Souter v Valuer General

Land and Environment Court (NSW)|2006-09-06|Before: Mr J, Preston CJ

CITATION : Souter v Valuer General [2006] NSWLEC 588

APPLICANT John Bedford Souter PARTIES : RESPONDENT Valuer General

KEY ISSUES: Valuation of Land :- Comparable land sales, adjustment for relevant factors including views, aspect, proximity to beach and movement in the market from base date

CASES CITED: Pyramid Pacific Pty Limited v Ku-ring-gai Council [2006] NSWLEC 522

APPLICANT Mr J Souter, self represented

LEGAL REPRESENTATIVES: RESPONDENT Ms A Pearman, barrister Instructed by: Ms Valentine Of: Crown Solicitor's Office

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

JUDGMENT This determination was given extemporaneously and it has been edited prior to publication 1 This is a verbal judgment for a matter that I heard in Nowra last week. The applicant has appealed under s 37 of the Valuation of Land Act 1916 (the Act) against the Valuer General's valuation for the property known as 5 Silver Strand Circle, Hyams Beach, a beachside village on Jervis Bay. The value ascribed as at 1 July 2004, the base date, is $504,000 and the applicant is contending that the value should be $300,000.

2 The Court met on site with the parties and undertook an inspection of the comparable sales as well as having the opportunity of the inspection of the subject property itself.

3 By way of description the subject property is one of a dual occupancy with the Torrens title. The attached dual occupancy was developed approximately 10 or 11 years ago and at the time the property Torrens title subdivision was permissible, however now under the Shoalhaven Local Environmental Plan subdivision of dual occupancy development is not permissible. Under the current LEP there are minimum allotment sizes and that is for attached dual occupancies 500 sq m and for detached dual occupancies 700 sq m.

4 The site can be described as on the southern slope of a relatively steep hill although it is steeper at the frontage and on the driveway but flattens out towards the rear of the subject site. The subject site is some 334 sq m, approximately 10 m wide, on average, and 33 m in depth. The adjoining site at No. 5A is of similar dimensions.

5 The Court had the opportunity of inspecting the comparable sales and the valuer that gave evidence on behalf of the Valuer General is Mr D Austin who is a qualified valuer and has been working in the Jervis Bay area for approximately the last four years. The Valuer General was represented by Ms A Pearman, counsel, and the applicant represented himself, as a litigant in person.

6 It was submitted by Ms Pearman that the Court did not have any expert evidence against that presented by the Valuer General's expert, Mr Austin in the proceedings and the onus is on the applicant in terms of s 40(2) of the Act to prove that the value should be disturbed. A judgment I refer to, while an unrelated subject matter as it involves costs, is that of Preston CJ, Pyramid Pacific Pty Limited v Ku-ring-gai Council NSWLEC 522 [2006]. This is relevant for His Honour's comments on expert evidence wherein he states: "the factual foundation and the reasoning process for the opinions established in the expert evidence can be used legitimately by the parties either to support the conclusion expressed by the expert or to derive an alternative conclusion to that reached by the expert. The Court can similarly use the factual foundation established in the expert evidence and the reasoning process from the factual foundation to arrive at the same or different conclusions to that expressed by the expert."

7 Evidence was also provided to the Court by Mr C Alison, the licensed and only real estate agent in the Hyams Beach area and also Mr M Crowther an accountant provided evidence with respect to the half purchase of 5A Silver Strand Circle.

8 During the hearing valuations for other properties were raised by the applicant and the Court indicated that these and the movement in valuations is not a relevant consideration and consequently this was not pursued further during the proceedings.

9 When matters are on appeal to the Court the valuation of individual properties come under greater scrutiny and any discrepancies are matters that are considered at some length in determining what is an appropriate valuation for the subject property.

10 For the Court record the comparable sales include 2/76 Cyrus Street, Hyams Beach. This property is behind the general store/real estate agency in Hyams Beach and it has a shared access drive with this and the beachfront reserve property. Number 76 is developed as a townhouse style development with another dwelling and these are at the rear of the land with the general store that has frontage to Cyrus Street. This comparable sale has a limitation in terms of no permanent occupancy is allowed by virtue of the condition of consent and the holiday letting is for a maximum period of 90 days. This property is very close to Hyams Beach. It is noted on the view that there are three beaches which constitute the beaches within the Hyams Beach village.

11 Number 9 Hyam Road, Hyams Beach, is a property that is adjoined by the National Park on two sides and it was described by Mr Austin as more saleable and impressive although bush fire prevention is a consideration. It is noted that the dwelling house on the subject site is one that has been factored in for demolition and indeed, whilst not a matter for these proceedings there has been an approval of a development application for a new dwelling house.

