Mir and ors v Valuer General

Mir and ors v Valuer General - [2009] NSWLEC 1309 - NSWLEC 2009 case summary — Zoe

[19]

17 Campbelltown Local Environmental Plan - District 8 (Central Hills Land) was gazetted on 29 January 1988 and applied to part of Lot 2 with the effect of changing part of the 7(a) zone under IDO 25 to a similar 7(d1) Environmental Protection (Scenic) zone although the range of permitted uses remained similar to those under IDO 25. 18 At the 2003 Base Date, Lot 2 was subject to the provisions of Campbelltown (Urban Area) Local Environmental Plan 2002 (LEP 2002) gazetted on the 22 February 2002. The main changes to the zone boundaries from IDO 25 were adjacent to the school zone and the neighbourhood business zone. Objectives for the zones were added by LEP 2002 but there were no major changes to the designated areas for the different land uses on Lot 2 from IDO 25. 19 A copy of the LEP 2002 zoning map is attached to the statement of Mr Grech. A hypothetical subdivision 20 The experts relied on a hypothetical subdivision of the 4 properties prepared by John M Daly & Associates Pty Ltd (see Attachment 1). The hypothetical subdivision generally adopted land uses consistent with IDO 25 and LEP 2002 but with some changes. It was generally agreed by all experts that the hypothetical subdivision represented a reasonable subdivision of the 4 properties. There was some disagreement between the experts on some areas of the hypothetical subdivision and these are explained later in the judgement. The hypothetical subdivision provides a total of 202 lots and a breakdown of the different land uses in the following way: 21 Property 1 - this property is triangular in shape with an eastern boundary adjoining the M5 Motorway and its northern boundary having a frontage to Exmoor Place. A watercourse cuts through the property near its northern boundary. The property has a total site area of 2.868 ha. The breakdown of the different land uses is: o residential -18,180 sq m, o riparian setback - 3,400 sq m, and o drainage - 7,100 sq m. 22 Property 2 - this property is generally rectangular in shape with a undulating to steep topography. The property is cut by a watercourse in the north-eastern part of the site. The property has a total site area of 7.372 ha. The breakdown of the different land uses is: o residential - 45, 620 sq m, o riparian setback - 5,200 sq m, o drainage - 14,000 sq m, and o scenic protection - 8,900 sq m. 23 Property 3 - this property is generally rectangular in shape with a undulating to steep topography. The property is cut by a watercourse in the north-eastern part of the site. The property has a total site area of 7.378 ha. The breakdown of the different land uses is: o residential - 22,780 sq m, o riparian setback - 6,600 sq m, o drainage - 18,700 sq m, o scenic protection - 11,700 sq m, and o open space - 14,000 sq m. 24 Property 4 - this property is generally irregular in shape with a undulating to steep topography. The property is cut by a watercourse in the north-eastern and southern parts of the site. The property has a total site area of 41.538 ha. The breakdown of the different land uses is: o residential - 91,780 sq m, o riparian setback - 39,600 sq m, o drainage - 27,400 sq m, o scenic protection - 245,300 sq m, and o open space - 8,100 sq m, and o neighbourhood business - 3,200 sq m. The highest and best use 25 Mr Ludvik and Mr Grech agreed that the highest and best potential use of each of the properties at each of the base states would be: o residential zoned land - a residential subdivision which creates vacant lots for sale, o neighbourhood business zones land - neighbourhood shops, o environmental protection zoned land - subdivision along zone boundaries to contain the 2 dwellings on Property 4 and the creation of a residue lot on Properties 2 and 3. The residue lot on Properties 2 and 3 would be undersized for the erection of a dwelling house but could be possibly be sold in conjunction with a residential lot or used for open space purposes, o open space or drainage zoned land - public open space and drainage purposes in conjunction with the subdivision and development of the balance of the land. 26 Mr Ludvik and Mr Grech agreed that a prudent purchaser would take into consideration a range of matters, when determining the likely development potential of the properties at each of the Base Dates. These matters would be: o flooding, o ecological, o aboriginal archaeology, o European heritage, o subdivision/road design, o acoustic, and o landscaping/scenic quality. 27 Mr Ludvik and Mr Grech helpfully agreed that the matters of flooding and ecological considerations are the primary matters that would affect the development potential of the properties. Other relevant matters agreed by Mr Ludvik and Mr Grech include: o the drainage/riparian corridors would need to be designed for the 4 properties, o an acoustic barrier would need to be designed for the 4 properties and constructed prior to any development of the properties, o the subdivision of all residentially zoned land would likely to be capable of being developed as one, and o the neighbourhood business zoned land could be developed independently of the other land uses. 28 Mr Hams and Mr Boubli agree on a large number of aspects of the hypothetical subdivision, however disagree on: o the width of the riparian corridor required to be provided in the creek environment, o the length of the bridge across the riparian area for the southern leg of Clydesdale drive, o the extent of the acoustic barrier along the property boundary with the adjacent freeway, and o the cost of the works required to embellish the riparian and drainage areas in the hypothetical subdivision. 29 Mr Maundrell and Mr Carrapetta rely on the evidence of their engineering experts for their preferred valuations. For the 2000 Base Date, Mr Maundrell and Mr Carrapetta agree that the highest and best use of Property 4 was land banking for future development.

