Insights Library
Review of Valuation of Land for Properties encumbered by Heritage Overlays.
Review of Valuation of Land for Properties encumbered by Heritage Overlays.
In the recent decision of WSTI Properties 490 SKR Pty Ltd v Valuer-General Victoria (Red Dot) (Land Valuation) [2023] VCAT 734, the Tribunal constituted by Justice Quigley and Senior Member Jacono ordered that the site value for a heritage property as determined by the valuation authority for the purposes of Land Tax and Council Rates Notice was to be reduced pursuant to section 25(1)(a) of the Valuation of Land Act 1960 (Vic).
This decision arose due to many factors including the correct statutory construction in assessing site value, the statutory definitions for ‘site value’ and ‘improvements’ and the effect of a Heritage Overlay on the highest and best use of the property.
Case Background
The Valuation of Land Act 1960 (Vic) (Act) sets out the statutory scheme for valuation of land in Victoria.
“The Act provides that for the purposes of the Local Government Act 1989 (Vic), a valuation authority must cause a general valuation of rateable land within each Council district as at 1 January in each calendar year. These valuations are used by Councils to levy rates under the Local Government Act 1989 (Vic) and by the Commissioner of State Revenue to levy land tax under the Land Tax Act 2005 (Vic).”
The Applicant sought a review of the valuation decision in respect of its property at 490 St Kilda Road, Melbourne on the basis that “the returned site value was too high having regard to heritage constraints of the property, the estimated cost to replace the existing heritage constrained building and the definitions as prescribed by the Act.”
Each party presented evidence in support of its position including expert evidence from valuation consultants, planning consultants, surveyors, and heritage experts.
Legislative Process for Review
Pursuant to section 16 and 17 of the Act, a person aggrieved by a valuation of any land made or caused to be made by the valuation authority, may lodge a written objection to that valuation on any of the following grounds:
- the value assigned is too high or too low;
- that the interests held by various persons in the land have not been correctly apportioned;
- that the appointment of the valuation is not correct;
- that lands that should have been included in one valuation have been valued separately;
- that lands that should have been valued separately have been included in one valuation; and
- that the area, dimensions or description of the land including the AVPCC allocated to the land are not correctly stated in the notice of valuation, assessment notice or other document.
An objection must be lodged within 2 months after the notice of valuation is given.
The valuation authority that determined the valuation of land must then assess the objection and within 4 months after receiving the objection, the valuer must advise the objector that:
- it considers that no adjustment in the valuation is justified; or
- it considers that an adjustment in the valuation is justified and recommend the adjusted figure to the Valuer-General.
Within 2 months of the Valuer-General receiving the recommendation, it must then make a determination of the valuation amount within 2 months.
If the objector is dissatisfied with the decision of the authority valuer or Valuer-General, then under section 22 of the Act, the objector may apply to VCAT for a review of the decision.
The Decision
In this case, the Applicant was dissatisfied with the valuation authority’s determination as it did not allow an amendment to the site values. Accordingly, the Applicant exercised its rights under section 22 of the Act for a review by the Tribunal. At the Tribunal the VGV changed the valuation methodology relied upon and increased the site value from the original.
The main issue in contention was in relation to the correct approach to determine the site value of the land which is subject to a site-specific heritage overlay.
The VGV argued that “as the heritage overlay is site-specific (that is the heritage significance is dependent on the extant building being in place) removal of the building meant that the effect of the heritage overlay was diminished such that a very significant development opportunity presented itself.” This meant that the VGV considered that, as the building on the land is to be disregarded when assessing the site value as the building is considered as part of the capital improved value of the land, the heritage overlay is also to be disregarded when determining the site value.
The Tribunal did not agree with the approach by the VGV in that the heritage constraints on a property are not to be disregarded when assessing the site value of the property and should be particularly taken into account when considering the principals under section 5A of the Act and the highest and best use of the land.
The Tribunal held that whilst there is no legislative requirement for the chronology in which a valuer is to assess matters relevant to site value, the Tribunal considers the following order to be most appropriate:
- Firstly consider the principals under section 5A of the Act and in particular the highest and best use of the land.
- Then the determination of the highest and best use of the land should inform the valuer in regards to the other matters in section 5A of the Act such as the effect of any planning scheme on the use of the land.
- Following determination of the highest and best use of the land and consideration to the matters in section 5A of the Act, the next step is to consider the statutory definitions for ‘site value’ and ‘improvements’ under section 2(1) and (2) of the Act.
The evidence before the Tribunal by both the VGV and Applicant was that the building on the subject land should and would be substantially retained given the heritage constraints. At paragraph 138 the Tribunal held that:
“….In our view a realistic, rather than highly hypothetical approach, needs to be taken and one which recognises that it is the planning control effect which is taken into account not the theoretical removal of the building to effectively retrofit an argument that no building equates to no heritage control. To equate a vacant site devoid of heritage controls as equivalent in the circumstances here is plainly in error.”
The VGV also sought to submit a further valuation which was conducted on a different methodology, however, the Tribunal held that an entirely new valuation on a different basis is not permissible within the context of an appeal by an Applicant against the VGV’s decision on the objection to the valuation, commenting that “It is the Tribunal’s role to consider whether or not the Valuer made the correct decision that no adjustment was required, in this case, to reduce the site value”.. A further valuation by an independent expert which demonstrates the reasonableness of the returned valuation may be submitted, but it may not be issued in substitution of the current returned valuation.
On the evidence provided to the Tribunal and noting the above methodology for assessing site value, the Tribunal determined that the returned site value ought to be reduced.
Key Takeaways
Despite the valuation authorities repeated attempts, the Tribunal decision highlights that heritage constraints of a property are not to be disregarded when assessing the site value of a property.
Further, the VGV is also not entitled to introduce a new valuation based on different valuation methodology in substitution of the original site valuation as part of any review proceeding.
