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31 July 2017 Some observations on the approach to valuations, land tax claims and the 'actual use of land'

By Cecilia Rose, Partner

Some observations on the approach to valuations, land tax claims and the 'actual use of land': Carlewie Pty Ltd v Roads and Maritime Services [2017] NSWLEC 78

Why is Carlewie important?

The Applicant ran some interesting arguments on valuation approaches in this matter, and the Court has made it clear that section 56 of the Land Acquisition (Just Terms Compensation) Act 1991 (JTC Act) envisages a single hypothetical transaction, rather than competition between purchasers.  The case also confirms the approach to land tax claims.  There is also some further commentary on the concept of 'actual use of land' which is made in the context of assessing whether an allowance for stamp duty can be granted.

The decision

Carlewie related to the acquisition of land for the construction of the St Peters Interchange section of 'Westconnex'.  The Applicant was the landowner and the land was subject to a number of interests, including a number of leases.  The valuation of the land was also complicated by a number of features including heritage matters, contamination issues, town planning issues, a fire safety order and costs associated with the replacement of the acquired land.  Most of the land was leased at the date of acquisition. 
 
The Applicant said that it was in the position to advantageously amalgamate adjacent parcels of land and that was an opportunity lost caused by the acquisition.  The 'land bank' characterisation of the applicant's activities was rejected by RMS. 
 
The Applicant adopted a different approach to valuation and how to consider competing expert opinions.  The Applicant said that in any sale there will be more than one hypothetical purchaser, and each will retain their own experts.  A hypothetical purchaser would receive advice supporting a higher value, so their offer, based on that advice, would "beat" other potential purchaser offers.  On this basis, the Applicant said the Court should proceed in the position that is most favourable to the Applicant.  The Court rejected this argument.  It disregards the function of expert evidence, disregards that a hypothetical purchaser would be fully informed, it would not be ignorant of competing advice.  Section 56 of the JTC Act envisages a single hypothetical transaction, it does not imagine competition between purchasers.
 
The Applicant's claim for land tax was rejected on the basis that there was no evidence in the proceedings that paying land tax is consistent practice in the market with respect to industrial land.  The adjustment for purchase price for land tax is something that is usually negotiated individually between the actual purchaser and vendor.
 
On the issue of the 'actual use of land', to qualify for a stamp duty allowance on the purchase of replacement land, the Court considered cases on actual use where land banking was demonstrated, or where it was shown the owner was not a passive investor.  The Court found that in this case there was nothing more than a vague and unstructured proposal to develop the land, potential future use was not an actual use.  The actual use was undertaken by the tenants in this case, as there was no evidence that land was being held for redevelopment or land banking later.

Cecilia Rose, Partner  |  Phone: +61 2 9233 5544  |  Email: cxr@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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