[34]

46 Considerable support for the need for the joint development of the subject properties comes from the Environmental and Planning and Assessment Act 1979 where it could be reasonably argued that the individual development of the properties (even assuming it was viable) would be inconsistent with the object in s 5(a)(ii), in that it would not reflect the "economic and orderly" development of the land when compared to the "economic and orderly" development of the land as shown in the hypothetical subdivision (or something similar). It could also be reasonably argued that there would be a reasonable basis for the rejection of an application to develop an individual property that did not give due regard to its relationship with adjoining properties, particularly when there are development control plan or similar documents, such as IDO 25, DCP 79, the Central Hills DCP that are designed to guide the overall form of development for the consolidated properties. 47 These are matters that could reasonably be expected to be known by a hypothetical vendor and purchaser of each parcel and the price paid for the properties would likely reflect an adjustment for risk. The significant difference between Mr Maundrell and Mr Carrapetta on an adjustment for this risk highlights their different approaches. The method of valuation 48 Mr Maundrell and Mr Carrapetta adopt different methods of valuation for the 2003 Base Date. In considering the competing methods, I am satisfied that the comparable sales method used by Mr Maundrell is the appropriate method in this case. Hemmings J in Pamalco Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [No 3] 71 LGERA 441 (at 447) relevantly states: Long experience has demonstrated that the most acceptable and reliable approach to the ascertainment of the value of land is the "selling approach" which was explained in Spencer v Commonwealth of Australia (1907) 5 CLR 418. In my opinion, the selling test described therein is as appropriate today as when initially formulated. The loss to the dispossessed owner is the sum which a prudent purchaser would be prepared to pay to the vendors for the land at the date of resumption after a hypothetical process of voluntary bargaining. For that purpose each party must be assumed to be cognisant of all relevant circumstances which might affect the value of the land.

[35]

