V PRESIDENT’S THE SOUTH AFRICAN LETTER · 2018-05-25 · Roshinee Naidoo, Andre Zybrands...

NATIONAL EXECUTIVE

OFFICE BEARERS 2010/2011

PRESIDENT

Kit Carson

VICE PRESIDENT

Trevor Richardson

LEGAL & CONSTITUTION

Derrick Griffiths (portfolio head),

Roshinee Naidoo, Andre Zybrands

MANAGEMENT & FINANCE

Trevor Richardson (portfolio head), Mark Bakker,

Ben Espach, Jenny Falck

MARKETING & PROFESSIONAL LIAISON

Lientjie Ackerman (portfolio head), Jenny Falck,

Ben Espach

MEMBERSHIP & TRANSFORMATION

Farrel October (portfolio head), Roshinee Naidoo,

Mark Bakker, Lientjie Ackerman, Kit Carson

EDUCATION

Anton Swanepoel (portfolio head), Kenneth Jones,

Alison Stober

ACTING GENERAL SECRETARY

t: 012 348 2757

f: 086 657 3164

e: [email protected]

www.saiv.org.za

BRANCHES

Southern

PO Box 18041, Wynberg 7824

t: 021 762 3313 f: 086 730 9193


13 Piers Road, Wynberg 7800

Eastern Cape

PO Box 34758, Newton Park 6055

t: 041 396 1400 f: 086 657 3003


85 Cape Road, Mill Park, Port Elizabeth 6001

Central

PO Box 300, Bloemfontein 9300

t: 051 448 9431 f: 086 657 3023


22 Elizabeth Road, Bloemfontein 9300

Northern

PO Box 3550, Menlo Park 0102

t: 012 348 1752 f: 086 657 3201


KwaZulu-Natal

PO Box 28060, Malvern 4055

t: to be advised f: 086 657 3031


THE SOUTH AFRICANINSTITUTE OF VALUERS

THE SOUTH AFRICAN

VALUER 1JULY 2011, NO.105

Dear Colleague,

How time flies when you’re having fun. A year ago

the FIFA world cup had just started and South Af-

rica was rocking. We were showing all and sundry

just what we could do. Since then we have had

some great sporting moments in rugby, cricket,

golf, swimming, netball, hockey, etc. I’ve probably

missed some out. If so, my apologies. But the point

is, we can do anything if we set our minds to it and show good will.

Then, on the other side of the coin, we have the grimness of South African politics. Rab-

ble rousing demagoguery, promises that are made by people knowing at the time that

they have no intention of fulfilling those promises, threats, counter threats, lies, corruption,

threats of violence, and, unfortunately, in far too many cases actual violence. If that person

doesn’t agree with you, then bash him over the head or burn his/her house down. How

democratic!

The contrast between the two scenarios above is sad and frightening. It affects our daily

lives and even more so it affects our profession. If the culture of intolerance is carried over

to valuations then we are, indeed, in for some tough times. In government circles there

seems to be an intolerance of experienced and qualified valuers. Instead there seems to

be a move towards those valuers who tend to provide the client with the value that he/

she is looking for. No more Sine Inclinatione (without bias). There are too many instances

of shoddy valuations or valuations that are padded to suit the client. And when we ask for

details about poor valuations we are not even afforded the courtesy of a reply.

On the other hand, how can we expect government and other authorities to hold the valu-

ation profession in high esteem if we don’t get our own house in order? For our own good

we have to be more diligent, more resourceful, more circumspect in our findings, and we

have to be completely without bias. This is the only way to convince the powers that be that

there is no substitute for high quality reports. And each of us must do our bit to achieve this.

We shall be writing to the Department of Trade and Industry and the Public Works Depart-

ment offering our services for lease agreement audits and rental valuations so that recently

highlighted agreements of lease are evaluated prior to conclusion – without bias.

We are also firming up a programme to reach out to all valuers and students/candidates to

push for transformation as far as we are able. A lot of this will coincide with the International

Valuation and Appraisal Week that is being mounted globally in the first week of November.

We believe, however, that education, or rather the lack thereof, is a major stumbling block

on the transformation road. And this is something that neither individual valuers nor the

Institute can do very much about. All we can do is encourage government to provide the

resources to achieve meaningful training of valuers. Individually we should all take on more

mentorship work.

Kit Carson

P R E S I D EN T ’ S LE T T ER

V

continued on page 4

SA Valuer Editorial Panel:

Lientjie Ackerman (Chair)

012 346 2207 / 082 371 0908

Jenny Falck (Southern Branch)

021 423 6400 / 083 270 4587

Kit Carson (Central Branch)

051 448 9431 / 082 821 1214

Mark Bakker (Eastern Cape Branch)

041 396 1400 / 083 227 3496

Roshinee Naidoo

(KwaZulul-Natal Branch)

031 464 9371 / 082 826 3969

Editor:

Patricia Leitich

[email protected]

Advertising and marketing:

Tony Korsten

[email protected]

Lindy Lever

[email protected]

Design:

Alexia Leitich

[email protected]

Publishers:

Pangram Publishing (Pty) Ltd

PO Box 48219

Roosevelt Park 2129

tel: 011 442.2260 or 011 442.1869

fax: 011 442.1852

Printers and mailing house:

Law Print

The editorial panel welcomes contri-

butions (by way of letters or articles)

that are appropriate and that ad-

dress an issue that is topical or of

strategic concern to the sector as

a whole. These should be submit-

ted to the editor at patricia@pan-

gram.co.za for possible publication.

Please, use the SA Valuer as your

platform to promote dialogue be-

tween SAIV members.

