Valuation court rules in favour of Haberfield site owner whose site was acquired by RMS

The NSW Land and Environment Court has ruled in favour of a garden outlet owner in Sydney’s Haberfield over a valuation dispute between him and the Roads and Maritime Services which acquired the property.

Judge Sheahan ruled that the applicant, Dan Wei Zheng’s claim for market value through his valuer was preferred to the government valuer.

The RMS compulsorily acquired the land owned by Dan Wei Zheng at 269 Parramatta Road, Haberfield on 15 December 2015 for the construction of Stage 1(b) of the NSW government’s WestConnex Motorway M4 East Project, involving the extension and widening of the M4 Motorway from Parramatta to Haberfield. 

The land area is 1,353.2 sqm with a potential floor space area of 2,029.9 sqm (if redeveloped) and contained buildings originally constructed around 1970 for use as a service station, but were used as a warehouse and display area for the sale of stone products such as bench tops, statues and garden features, noted the judge.

Valuers from the two sides, Messrs John Sanidas for the original owner and government valuer Lunney said the direct comparison method should be the primary valuation method.  

Even, adopting the same valuation method, the two experts arrived at two different market valuations being $805,000 apart. 

David Lunney determined market value at $3,755,000 or $1,850 of potential gross floor area. 

Dan Wei Zheng’s case for valuation was determined by Sanidas who found the market value at $4,560,000 or $2,250 of potential gross floor area. 

The valuer-general valued the land for RMS at $3,635,000 or $1,790 of potential gross floor area.

“In general terms, I prefer Sanidas’s evidence to Lunney’s, but I need now to explain my reasons,” said the judge.

When the two experts adopted secondary (or check) valuation method i.e capitalisation of (notional) rent a difference of $1,760,000 was revealed. 

The government valuer determined ($2,500,000) whist Sanidas determined ($4,267,000). 

Sanidas said the close assessments based on the primary and secondary methodologies was largely due, in his view, to competing property market segments. For example, the owner occupier and or investment/development market segment each saw comparable underlying land value.  

The judge noted that “given the disparity between the valuer’s applications of their secondary/check method – capitalisation of (notional) rent – I do not consider it necessary or useful to go into detail, beyond noting that the figure arrived at by Sanidas, when employing this method ($4,267,000) is reasonably comparable to the value at which I have arrived after my analysis of the valuation evidence”.

While the valuers agreed regarding what constituted the highest and best use of the land, as it existed at the date of acquisition, Sanidas said the land had the further advantage of being able to continue indefinitely in a profitable manner. 

The valuer for the RMS submitted that the improvements to the site at the date of acquisition represent a significant underdevelopment, which were at the end of their economic and functional life; albeit nevertheless capable of ongoing use. 

Sanidas said the jurisdiction of the NSW Land and Environment Court allow where a person or business is dissatisfied with the award of compensation determined by the Valuer-General in connection with the compulsory acquisition of land, that person or business is entitled to have that determination reviewed by a judge of the Land and Environment Court, in what is known as ‘Class 3’ of the Court’s jurisdiction.  

Class 3 is unique, because it represents the only forum in which an applicant may go to have their compensation reviewed by a third party. 

The valuers identified the “Bunnings precinct” as a prime retail hub for, particularly, industrial and construction goods. That hub benefitted from exposure to very heavy passing traffic, but there were competing views as to how far from the Bunnings corner along Parramatta Road, the precinct extended to the east (city bound). 

But there was general agreement between the expert valuers as to the number of adjustments to apply to the evidence. The three adjustment factors included:-      

1.The Bunning Precinct - location advantage due to large traffic volumes 

2.Corner advantage - evidence showing premiums paid for corner sites 

3.Monthly market improvement- evidence showing market growth of 1.5% per month or 18% per annum. 

The adjustment — 5% of 15% — to be applied to the evidence was for the court to determine. 

The court’s adjustment ultimately saw a judgement for market value $4,560,000/$2,250 sqm generally in line with Sanidas’ determination of market value.