There are many acceptable valuation approaches, and a hypothetical development exercises are also a valid and useful tool in the hands of an expert valuer. However, the inevitable multiplicity of assumptions and adjustments make such mathematical hypothetical assessment less reliable than the "selling" approach based on market sales of comparable land with the minimum of adjustment. 49 These comments are supported by Jagot J in Graham Trilby Pty Limited v Valuer General [2008] NSWLEC 217, where Her Honour states (at 26): 26 A convenient starting point for the methodological dispute is the observation of Wells J in Bronzel v State Planning Authority (1979) 44 LGRA 34 at 38 that: …this Court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism. 27 That having been said it is well recognised that, if comparable sales are available, direct comparison has repeatedly been identified as the "conventional valuation technique" (see, for example, the summaries in Alan Hyam, The Law Affecting the Valuation of Land in Australia, (3rd ed, 2004), at 126 - 141 and Douglas Brown, Land Acquisition, (5th ed, 2004), at [4.9]). The basis for this preference is obvious - if comparable sales are available then they represent direct evidence of the market's evaluation of all of the variables that a valuer must otherwise account for by a subjective opinionative process in the residual or hypothetical development approach. This proposition underscores why the fact that developers buying en globo parcels may routinely use a residual analysis to determine land value is an insufficient reason (at least considered in isolation) to disregard or place little, if any, weight on comparable sales. 50 While the reliability of the comparable sales method of valuation can be questioned in some circumstances, I am satisfied that the comparable sales method is appropriate in this case because: o the sales are en globo land, o the 2000 Base Date sales were zoned rural although ear-marked for residential development, and as such the sales would reflect a more conservative value, o the 2003 Base Date sales were zoned for residential or urban purposes, similar to that of the subject properties, o it would be unreasonable to expect multiple nearby sales of residentially zoned en globo land, particularly when the properties in this appeal involve most of the undeveloped land in Blairmount o the sales used by Mr Maundrell are not that distant from the properties that a reasonable adjustment could not be made for distance, o the sales at the 2000 Base Date are not overly close to the Base Date but the market at the time was relatively flat, and o the sales at the 2003 Base Date are close to the Base Date when the market at the time was relatively buoyant. 51 The subjective opinionative process in the residual or hypothetical development approach referred to by Jagot J in Graham Trilby is highlighted in the evidence of the valuers in their assessment of the profit and risk. Mr Maundrell (in response to Mr Carrapetta) provides the following assessment: o 20% for the hypothetical approach over Lot 2. o 17.5% for the hypothetical approach over Parcels 1-3. o 17.5% for the hypothetical approach over Parcel 4. 52 Mr Carrapetta, for comparison, provides the following assessment: o 25% for the hypothetical approach over lot 2 DP1042471. o 25% for the hypothetical approach over Parcels 1-3. o 25% for the hypothetical approach over Parcels 4. 53 Mr Carrapetta provides the following profit and risk assessment for the Properties 1, 2 and 3 for both his original valuation (Original)and the Valuer General engineering assumptions (Revised ): o 40% for the hypothetical approach over Parcel 1 (Original), o 35% for the hypothetical approach over Parcel 1 (Revised), o 45% for the hypothetical approach over Parcel 2 (Original), o 35% for the hypothetical approach over Parcel 2(Revised), o 35% for the hypothetical approach over Parcel 3 (Original) o 35% for the hypothetical approach over Parcel 3 (Revised). 54 A consistent theme running through the evidence of Mr Carrapetta was a stated or implied assumption of non-cooperation in the joint development of the properties, if the properties were in different ownerships. I do not accept that the degree of non- cooperation suggested by Mr Carrapetta is likely to occur for the reasons set out in earlier paragraphs so I would be more inclined to accept the profit and risk assessment by Mr Maundrell, if hypothetical development approach was to be used.

[46]

68 Mr Boubli states that the embellishment of the riparian areas needs the provision of erosion and flow measures to control increased runoff within the watercourse as a result of the development. The rates adopted from Camden are based on attenuation of flows off the site and hence upon a "natural" pre-development flow regime. There is no flow attenuation within the development and so the flow within the watercourse will be increased as a result of an increase in impervious areas and will be discharged to the watercourse in a series of outlets, which concentrates the flow. Further, the upstream flows will be conveyed through the site and discharge to the watercourse as a concentrated flow, rather than a sheet flow as in the existing predevelopment state. These increased and concentrated flows would generally be controlled by a series of natural engineering features, such as rock pitching to the invert and creek banks, dense planting and regeneration within the drainage corridor and riparian areas. Findings 69 On this issue, I generally agree with the conclusions of Mr Boubli. At the Base Dates, the works required for the drainage and riparian areas would likely have been more than the planting of trees, as suggested by Mr Hams. The treatment of stormwater flows generated by the development needs to be addressed and would require some engineering measures to address the additional and more concentrated flows from the development of the properties. Noise barrier 70 Mr Hams and Mr Boubli disagreed on the extent of the noise barrier required along the southern boundary with the South-Western Freeway. Mr Hams maintains that the noise barrier should be located along the rear property boundaries of the proposed lots in Property 1 with some returns adjoining the drainage land whereas Mr Boubli maintains that the noise barrier should be extended across the full width of the drainage land. The additional cost estimated by Mr Boubli is $39,600 for an additional 40 m of barrier and an extension of the freeway culvert at a cost of $150,000. Findings 71 In the absence of any acoustical evidence, it is not possible to conclude whether the additional works suggested by Mr Boubli are required however the cost of the additional acoustical barrier is not a large expense and would not impact on the valuations of the properties in any meaningful way even if the additional fencing was required. I am not satisfied that some other means of providing the additional acoustical fencing for the proposed lots could not be found without the need for the extension of the freeway culvert and as such, it is not a cost that should be included in the valuation of the properties. The valuation of Property 4 at the 2000 Base Date Carrapetta evidence 72 In accepting that the property can be developed in isolation from Properties 1,2 and 3, Mr Carrapetta states that the residential area of 9.11 ha indicates a yield of 114 residential lots however based on the evidence of Mr Boubli, the riparian zone is likely to be required to be widened because of a standard setback from the bank of the nearby creek and the yield would be reduced by up to 10 lots. For similar reasons, the area set aside for neighbourhood business may also be reduced in size.