The information and data presented

in the SA Valuer are recorded in

good faith, using sources believed

to be reliable.

The views and opinions expressed

in the SA Valuer are not necessarily

those of the SAIV, notwithstanding

the fact the SA Valuer is the official

publication of the SAIV. Neither are

they representative of the opinions of

the publisher or the editor. Copyright

applies to all material contained in

this issue and reproduction in what-

ever form is not permitted without

the written authorisation of the editor.

THE SOUTH AFRICAN

VALUER2JULY 2011, NO.105

C O N T EN T SV

j u l y 2 0 1 1 , n o . 1 0 5

President’s letter

Letter to the editor: SAIV : Trade union?

Northern Branch seminar

The legal beagle

Sectional title valuations, by Arie Mooiman

Cover story: SAIV awards bursaries to two deserving candidate valuers

What every property professional ought to know about risk, feasibility and property development, by Tony Collins

IVSC news

Appraisal Institute news

SAIV at home:22 Branch annual general meetings24 Continued education and training26 From the general secretary’s office28 Membership statistics

Professional directory

1

4

5

14

15

16

17

20

21

22

29

P A N G R A M

P A N G R A M

P A N G R A M

On another tack, we have opened an office in Pretoria for the General Secretary and for the

Northern Branch Secretary. Things are settling down nicely and you are welcome to pop

in and make contact with the secretaries. The resultant improved efficiency is already evi-

dent. Membership data has largely been cleaned up. Upgraded membership from student

to member is bringing the Institute into a more tightly knit organisation and I’m sure you’ll

agree that it is worthwhile belonging to an efficiently run organisation.

Here’s hoping for more good will and better times,

Regards,

Kit Carson

LE T T ER S S A I V : T R A D E U N I O N ?

V

VSAIV: Trade Union?

During recent years, whilst attending seminars and meetings of the Institute, I was pleasantly surprised to see that many new

faces had joined our Institute. The Property Valuers Profession Act No 47 of 2000 (the Act) requires that all valuers be registered

with the South African Council for the Property Valuers Profession (SACPVP) before being allowed to practise as a valuer. The

SACPVP is thus empowered to act as ‘watchdog’ to protect the public interest.

In today’s difficult economic climate and sometimes dealing with uninformed clients, it is inevitable that complaints will arise and

in some cases are lodged with the SACPVP which is then obliged to respond in terms of the prescriptions of the Act.

It has come to my notice that the SACPVP, from time to time, appoints members of the SAIV to serve:

• as a member of an investigating committee as contemplated in clause 4 of the Rules of the Act;

• on a disciplinary tribunal as contemplated in section 31(1) of the Act.

The above creates, rightly or wrongly, the perception that members of the SAIV, so appointed, align themselves (and by implica-

tion, the SAIV) with the SACPVP, instead of protecting the interests/rights of its (the Institute’s) members.

Whilst I recognise the fact that there is a duty on the SAIV to protect the interests of the general public, is its first and most impor-

tant function/duty not to protect the interests of its members?

See clause 3 of the Institute’s Constitution: Objectives and Powers.

In matters where the SACPVP takes action in terms of the provisions as set out above, should the SAIV not appoint a qualified

member to act on behalf of its members so investigated or so charged? It is submitted that the SAIV could/should be likened to

a trade union under such circumstances.

Jaap du Toit

N O R T H ER N B R A N C H S EM I N A R

V

The Northern Branch of the Institute presented a

seminar after its Annual General Meeting on 14

April at the Protea Hotel, Midrand. Approximately

150 members attended and Hein Hartman was the

competent master of ceremonies for the day.

The morning session started with Adv

Christiaan van der Merwe talking

about The impact of the Consumer

Protection Act, 68 of 2008 on lease

agreements of immovable property.

Because of the importance and com-

plicated nature of the Act, the advo-

cate’s presentation follows in full.

Introduction

The Consumer Protection Act 68 of 2008 (‘the CPA’ or ‘the Act’)

finally commenced on 31 March 2011 and brought about a num-

ber of important consequences in respect of lease agreements

of immovable property. The Act governs the process leading to

the conclusion of a lease agreement and regulates the contents,

expiry and renewal of such lease agreements.

The purpose of the CPA is stated to be the promotion of a fair,

accessible and sustainable marketplace for consumer products

and services. The Act aims to strike a balance between the

rights and interests of consumers and suppliers, with the latter

now being burdened with most of the risks of a transaction. In

the context of lease agreements landlords now have a far great-

er responsibility towards the tenant, with severe consequences

should the provisions of the CPA not be adhered to.

Although the introduction of the CPA is welcomed, the effect

thereof is uncertain and remains subject to a degree of specula-

tion. Only after the provisions of the Act have been tested by the

courts will a degree of certainty prevail.

This memorandum will provide a concise overview of relevant

aspects of the CPA in respect of lease agreements. In the inter-

ests of brevity I was requested to utilise the wide strokes of the

broadsword rather than the detailed cuts of the scalpel. I there-

fore cover general issues without necessarily pointing out all the

qualifications and exceptions provided for in the Act.

Application of the Act

The Act applies amongst others to agreements between sup-

pliers acting in the ordinary course of business for the supply

of goods and services and consumers in exchange for consid-

eration.

“Service” is defined to include a right of occupancy of, or power

or privilege over or in connection with, any land or other immov-

able property, other than in terms of a rental. “Rental” means an

agreement for consideration in the ordinary course of business,

in terms of which temporary possession of any premises or oth-

er property is delivered, at the direction of, or to the consumer,

or the right to use any premises or other property is granted,

at the direction of, or to the consumer, but does not include a

lease within the meaning of the National Credit Act. In my view

lease agreements of land or other immovable property cannot

be regarded to fall within the ambit of the supply of a service

under the Act.

