Square Holdings Pty Ltd v Valuer General of New South Wales

Site context

1. The subject site is an inside allotment with rear secondary lane access to Seymour Place. It has an area of 278.08 square metres and is zoned R1 General Residential under the LEP. It has a maximum height limit of 12 metres, and appears on the Floor Space Ratio Map in the LEP in an area known as "S1", which allows a maximum Floor Space Ratio ('FSR') of 1.5:1.
2. The surrounding development primarily consists of attached two to four level residential terrace housing. At the base dates, the subject site was improved by a part two and three-storey residential terrace, used as a boarding house containing 17 rooms, each with its own bathroom.
3. It is agreed that the building is built to the maximum FSR permitted under the controls (1.5:1). This means that the building has a Gross Floor Area ('GFA') of 417.12 square metres.

Evidence

1. On 3 September 2018, the Court conducted a site view of the subject site and six comparable properties identified by the parties: 46-48 Foveaux Street, Surry Hills; 150 Flinders Street, Paddington; 548 Crown Street, Surry Hills; 52 Hopewell Street, Paddington; 203 Cleveland Street, Redfern; and 207 Cleveland Street, Redfern. Of the six comparable properties, each save the Cleveland Street sales, is relied upon by Derek Hill, expert valuer for the respondent, in his expert report dated 3 August 2018.
2. The applicant appears through Mr Prodromou, who is a qualified solicitor but who appears for the applicant as agent in his capacity as one of its directors. The applicant does not rely upon expert evidence, but relies upon a detailed bundle of documents and detailed written and oral submissions. The applicant draws attention to the two Cleveland Street sales not relied upon by Mr Hill in his expert report.
3. Mr Hill had earlier used the two Cleveland Street sales in reports he prepared in relation to the applicant's initial objection to the land value. Separate reports were commissioned by the respondent and prepared by Mr Hill in relation to each of the 1 July 2015 and 1 July 2016 base dates after the initial objections were lodged and prior to the commencement of the current appeals ('objection reviews'). In respect of each base date, Mr Hill found in the objection reviews that the land value reached was supported by market evidence and fell within an acceptable range of values.
4. Accordingly, neither of the objection reviews recommended an adjustment to the issued land values. The objection reviews were in evidence as part of a bundle of documents prepared by the applicant.
5. At par 41 of his expert report prepared for the present appeals, Mr Hill explains the methodology he has used to reach his values for the subject site at the relevant base dates: VALUATION METHODOLOGY 41. In determining the value of the subject land as at each of the relevant base dates, the approach which should be adopted to this heritage restricted valuation is as follows: a) The land is to be considered to be, at the moment at which its valuation is determined, in the notional condition of being devoid of improvements, other than land improvements. b) A sale of the subject land must be assumed to have occurred on the base date, between willing but not anxious parties. c) The "purpose for which the land was used" on the respective base dates must be identified. d) The identification of the purpose for which the land was used at those date is to be determined at a suitable level of generality. Under normal circumstances, a suitable level will be one at which the use of the land for the purpose can be categorised in such a way as to contemplate the use of the land for the same purpose by others than its actual occupants at the relevant moment. e) In the present case, the purpose, so determined, for which the land was used on the relevant base dates was that of a residential boarding house use. f) Section 14G of the Act requires one to assume that there is no legal or other impediment to the continuation and maintenance of the improvements on the land as at the base date. g) Any potential for adding to, replacing or altering the improvements on the land as at the base date must be disregarded: the section demands that it be assumed that no other improvements may be made to or on that land. h) As at each of the base dates, the use of the subject property was for a residential boarding house use. i) For the reason, comparable sales of land, (including lightly and improved land), within the CBD fringe areas will provide useful evidence of the price that would have been paid in the notional sale to the hypothetical purchaser at the base date; however, it will be necessary to make such adjustments (if any) as are demanded by the requirement that the assumptions contained in section 14G of the Act be made. j) Sales of unimproved or notionally unimproved sites (those purchased for the purpose of demolition of existing improvements and construction of boarding house aligned use buildings) transacted within the fringe areas of the Sydney CBD may conveniently and appositely be analysed on the basis that the price has been agreed by reference to a rate per square metre of gross floor area ($GFA/m²). k) Such sales must be examined and analysed, with appropriate adjustments, in order that a $GFA/m² rate for the land may be derived. l) In undertaking the land valuation regard has been given to the subject building as it determines the town planning considerations that are required when undertaking the land valuation. m) These considerations, as based upon the continued use on the subject land as at the base date, include; - the use - residential boarding house accommodation; - the maximum quantum of GFA that may be derived on the land - 417.12 square metres as existing; and - Height controls - as per the existing building. n) The sales used within this review are of this same use, i.e. a boarding house style basis. o) For analysed sales evidence, refer to page 13, "Comparable Sales", I adopt a rate per square metre of GFA as at the relevant base dates. p) The resultant GFA rate is then applied to the gross floor area of the building, i.e. 417.12 square metres, to provide a land value. q) The valuation calculation, using this valuation methodology, may be seen in, page 17, "Land Valuation Calculations". (Emphasis in original.)
6. In relation to each sale he has relied upon, Mr Hill provides an analysed GFA rate for each of the base date 2015 and the base date 2016, then he makes an allowance for market movement to adjust the analysed land value to that of the relevant base dates. He has made an upward adjustment of 7.5% for sales occurring prior to the relevant base date and a downward adjustment of 7.5% for sales after the base date.
7. In respect of the 1 July 2015 base date, Mr Hill adopts a comparable sales methodology and uses four properties in his expert report to reach an analysed GFA rate of between $4,058 per square metre and $4,687 per square metre as shown in the following table extracted from his expert report: Site in FSR Analysed $/GFA Sale GFA rate Sale GFA rate Address square GFA land value of sale at comment after adjustments metres at 1 July 2015 base date to subject to subject 46-48 Foveaux Street, 246.6 3.59:1 $3,320,000 $3,689 Inferior $4,058 Surry Hills 900 square metres per square metre per square metre 150 Flinders Street, 191.5 1.51:1 $1,305,000 $4,500 Comparable $4,500 Paddington 290 square metres per square metre per square metre 548 Crown Street, 227.6 1.05:1 $1,250,000 $5,208 Superior $4,687 Surry Hills 240 square metres per square metre per square metre 52 Hopewell Street, 607 1.5:1 $3,165,000 $3,478 Inferior $4,174 Paddington 910 square metres per square metre per square metre

