In the recent decision of Calder Park Raceway Pty Ltd v Brimbank CC  VCAT 551 (Calder Park), the Tribunal took the opportunity to state its clear expectations of the content of expert valuer evidence. The case is known as a "Red Dot" case because it is considered by the Tribunal to be a case of interest.
The Tribunal stressed that while valuation is not an exact science there is a need for a transparent flow of reasoning to be provided by a valuer to support the professional judgement reached on the value of the land.
Highest and Best use
A finding that is made about the highest and best use will often be critical to the valuation assessment that follows, and in determining what sales are truly comparable. In Calder Park the Tribunal was critical about the basis and level of explanation about how the highest and best use has been derived by the valuers.
The first task of the valuer is to determine the highest and best use is then to value the land on that basis. It is not appropriate to determine the highest and best use by reference only to value.1
Highest and best use may be set out as alternatives.2 However, it is still necessary to define with a level of specificity the form that such alternatives may take. Further, in order to identify comparable sales, it is necessary to identify what uses are likely to be most profitable for the subject land and what are the most probable of the potential uses.3 Such information must be set out in a transparent manner, and not simply as an afterthought. In doing so valuers should also have regard to the risks associated with any potential use, as the most profitable potential use may be attended by a serious risk.
In Calder Park, the Tribunal was also critical that the parties had not presented any evidence, such as financial data, in relation to why the current use of the land (being a racetrack) was no longer a viable option. Valuers and parties should consider the extent to which financial data and/or a feasibility analysis will assist their position on highest and best use. With complex properties, evidence of non-valuer experts may often be critical to the case.
Analysis of comparable sales
A valuer's witness statement needs to set out not only the comparable sales and an analysed sales rate, but also the factors that have led to the contended value such as:
- time, size, and location;
- why one site or location is superior to another;
- what are the particulars market conditions or trends that have been relied upon; and importantly,
- why the valuer has made a particular adjustment.
If the comparable sale is so different to the subject site in relation to the factors set out above, then consideration must be given as to whether it is a 'comparable sale' at all. In Calder Park the Tribunal said that its preference is to have directly comparable sales. However, it acknowledged that there are occasions where such sales are simply not available, and a degree of common sense needs to be applied. In such event, VCAT is prepared to give cautious consideration to a range of imperfect comparable sales (rather than having no sales evidence at all), but such an approach requires the valuer's professional judgement and any adjustments to be even more clearly and transparently articulated in the valuer's expert witness statement, if evidentiary weight is to be applied to those sales.
In Calder Park the Tribunal disregarded a number of comparable sales put forward by the parties' experts on the basis that they could not be considered comparable due to substantial differences in zoning, location, different encumbrances attaching to the sites, as well as one of the sales not being a market transaction. As a result the Tribunal was left with only two comparable sales to rely upon in making its finding as to the valuation of the subject land.
Single hypothetical sale
In Calder Park the land comprised four separate titles with two very discrete parts. The Tribunal therefore gave some consideration to whether the value placed on the land should be assessed as a single hypothetical sale, or whether a genuine hypothetical seller might choose to sell the land by separate title, or in two parts which would affect the value.
The definition in section 2 of the Valuation of Land Act 1960 (Vic) (VL Act) requires the Tribunal to determine the sum which the land might be expected to realise at the relevant date "if offered for sale on such reasonable terms and conditions as a genuine seller might be expected to require...". The Tribunal concluded that this required it to assess the value as a single hypothetical sale.4
However, in doing so, regard can be given to the different attributes of the different parcels of the land. Further, provided the necessary evidence is provided, there may also be scope for adjustments to be made to the value to take into account bulk or 'in-line' purchases of multiple parcels in a single hypothetical sale.
Therefore, although a single sale is the basis for the valuation, provided sufficient evidence is presented, consideration can be given to different factors affecting different parts of the land, such as zoning and planning controls, as well as discounting adjustments.5 A valuer's unsupported opinion (no matter how experienced) may be given little if any weight.
In Calder Park the Tribunal was highly critical of the parties' experts failing to provide detailed evidence and reasoning in a transparent flow of information.
It is critical for experts and lawyers to ensure the evidence for their client's case is most likely to be accepted in a contested hearing. Not only should a reasoned valuation be presented, but the methodology and professional judgement sitting behind that valuation needs to be presented in a transparent manner.
1 Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources, (1988) 65 LGRA 410, 415
2 ISPT Pty Ltd v Melbourne City Council & Anor  VSCA 180, 56.
3 Ibid at 60.
4  VCAT 551, 50
5 As a note, when determining the site value of a single larger parcel of land, and in interpreting section 2 of the VL Act, regard must also be given to the recent decision in Port of Melbourne Corp v Melbourne City Council & Valuer General Victoria  VSC 714, which considered this definition in detail.
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