Comparable Sales
10The second point to be determined is the rate per square metre to be applied. This rate is determined from analysis and adjustment of comparable sales. Ultimately, the valuers agreed that the only sales that have a significant bearing are:
(a)Sales of 1-2 Wentworth St and 2A Fanning St, Tempe to the Council relied upon by Mr Dundas. Those lands had an underlying residential zoning and were for an open space purpose, namely consolidation into the adjacent parkland.
(b)A sale by Sydney Airport Corporation Limited (SACL) to SW of an easement for water supply purposes, which was utilised for the continuation of the pipeline just north of the subject easements. This sale is relied upon by Mr Lunney.
11The valuers agree that, generally, sales to public authorities are not accepted as good evidence of market value.
12Mr Dundas considers that regard should only be given to the residential sales and that the SACL transaction should not be relied upon as it requires too much adjustment. Mr Lunney takes the opposite view, preferring to rely entirely on the SACL transaction.
13The principal points in dispute are:
(a)Should the residential sales be considered and, if so, should a discount be applied for their underlying residential zoning?
(b)What adjustments, if any, should be applied to the compatible sales to reflect the features of the acquired land?
14If a council is prepared to buy residential land at residential values for open space purposes, such as where there is a shortage of needed open space land in a locality (as is often the case in inner city localities), then in assessing market value compensation for compulsory acquisition of the council's open space land, there should be no discount from comparable residential sales prices merely because the acquired land is zoned for open space: Leichhardt Council v Roads and Traffic Authority of New South Wales (No 3) [2009] NSWLEC 3. In that case Lloyd J at [22] adopted the following comments of Gobbo J in the compulsory acquisition compensation case of City of Brighton v Road Construction Authority [1986] VR 255, (1985) 59 LGRA 262 at 272:
Where a parcel of land is set aside for parkland use, its value will be related to the price that a purchaser of parkland will be prepared to pay, given that such purchaser will be using the land for that which constitutes for it the highest and best use of the land. It will also be related to what that purchaser would have to pay - assuming reasonable opportunity and not compulsion to effect a purchase - if it were to purchase other land that might equally meet its purpose. Such purpose of other land may lead it to have to pay the equivalent of residential values.
The fact that emerges very clearly is that municipalities, especially those like that claimant in developed areas, cannot purchase land appropriately zoned for parkland purposes. They are obliged to buy residential land, at or near residential values, when they wish to secure parkland.
The authority's valuers argued that where a municipality bought residential land for parkland purposes and then had imposed on the land a reservation for public open space, its value was immediately reduced. It is difficult to understand why this is so, for the municipality is the main factor in the market for parkland. It will clearly be prepared to pay the original price it paid for the very good reason that, if it did not buy this land at that price, it would be compelled to pay that price for residential land, there being no parkland so zoned available for sale.
15In Leichhardt (No 3) Lloyd J also said:
25 In Roads and Traffic Authority of New South Wales v Blacktown City Council at [40] to [42], the Court of Appeal accepted the practice of using comparable sales of properties acquired by councils for open space purposes, but which had residential zoning or residential uses. Spigelman CJ also accepted the long established practice that a person who wishes to acquire land for the purpose of open space is, in fact, prepared to pay residential values to make such an acquisition (at [44]). His Honour said (at [44]):
This is an example of the "willing but not anxious purchaser" element of the market valuation test, the traditional test now found in s 56(1) of the Just Terms Act.
...
33 The facts and circumstances of the present case are different from those in the Sutherland case. Unlike Sutherland, there is a severe shortage of open space in Leichhardt. Leichhardt Council is active in the market of acquiring land for the purpose of open space. That is, the council is a buyer of land in the market for open space, it accumulates open space, there is a shortage of open space in the municipality and the council pays residential values to obtain it. The hypothetical willing but not anxious seller, with the knowledge of the market, would be aware of the prices paid by the willing but not anxious buyer and would thus be unwilling to settle for less than a full residential value in the hypothetical sale.
34 As in the City of Brighton case, the market value disclosed in the present case reflects the history of purchases by the council for open space in Leichhardt. Moreover, as noted by Gobbo J in the passage set out at par [22] above, this may lead and, in fact, has led, to the council having to pay the equivalent of residential values. Accordingly, in my opinion, the discount due to the fact that the subject land is zoned for open space, on the facts and circumstances of the present case, should be nil. It represents the price that a willing but not anxious purchaser is prepared to pay and a willing but not anxious seller is prepared to accept, for land intended to be used for open space in Leichhardt. The result is a market value for the acquired land of $1,175 per square metre, that is, the sum of $1,053,740.