“Goods” is defined to include a legal interest in land or any other

immovable property, other than an interest that falls within the

definition of “service”. A lease agreement is, in my view, a legal

interest in land as contemplated in the definition. In the premises

the CPA applies to the promotion of leases, the lease agreement

and the actual goods that are supplied or performed in terms of

the transaction.

No distinction can be drawn between leases of commercial, re-

tail, industrial or residential property.

“Consumer” is defined to include a person (whether natural or

juristic) who has entered into a transaction with a supplier in the

ordinary course of a supplier’s business.

“Supply”, in relation to goods, is defined to include rent and hire

in the ordinary course of business for consideration. In my opin-

ion the CPA would probably not apply to once-off lease agree-

ments or leases not concluded in the ordinary course of the

supplier’s business. Whether or not a particular lease agreement

falls within the ambit of the Act will depend on how widely this

aspect is construed by the courts.

Certain tenants excluded

The Act does not apply to any transaction in terms of which

continued from page 1

THE SOUTH AFRICAN


THE SOUTH AFRICAN


the consumer is a juristic person whose asset value or annual

turnover, at the time of the transaction, equals or exceeds the

threshold value of R2 million.

In terms of Item 3 of Schedule 2 the Act does not apply to any

transaction concluded, or agreement entered into, before the

general effective date, but certain sections may be applicable

to the expiry or possible renewal of the agreement on or after

such date.

Process before the conclusion of a lease

The CPA provides an extensive and complex framework of fun-

damental consumer rights and the protection of such rights. It

is outside the ambit of this memorandum to analyse these con-

sumer rights in any detail, other than to point out that landlords

will have to adhere to the principles of the Act when negotiating

leases with prospective tenants. I shall highlight only a few of

these principles in this section.

The Act protects against discriminatory marketing and prohibits

a landlord from unfairly discriminating between prospective ten-

ants. The landlord may not exclude any person or category of

persons from accessing any goods or services, target particular

communities, districts, populations or market segments for ex-

clusive, priority or preferential supply of any goods or services

or exclude a particular community, district, population or market

segment from the supply of any goods or services offered by

the supplier. All tenants and prospective tenants will have to be

treated equally.

Consumers’ right to privacy is protected and marketing is strict-

ly regulated by the CPA. Section 16 provides for a cooling-off

period after direct marketing and a consumer may rescind a

transaction resulting from any direct marketing without reason or

penalty within five business days after the later of the dates on

which the transaction or agreement was concluded or the goods

that were the subject of the transaction were delivered to the

consumer. This may entail taking of occupation by the tenant.

Part F of Chapter 2 enshrines a consumer’s right to fair and

honest dealing. A supplier or an agent of the supplier must not

use physical force against a consumer, coercion, undue influ-

ence, pressure, duress or harassment, unfair tactics or any other

similar conduct. It is regarded as unconscionable conduct for

the supplier knowingly to take advantage of the fact that a con-

sumer was substantially unable to protect the consumer’s own

interests because of physical or mental disability, illiteracy, igno-

rance, inability to understand the language of an agreement, or

any other similar factor. Section 41 further prohibits the supplier

from making false, misleading or deceptive representations in

relation to the marketing of goods or services.

Terms of lease agreements

The terms of a lease agreement of immovable property must

comply with the provisions of the CPA. I draw attention to a

number of relevant aspects.

Plain and understandable language

Tenants, as consumers, have the right to information in plain and

understandable language. A notice, document or visual repre-

sentation is deemed to be in plain language if it is reasonable to

conclude that an ordinary consumer of the class of persons for

whom it is intended, with average literacy skills and minimal ex-

perience as a consumer of the relevant goods or services, could

be expected to understand the content, significance and import

thereof. Landlords should therefore ensure that lease agree-

ments are easily understandable and care should be taken in

the use of so-called “boilerplate clauses” and legal jargon.

Fair, just and reasonable terms and conditions

A landlord may not offer to supply, supply, or enter into an agree-

ment to supply, any goods or services at a price or on terms

that are unfair, unreasonable or unjust. Whether these provisions

would allow, for instance, a tenant to contend that the rental is

unfair or unreasonable will have to be determined by the courts

in due course.

The CPA further prescribes that the attention of a consumer

must be drawn to certain terms and conditions of a consumer

agreement. These would include provisions that limit the risk or

liability of the supplier or constitute an assumption of risk or li-

ability by the consumer. The Act also prohibits a supplier from

making a transaction or agreement subject to particular terms

and conditions. A landlord may not require a tenant to waive a

right it enjoys in terms of the CPA or attempt to avoid the land-

lord’s obligations or duties under the Act.

Duration of the lease

In terms of section 14(2), read with regulation 5, the maximum

duration of a fixed-term consumer agreement is 24 months from

the date of signature by the consumer.

Cancellation, expiry and renewal of fixed-term agreements

The most far-reaching provisions of the CPA, in my opinion, re-

late to the regulation of fixed-term agreements, ie contracts for

a definite duration. It should be noted, however, that these pro-

visions do not apply to transactions between juristic persons,

regardless of their annual turnover or asset value.

Cancellation

Section 14(2)(b)(i)(aa) grants a tenant the right to cancel the

fixed-term lease agreement upon expiry of its fixed term, without

penalty or charge, but the tenant remains liable for any amounts

owed in terms of that agreement up to the date of cancellation.