1. Having undertaken adjustments as further described below, Mr Hill adopts what he describes as a "conservative" GFA rate of $4,200 per square metre for the subject land. This compares to a rate of $4,028 used for the issued land value and gives a total value of $1,750,000 which is greater than the issued land value of $1,680,000. On the basis of this evidence, the respondent submits that the appeal in respect of the 1 July 2015 base date should be dismissed.
2. Mr Hill states that his adopted GFA rate takes into account the approved use on the subject land as at the base date, the maximum quantum of GFA that may be derived on the land (417.12 square metres), as existing, and the current height of the development. Therefore, the GFA rate is reflective of what a hypothetical purchaser would pay as at the base date for land that contains the right to develop a new boarding house development containing a GFA of 417.12 square metres over a part two and three-storey development.
3. Mr Prodromou was critical of the fact that the two unimproved sites (46-48 Foveaux Street and 52 Hopewell Street) had significantly lower GFA rates after adjustment than the other two sales he relied upon and submitted that this discrepancy was indicative of errors in Mr Hill's approach. However, I accept the evidence of Mr Hill that the difference is better explained by the significant differences in overall GFA between the properties.
4. In respect of the 1 July 2016 base date, Mr Hill uses the same four properties in his expert report to reach an analysed GFA rate of between $4,352 per square metre and $5,063 per square metre as follows: Site in FSR Analysed $/GFA Sale GFA rate Sale GFA rate Address square GFA land value of sale at comment to after adjustments metres at 1 July 2016 base date subject to subject 46-48 Foveaux Street, 246.6 3.59:1 $3,560,000 $3,956 Inferior $4,352 Surry Hills 900 square metres per square metre per square metre 150 Flinders Street, 191.5 1.51:1 $1,412,500 $4,871 Comparable $4,871 Paddington 290 square metres per square metre per square metre 548 Crown Street, 227.6 1.05:1 $1,350,000 $5,625 Superior $5,063 Surry Hills 240 square metres per square metre per square metre 52 Hopewell Street, 607 1.5:1 $3,395,000 $3,731 Inferior $4,477 Paddington 910 square metres per square metre per square metre

1. Mr Hill again adopts what he describes as a "conservative" GFA rate of $4,500 per square metre for the subject land. This compares to a rate of $4,603 for the issued land value and gives a total value of $1,875,000, which is less than the issued land value of $1,920,000. In those circumstances, the respondent accepts that the appeal should be upheld, but contends that a land value of $1,875,000 should be confirmed rather than a lower amount.
2. The applicant did not file any expert evidence, but Mr Prodromou filed a table analysing the comparable sales, in which specific criticisms of Mr Hill's approach were identified. I will explain and analyse the applicant's criticism of Mr Hill's expert evidence later in the judgment.
3. The applicant initially contended for land values in the sums of $1,300,000 in respect of the 1 July 2015 base date and $1,375,000 in respect of the 1 July 2016 base date. In documents provided to the Court on 31 August 2018, the applicant calculated values for the property of $1,040,000 on the 1 July 2015 base date and $1,170,000 on the 1 July 2016 base date. However, during the course of the hearing before the Court on 3 September 2018, the applicant advised through Mr Prodromou that it does not contend for lesser values than the figures originally sought.
4. Despite not calling any expert evidence, the applicant relied upon an affidavit of Mr Prodromou dated 19 June 2018 and a bundle of documents comprising sales reports, development application documents, development consents, advertising, the earlier reports prepared by Mr Hill and other material in relation to each sale. In addition to the expert report of Mr Hill, the respondent relied upon a bundle of extracts from the Sydney Development Control Plan 2012 ('DCP').