12 Number 7 Hyam Road obviously adjoins No. 9 and is one removed from the National Park although this property as for No. 9 also has National Park at the rear.

13 Number 1 Bayview Avenue, is on the corner of Cyrus and Bayview and this is the property that is the closest to the beach and indeed the beach can be seen through the end of the road where there is a carpark and other facilities for the Hyams Beach area.

14 Number 2 Lister Court is a difficult sale also in that for direct comparability it is on a small lot and in a community title development and it has a relatively smaller land area. It has views of the water although this is across other rooftops that are in closer proximity and are dominate in the view.

15 Number 5 Illowra Lane was also one that was used in the comparable sales.

16 Mr Souter provided evidence also for the property that adjoins, that is the attached dual occupancy at No. 5A. It is noted that this was not a sale in the conventional manner as it was sold to the business partner who bought the other half out after it had been on the open market for some time. It was submitted on behalf of the Valuer General that this property is not an arms length transaction as there was no outside party involved and that it should not be used in terms of a comparable sale.

17 At the end of the day I have not compared it included it as a comparable sale in the analysis of the other sales. However, by way of a check against the value of the subject land I have provided information as Mr Austin valued the subject property in November 2005 and his evidence is there had been a significant decline in the market of some 25-30 percent from the base date. He valued it in November 2005 at $460,000 for the purposes of stamp duty but he confirms this still represents a market evaluation and this report was in evidence. Mr Austin also provided an estimate to the Court whilst he said it was an academic exercise, of the value of the improvements for the property at No. 5A to be approximately $190,000.

18 The evidence of Mr Crowther is that the property at No. 5A was given two market appraisals in January 2000 one at some $600,000 and the other at $650 - $700,000 and for the value of the improvements he placed these at approximately $180,000 to $200,000.

19 In terms of comparability, clearly it goes without saying that valuation is not a science and in terms of comparable sales it also goes without saying that the best sale would be the subject property and also the best sale would be the land value only with no capital improvements.

20 The properties that the Court had the opportunity of inspecting are rather divergent and that is clear from the factors or the adjustments that are made in the table by Mr Austin. Mr Austin is of the opinion that the most comparable sales in order are those that he included numbered 1 to 6 that I cited earlier. He considers the most comparable to be Cyrus Street, the second most comparable 9 Hyam Road and 7 Hyam Road and then No. 1 Bayview Avenue. Mr Austin is a qualified valuer and he does have experience in the region or the area of Jervis Bay.

21 As pointed out by Mr Souter there are a great number of variables and indeed Mr Austin's table refers to some of these. Mr Souter submitted that Mr Austin's table contained a number of errors and these were corrected during the course of the proceedings. The criticism or comments submitted by Mr Souter in terms of Mr Austin's report was that the report did not make the reasoning clear in terms of what was included in the various factors. In this regard Mr Austin was asked questions about what was meant by location in the table and Mr Austin responded that location includes: beach access, topography; and drainage but then when asked about solar access or aspect Mr Austin said these were also included in 'location'.

22 I have considered Mr Austin's evidence of factoring in land size and the maximum allowance or the maximum adjustment that should be made for this. He considers that 20 percent is the maximum that one should allow in terms of land size because the value is very much dependent upon the fact that a dwelling house can be erected on each of the subject sites.

23 In terms of the limited sales in table on analysis it is difficult to ascertain the relative factors and percentages relative to the subject site. Mr Austin has made, at the most, an allowance of 20 percent and he states that the properties in Hyam Road, that is Nos. 9 and 7, that have an area of some 835 sq m that there should be an allowance of 20 percent made as these are superior to the subject site. Also in terms of views, he considered that views should only allow for a maximum factor of 20 percent.

24 I agree with Mr Souter that in Mr Austin's report he does not clearly articulate the basis for all the adjustments and it is often difficult to examine the values arrived at. At the same time in terms of valuation practice I must have regard to the comparable sales. Mr Austin himself said that from around the base date that there were very few sales and this makes the task even more difficult. He states that the market peaked in December 2003 and then declined to the base date by about five percent but there are few sales which actually show this decline, although there were plenty of listings. He stated that in many respects it was based on his experience that there had been a rather significant decline in the market in the area.

25 The Court has had regard to his expert evidence. I have also had regard to the evidence presented by Mr Souter and in terms of the Chief Judge's guidance in terms of expert evidence it can be used to derive alternative conclusions as well. The role of the Court is to, on the basis of all the information and all the evidence submitted to the Court, to ascertain what is the value of the land under appeal. In my assessment I have factored in different percentage variables to Mr Austin in his analysis, having regard to the site inspections that afforded the Court the opportunity to understand the differences in the subject properties.

