An important valuation decision recently addressed key valuation processes and their review – Boulter v Valuer-General Victoria (Land Valuation) (Boulter)[1].
VCAT warned owners and ratepayers that review can result in a higher valuation. It emphasised the complexity of valuation cases and urged effective communication by the valuer with the owner/ratepayer once any objection is lodged.
It found automated processes under the Valuation Best Practice Specifications Guidelines (VBPSG) were transparent and rigorous. It reiterated its role as an expert tribunal in valuation review matters and its entitlement to seek relevant information from the valuer. It addressed a narrow ‘peer review’ brief by the Valuer-General (VGV) to its expert witness noting its limits, the weight given to it and VCAT’s need for relevant information.
VGV was the Valuation Authority. Kellehers advised after the VCAT application but was not involved in any aspect of the VCAT review. This was a case where legal costs were disproportionate to potential gains, resulting in the landowner appearing in person at VCAT without legal assistance or supporting expert evidence. VGV was represented by counsel and instructing solicitors and called expert evidence. VCAT noted that valuation review requires specialist expertise and knowledge, particularly with an unusual land use and occupancy arrangements and limited direct comparable sales evidence.
* * *
The case concerned land at Taylor Bay near Lake Eildon, developed and leased for boat and caravan storage units. The review ‘occupancy’ was part of a larger ‘house’ property comprising a separate occupancy, although both occupancies were on the same title. Assessment of the larger occupancy was not before VCAT. All values were challenged by both owner and VGV. The owner also claimed an incorrect allocation of the Australian Property Valuation Classification Code (AVPCC)[2]. This case note focuses on the broad valuation process addressed by the Determination. It omits the particular valuation analysis of the land itself.
VCAT amended upwards all values but accepted the revised AVPCC. It warned the owner of the risk of a higher value and provided him with the opportunity to withdraw his review application, but he declined. Noting the legislation and litigation risk, it commented that ratepayers:
‘may find it a difficult pill to swallow that, in seeking to review the returned valuations, … [VCAT’s valuations] are found to be considerably higher than not only …contended valuations but also the returned valuations originally under review’[3].
VCAT confirmed the owner’s strong sense that he was treated unfairly and not given information enabling him to better understand the property valuation. It emphasised the importance of good communication and transparency, particularly, at the objection phase. It warned that each party must establish the accuracy of its own valuation[4] and that, once a case is conducted, it is no longer possible to contend that the original valuation be upheld.[5]
It reiterated that its legislative powers are:
‘to make its own decision on the evidence before it and the current law’ and ‘not to evaluate the merits of the decision under review, or the decision-making process’[6].
It is to ‘stand in the shoes’ of the original decision-maker’,[7] and is required to ensure that:
‘every matter or thing [considered] relevant … shall be taken into account’[8].
In assessing an occupancy within a larger property, it found it needed to consider the valuation of the larger occupancy. It noted that data errors made by the original valuer were misunderstood by both parties as data errors do not equate to errors in levels of value.
VBPSG Automated Mass Valuations
VCAT addressed issues arising from techniques introduced since VBPSG in the 1990s, where large volumes of sales analysis is automated into homogenous groups of sub-markets and that analysis is applied to individual properties. It rejected an argument that the output of a ‘mass valuation’ process was not a valuer’s valuation as required by VLA[9], holding that, as VLA refers to ‘a person’ and ‘a valuer’, returned valuations undertaken via automation are valuations by a valuer.
It found the VBPSG framework to be a transparent and rigorous process as, although automated, outputs for most properties provide sales analysis and look up tables applicable to the relevant sub-market group from which a calculation is then applied to the particular site. However, it emphasised that at the review phase it was most important to establish effective communication with the objector.