Legislative context

1. The annual valuation of land is principally governed by s 6A of the Valuation Act which relevantly provides: 6A Land value (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made. …
2. Section 14G, which makes provision for sites with heritage listings, relevantly states: 14G Valuation subject to heritage restrictions under EPI (1) Land that is heritage restricted on the date by reference to which its land value is to be determined is to have its land value determined on the basis of the following assumptions: (a) that the land may be used only for the purpose, if any, for which it was used when the value is determined, (b) that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued, (b1) that all improvements referred to in paragraph (b) on that land are new (without any deduction being made because of their actual condition), (c) that no improvements, other than those referred to in paragraph (b), may be made to or on that land, (d) that the cost of construction of improvements on that land has no effect on its land value, with the result that there is to be no reduction in land value because of any difference between the cost of construction of the improvements referred to in paragraph (b) as new improvements and the cost of construction of other improvements used as a basis for comparison in the determination of land value. (1A) When the land value of heritage restricted land is determined on the basis of the assumptions required by this section, there is to be no deduction from or other adjustment of that land value on account of the effect on land value of any factor concerned with the land being heritage restricted land (other than the effect of those assumptions). …
3. The statutory framework relevant to the current proceedings was summarised relatively recently by Sackville AJA in Valuer-General of New South Wales v Oriental Bar Pty Limited [2016] NSWCA 48; (2016) 217 LGERA 1 ('Oriental Bar') at [61]-[70]: [61] Subject to certain exceptions, the land value of each parcel of land in New South Wales is to be ascertained each year. The valuation is to be made as at 1 July in the valuing year in which the valuation takes place. The Valuer-General is empowered to value any parcel of land at any time. [62] Assessment of land value is to take place in accordance with s 6A(1) [of the Valuation Act]… … [63] Section 6A(1) uses the term "land improvements". That term is relevantly defined in s 4 of the VL Act as follows: "(d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation, …" [64] Section 6A(2) of the VL Act was introduced by the Valuation of Land and Local Government (Amendment) Act 1959 (NSW) (1959 Act). The principal purpose of the provision, as Tobias JA explained in Commonwealth Custodial Services Ltd v Valuer-General, is to ensure that land value should be determined having regard to the highest and best use of the land, including its use at the date to which the valuation relates. Section 6A(2) provides as follows: "Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made." [65] Section 14G of the VL Act was inserted by the Valuation of Land Amendment Act 2000 (NSW) and is in Div 2 ("How land is to be valued") of Part 1B ("Valuation of land") of the Act… … [66] In Trust Company of Australia Ltd v Valuer General, Campbell JA observed that: "[s]ection 14G(1) is in some ways the converse of s 6A(2). Both of them provide a different method for valuation of land to that which is provided by s 6A(1). Section 6A(2) is concerned with ensuring that land is not undervalued when an existing use of the land is more valuable than any use to which the land could be put if the improvements on it had not been made, while s 14G(1) is concerned with ensuring that land is not overvalued when heritage restrictions on the land have the effect that continuing its existing use is less valuable than any use to which the land could be put if the improvements on it had not been made." [67] It will be seen that there are similarities between s 6A(2)(a) and (b) and s 14G(1)(a) and (b). However, s 6A(2)(a) requires an assumption that the land may be used for any purpose for which it was being used or for which it could be used at the valuation date. By contrast s 14G(1)(a) requires an assumption that the land may be used only for the purpose, if any, for which it was being used at the valuation date. On the other hand, there is not only a close textual resemblance between s 6A(2)(b) and s 14G(1)(b), but a "clear structural resemblance". Section 14G(1)(c) and (d) have no parallel in s 6A(2). [68] The Valuer-General is required to give notice of each valuation of land to specified persons, including the owner of the freehold estate on the land. [43] A person to whom the Valuer-General has given notice may lodge a written objection to the valuation. Section 34(1) specifies the only grounds on which objection may be taken under the VL Act to a valuation. The ground relevant to the present appeal is "that the values assigned are too high or too low". [69] The Valuer-General is required to consider an objection that has been duly made and either allow or disallow it. If the objection is disallowed in whole or in part, the Valuer-General must give reasons for doing so. [70] A person entitled to object to a valuation may appeal to the L & E Court if dissatisfied with the Valuer-General's determination of the objection. Section 40(1) of the VL Act provides that on appeal the L & E Court may do any one or more of the following: "(a) confirm or revoke the decision to which the appeal relates, (b) make a decision in place of the decision to which the appeal relates, (c) remit the matter to the Valuer-General for determination in accordance with the Court's finding or decision." On an appeal, the appellant has the onus of proving the appellant's case (emphasis in original, citations omitted).
4. At [116]-[119], his Honour continued: [116] The legislation governing the determination of the land value of heritage restricted land requires the valuation to the conducted on the basis of a rather curious combination of assumptions. Section 6A(1) of the VL Act provides that the "land value of land" is: "the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require." [117] However, s 6A(1) also provides that the land value is to be determined on the basis of a "counterfactual" or "notional" assumption. It must be assumed that the improvements on the land (other than so-called "land improvements") had not been made. This assumption has formed part of the legislative scheme from the beginning and is not confined to heritage restricted land. The scheme contemplates a "hypothetical sale … of something which does not exist in the real world", although the hypothetical price is "determined by reference to market conditions in the real world". Because of the character of the hypothetical sale, the concept of "land value" in s 6A(1) has been variously described as "artificial", "a mental exercise in unreality" and "unique". [118] Section 14G, introduced into the VL Act much later than the forerunner to s 6A, is specifically concerned with the determination of the land value of heritage restricted land. Section 14G(1) requires assumptions to be made that reflect the actual position on the valuation date. Thus heritage restricted land is to have its land value determined on the basis (relevantly) of the following three assumptions: "(a) that the land may be used only for the purpose, if any, for which it was used when the value is determined, (b) that all improvements on that land when the value is determined may be continued and maintained in order that the use of that land as referred to in paragraph (a) may be continued, … (c) that no improvements, other than those referred to in paragraph (b), may be made to or on that land." [119] In addition, s 14G(1)(b1) qualifies s 14G(1)(b), in that it requires an assumption that all improvements referred to in s 14G(1)(b) are new, without any deduction being made because of their actual condition. This provision manages to combine an assumption founded on the actual position (the improvements on the land at the relevant date) with a counterfactual assumption (that all improvements on the land are new, without regard to their actual condition) (citations omitted).
5. I respectfully adopt his Honour's analysis.