More controversially, the tenant is also afforded the right to can-

cel that agreement at any other time, by giving the landlord 20

business days’ notice in writing or other recorded manner and

form. In addition to claiming any amounts owed up to the date

of cancellation, the landlord may in the event of the premature

cancellation of the lease impose a reasonable cancellation pen-

alty in respect to any goods supplied, services provided, or dis-

counts granted to the tenant in contemplation of the agreement

enduring for its intended fixed term.

The Minister has not yet prescribed the manner, form and ba-

sis for determining the reasonableness of the cancellation pen-

alty. It therefore remains to be seen if it will enable the landlord

to claim an amount equal to the common law damages that it

would have been entitled to claim in the event of a breach of the

agreement. The provision also has implications regarding the

landlord’s common law lien or hypothec, which may be limited

to rentals and other amounts payable in terms of the lease.

The landlord is also entitled to cancel the lease at any time, but

only after a material failure by the consumer to comply with the

agreement. The landlord must give 20 business days’ written

notice to the consumer of the failure and the consumer must

have failed to rectify the failure within that time.

Expiry and renewal

Not more than 80, but not less than 40 business days before the

expiry date of the fixed term of the consumer agreement, the

lessor must notify the lessee in writing of the impending expiry

date and notify the tenant of any material changes that would

apply if the agreement is to be renewed or may otherwise con-

tinue beyond the expiry date. The lessor must also notify the

tenant of its options under the Act.

Upon expiry of the fixed term of the lease agreement, it will be

automatically continued on a month-to-month basis, subject

to any material changes of which the lessor has given notice,

unless the tenant expressly directs the landlord to terminate

the agreement on the expiry date or agrees to a renewal of the

agreement for a further fixed term.

General

The new CPA will require a comprehensive review of lease

agreements to ensure not only that they comply with the Act,

but also to ensure that they suitably address the respective par-

ties’ interests after the extensive changes introduced by the Act.

Especially financiers and sureties will have to ensure that they

are adequately protected.

With the exclusion of transactions between juristic persons from

the provisions of section 14 of the CPA, one may expect sig-

nificant changes in the rental market to avoid the right of early

termination by natural persons as contemplated in that section.

For example, the sole proprietor of a home industry may now

find that landlords are unwilling to enter into a personal lease

and insist on the tenant adopting a corporate identity. This will

have significant income tax implications for the tenant.

There appears to be a significant overlap between the CPA and

the Rental Housing Act 50 of 1999, which governs leases in re-

spect of dwellings. The provincial Rental Housing Tribunals es-

tablished under the latter statute may in terms of section 5(3) of

the CPA apply to the Minister for an industry-wide exemption

from one or more provisions of the CPA on the grounds that

those provisions overlap or duplicate a regulatory scheme ad-

ministered by that regulatory authority in terms of other national

legislation.

Valuers will have to be cautious when they assess income de-

rived from a lease concluded by a natural person, as such lease

may be cancelled at any time by the lessee.

The second speaker of the morning

was Theuns Behrens of M&T Prop-

erties who gave a brief overview of

The fundamentals and peculiari-

ties relating to valuations in Af-

rica. Theuns has travelled in some

15 countries in Africa and has a good

general idea about their differences

which can be significant. For the past ten years or so South Af-

rican valuers have been venturing across our borders; most of

them have done a good job and kept the profession’s name in

good repute, even though it is not always as easy as it seems.

Theuns considers that it is worth it, but careful research is need-

ed beforehand to avoid problems.

Nowhere is there a stronger demand for new real estate devel-

opments than in Africa and India, according to Actis (a leading

private equity investor in emerging markets which has been in-

vesting exclusively in these markets for nearly 60 years). There

is a growing presence of Chinese investors in Africa; and many

mining are in evidence because of the availablility of natural re-

sources; investment from South Africa is driven largely by re-

tailers, entrepreneurs and hoteliers who wish to expand their

businesses across the African continent. This expansion has

induced contractors, developers and banks to follow, and as

a consequence the expertise of valuers has become necessary.

Theuns warned that before embarking on doing business out-

side our borders valuers should ensure that their travel docu-

ments are in order; that they have taken all the recommended

medical precautions; that they have reconfirmed travel and

accommodation arrangements; have gathered as much infor-

mation as possible beforehand – and most importantly – have

obtained at least 50% of payment upfront.

The table on pages 8 and 9 compares the eleven African coun-

tries in which Theuns has done business:

THE SOUTH AFRICAN


THE SOUTH AFRICAN


Namibia Botswana Mozambique Zambia Zimbabwe Tanzania Kenya Uganda Angola Ghana Mauritius

Roman-Dutch and

traditional court system

Public land is

state-owned; private

land has freehold title

Namibian Dollar (part of

Common Monetary Area)

1ZAR=1NAD

R110-R120/m² gross;

cap rates ±1.5% higher

than SA

Similar to SA

Legal system

Land

ownership

Currency

Office rental

Valuation

Roman-Dutch and local

customary law

Public land is state-owned

with leasehold rights;

private land has freehold

title; highest ranking in

Africa on global Property

Rights Index

Pula (BWP)

Similar to SA;

±US$18/m²

Preferably a member of

Real Estate Institute of

Botswana

Portuguese civil law and

customary law

All land belongs to the state;

10 to 50 year concessionary

leasehold or right of

occupancy; effectively

ownership limited to top

structures.

Metical (MZM)

Prime offices US$25-28

Beware of lease currency.

English common law and

local customary law

All land belongs to the

people, held in trust by

the President; leasehold

of max 99 years; no free-

hold system; functional

deeds registry system.

Zambian Kwacha (ZMK)

Prime offices US$18-23

Number of SA investors

– Manda Hill SC; Liberty

busy with US$200 million

mixed use development.

