In April this year the NSW Land and Environment Court
will consider the interpretation of section 6A of the Valuation
of Land Act 1916 (NSW), and decide whether the Valuer-General
appropriately ignored contamination when valuing land.
On 3 February 2015, in Challenger Listed Investments Ltd v
Valuer-General  NSWLEC 7, Justice Biscoe ordered that a
separate question be determined in relation to the manner in which
contamination of land is to be taken into account when valuing
land. The question to be answered is as follows:
Having regard to the agreed facts that the land is
contaminated and that the source of the contamination are [sic] the
improvements on the land or their operation, is the contamination
of the land a matter to be disregarded in the determination of
'land value' under the Valuation of Land Act
The Court's determination of this question could alter the
appropriate valuation methodology carried out on contaminated
sites. This decision has the potential to impact parties
transferring property and authorities who compulsorily acquire
Challenger owns a contaminated site comprising a manufacturing
and distribution facility in Sydney's southwest
(Site). Between 2011 and 2013, the Valuer-General
(VG) determined the land value of the Site three
times in accordance with section 6A of the Valuation of Land
Act (Valuation Act). Challenger contested
these determinations, contending that the land had no value at each
valuation base date, largely due to the cost of remediating the
THE CURRENT VALUATION METHODOLOGY
In summary, section 6A of the Valuation Act provides:
subsection 6A(1): the value of the land
consists of the expected sale value, assuming that any improvements
had not been made;
subsection 6A(2): it is assumed that the land
may be used or continue to be used for any purpose for which it was
being used or could be used, and such improvements may be continued
or made on the land as required in order to enable the land to
continue being used. Nothing in subsection 6A(2) prevents the
valuer from having regard to any other purpose for which the land
may be used on the assumption that the improvements referred to in
subsection 6A(1) had not been made.
The VG's current valuation methodology does take
contamination into account in accordance with subsection 6A(1).
However, under subsection 6A(2), the VG can issue a determination
that does not account for the cost of remediating the contamination
if the current use of the land can continue indefinitely. This
proposition was relied upon by the VG in relation to the Site, who
considered that remediation was a long term issue as the Site could
continue to be used as a manufacturing and distribution facility
without remediation occurring. As a result, the VG did not factor
in the contamination in determining the land value over the three
Challenger claimed that the VG wrongly interpreted section 6A(2)
of the Valuation Act. In doing so it relied on Fivex Pty Ltd v
Valuer-General  NSWLEC 27
(Fivex) in which it was held that the
costs of improvements were to be deducted from the valuation.
Challenger also relied on its own draft valuation evidence which
assessed the land value of the Site as nil once the improvements to
remedy the contamination were taken into account.
The VG is currently appealing the Fivex decision, and
argued that the issue of contamination in the Challenger valuation
should be stayed until the Fivex appeal was finalised.
This argument was rejected by the Court. Biscoe J found that
resolution of Challenger's question would result in substantial
savings in time and expense, and would significantly narrow the
field of litigious controversy.
The Court has set a hearing date for April 2015. The outcome of
the hearing is potentially significant if the decision is made in
Challenger's favour. Such a determination would mean that the
VG would need to overhaul its current policy in relation to
contaminated sites. This could result in changes to the approach to
land valuation generally, which would impact parties transferring
properties and public authorities resuming land. We will publish a
further update on the hearing outcome once the Court publishes its
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Most awarded firm and Australian deal of
Australasian Legal Business Awards
Employer of Choice for
Equal Opportunity for Women
in the Workplace (EOWA)
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).