In recent months, the highly publicised decisions by the High Court and Supreme Court in separate matters, found in favour of ratepayers, where municipalities over estimated – or in one case “thumbsucked’ property valuations, has drawn comment from Dianne de Wet, Professional Valuer with Massel Property Services and President of the South African Institute of Valuers (SAIV).
The two matters concerned Msunduzi (Pietermaritzburg) local municipality in the KwaZulu-Natal Midlands, and Thaba Chweu in Mpumalanga.
While news reports do not always disclose the full facts in the matter and can lead to a distortion of the outcome, justice for the plaintives has been seen to be done. In the Msunduzi matter, the ratepayers did not submit sufficient evidence to support their contention that the properties were overvalued. However, the judgement was particularly scathing of the Appeal Board in that they did not make clear what the requirements were when appealing a value and seemed to make ad hoc rulings. They also, based on evidence given at the hearing, were vague when describing the manner in which outcomes were determined, viz “contingencies” applied in determining the final values. The Municipal Property Rates Act provides guidelines and regulations for the determination of property rates, including specific ratios for different property categories, such as agricultural properties.The Act sets a limit on the ratio at which agricultural properties can be rated, not exceeding 25% of the rates levied on residential properties.
A fair outcome?
Having read the judgements, it is not clear whether the Valuation Appeal Board was involved in the Thaba Chweu Rural Forum matter as the municipality consistently levied illegal rates and acted in conflict with the various laws governing local government and property rates. However, in the Msunduzi matter, the court held that part of the Appeal Board’s function is to determine market value and there is no onus upon an appellant to prove the market value of his property, in fact the onus is on the municipality to prove that a true market value for the subject property has been determined. This could have implications for all municipal valuers when dealing with appeals in future
How were the original valuations conducted?
In both instances, Msunduzi and Thaba Chweu, the valuation roll was outsourced to a service provider following a tender procedure. The problem with this approach is that more often than not, the lowest tender is accepted – whether the work can properly be undertaken for the lowest contract fee or not, is debatable. The lowest bidder in the tender process may not necessarily be the most qualified or experienced service provider. Choosing a service provider solely based on cost can compromise the quality of the valuation work and can impact the true reflection on market values. When outsourcing a valuation roll, a municipality may have limited control over the process and the quality of work delivered by the service provider. This can result in inconsistencies, errors, or inaccuracies in the valuations, potentially leading to unfair property assessments and disputes from ratepayers.
What is the process when undertaking valuations for rates purposes?
The first step is to prepare a market report as at the date of valuation. This is based on rentals, operating costs, sales values, property attributes influencing values, etc., for each homogenous value area within the municipality. The municipal valuer with the assistance of data collectors must collect property attribute data and take photographs. If using statistical regression analysis techniques (mass appraisal), good data should ensure good results. Outliers must always be interrogated to ensure that they are correctly valued and to ensure consistency. Consistency is achieved through good data collection where properties with similar attributes should have similar values.
Statistical regression analysis is essentially an iterative process where a quality assurance is performed repeatedly throughout the process to ensure that the final values align with the information gathered in the market report. Various tests are conducted to confirm the accuracy of the results. These checks will ensure that the results conform to the information gathered for the market report.
It is important when tendering that valuers ensure that they do not quote fees that are too low to create a valuation roll that will withstand public scrutiny and legal review. Municipalities should also be cognisant of how much a properly created valuation roll will cost so that they do not fall into the trap of accepting a bid that is too low.
By Dianne de Wet, President of the South African Institute of Valuers – SAIV
The problem lies with the Supply Chain Management and Bid Committee that will virtually only entertain the lowest tender regardless.
They have no idea what the GV entails. Regards
I hear your point but let us start by cracking the whip within our Profession.
The judgement by the KZN Division of the High Court in Locum Investments (Pty) Ltd and Others v Msunduzi Municipality and another 2023 JDR 100 KZP is in part a good decision, but, in general, it is in my respectful fundamentally opinion flawed.
* It aims to portray an appeal board as a super-valuer. It is not.
* Whilst it is accepted that the Valuations Appeal Board is not an appeal court it does not mean that when adjudicating an appeal against a municipal valuer’s decision that the onus is on that valuer to carry the onus to prove its decision to be correct. It is the appellant that alleges it and must carry the onus to prove to the Board that the decision was incorrect.
In my opinion the decision should be taken on appeal to the Appellate Division
The Board is a creature of statute and derives its powers and responsibilities from the Act. Regarding appeals, the Act in s57(a) determines that the function of an appeal board is “to hear and decide appeals against the decisions of a municipal valuer concerning objections.” It never was the Board’s function to perform the valuation of a property. Its primary task is to consider an appeal against the valuer’s objection decision.
It is trite that valuation is not an exact science, and, for valuers, the exercise of professional judgement is often intuitive, and based on experience accumulated over time, or an intrinsic knowledge of particular factors. The exercise of professional judgement forms an important part of dealing with an objection. It is this decision that is normally appealed against and what the Board must consider and decide on.
As stated, a Board dealing with a disputed valuation should not attempt to itself value the property in question or to introduce a third set of valuation opinions, or make its own assumptions about the property, but should decide the matter on the evidence and submissions before it. The Board is however entitled to piece together a valuation from the evidence and submissions before it, and it is under no obligation to agree wholly with one valuer or another, or with both of them.
A Board is placed in a difficult position if the valuation evidence before it is defective, incomplete, or irreconcilable as it would appear in the current matter is the case. In such an event, the Board should make use of whatever other evidentiary material is before it to correct, complete or reconcile the evidence in order to reach an appropriate valuation outcome. The Board, based upon its composition (legal person plus two expert and experienced valuers) has a greater degree of latitude in using combined expert skill and knowledge in this regard, in order to reach the correct and preferable decision in a merits review, by standing in the shoes of the original decision maker. This is the only circumstances where the Board can determine the valuation.
It is the task of the Appellant and its representatives to provide reasons why the Board should do that.
If the Court’s decision in the Locom Investments matter is to be followed it would mean that all that an appellant has to do in its appeal submission is simply to state that the Valuer’s decision was incorrect, without providing any reasons for such allegation. This would be defeating the purpose of the Act.
The SACPVP is also part to blame, nevermind the Supply Chain Management in terms of MFMA. The Council must crack the whip to its members ( Professional Valuers) when found to be acting unethical in terms of the work done. SACPVP committee members are toothless simple because they are nominated by the same incompetent valuers.You may complain about these members Council will do nothing. We need to raise these issues the Ministry of Public work and Infrastructure. The Profession is slowly losing its credibility to many communities due to this ” do as you please ” behaviour by certain valuers. We need to protect our noble profession. Office of the Valuer General is worse.