The correct approach to valuation

1. It is now generally accepted that, insofar as there are comparable properties available, the conventional valuation method is the comparable sales approach: River Bank Pty Ltd v Commonwealth; Rumble v Commonwealth (1974) 4 ALR 651 at 653; Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 at [24]; Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508 at 513; New South Wales Cremation Company Pty Limited v Valuer General [2016] NSWLEC 135 at [84]-[88].
2. There has been significant judicial consideration of the correct approach when undertaking a valuation using the comparable sales methodology.
3. In Crompton v Commissioner of Highways (1973) 5 SASR 301, Wells J stated at 317: …ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical and temporal range, and from these select those that appear potentially useful as a basis for comparison. Those selected should then be carefully analysed by reference to an extensive list of characteristics of land sales the compilation and assessment of which fall clearly within the province of the experts. Whether or not one or more of those sales is, and how it or they ought, to be compared with the subject land becomes then a matter of degree, and a final decision is reached, often by those same experts drawing a series of nice distinctions. Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more reliable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. At a particular point it will be found that, in respect of the remaining available sales, the adjustments and allowances that would need to be made are of such a magnitude that it ceases to be safe or sound to treat them as sufficiently similar to the assumed sale of the subject land, and they must thenceforward be rejected.
4. It is accepted that a valid method of conducting a comparable sales approach is to undertake it in the four steps of accumulation, analysis, adjustment and application: Constantine v Blacktown City Council (No 2) [2016] NSWLEC 81 at [100]; Hoy v Coffs Harbour City Council [2015] NSWLEC 128 at [83] (leave to appeal this judgment was refused in Hoy v Coffs Harbour City Council [2016] NSWCA 257; (2016) 281 LGERA 411 at [61]); Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No 6) [2015] NSWLEC 18 at [344]; Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [197] ('Marroun') (affirmed on appeal in Marroun v Roads and Maritime Services [2013] NSWCA 358; (2013) 211 LGERA 391 at [75]).
5. First, the valuer, judicial or otherwise, should accumulate comparable properties. In undertaking this process, the "sales to be treated as comparable sales need to be truly comparable", although the Court should not be "unreasonably selective" of its comparable properties: Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; [2003] HCA 8 at [18].
6. Second, the valuer should analyse those comparable sales. This often involves converting the value of those sales into another measurement that can be easily compared: Marroun at [201]. Examples of this process include converting those sales into unitary rates, such as a dollar per square metre rate.
7. Third, and relevant for the present matter, the valuer should adjust those properties he or she considers comparable to create equivalence with the unimproved subject land. As stated by Biscoe J in Holcim (Aust) Pty Ltd v Valuer-General [2009] NSWLEC 225 ('Holcim') at [31]: The basis for the valuers' valuation assessments is the sales comparison method. Accepted valuation practice permits adjustments for differences, such as in location, area and time to enable valuers to have comparable values which, following adjustment, account for the various differences with the subject property. Such adjustments are generally based on a reasoning process drawing on the skill and experience of the valuer and are undertaken to derive an opinion of value through a deductive process. Because properties are rarely identical, adjustments for differences are obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property. Too many adjustments potentially render the comparable sale unsafe to rely upon. Caution is therefore required where large adjustments are to be made. Reflecting the significant roles of skill, experience and personal assessment in the adjustment process, the scope for differences in the quantum and direction of adjustment between valuers can be considerable. Third, the Court should then apply these adjusted values to the subject property. The purpose of this is to determine, based on comparable sales and as best it can, what value the subject property would obtain if it were to be sold on the market.
8. The Court prefers the process of adjustment to be as clearly articulated and transparent as possible. As Pepper J said in Tomago Aluminium Company Pty Limited v Valuer General [2010] NSWLEC 4 ('Tomago') at [45], after quoting the principles articulated in Holcim: To this it may be added that it is necessary to make explicit adjustments for differences so that the adjustment process is sufficiently logical. An implicit process comprising a single adjustment, rather than separately itemised and reasoned adjustments, risks rejection for want of transparency.
9. Fourth, the valuer should apply the comparable sales to determine a value of the subject land based on the adjusted values of the comparable properties.