[49]

76 Mr Carrapetta's land value, based on comparative sales, is $2,000,000 ($2,007,000), being: o residential - 911,800 sq m @ $10/sq m = $911,800, o scenic protection - 245,300 sq m @ $4/sq m = $981,200 o neighbourhood business - 2,850 sq m @ $40/sq m = $114,000. 77 The areas for the riparian setback, drainage and open space were seen by Mr Carrapetta as a liability and given no value. Maundrell evidence 78 Mr Maundrell relies on sales of en globo land at Glenfield and Elderslie. The relevant residential en globo sales are: o Sale 1 - Glenfield Area: 2.025 ha. Sale price: $1,518,750 ($75/sq m). Zone: Rural 1(a). Contract date: 20 December 2001. Adjusted land value at Base Date: $$1,239,796 ($61.22/sq m). o Sale 2 - Glenfield Area: 0.5208 ha. Sale price: $390,600 ($75/sq m). Zone: Rural 1(a). Contract date: 20 December 2001. Adjusted land value at Base Date: $318,857 ($61.22/sq m). o Sale 3 - Glenfield Area: 1.128 ha. Sale price: $1,000,000 ($89/sq m). Zone: Rural 1(a). Contract date: 7 March 2002. Adjusted land value at Base Date: $800,000 ($70.92/sq m). o Sale 1 - Elderslie Area: 6.084 ha. Sale price: $3,200,000 ($63/sq m). Zone: Rural 1(a). Contract date: 20 December 2001. Adjusted land value at Base Date: $3,520,000 ($57.85/sq m). o Sale 2 - Elderslie Area: 5.02 ha. Sale price: $3,300,000 ($63/sq m). Zone: Rural 1(a). Contract date: 9 March 2001. Adjusted land value at Base Date: $3,465,000 ($69/sq m). 79 Mr Maundrell states that the Glenfield sales range between $61/sq m and 71/sq m and the Elderslie sales range between $58/sq m and $69/sq m. These sales are all zoned non-urban at the respective sale dates and would have been acquired for land banking. Mr Maundrell makes an overall adjustment of 60% to bring these sales in line with Property 4. Mr Maundrell states that the adjustment is based on: …the reduced density obtainable of over 348,200 sq m of development land. The overall Residential En globo rate includes all riparian buffer areas, drainage, open space and remnant protection zoned land. This approach is well supported by the sales evidence, which also contains similar land types. The hypothetical development calculation over Lot 2 of 59.25 ha also supports my opinion.

[55]

