The case C & V Engineering Co Pty Ltd as Trustee for the Pizzolato Settlement v Department of Planning Industry and Environment – Valuer General of NSW [2024] NSWLEC 57 provides important insights into the complexities surrounding land valuation in urban environments, particularly when adjacent to developments like Mascot Towers.

Background

Mascot Towers, a mixed-use development located at 1-5 Bourke Street, Mascot, became known after its residents were evacuated in 2019 due to severe structural damage. This incident had a profound ripple effect on that property and also surrounding properties, influencing both market perceptions and practical considerations for nearby land development.

In this case, the parties were in dispute with respect to land valuations of two parcels in Mascot. Arguments related to the proximity to Mascot Towers and the impacts of that development adversely affecting the land value. It was contended that the highest and best use of their properties was either as boarding houses or for mixed-use development. However, the significant construction issues related to developing basement parking due to Mascot Towers’ problems necessitated a re-evaluation of feasible development strategies.

Key Issues in the judgment

1. Highest and Best Use: The court examined whether the highest and best use of the properties was as boarding houses or mixed-use developments. Given the additional costs associated with safe construction methods near Mascot Towers, such as diaphragm wall construction to mitigate the risks of high water tables and unstable soil conditions, the viability of mixed-use developments with extensive basement parking was questionable.
2. Structural Engineering Constraints: The proximity to Mascot Towers required more expensive construction techniques. The Court heard that typical secant piling methods were impractical, necessitating the more costly diaphragm wall construction. This directly impacted the feasibility of developments requiring substantial basement parking.
3. Planning Controls and Compliance: The land being considered was zoned B4 Mixed Use under the Botany Bay Local Environmental Plan 2013, with specific requirements for floor space ratios and building heights. The additional planning controls for boarding houses, including car and bicycle parking stipulations, further complicated the development considerations.
4. Market Perception and Risk: The stigma attached to Mascot Towers influenced market perceptions. Hypothetical purchasers were assumed to be fully informed and would likely factor in the additional construction risks and costs. The Court considered whether a mixed-use development, despite being permissible, was financially feasible given these challenges.

Court’s Decision

The Court ultimately had to balance the legal permissibility of potential developments with their financial and practical feasibility.

The Court found that the significant structural engineering challenges and costs associated with developing basement parking near Mascot Towers, coupled with the market’s preference for boarding house developments that did not require such extensive construction, outweighed the feasibility of mixed-use developments. On this basis, the Court upheld the adjusted land valuations based on the boarding house use.

Conclusion

The decision underscored the significant impact that neighboring developments like Mascot Towers can have on land valuation and development strategies. The judgment reinforced the importance of considering both market perceptions and structural feasibility in land valuation disputes.

The judgment highlights the intricate interplay between urban development, market perceptions, and regulatory frameworks. It serves as a crucial case study on the potential long-term impacts of structural issues and the importance of comprehensive risk assessment in property development and valuation.

Read more

You can read the full Court judgment below.