Consideration

1. I consider that the approach of Mr Hill, as extracted above at [13] and further considered below, is in accordance with the acceptable approaches both in his selection and analysis of appropriate comparative sales and in respect of his application of ss 6A and 14G of the Valuation Act. In the course of oral submissions, Mr Prodromou stated that he did not cavil with the approach of Mr Hill, but contends that there are errors which arise in his application of the methodology to the sales analysed.
2. In the circumstances, the differences between the parties relate to evidentiary rather than legal disputes. This requires consideration of the evidence of Mr Hill, including Mr Prodromou's cross-examination. I shall consider each of the four properties relied upon by Mr Hill, as well as the questions put by Mr Prodromou as to why Mr Hill did not place reliance upon the Cleveland Street sales. It is also important to remember that the applicant bears the onus of showing that an error has been made: Valuation Act s 40(2); Oriental Bar at [70].

150 Flinders Street

1. 150 Flinders Street is located 15 metres south of the subject site. At the date of sale in October 2016, and presently, 150 Flinders Street was and is improved by a two-storey brick terrace with loft. The building has 13 rooms and a GFA of approximately 290 square metres.
2. Mr Hill subtracts $1,087,500 from the sale price for the added value of the improvements and $50,000 for the turnover benefit but does not make any adjustment for comparability to the subject site.
3. The applicant makes two complaints about the way in which 150 Flinders Street was used by Mr Hill. First, the applicant notes that the property sold five years earlier, on 9 November 2011, for $1,360,000 and then on 13 October 2016 for $2,550,000 (the sale relied upon by Mr Hill), an increase of 87.5% in four years. The applicant says that this 87.5% increase is significantly more than the median percentage increase in Paddington over that period. A document in the applicant's bundle of documents obtained from realestate.com.au states that the median percentage increase for Paddington houses from 2011 to 2016 was 46%.
4. Mr Prodromou in his affidavit affirms that in the period between the 2011 and 2016 sales, 150 Flinders Street underwent substantial alterations and additions. He contends that Mr Hill has not taken sufficient account of these improvements in his valuation.
5. The second complaint that the applicant makes is that at the time of the 2016 sale the property was an operating boarding house and included furniture and fittings. Mr Prodromou put to Mr Hill that he did not take account of this, particularly the furniture, when adjusting the sale to its GFA rate.
6. Mr Hill responded that he did not consider that it was appropriate to make any further adjustment for the renovations. He explained that the figure he adopted for the added value of the improvements was reached by adopting a building rate of $5,000 per square metre (based upon Rawlinsons and the built costs of boarding houses) and adjusting 25% for depreciation. In circumstances where the renovation was not in a modern style and resulted in what he considered a "reasonable quality" makeover at best, Mr Hill opined that the amount he reached for the added value of the improvements was more than fair and reasonable.
7. In relation to the applicant's second complaint, Mr Hill stated that he did not believe a further adjustment needed to be made for the fact that the boarding house was operational and included furniture and fittings at the time of the sale. He included a $50,000 "turnover benefit" in his analysis of the sale, which he considered was sufficient and that no further adjustment was required for what he considered the modest level of furnishing.
8. As he has done with each of his four analysed comparable sales, Mr Hill has provided discrete comment in relation to the adjustments to the subject site he believes are required. These relate to each of location, size of GFA, shape, views, access, heritage, and what he describes as "DA", which refers to the ability of the property to be used for a purpose that would otherwise require development consent. Under the approach mandated by s 14G of the Valuation Act, there is an assumption that the subject site was able to continue its use as a boarding house. Sites which required consent to be obtained for this use would be inferior compared to the subject site under the "DA" heading.
9. Mr Hill gives, in a transparent manner (as considered by Pepper J in Tomago), commentary in relation to precisely how each of the adjustments had been made and, in some circumstances, allocating a discrete percentage for various aspects of comparability, which he then concludes as to an overall adjustment. He has adopted a similar approach in relation to each of the comparable sales. In relation to 150 Flinders Street, balancing the adjustments, he ultimately makes no final adjustment for comparability.
10. I find that Mr Hill's approach is conspicuously transparent (in the sense dealt with in Tomago at [45]) and, absent any expert evidence to the contrary, I do not accept the applicant's complaints and criticisms in relation to his approach.