Mixture of Roman-Dutch

and English common law;

compulsory ICJ jurisdiction

not accepted

Doubtful at present

Zimbabwean Dollar (ZWD)

Prime offices US$10

Combination of British,

East African and Islamic

law


state; leasehold of 33-99

years, depending upon

use.

Tanzanian Shilling (TZS

Prime offices ±US$20/m²

All property valuations

must be endorsed by the

Government Chief Valuer.

Based on 1963

Constitution and

common law

precedent

Freehold and lease-

hold; majority owned

by government and

available for leasehold

from 50-99 years,

depending on use.

Kenyan Shilling (KES)

Prime offices ±US$10/

m²

Regulated by the

Valuers Registration

Board and the

Institute of Surveyors

of Kenya.

Member of Common-

wealth, follows English

common law

Freehold solely to

citizens; leasehold to

foreign nationals;

customary ownership.

Ugandan Shilling (UGS)

Prime offices ±US$18/

m²

Similar to Kenya

Portuguese civil law

and customary law


state; concessionary

leasehold rights of up to

45 years; ranked low on

Property Rights Index.

Kwanza (AOA)

Oil is king! Prime offices

up to US$150/m²

Could be profitable

but also cumbersome;

most documentation in

Portuguese.

Well developed and pro

business; base of Anglo

Saxon common law

and local customary/

religious laws

Public land and private

land; leasehold rights

up to 99 years, subject

to renewals; no

freehold; just below SA

on Property Rights

Index; almost

impossible to establish

clean title.

Cedi (GHC)

Prime offices up to

US$30/m²

Rates based on DRV

Based on French

civil law with

elements of English

common law in

places

Leasehold and

freehold; freehold

and long-term

household can be

mortgaged; foreign

national freehold

ownership and

residency via

Integrated Resort

Schemes (IRS).

Mauritian (MUR)

Decentralised of-

fices in Cyber City

up to US$26/m²

Registered with The

Royal Institution of

Chartered Surveyors.

The risks and potential pitfalls for valuers in these countries are:

• Political and country

• Currency and income – lease in hard currency (US$) and trading

in local currency

• Interest rate risk impact on discount rates

• Lack of availability of market information

• Valuing in uncertain markets requires adjusted valuation

methodology

• DCF method of valuing more prominent

• Land lease rental could become an operational expense

• Impact of withholding taxes for non-resident investors

• Property valuation in Africa is not an exact science

• Always adhere to International Valuation Standards.

Theuns concluded by saying that the moral of the story is that

there are opportunities for South African property valuers in Af-

rica, but they should tread carefully and try to forge alliances

with in-country/global valuation firms – “remember the pioneers

get the arrows but the settlers get the land”.

Developing inner city communities

was the title of the next presentation.

It was given by Renney Plit, COO of

Afhco Holdings, who captivated his

audience with his enthusiasm. He

used to work closely with valuers

and expressed his pleasure at being

invited to talk to them because one of

the big problems we face in the inner city is that the majority of

our ‘intellectual communities’ don’t know about the Joburg inner

city and have not been there for many many years, regard it as

decayed, criminal, elements roaming around with guns and ‘you

don’t go near the place’.

The purpose of the talk is to bring through where the city is to-

day, where it is going and what is happening, what has been

happening and the amount of investment that is taking place

there, what kind of returns can be expected there, the type of

competition that is there now and where the city is heading. It is

important to try to change perceptions more than anything else.

Afhco started in 1996. To compare where we were and where

we are now, Renney showed the following slide which was titled

‘Understanding the city’:

Where we were Where we are now

• First year returns in excess of 40% • 12-13% first year returns

• Lister Building bought in 1998 for R500 000 • Lister sold in 2010 for R43 million

• Inner city owners could not collect rent • Afhco bad debt ratio below 1%

• Buildings left to decay • Rejuvenation, conversions, upgrades

• Overcrowding • Strong management and access control

• Building hijackings • Good management – low risk

• Exodus of owners and investment from city and country • Substantial investment into inner city and return of investors

• Public transport left in hands of taxi gangs • Gautrain, Rea Vaya buses, improved policing of taxi drivers

• Parks vandalised, used as makeshift accommodation • Joburg Parks with private sector upgrading and managing

• Inner city dangerous and deadly, especially at night • New generation considers inner city chic and cool place to

hang out!

THE SOUTH AFRICAN


THE SOUTH AFRICAN


The indicators:

• Normalisation of the market – competition and high demand

• Normalisation of returns

• Increased investor competition – from large to small

• Bank funding available – banks now view the risk differently

• Return of nationals – retailers and franchises

• Sales of retail businesses – happens often, also for key money

in prime positions

• Direct institutional investments - big money coming back into

the city again and lots of opportunity

• No longer transient residential market – people live and work

in the city (average tenancy on a flat is about four years)

• Aspirational and trendy for the young generation – arts and

fashion precincts, jazz clubs and good hotels.

Renney then listed the factors that make space valuable when

buying bulk space (buildings) for conversion purposes: price

(below R1 000m²); size (economies of scale); shape; structure;

condition; location (proximity to bus, train, school); retail is a

critical factor; parking (needed for 15% of residents); occupancy

(can be difficult to empty a building); the state of council ac-

counts (clearance certificates not obtainable); zoning (business,

residential or mixed use – valuers should take note of the tariff

payable); the state of public open spaces. Renney advised valu-

ers to look carefully at the zoning of a building to establish what

tariff the owner is paying.

Problems and pitfalls can be listed as: location, the impact of

bad buildings, the price of bulk, the rising cost of conversion/

construction, the state of the surrounding area, the state of

the building itself, electricity supply, the design of the building,

Council bureaucracy/inefficiency, the understanding and per-

ceptions of the city and the availability of stock.

