The Valuation of Land - Turnbull Planning International

Robert Croft Holdings Pty Ltd v Valuer General [2018] NSWLEC 190.

Turnbull Planning International has experience in the planning and legal aspects of matters relating to the compulsory acquisition of land, the valuation of land, and the payment of compensation.

Recently, the Director and Legal Counsel of our firm, Mr Pierre Le Bas, was involved as an expert planner in this matter.

The proceedings

This was an appeal under s 37 of the Valuation of Land Act 1916 (NSW) (the ‘VLA’) by the applicant in relation to the Valuer General’s assessment of land value of the applicant’s property in Ben Boyd Road, Neutral Bay (‘the site’).

The applicant had lodged objections under s 29(3A) of the VLA with respect to the 2015 and 2016 valuations of the site. The respondent subsequently notified the applicant of the outcome of its review of the 2015 and 2016 valuations, and its intention to disallow the applicant’s objections. Shortly thereafter, the respondent disallowed the objection to the 2015 valuation and the applicant then filed with the Land and Environment Court a Class 3 application, contending for a lower land value for both the 2015 and 2016 valuations, which was subsequently revised to the same amount for both dates. In essence, the applicant was of the view that the land value, as assessed, was too high, so he commenced proceedings in the hope that the Court might see fit to reduce the respondent’s valuation.

The proceedings were conducted on the basis that only the 2015 valuation was before the Court for determination, with neither party submitting evidence nor making submissions in relation to the 2016 valuation.

The site

The site, which was zoned R4 High Density Residential under the relevantly applicable local environmental plan, was a waterfront block, with the Neutral Bay harbour at its southern boundary. A three-storey block of flats, comprising six two-bedroom units, had been erected on the site which had no street frontage or vehicular access. Ben Boyd Road, to the north of the site, and high above the level building pads, offered very limited street parking, which was competitively in demand during the Court’s view. Access to the site was only by foot via a steeply sloping downward pedestrian pathway from Ben Boyd Road, which traversed a vegetated strip of Council land.

The valuation experts retained by the parties agreed on the following matters with respect to the zoning of the site, as at the date of the valuation:

planning instruments relevant to the site included the North Sydney Local Environmental Plan 2013 (NSLEP), North Sydney Development Control Plan 2013 (NSDCP), and Sydney Regional Environmental Plan (Sydney Harbour Catchment) 2005 (Harbour SREP);
the site was zoned R4 High Density Residential under NSLEP;
the site contained a maximum building height limit of 12m from the existing ground level; and
a part of the southern section of the site was located within the Foreshore Building Line area.

Relevant legislation

Particularly pertinent to the matter were ss6A(1) and (2) and s40 of the VLA which provide as follows:

6A Land value

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.
Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that:
1. 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 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.

40 Powers of Land and Environment Court on appeal

On an appeal, the Land and Environment Court may do any one or more of the following:
1. confirm or revoke the decision to which the appeal relates,
2. make a decision in place of the decision to which the appeal relates,
3. 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.

Importantly, s 40(2) of the VLA places the onus of proof on the applicant to prove their case.

Submissions on planning

The planning experts agreed, among other things, that pursuant to s6A(1) of the VLA the land is assumed to be vacant (if this is the relevant approach for the valuers by virtue of their own determination) and it is valued at its ‘highest and best’ permitted use. In circumstances where, however the development of land ‘exceeds’ the current zoning and the relevant planning objectives, controls and restrictions, s6A(2) of the VLA is able to be applied and the valuer considers the existing use rather than that which would be approved by the current planning objectives, controls and restrictions.

The Court accepted the planning evidence of Mr Le Bas who was of the opinion that the site was not capable of being developed in circumstances where no off-street parking was able to be provided. Mr Le Bas was of the opinion that, contrary to the other expert planner’s assessment, providing rooftop parking on the parcel would require a right-of-way to be granted over the driveway of the residential development on the western boundary of the Land, which would be most unlikely to be supported by the neighbours, given potential adverse amenity impacts in terms of views, vistas and aesthetics.

The applicant argued that Mr Le Bas’ analysis ought to be adopted for the purposes of the valuation exercise—in particular, that the current use of the site was the ‘highest and best use’ and that therefore the site ought to be valued in accordance with s 6A(2) of the VLA rather than s 6A(1), as relied upon by the respondent.

Submissions on valuation

The applicant’s valuer’s assessment of the value of the site as at the 2015 valuation date was $1,400,000, assessing the land in accordance with s6A(2) of the VLA (dealing with continuing use), which the valuer submitted, was the correct approach to the valuation of the land in this case. The applicant’s valuer considered that the site was not suitable for high density residential development due to its modest size (480sqm). On that basis, the applicant’s valuer was of the opinion that the current development on the site (six residential units, with a gross floor area of 390sqm) represented the highest and best use of the land.

However, the respondent argued that the appropriate pathway to the valuation of the site was via s 6A(1) of the VLA.

The valuers agreed that the site ought to be valued by the direct comparison method (‘comparable sales’) and on a gross floor area (GFA) basis.

The Court’s decision

Contrary to the respondent’s submission, Molesworth AJ preferred Mr Le Bas’ evidence and concluded that it was appropriate to apply s 6A(2) of the VLA to the valuation exercise required in this case, and that the highest and best use of the site was the existing use of the site as characterised by the apartment building extant upon the site, containing six two-bedroom apartments.

Be that as it may, his Honour ultimately concluded, in accordance with s40(1)(a) of the VLA, that the Valuer General’s issued land value of the land as at the July 2015 base date of $1,680,000 should not be disturbed.