16Marrickville local government area is deficient in public open space. The Plan of Management Tempe Recreation Reserve 1997 records it as having the second lowest level of open space per capita in the Sydney region. The Department of Planning's 2003 open space inventory of the Sydney region records Marrickville local government area as having 1.88 hectares of open space per 1,000 persons compared with 7.78 hectares per 1,000 persons for the Sydney region. In 2005 and 2006 Council paid residential rates to purchase two properties with an underlying residential zoning for public open space purposes, namely to extend the adjoining parkland (1-2 Wentworth Street and 2A Fanning Street). The Marrickville Local Environmental Plan 2001 zones as open space other residential properties in the same locality as those two properties (enabling owner-initiated compulsory acquisitions at residential rates for their underlying residential zoning). In these circumstances, in my opinion, no discount should be applied to the comparable residential sales merely because the acquired land is zoned for open space.
17There should, however, be adjustments for other factors including for location, topography and environmental features: as, for example, in Leichhardt Council v Roads and Traffic Authority of New South Wales [2005] NSWLEC 86.
18As the residential sales abut and have been incorporated into Lot 306, they provide, if adjusted, some indication of value. Similarly, as the SACL sale was for the northern continuation of the same infrastructure, if adjusted it also provides some indication of value.
19I consider it appropriate to have regard to both these (far from perfect) comparable transactions, as there is no other evidence available. Factors to be considered include:
- Date of sale
- Area of land
- Topography
- Subdivision potential
- Availability of services
- View
- Flood affectation
- Aircraft noise affectation
- Road access
- Environmental Issues
- Restricted airspace height limitation
- Onerous easement conditions - SACL land
20No 1-2 Wentworth St, Tempe was acquired by Marrickville Council in June 2005 for a consideration of $690,000, for consolidation into the adjacent parkland. The property was zoned open space/recreation but market value was assessed assuming an underlying zoning of residential. The property comprised an area of 613 square metres. An old cottage was located on the property but was assessed to have no value. Mr Dundas analysed this sale at a rate of $1,126 per square metre.
21No 2A Fanning St, Tempe was acquired by Marrickville Council in March 2006 for a consideration of $560,000, for consolidation into the adjacent parkland. The property was zoned open space/recreation but market value was assessed assuming an underlying zoning of residential. The property comprised an area of 613 square metres. An old cottage was located on the property but was assessed to have no value. Mr Dundas analysed this sale a rate of $914 per square metre.
22Mr Dundas adopted a rate of $1,000 per square metre for these residential sales and did not consider an adjustment for the older dates to be necessary.
23To compare these residential sales to the subject, Mr Dundas allowed a discount of 20 per cent to reflect the difference in size between the residential sites (613 square metres) and the subject site (4,379.3 square metres) to determine a rate of $800 per square metre for the level sections of the subject. He made a further adjustment of 20 per cent to a rate of $600 per square metre for the sloping batter area of the subject.
24Mr Lunney's opinion is that these two residential sales do not provide reliable evidence as to the market value of the easement area as significant adjustment to these sales would be required to bring to account the differences between them and the Easement Area.
25Mr Lunney consider that the most relevant market evidence is the SACL sale of an easement, which he thought was on virtually identical terms to the acquired easements, over adjoining land to the north.
26The effective extension of the subject easements over the adjoining SACL land was negotiated between SACL and SW at an effective rate of $125 per square metre. This rate was applied to the whole of the easement area of the SACL land, where the pipeline was above ground. Additionally, it was reported that the residue of the SACL land, from which the elevated pipeline would be visible, suffered a diminution in value equivalent to 1.25 percent.
27Mr Lunney relied on the SACL sale because the SACL easement provides for a continuation of the same desalination plant water supply pipeline as is erected within the area of the acquired easements, and he thought that the terms of the SACL easement are virtually identical to the terms of the acquired easements. Mr Lunney considered that the adjoining SACL land suffered a number of the same physical constraints as those which are suffered by the subject easements area.
28A table in evidence detailing the calculations for the SACL purchase indicates that the rate of $125 per square metre was applied to the whole width of the easements. A lower rate was not applied to the maintenance road area, as applied by both valuers to the subject easements. In my opinion, by adopting this different approach to the treatment of the subject land, Mr Lunney has under estimated its value when considering the SACL transaction. Mr Lunney, without adjustment, applied this rate per square metre to the calculation of the compensation for the subject easements.