Construction risks (as with most construction) include project

cost overruns, time overruns, design overruns, getting vacant

occupation, slower take-up than projected, snags, Council

charges, Council inefficiencies, new legislation (which is ‘all in

the air’ and has not been thought through properly), interest rate

changes, theft of materials, and heritage. Positive results of in-

vesting in residential property in the inner city include low bad

debt; low vacancy levels; a growing market in size, affluence

and expectations; growth in education levels and sophistication;

increase in social activity; return of the nationals; Council’s focus

on the inner city; the opening of the Branson Centre of Entrepre-

neurship in the Fashion Kapitol in 2011; the inner city is ‘cool’

with a unique vibe and culture.

Renny presented some examples of conversions of large build-

ings, showing views of the apartments and how a light well had

to be ‘cut out’ of the old Greatermans building so that the floor

area could be divided into apartments. He described the target

earners in the inner city as between R3 500 and R10 000 per

month, with average earners at R5 400; how his company man-

ages the buildings and the tenants (using extensive credit vet-

ting) and provides many value-adds. These include strict access

control, a free shuttle service, telephones, 24-hour security, roof

playgrounds for children, managed and upgraded precincts and

parks, and preferential enrolment into their sponsored pre- and

primary school. He ran through an example of cost analysis on

an average sized apartment.

Renney concluded his presentation by repeating that Joburg is

a city in transformation which still needs much work and devel-

opment; there is co-operation from the Johannesburg Develop-

ment Agency; the risks are low and the returns are good; inves-

tors should not be scared of it – it is worth coming to see. He

stressed that buildings cannot be developed in isolation; homes,

not houses, must be created and surrounding communities de-

veloped as well.

After an enjoyable buffet lunch and

some networking, delegates settled

down for the afternoon session

which took the form of a panel dis-

cussion. Hein introduced the panel

chair, Norman Griffiths. The topic for

discussion was Residential proper-

ty as an investment medium, and

seamlessly followed Renney Plit’s morning presentation. Nor-

man explained that the members of the panel were as enthu-

siastic about what is happening in the Johannesburg CBD as

Renney Plit. They would expand on what Renney had said and

give a broader picture, the financial picture and funding. There is

a move to float one or more residential funds through the prop-

erty unit trust movement. Historically the area is one where com-

mercial, industrial and retail totally dominated the field. There are

big question marks in the market as to what sort of yields they

should come in at (7½ to 11% in the commercial market). Many

think if they come into the commercial market the yield should

be much higher. Norman introduced the panel: Rob Wesselo,

the country (South African) director of International Housing So-

lutions which invests heavily in the affordable housing market;

Ben Espach of Rates Watch; Carolise Lang, head of residential

and affordable housing at FNB Housing Sector and Clive Kaplan,

CFO at Afhco.

Rob Wesselo spoke about residen-

tial property in general (not only in

the Joburg CBD); he shares Renney’s

view that if you give people good, af-

fordable housing which is well man-

aged, this can be a successful invest-

ment. Rob opened the discussion by

asking the question: Why is there no

strong residential asset class in South Africa? In some coun-

tries like the Netherlands, Sweden and Germany over 50% of

the housing is held in residential equity funds where institutions

have invested large sums of money in residential funds and

managed them for a term. This is not seen as a particularly risky

asset class in those countries. Over the past ten years these

funds have been the second best performers in Europe after re-

tail. This is not seen as a risky investment, but rather as a middle

of the road, static investment. It is easier to replace one residen-

tial tenant than it is to replace a commercial or retail tenant who

moves out of a large premises. This is the same in South Africa

where vacancies are low as long as the properties are well man-

aged and maintained and the vetting policy for new tenants is

strict – it is not seen as a high risk investment. Urbanisation is

happening in South Africa quicker than in most of the world and

this is a positive for the residential market in the future. A big

residential listing would make the market a lot more vibrant than

it is at the moment. IPD in South Africa currently does not mea-

sure residential returns but we have now an emerging class of

well run property funds with institutional investors which are un-

listed. The more measurement of returns there is of these funds,

the more interest there would be from investors.

One of the big problems in the residential market which is not

found in the commercial market is the tax legislation. To the ex-

tent that any fund has more than 50% of its investments in resi-

dential property, any change in shareholding in that company

will attract transfer duty – the single biggest impediment to listed

residential property funds in South Africa. There is strong de-

mand for properties in the affordable housing market throughout

South Africa in the CBDs and outside of them. We are dealing

with this and The Property Loan Stock Association has appoint-

ed a property financier to engage with with Treasury on this issue.

Feedback thus far is that Treasury is enthusiastic about assisting

and clearing the way to making residential listed funds viable.

This would bring investment into housing which is a strong focus

of the government at the moment and we are seeing more and

more people moving towards rental accommodation as a way of

addressing the housing shortage. Housing rental is the way the

rest of the world works. It seems that over the next two years or

so there will be a residential fund listed. In the space of ten years

the commercial listings have become formalised and performed

well. It has been easy to determine the returns the funds would

have; this has not been an option for residential funds on the

JSE. There are now many companies which have significant res-

idential property portfolios which are well accounted for and well

reported. Over the past five years these have become a force.

Analysts could show what kinds of returns these funds could

attract. Equity is no longer an issue and debt funding seems

to be improving because of the growing demand for affordable

housing. This is not the case with industrial, commercial or retail

property in the current market. Perceptions of risk are changing

and the banks are starting to have confidence that this market is

sustainable - provided it is managed properly.

