20176 and Lot 64 on Plan 33024, located approximately 8 kilometres from the subject site, and with an approximate total area of 553 hectares. This land, valued contiguously, has an assessed unimproved value of $428 per hectare.

(b) Lot 3039 on Plan 120966, Lot 2851 on Plan 113726, Lot 3023 on Plan 23188, Lot 26 on Plan 107800 and Lot 2287 on Plan 103321. This land is situated 11 km east of the subject land and is 964.9 hectares in area. The land was sold in August 2003 for $1 200 000. Together with other contiguous land in the same ownership, the assessed unimproved value is calculated at $249 per hectare.

(c) Lot 28 on Plan 28842, sold in January 2004 for $95 000. The lot is 45.6 hectares in area, and located 8 kilometres east from the subject land. The assessed unimproved value is calculated at $1335 per hectare.

(d) The subject land, which was purchased by the applicant in March 2000 for $135 000, and as discussed above, has been assigned an unimproved value of $69 500, which equates with $610 per hectare.

51 Mr Flanigan similarly provided evidence regarding recent sales in the area. These were analysed by Mr Clark in the respondent's grounds of response. These include:

(a) Lot 43, which Mr Flanigan says sold in 2002 at a value of $203 per acre for 590 acres. Mr Clark appeared to group the sale of Lot 43 on Plan 232355 and Lot 68 on Plan 123212. Mr Clark says this sale took place in April 2000, for a value of $123 000. The assessed unimproved value of the land was calculated at $68 460, which equates to $252 per hectare.

(b) Lot 36 on Plan 232355, which sold for a price of $225 000 in November 2002. The area of Lot 36 is 117 hectares. The assessed unimproved value of the land is $834 per hectare. Mr Flanigan has provided evidence that the land sold for $750 per acre.

(c) Lot 33, which Mr Flanigan says sold for $630 per acre for a 270 acre lot. Mr Clark noted that the sale of the land occurred in September 2004, at a value of $180 000 for 109 hectares. The assessed unimproved value of the land was calculated at $814 per hectare.

(d) Lot 32, which was purchased by Mr Flanigan in September 2004, at a price of $255 per acre for 1060 acres. The lot size in hectares is 429 hectares. Mr Clark noted that the purchase price was $270 000, of which the assessed unimproved value was $137 482, equating to $320 per hectare.

52 It should be noted that a conversion of acres to hectares, while not entirely accurate in this case, provides a similar set of areas and values from both the applicant and the respondent. There did not appear to be any argument between the parties regarding these values.

53 Having considered the evidence and the material presented, the Tribunal is satisfied that the valuation is appropriate, and that accordingly, the appeal should be dismissed.

54 The orders of the Tribunal are:

Appeal dismissed.

I certify that this and the preceding 11 pages comprise the reasons for decision of the Tribunal.

______________________

B Moharich

Member