Capital value – Vast amounts of surface waste

What is the issue?

The Supreme Court of South Australia has recently clarified that the presence of substantial surface waste on an industrial site will have a negative effect on site value and capital value for the purposes of assessment by the Valuer-General.

What does it mean for me?

Owners of land affected by significant industrial or household waste or contaminated soil and groundwater may refer to the decision of the Justice Parker in Bosnakis v Valuer-General [2017] SASC 158 (3 November 2017) when seeking reassessment of site value or capital value for the purposes of rates notices.

What was decided?

The Court applied the test set down by the High Court in Spencer v The Commonwealth[1] on the proper approach to the meaning of market value.  The test is neatly stated as:

The value of land is the price arrived at by a willing but not anxious buyer negotiating with a willing but not anxious seller, both perfectly acquainted with the land and cognisant of all circumstances which might affect its value.[2]

The evidence established that the land in Para Hills was affected by vast surface debris.  Photographs showed a great variety and volume of waste on the land including tyres, concrete pipes, rubble, a large concrete slab, a septic tank, car parts, white goods, polystyrene foam, pallets, sheets of metal, used oil drums and a fibreglass pool shell.

The appellant’s and the Valuer-General’s expert witnesses agreed that the surface waste would impact upon site value and capital value.  There was a significant difference in capital value, with the Review Valuation being $1,050,000, the Valuer-General’s expert contending for $845,000 and the appellant’s expert arriving at a sum of $625,000,.  The two experts before the Court were agreed that the vast amount of rubbish would have a negative effect on what the hypothetical purchaser would be prepared to pay.

The argument by the Valuer-General that because the surface waste was a chattel, it ought not be taken into account because it was not relevantly ‘in the land’ was rejected by the Court.  The phrase ‘in the land’ was submitted to mean the land including all improvements and fixtures that are part of the land.  While the Court accepted the rubbish items were chattels rather than fixtures, he did not accept that the phrase ‘in the land’ was of assistance and distinguished the authority of CSL Limited v Valuer-General.[3]

The Court adopted the appellant’s site valuation of $416,000 at the valuation date.  The capital value was accordingly $625,000; a reduction of $425,000 from the Review Valuation.

What are the next steps?

Owners of land affected by surface contamination or soil and groundwater contamination should seek advice regarding their options for seeking review of valuations of land advised in rates notices if that notice does not consider the contamination.

[1] (1907) 5 CLR 418, 432 and 441 per Griffith CJ and Isaacs J.

[2] Commonwealth Custodial Services Ltd v Valuer-General [2006] NSWLEC 400, [13]

[3] CSR Limited v Valuer-General (1977) 17 SASR 446, 450, Wells J.

(c) Eliza M Bergin 2017