548 Crown Street

1. The property at 548 Crown Street is located 560 metres to the south-west of the subject site. At the date of sale in December 2015, and presently, the site was and is improved by a part one and two-storey brick terrace with a loft and iron roof. It is one of five attached terraces built circa 1900 and located within a heritage conservation zone. The building has a GFA of approximately 240 square metres with five rooms.
2. Mr Hill adjusts 548 Crown Street downwards by 10% for comparability to the subject site, having regard to 548 Crown Street's superior location and GFA size, inferior shape and access, and comparable views, heritage, and development application status.
3. The applicant's principal complaint about the way in which Mr Hill has analysed 548 Crown Street is that he has used the existing FSR of 1.05:1 rather than the maximum provided by the planning controls of 1.75:1. Mr Prodromou observes that a heritage listed property at 524 Crown Street had recently received development consent for an application which provided for the maximum permissible FSR of 1.75:1.
4. The applicant also submits that Mr Hill has erred in treating 548 Crown Street as a heritage item when it is only a contributory heritage item under the DCP, and not a heritage listed item under the LEP, like the subject site. The applicant also says that the views are plainly not comparable, in spite of Mr Hill's finding to the contrary.
5. Mr Hill opines that the 1.05:1 FSR is the appropriate one to use in circumstances where it is unlikely that approval could ever be obtained for a higher FSR on the site. In this regard, Mr Hill places reliance upon the fact that 548 Crown Street is one of five adjoining terraces, each of which is a "contributory building" (in that it contributes to the character of a heritage conservation area) in the DCP.
6. The DCP's Glossary of Terms defines "contributory buildings" as follows: Contributory Buildings are buildings that make an important and significant contribution to the character of a heritage conservation area of heritage streetscape and have a reasonable to high degree of integrity and date from a key development period of significance. Contributory buildings are defined as buildings which are from a significant historical period layer, highly or substantially intact or significant historical period layer, altered yet recognisable and reversible.
7. Section 3.9.6 of the DCP provides: 3.9.6 Heritage conservation areas Buildings and sites within heritage conservation areas are identified on the Building contributions map as being contributory, neutral or detracting to the character and heritage significance of the heritage conservation area. The contribution of these buildings is based on studies carried out by heritage consultants for the City. New development in heritage conservation areas must be designed to respect neighbouring buildings and the character of the area, particularly roofscapes and window proportions. Infill development should enhance and complement existing character but not replicate heritage buildings. (1) Development within a heritage conservation area is to be compatible with the surrounding built form and urban pattern by addressing the heritage conservation area statement of significance and responding sympathetically to: (a) topography and landscape; (b) views to and from the site; (c) significant subdivision patterns and layout, and front and side setbacks; (d) the type, siting, form, height, bulk, roofscape, scale, materials and details of adjoining or nearby contributory buildings; (e) the interface between the public domain and building alignments and property boundaries; and (f) colour schemes that have a hue and tonal relationship with traditional colour schemes. (2) New infill buildings and alterations and additions to existing buildings in a heritage conservation area are not to be designed as a copy or replica of other buildings in the area, but are to complement the character of the heritage conservation area by sympathetically responding to the matters identified in (1)(a) to (e) above. (3) Infill development is not to include garages and car access to the front elevation of the development where these are not characteristic of the area. (4) Development within a heritage conservation area is to be consistent with policy guidelines contained in the Heritage Inventory Assessment Report for the individual conservation area.
8. Section 3.9.7 of the DCP makes specific reference to contributory buildings and provides: 3.9.7 Contributory buildings Contributory buildings are buildings that make an important and significant contribution to the character and significance of the heritage conservation area. They have a reasonable to high degree of integrity and date from a key development period of significance of the heritage conservation area. They are buildings: • from a significant historical period and are highly or substantially intact; or • from a significant historical period and are altered yet recognisable and reversible. (1) Contributory buildings are to be retained unless the consent authority determines the replacement is justified in exceptional circumstances. (2) Alterations and additions must not significantly alter the appearance of principal and significant facades of a contributory building, except to remove detracting elements. (3) Alterations and additions to a contributory building are to: (a) respect significant original or characteristic built form; (b) respect significant traditional or characteristic subdivision patterns; (c) retain significant fabric; (d) retain, and where possible reinstate, significant features and building elements, including but not limited to original balconies and verandahs, fences, chimneys, joinery and shop front detailing; (e) remove unsympathetic alterations and additions, including inappropriate building elements; (f) use appropriate materials, finishes and colours; and (g) respect the pattern, style and dimensions of original windows and doors. (4) Where an addition to the building is proposed, significant external elements are to be reinstated. (5) Foyers or other significant interior features, including hallway detailing, panelling and significant staircases, designed to be visible from the street, are to be retained especially where they form part of the building's contribution to the character of the heritage conservation area.
9. Mr Hill opines that, having regard to these provisions of the DCP and the fact that consent will never be obtained for the demolition of the existing building which has limited access arrangements, the only way to increase the FSR of 548 Crown Street would be to add an additional storey and that this would be highly unlikely to obtain approval.
10. In this respect, Mr Hill acknowledges that in a town planning sense there is a distinction between a building which is individually heritage listed in a local environmental plan and one which is designated a contributory building in a development control plan, but that this distinction does not make any material difference in valuation.
11. In regard to the views, Mr Hill noted that there are "pluses and minuses" in relation to the views from the subject site and 548 Crown Street but that neither allows views from the side and that neither is manifestly superior to the other. In submissions, Mr White, counsel for the respondent, suggested that Mr Prodromou was conflating "views" with "location".
12. Again, absent any expert evidence to the contrary, I find Mr Hill's evidence compelling. My reasons may be briefly stated.
13. First, I do not accept that there is a relevant difference for valuation purposes whether a particular building is individually listed as a "heritage" item or is designated in a planning instrument (such as in this case, the development control plan) as a "contributory building". The obligations set out in the relevant clauses in the DCP are clear. As such, I accept Mr Hill's evidence in this regard.
14. Second, in relation to Mr Hill's adjustment made for views, again noting that he has separately considered adjustments for location, size, GFA, shape, views, access, and heritage (as he has done in his analysis of each comparable sale) and that some percentage adjustments, for example, location, result in a downward adjustment of 20%; whilst, conversely, in relation to shape, he has made an upward adjustment of 10%; provides a nuanced analysis, which I accept. As such, the applicant's criticisms in relation to 548 Crown Street, which adopt an overall criticism of the discrete heritage and view component adjustments, are not compelling.