VCAT’s Role
VCAT reconsidered its role as an expert tribunal in valuation matters. It rejected an approach that it should only interfere with a valuation if it was somehow unsound[10], whilst emphasising that it is not to undertake its own valuation. Following earlier authority, it restated its role required application of its expert knowledge and skill and that it must:
‘evaluate the intellectual foundation of each valuation and the evidence supporting each valuation and the probative force of the evidence founding the expert’s opinion’ … (depending) on the particular facts and circumstances, the nature of the assumptions and how the evidence is prepared’.[11]
Expert Evidence
In the course of his evidence, it emerged that VGV had directed its expert valuation witness ‘to make certain assumptions in preparing his evidence, rather than sourcing and verifying all the information himself’. The witness had not verified all the information provided with the original valuation and VCAT had difficulty ascertaining relevant sales evidence from him. It characterised his evidence as ‘a form of ‘peer review’ evidence’ which could be a legitimate approach but impacted the weight it placed on it and, in this case, required it to request additional information. VGV claimed that VCAT was seeking ‘fresh information’ that was beyond its powers and that the information was irrelevant, unreliable and lacked probative value. VCAT considered its request to be relevant and within its power to inform itself at it thought fit.
AVPCC
VCAT considered the appropriate method for using AVPCC, which is a s a tiered set of codes. The first digit is a high-level ‘primary’ category, eg residential , describing the economic function or industry type land use and is often linked to zoning. The next is a ‘secondary’ sub-category, eg residential development land, single residential accommodation, describing what takes place and what is observable as to actual land use. The last is a ‘tertiary’ category further breaking up and defining land use that can include a recent planning or building permit. VCAT found that the first place to start in determining the correct AVPCC is at the high level, then moving down to the secondary and tertiary sub-categories. It rejected the valuer’s approach of starting with land use and then searching the code categories for an appropriate sub-category.
OUTCOME
The case is a reminder of the complexity of valuation review. It emphasises how important the objection process is to avoid the risks of VCAT review, with its uncertain valuation outcome. Whilst confirming current automated valuation techniques, provides some direction to VGV and consultant valuers as to process improvements to consider in addressing objections and on VCAT review and expert evidence.
KELLEHERS AUSTRALIA
Dr Leonie Kelleher OAM.
30 September 2022
Copyright © Kellehers Australia 2022.
Liability limited by a scheme approved under Professional Standards Legislation
This fact sheet is intended only to provide a summary and general overview on matters of interest. It does not constitute legal advice. You should always seek legal and other professional advice which takes account of your individual circumstances.
[1] [2022] VCAT 305, VCAT P353/2022 – Red Dot Decision. Senior Members Daicic (presiding) and Jacono.
[2] AVPCC is a code based on the VBPSG that is assigned, usually by the valuer, to classify the land use of each occupancy. The AVPCC Land Use Classification allows allocation pursuant to the Schedule in Fire Services Property Levy Act 2012 (Vic).
[3] Part III VLA – procedure for objecting to a valuation – normally within 2 months of giving the valuation. The objection must be referred to the original valuer, who must reconsider it within 4 months of receiving the objection and give the objector a copy of a recommendation to adjust or not. The Valuation Authority must then consider the recommendation and determine it within 2 months of receiving the recommendation and give notice of decision to objector, valuer and any rating authority. A dissatisfied objector must apply to VCAT within 30 days but is limited to – the grounds of objection and any other grounds in the Application for Review and, if too high a value, the amount contended as the correct value. Pursuant to s25(1)VLA, on review VCAT (or the court) may confirm, increase, reduce or otherwise amend any valuation and make any other order it thinks fit: ss 2(3) and 24 VLA.
[4] Challenger Property Asset Management Pty Ltd v Stonnington City Council [2011] VSC 184 [16].
[5] 101 Collins Street Pty Ltd v City of Melbourne (unreported, VSC, Batt J, 2 April 1996, 83-84.
[6] Action Towing Pty Ltd v VicRoads [2015] VCAT 249 [22].
[7] Mond v Perkins Architects & Anor [2013] VSC 255 [10], Emerton J.
[8] S5A VLA
[9] VCAT referred to Reg 12 Valuation of Land Regulations 2014 that permit a valuation return to comprise data, text or images able to be stored and transmitted electronically and contains the required information from the Valuation Best Practice Specifications Guidelines (VBPSG).
[10] ISPT Pty Ltd v City of Melbourne (Land Valuation) [2007] VCAT 652 [18]-[19], Morris J. And, ISPT Pty Ltd v Melbourne City Council and VGV [2008] VSCA 180, (2008) 20 VR 447, 455 [26].
[11] Boulter [124].
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