The value of Property 4 at the 2000 Base Date 87 The value of Property 4 at the 2000 Base Date is $4,377,000 ($4,377,550), based on o residential (inc riparian area) - 131,380 sq m @ $25/sq m = $3,284,500, o drainage - 27,400 sq m @ $2/sq m = $54,800, o scenic protection - 245,300 sq m @ $3.50/sq m = $857,500, and o open space - 8,100 sq m @ $7.50/sq m = $60,750 and o neighbourhood business - 3,200 sq m @ $37.50/sq m = $120,000. The valuation of Properties 1, 2, 3 and 4 at the 2003 Base Date Maundrell evidence 88 Mr Maundrell relies on sales of en globo land at Edmondson Park, Glenfield, Leumeah, Kearns and Elderslie although he places greater weight on the 3 sales at Glenfield and the 2 sales at Elderslie for the residential rate for the 2003 Base Date. The following is a summary of these sales: o Sale 1 - Glenfield Area: 1.832 ha. Sale price: $2,550,000 ($139/sq m). Zone: Residential 2(b) and 6(a) Open Space. Contract date: 4 March 2003. Transfer date: 16 July 2003. Adjusted land value at Base Date: $2,677,500 ($146/sq m). o Sale 2 - Glenfield Area: 5.83 ha. Sale price: $10,488,000 ($180/sq m). Zone: Residential 2(b) and 6(a) Open Space. Contract date: 19 June 2003. Transfer date: 10 October 2003. Adjusted land value at Base Date: $10,998,437 ($188/sq m). o Sale 3 - Glenfield Area: 2.544 ha. Sale price: $4,500,000 ($177/sq m). Zone: Residential 2(b) and 6(a) Open Space. Contract date: 17 September 2003. Transfer date: 29 January 2004. Adjusted land value at Base Date: $4,245,283 ($167/sq m). o Sale 1 - Elderslie Area: 10.8 ha. Sale price: $12,143,520 ($112/sq m). Zone: Rural 1(a). Contract date: 16 October 2002. Transfer date: 7 July 2003. Adjusted land value at Base Date: $11,115,480 ($124.45/sq m). o Sale 2 - Elderslie Area: 10.14 ha. Sale price: $10,396,000 ($103/sq m). Zone: Rural 1(a). Contract date: 13 May 2003. Transfer date: 29 June 2004. Adjusted residential land value at Base Date: $8,167,800 ($117/sq m flood free and $96/sq m flood affected). 89 Mr Maundrell states that the Glenfield sales provide a range between $146/sq m and $188/sq m with the land mainly zoned residential and some open space. The Elderslie sales provide a range of $96/sq m (flood affected) and $124/sq m. Mr Maundrell makes a similar adjustment of 60% to bring these sales in line with the subject properties for the 2003 Base Date. The valuations Property 1: 90 Mr Carrapetta's land value of $482,500 is based on a net realisation of $2,305,767 and development expenses of $1,823,359.

[63]

Findings - scenic protection rate 101 Consistent with his approach in giving each property different rates for residential zones land depending on the particular characteristics of the property, Mr Maundrell adopts a similar approach for the scenic protection areas. He adopts the following rates: o Property 2 - $8/sq m, o Property 3 - $5/sq m, and o Property 4 - $6/sq m. 102 I am satisfied that Mr Maundrell's rate for Property 4 is appropriate given its potential subdivision however I do not accept his rates for Properties 2 and 3. Residential lots in the hypothetical subdivision surround the scenic protection areas on these properties and their potential is largely limited to an amalgamation with an adjoining residential lot. Based on the minimum lot size of 100 ha and the limited permissible uses within this zone, the value of the scenic protection land on Properties 2 and 3 is extremely limited and the value should reflect this fact. In my view, the appropriate rate is $1/sq m. Findings - neighbourhood business rate 103 Mr Maundrell and Mr Carrapetta agreed that a rate of $75/sq m for the neighbourhood business land is appropriate for this land although they maintained that the rate should apply to different areas. I adopt the rate of $75/sq m for the neighbourhood business land for the area identified by Mr Hams as being available for development. Findings - open space/drainage rate 104 Mr Carrapetta stated that the open space and drainage areas were a liability and given no value whereas Mr Maundrell adopts the following rates: o Property 1 - $8/sq m, o Property 2 - $8/sq m, o Property 3 - $5/sq m, and o Property 4 - $5/sq m. 105 Accepting that the land must have some value, it is unclear why Mr Maundrell adopts the same rate for Properties 3 and 4 for both base dates, given the agreed position of both valuers that there was a significant change in the market between the base dates. Having found that the appropriate rate for Property 4 at the 2000 Base Date was $2/sq m, Mr Maundrell's rate of $5/sq m for the 2003 Base Date would appear marginally high. It is also unclear why the rate for Properties 1 and 2 is substantially greater than for Properties 3 and 4 considering that Mr Maundrell proposed an identical rate for all properties at the 2000 Base Date. I propose to adopt a rate of $4/sq m for all properties.

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