52 Hopewell Street

1. 52 Hopewell Street is located 560 metres north-east of the subject site. At the time of sale in December 2014, 52 Hopewell Street contained a brick commercial building known as "Bourkes Smash Repairs". Subsequent to the date of sale, development consent has been obtained for the demolition of the existing building and the construction of a three-storey boarding house.
2. Mr Hill assessed 52 Hopewell Street as having superior location and heritage status (52 Hopewell Street not being heritage-restricted), inferior GFA size and access, and comparable shape, views and development application status. Mr Hill, having again allocated specific percentage adjustments for various factors, made an overall upwards adjustment of 20% for comparability to the subject site.
3. The applicant makes five complaints in respect of Mr Hill's analysis of 52 Hopewell Street: 1. The cost of demolition and contamination remediation of $450,000 used by Mr Hill is too high and inconsistent with an estimate of a quantity surveyor report submitted to Council as part of a development application for the site; 2. Mr Hill has not made allowance for the value of the seven car parking spaces and the five motorcycle spaces to be built in the excavated garage; 3. The downward adjustment of 10% for location is too low; 4. Mr Hill's assessment that the views and streetscape are comparable is not supportable; and 5. Mr Hill's assessment that the access for 52 Hopewell Street is inferior to the subject site is incorrect.
4. In relation to the $450,000 figure for demolition and contamination remediation, Mr Hill stated that he spoke to the valuer who analysed 52 Hopewell Street in 2015, who advised that this was the estimate of the remediation works covered by an earlier development consent which was obtained in 2010. Mr Hill stated that the quantity surveying report relied upon by Mr Prodromou referred only to the works required for the consent sought in 2016 for the building of the boarding house.
5. In light of the fact that it is unclear from the face of the quantity surveying report, which does make reference to the earlier 2010 consent, whether the estimate applies to all remediation works or just those required for the construction of the boarding house, Mr Prodromou properly advised the Court that the applicant does not press its contention in relation to the $450,000 figure being inappropriate.
6. In relation to the car parking provided at 52 Hopewell Street, Mr Hill stated that recent GFA figures show that car parking in a boarding house development is not necessarily considered a benefit and that an analysis of the increase in rent that may be able to be obtained against the cost of constructing the basement car parking would need to be considered. Having regard to the fact that tenants in boarding houses do not typically require car parking, Mr Hill opined that on balance he considered that no adjustment was appropriate for the car parking provided.
7. Mr Hill did not consider that an adjustment of more than 10% for the location of 52 Hopewell Street was appropriate. In addition, he did not resile from his opinion that the views and streetscape are comparable to the subject site.
8. In relation to access, Mr Hill observed that, whilst the frontage of 52 Hopewell Street is wider than the subject site, 52 Hopewell Street does not have rear access. Although he accepted that vehicular and pedestrian access was available from the front of the property at 52 Hopewell Street, Mr Hill opined that the provision of vehicular access impacted upon its availability to pedestrians.
9. Given Mr Prodromou's concession regarding Mr Hill's adjustment of $450,000 to the $2,600,000 sale price, I accept Mr Hill's overall analysis of the sale and find that it is appropriate to make the $450,000 adjustment. In particular, I accept Mr Hill's evidence that no adjustment was appropriate for car parking for the reasons that he has stated (as summarised above) and I accept his expert opinion that the views and streetscape are comparable.

