Determining land value – the “unwieldy complexity” of section 6A of the Valuation of Land Act 1916

With the recent changes in the property market, land owners and developers should consider carefully their land valuation assessments issued by the Valuer-General and consider whether to object to the land value determination.

Although the process can be straightforward, with an objection needing to be lodged within 60 days of receipt of the land value assessment, determining whether the land value is too high is not.

To say that the meaning of “land value”1 is complex is an understatement. Courts have laboured over its elaborate structure2 and its meaning.3 As Molesworth AJ stated:

“If ever there was a statutory provision which requires one to stand back and strive for a clear thinking mindset, it is s 6A of the Valuation Act, specifically ss 6A(1) and 6A(2). Rarely has there been a statutory provision that so lends itself to entrapment down the path of obfuscation”.4

Land value v market value

Land value is similar to “market value” paid by a resuming authority after the compulsory acquisition of land, in that it is determined:

  • by reference to a hypothetical sale, and
  • market conditions in the real world as at the date of the valuation.5

But in contrast to “market value”, it “is a sale of something which does not exist in the real world: the “fee-simple” stripped of improvements other than “land improvements””.It is “the price realised by a potential sale on certain assumptions” (which are set out in subsection (2)).7  

What does it really mean?

On reading s 6A, it is easy to conclude that subsections (1) and (2) are inconsistent or require two valuations to be undertaken.  

Valuers have often, understandably but mistakenly, undertaken separate valuations, one by reference to the hypothetical sale (s 6A(1)), and the other by reference to the assumptions (s 6A(2)). However, the Court of Appeal has made clear that there is “a single task of identifying the price of a hypothetical sale, subject to certain assumptions”8 and it “will only ever yield one answer”.9

The mandatory assumptions in (2) are complex10 and intricate.11 They prevail over subsection (1).12

 The LEC and the Court of Appeal recently considered appeals relating to the land value of two large parcels of land in the Botany Industrial Park. Both lots were used for heavy industry and their continued use relied on existing use rights under the Environmental Planning and Assessment Act 1979.

Each parcel was significantly contaminated and the second lot was subject to a substantial blast zone due to acute fire and explosion risks. The Valuer-General assessed land value for each parcel without regard to the cost of remediating the contamination. 

The land owner argued that the land value should be significantly discounted because the contamination would give rise to an obligation to remediate it before the erection of the existing improvements on the land.13 

Molesworth AJ in the LEC and the Court of Appeal disagreed and dismissed the landowner’s appeal. Each court held that the existing use of the land as heavy industry would continue to be an available use because of existing use rights, without the need for remediation.14

In each of the decisions, the courts grappled with the valuation exercise required to be undertaken under s6A.

The first assumption – use of land for a purpose

It is to be assumed that the land:

  • may be used for any purpose for which it could be used at the valuation date, or
  • may continue to be used for any purpose for which it was being used at the valuation date.

The second assumption – improvements on the land

It is to be assumed that the improvements may be continued or made on the land as may be required in order to enable the current use of the land to continue.15 

This requires an assumption to be made in relation to the improvements required in order for that current use to continue.16

However, the Court pointed out, by hypothetically allowing the improvements on the land to remain for the purposes of facilitating a proper valuation, it does not follow “that the actual capital value of the improvements are taken into the calculation exercise”.17

As Leeming JA stated:

“…the improvements are assumed to be present merely for the purpose of permitting an unimproved land value to be calculated having regard to the purpose for which they [improvements] were erected and for which they are required.”18

The proviso

The assumptions are subject to the proviso following (2). 

The Court of Appeal has held that although making an assumption as to how the land improvements may be used is mandatory, if there is another purpose for which the land may be used and which does not require the improvements to have been made, then regard may be had to the other purpose in undertaking the land valuation.19


1. Section 6A(1) and (2) of the Valuation of Land Act 1916 (Act) provides:
(1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.
(2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that:
(a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and 
[First Assumption]
(b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,[Second Assumption]
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.”  (emphasis added). [Proviso]
2. Olefines Pty Limited v Valuer-General of NSW [2018] NSWCA 265 at [49] (Olefines C of A).
3. Olefines C of A per Leeming JA at [38]. His Honour referred to the “unwieldy complexity” of the provision at [32].
4. Olefines Pty Limited v Valuer-General of NSW [2018] NSWLEC 18 at [115] (Olefines LEC).
5. Value-General v Fivex Pty Limited (2015) 206 LGERA 450 per Leeming JA (with whom Basten and Gleeson JJA agreed) at [12] (Fivex).
6. Fivex at [11].
7. Olefines C of A per Leeming JA at [37].
8. Olefines C of A at [38].
9. Olefines C of A at [38].
10. Olefines C of A per Leeming JA at [38] and [43]. It was Leeming JA who referred to the “unwieldy complexity” of s 6A in Olefines C of A at [32].
11. Olefines C of A at [41] and [44].
12. Olefines C of A at [39].
13. Olefines LEC at [34]. 
14. Olefines C of A per Basten JA at [18]: per Leeming JA at [51].
15. Olefines C of A at [41].
16. Olefines C of A per Leeming JA at [44] and [45].
17. Olefines LEC at [124].
18. Olefines C of A at [49]. See also Molesworth AJ in Olefines LEC at [124] where his Honour said:
“The “bricks and mortar” of the actual improvements are not valued, simply the land upon which they sit. The hypothetical “remaining” improvements are simply considered as part of the artificial mechanism in the valuation exercise in order to precisely identify what the highest and best use of the land is at the relevant date – that use which underpins the hypothetical offering to sell the land … the scheme of s 6A(2) is to allow the improvements to remain so as to act as a touchstone to precisely identify and characterise the use of the land being valued.”: Olefines LEC at [124].
19. Fivex per Leeming JA at [33]. See also Fivex at [31] and [34].


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