Norman commented on the perceptions of investors and on

anti-landlord legislation, even though we are a long way from

The market in the Joburg inner city is changing, becoming more

affluent and demanding; it is an aspirational environment (dis-

satisfaction with government services). There are pockets of

bad areas and bad buildings located all over the city. There is

still a long way to go in a big city, but the change has been

phenomenal.

Renney then looked at understanding the city. The inner city is

home to an estimated 400 000 people and is growing rapidly

because private developers are rolling out housing at an aggres-

sive pace. Three years ago the City Council realised that the reju-

venation of the Joburg city is residential, rather than commercial

because the big corporates are not coming back. The council

set an objective that the private sector should provide between

50 000 and 70 000 new housing units in the city by 2014. This

may be achieved because development is taking place and the

investment is substantial. The Council looked at the blockages

to expedite that delivery and has gone far in creating new hous-

ing in the city, most of which is conversion from empty commer-

cial to residential. Over one million commuters pass through the

inner city daily, coming in by train, bus and taxis; the Gautrain

will soon run from Park Station. It is a cosmopolitan shopping

mecca for Southern Africa – shopping in Joburg is a major inter-

Africa event with an estimated R2 billion per annum being spent.

The provision of an inter-Africa bus terminus is mooted. Hotels

now cater for these traders.

The Urban Development Zone (UDZ) tax incentive is an incentive

scheme aimed at encouraging inner city renewal across South

Africa. Any taxpaying, property owning, individual or entity may

claim the tax benefits of the UDZ incentive which has been ex-

tended. The incentive takes the form of a tax allowance covering

an accelerated depreciation of investment made in either refur-

bishment of existing property or the creation of new develop-

ments within the inner city, over a period of five, or 17 years,

respectively. The cost of construction work can be written off

over five years which is significant. This has not stimulated in-

vestment into the inner city, as this is happening in any case – it

takes years before a tax benefit is felt - rather it helps cash flow

down the line.

The Council is aware of the inner city and sees it as being the

hub of Africa and has put a lot of money, development and strat-

egies for upgrading into it. The social activity within the Joburg

inner city is on the rise again (there are 24-hour food outlets).

The national retailers are coming back into the city if they can

find the space. There are no large spaces available and the big-

ger nationals are not prepared to pay the rentals that the smaller

tenants pay. The value of retail space has changed and in some

high foot traffic areas rental rates can be as high as R350/m².

The average is between R80 to R150/m². Nightlife is starting to

come back to the city and it is becoming a normal society again

– one of the key objectives.

THE SOUTH AFRICAN


THE SOUTH AFRICAN


rent control which kills investment. Rob added that the demand

is for residential accommodation. There is never no risk and it

is management intensive. The regulation issue – we are a lot

better off than in Europe where rentals are seriously regulated

whereas here returns are double digit. There is a skills shortage

in the area of residential property managers – people are being

trained to fulfill these roles. Norman pointed out that the trend is

to take the management company in-house – buy the stock and

the management.

Carollize Laing, speaking from a

banking aspect, agreed that residen-

tial property as an investment class

has not really been explored exten-

sively in the past, yet most of the

banks have significant exposure in

the market which has been built up

over the past five to seven years.

Although FNB has never really been in that market they have

set up a policy to deal with that class and to fund it. The banks

would look at who is running the property, what is the size of

the portfolio, general upkeep, vacancies and bad debts – the

operator will be assessed first. He must be solid with an existing

portfolio, show a track record of maintaining vacancies and bad

debts below a 3 to 5% ratio and have been able to keep op-

erational costs intact. The valuers would come in when a bank

investigates the location and details of the property and what

competes with it in the area in terms of size and rates – a de-

mand study. The banks’ main interest is cash flow because this

drives repayment of the loan. With an existing building a bank

would look at the rates the client has been able to achieve on

that property; if it is a new build or conversion a bank would look

at the market dynamics, what the market can afford and would

typically pay for that sort of property, and then build the cash

flow on a projected basis from that.

The same would happen with operational costs. The bank will

look at the basic cash flow and always build in certain stress

elements. Operational costs will depend on the size, density and

height of the building (whether it would need lift maintenance).

The bank would generally see anything between 20 and 30%

as market related operational costs on the building, and build

in bad debt and vacancies up to 5%. From this base case the

bank then adds stresses: stressing interest rates by 3% off the

base that would be charged on term loans, vacancies up 7½ to

10% and operational costs by 5% from the base, to see how

much tolerance the projected cash flow has to sustain the bond

installment. It is a numbers and cash flow game to determine the

bank’s eventual level of gearing.

From a risk aspect why are banks (credit) nervous about getting

into this market? Legislation is pro-consumer, rather than pro-

tecting the property investor, which makes it difficult to get rid of

a non-paying tenant and this could lead to a lengthy court ac-

tion. Although Joburg inner city operators have perfected a way

to deal with non-paying tenants, getting rid of them quite easily

using access control; demand is such that these tenants can

be replaced quickly. Banks always look at an exit strategy from

a property whether residential, industrial or commercial. With

residential stock this would be another investor, so the location

of the property is important. On funding sectional title proper-

ties, end-user funding comes down to affordablility where 100%

loans are granted for affordable housing.

There are numerous problems at the

municipalities, but Ben Espach cov-

ered two issues: rates policies and

valuation rolls. Ben confirmed that

rates policies allow rebates and that

in the inner city area if at least 80%

of a building is used for residential

purposes, you get a 40% rebate. It is,

however, a struggle to get those applications through and once

this happens it is difficult to get this shown on your account; it

often takes more than a year and this affects cash flow. Valuers

need to study those policies and make sure that the municipali-

ties follow them.