46-48 Foveaux Street

1. The property at 46-48 Foveaux Street is located approximately 770 metres west of the subject site. At the date of sale in April 2014, 46-48 Foveaux Street was improved by a two-storey brick commercial building, which was demolished in 2016.
2. Mr Hill assessed 46-48 Foveaux Street as having a superior location and heritage status (46-48 Foveaux Street not being heritage listed), inferior GFA size and development application status, and comparable shape, views and access compared to the subject site. Overall, Mr Hill made an upward adjustment of 10%.
3. The applicant's principal complaint in relation to Mr Hill's analysis of 46-48 Foveaux Street is that the 10% adjustment for location is insufficient. The applicant also submits that 46-48 Foveaux Street has superior views and streetscape compared to the subject site.
4. Mr Hill opined that, whilst he agreed that 46-48 Foveaux Street is in a superior location compared to the subject site, it was not significantly superior. He explained this was because, although 46-48 Foveaux Street was close to Central Station, it was in a predominantly industrial area of Surry Hills and that the subject site was closer to Bourke and Crown Streets and Taylor Square, locations likely to be appealing to boarding house residents.
5. In relation to views, Mr Hill observed that 46-48 Foveaux Street was an inside allotment with no side windows available, similar in that respect to the subject site. He opined that neither 46-48 Foveaux Street nor the subject site is significantly superior in respect of views.
6. I accept the evidence of Mr Hill that each of 46-48 Foveaux Street and the subject site are comparable in terms of views and Mr Hill's evidence that 46-48 Foveaux Street has a slightly superior location. Accordingly, I find that Mr Hill's 10% adjustment is appropriate in the circumstance. I also accept the submissions of Mr White of counsel, appearing for the respondent, that the submissions made on behalf of the applicant conflate adjustments in relation to "views" and "location". In any event, I accept Mr Hill's expert evidence in this regard.

The Cleveland Street sales

1. As I noted above, the sales at 203 (in December 2013) and 207 (in April 2015) Cleveland Street were included in the objection reviews, but were not included in Mr Hill's expert evidence prepared for these appeals. The applicant submits that the Cleveland Street properties are the most comparable in relation to streetscape, being boarding houses that front a busy street.
2. Mr Hill stated that he no longer relies upon the Cleveland Street sales because the properties are located approximately 1.5 kilometres from the subject site which is almost double the distance of the sales upon which he does rely; the properties have significantly greater GFA compared to the subject site; and the sales are older. In those circumstances, Mr Hill opined that he has relied upon the best evidence available which is the other four sales.
3. The applicant challenged Mr Hill's assessment in the objection reviews particularly in relation to 203 Cleveland Street which he says sold again in April 2016, and in respect of which he says Mr Hill had used an incorrect GFA figure. The applicant also points to a development consent for the property for additions which was granted in May 2017. No expert evidence in relation to the 2016 sale was adduced by either party.
4. In the circumstances of the lack of evidence in respect of the Cleveland Street sales, I advised the parties during the course of the hearing that I was reluctant to place weight upon them. Despite this, I accept the evidence of Mr Hill that the Cleveland Street sales would require significant adjustment to render them comparable to the subject site, and in circumstances where Mr Hill has not performed such adjustments for the purposes of these appeals and no expert evidence has been produced by the applicant suggesting what adjustments would be appropriate, I do not place reliance upon either 203 or 207 Cleveland Street.

Conclusion on appropriate valuations

1. Having considered the evidence, and having regard to the lack of expert evidence called by the applicant, I have concluded that the applicant has failed to discharge its onus of establishing that the valuations conducted by the respondent's expert are incorrect. In those circumstances, it is appropriate to dismiss the appeal in relation to the 1 July 2015 base date, and to the extent that Mr Hill has concluded that the appropriate figure in relation to the 2016 base date is $1,875,000, (which is less than the issued value of $1,920,000) uphold the appeal in relation to the 1 July 2016 base date.
2. I note that the applicant in its summonses sought costs, however costs in respect of proceedings commenced under s 37(1) of the Valuation Act are subject to r 3.7 of the Land and Environment Court Rules 2007 (NSW), which relevantly provides: 3.7 Costs in certain proceedings (cf Land and Environment Court Rules 1996, Part 16, rule 4) (1) This rule applies to the following proceedings (except for appeals under section 56A of the Act): … (ii) appeals under section 37 (1) of the Valuation of Land Act 1916, … (2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances. …
3. In the circumstances, I do not consider it would be fair and reasonable to make an order for costs in respect of either appeal. I consider it appropriate that the parties bear their own costs.

In proceedings 2017/00356445 1. The appeal is dismissed.

In proceedings 2017/00356446 1. The appeal is upheld. 2. The valuation of the land being Lot 22 in DP 978820, known as 144 Flinders Street, Paddington as at 1 July 2016 is set in the amount of $1,875,000.

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