26 The Court, in terms of 2/76 Cyrus, considers that this is a somewhat difficult property to compare to the subject site because of the restriction on the occupancy or permanent occupancy of the dwelling and, in this regard, Mr Austin provided a 20 percent adjustment. However, in terms of size and having regard to what Mr Austin said, the 2/76 Cyrus is 116 sq m. Nonetheless, having regard to the fact that there is an existing dwelling on it and it provides for accommodation and the ancillary needs in terms of a residential property, albeit it a property letting, an adjustment for size, having regard to Mr Austin's evidence that 20 percent is the maximum, in my opinion five percent should only be allowed in terms of the subject site being superior than No. 2/76 for size. In terms of location and including beach access and topography and having regard to the aspect, having regard to solar access afforded to the subject property, Mr Austin provides for a plus ten percent. However, in my assessment, that should be adjusted in the opposite way to minus 10 percent as 2/76 is superior in these factors. This provides for an overall adjustment of minus 5 percent such that the comparable land value would be approximately $403,000.

27 In terms of 9 Hyams Road, this is the property that adjoins the National Park and this sale provides for an adjusted figure of $725,000 and adding the price of the demolition takes it to $735,000 in Mr Austin's table. However, once again in terms of location, I consider that this is a far superior property than the subject property in terms of the aspect and solar access; in terms of the position and it is noted that whilst it is slightly further to the beach, at the same time the difference in number of metres to the beach would not place it as less superior to the subject site and in this regard I have factored in minus five percent as opposed to Mr Austin's 10 percent and the overall adjustment becomes minus 45 per cent. In my assessment this derives a value of some $404,000.

28 In terms of No. 7 Hyams Beach I have done a similar exercise in terms of location, factoring in minus five providing for a valuation of some $387,000.

29 In terms of No. 1 Bayview, I have carried out a similar exercise. I have factored in minus 15 for location as this property is significantly more superior than the subject as opposed to minus 10 and this results in a $409,500 value.

30 Given the respondent's submission that the most comparable are sales 1 to 3 I do not need to continue the exercise for the other properties but suffice to say I have adjusted these also.

31 As I stated earlier, while I am not relying on the sale of No. 5A, the adjoining attach dual occupancy dwelling, nonetheless this does provide for a useful check especially given it is based on Mr Austin's market evaluation of the property. As Mr Souter stated, this is clearly the most comparable property. The difficulty is the difference between the base date and the valuation and it is not a sale that should be relied upon however it does provide a check. When I say it should not be relied upon it is because of the circumstances of a business partner buying out the other partner and it may be argued that it is not an arm's length transaction therefore I cannot rely on it in my primary analysis. But, as a check, if I look at the $460,000 valuation of Mr Austin, as of November 2005 and adjust it according to Mr Austin's change in the market of between 25 and 30 percent and therefore if I factor in an adjustment of say 27.5 per cent, I would arrive at a figure of $586,500. If I then deduct the improvements in accordance using again Mr Austin's assessment of $190,000, I arrive at $396,500 land value. This exercise with 30 percent with the same deduction for improvements I would arrive at $408,000 and if I did the adjustment in terms of 25 percent move in the market I would arrive at $385,000.

32 Having regard to all the evidence to the Court I am of the opinion that the appropriate valuation as at the base date for the subject property is $400,000. While, as I said, valuation is not a science at the same time the Court must rely on the comparable sales here provided in Mr Austin's expert evidence but at the same time I can also have regard to the other evidence to the Court.

33 Mr Souter correctly pointed out that there were numerous discrepancies in Mr Austin's table and it was also difficult in some respects to analyse because of the variables and the range in terms of adjustments especially without a clear explanation of the variable factors. In this regard he pointed to the adjustments of the sale price as of the base date and the differences in percentages without an explanation, even though often the time of the sale was similar to the base date or similarly removed from the base date. There were also other mathematical errors in the calculations that Mr Souter observed.

34 In my assessment, I considered all the evidence including and that of the expert and other people that gave evidence to the Court and also the submissions made by Mr Souter and the respondent. Applicants are often self-represented in this Court, in particular in valuation matters, and this does not preclude a thorough assessment and analysis by the Court to arrive at and determine the valuation for the property under appeal.

35 Therefore, on the basis of my assessment, the formal orders of the Court are: 1. The appeal under s 37 of the Valuation of Land Act 1916 is upheld in part.

The valuation of $504,000 for the land known as 5 Silver Strand Circle, Hyams Beach, is adjusted to $400,000 as at the base date of 1 July 2004.

The exhibits except A and 7 are returned. ___________________ J S Murrell Commissioner of the Court rjs

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.

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