In looking at categories of property one must take notice of the

multi-purpose category. It is in the Joburg policy, but it is not ap-

plied. A Valuation Appeal Board decision was necessary to force

them to apply their own policy, and it is still a problem to get it

implemented. Ben urged valuers who deal with municipalities

to ensure that they have the most recent rates policy (there is a

policy for every financial year). Valuers must work with the policy

applicable to the financial year in question.

Ben pointed out that we should be glad there is a valuation roll

because it is a challenge. Municipal valuers have a difficult job

and should not be criticised too harshly. They do their best but

do not have the resources – proper systems and skilled people

- to do the valuations. If the valuations are carried out properly in

the CBD the rates for the refurbished buildings will increase as

their values have not been changed. Asset managers will have

to make provision for increased rates if the valuations are done

correctly.

There are many buildings in the CBD areas which extend over

two properties – sometimes called parent and child properties

– and this causes problems in getting rates clearance. The valu-

ation roll gives a value for ‘the family’ and none for one of the

properties. It may have been omitted from the roll or indicated

on the roll and valued with another property, or valued with the

whole ’family’ and then apportioned and the value does not

make sense. Valuers should take care when dealing with these.

Ben suggested that municipal valuers should come together

and decide on a way forward. It is easier to understand if the

full value on one property and none on the other. The challenge

is when you ask for a clearance and the process is frustrated.

These are the pros and cons of dealing with this situation.

It is also frustrating to lodge an objection with the rates appeal

board and then wait for two years for the appeal hearing, wait

for over a year to get the objection results and then when you

ask for your account to be changed, this is not done because

the rates department needs to be instructed by the city valu-

ers to do so. This can cause another delay of up to two years

before the account is adjusted. Although the Gauteng Valuation

Board is doing an excellent job and handing down their deci-

sions, these are not implemented. This affects the cash flows of

property administrators. Even though the period for objections

on municipal rates has passed, there is still a query process but

queries can be left unanswered for over a year.

If you do a valuation on a building which is significantly under-

valued on the roll in relation to a recent sale price, you have to

pre-empt what is going to happen as this will affect the cash

flow and the value. Valuers need to take care if they see those

differences. In Durban a supplementary valuation is done but

they can’t backdate the rates if they follow the MPRA. Munici-

palities should be more aware of such cases as this influences

their income. Valuation rolls are not complete, so all the gaps

need to be closed and the collection rate increased, as Trevor

Manual did at SARS.

Norman agreed with Ben; he was sure that everybody in the

audience had experienced frustrations with the Rates Act. He

pointed out that valuers should remember that there is valuation,

categorisation and rates; valuers are being involved in the latter

two as opposed to valuation issues and as a result spend much

time and frustration with municipalities. He voiced the opinion

that there should be some initiative from the Institute on this

very issue because nationally there is a huge problem with the

administration of this Act. A large development company has

threatened to stop doing developments if the municipalities

carry on in this way, or even move away from owning property.

These problems must be addressed.

Clive Kaplan confirmed these frus-

trations regarding rates from the

financial and investor point of view.

Most of Afhco’s buildings are val-

ued at far less than the municipal

valuation and most qualify for a 40%

rebate but they are unable to com-

municate with anybody at Council.

Renney is working with the Property Owners and Managers

Association (POMA) through Council and getting a positive re-

sponse from people at the top but this is not finding its way

down to the people doing the work. There is a ‘huge mess with

the billing system (SAP) installation which is a major problem.

Cost savings are crucial to those operating in the city and you

can’t go back and claim one or two years’ overpayment.

Norman wrapped up the discussion by reiterating that there is

the perception that the Joburg CBD is a ‘no go’ area but what

has come through from the speakers is that it is a vibrant place,

it is changing, that it is an investment area that people should

look at.

The first thing valuers should do is to understand the market that

they are valuing in; there is any number of comparable transac-

tions which have happened within the CBD and it is the job of

valuers to unravel these. There is a wealth of information about

how these proprty transactions have happened, with 10 or 11%

returns on major residential portfolios. It is interesting that there

is a pro and con here – the risk side is what valuers are inter-

ested in – how do you determine the cap rates and on the risk

side a lot of the normal boxes that you would tick as positive are

negative in this particular scenario.

A major commercial portfolio would need a long lease, single

tenant, prime tenant, nationals, not many single tenants which

only have one month’s lease and significant management issues

(7% charge). Management is the key if you can float companies

on the strength of the management, it will happen.

On the European scene, the IPD gives residential statistics

based on portfolios of social housing. In The Netherlands the

size of the portfolio is €65 billion, monitored from an investment

point of view; returns are 1 to 2%. In the United Kingdom there

are 17 funds involved in residential development with units val-

ued at R44 billion. Both Renney and Rob said we in South Africa

should be floating residential social housing companies, draw-

ing public investment into residential portfolios. Norman round-

ed off by saying that a major perception may have shifted that

afternoon because of the presentations, which is what he had

set out to achieve.

THE SOUTH AFRICAN


THE SOUTH AFRICAN


T H E LE G A L B E AG LEV

The SAIV received a letter from Mr JD de V Truter,

Attorney and Professional Associated Valuer of the

firm Truter & Hurter Inc, in which he writes, inter

alia, as follows:

"Writer is addressing this letter to the Institute so that you can ad-

vise any valuer who qualified in terms of the transitional clause

in the Act to be extremely careful not to be late in paying any

fees due to the South African Council for the Property Valuers

Profession ("SACPVP").

For some reason or another, my client did not pay his annual fees

in time and was removed from the roll of valuers. When he reap-

plied, he was advised that his qualifications are not sufficient to

practise as a valuer and has to re-qualify. He was advised by

the Council that the transitional arrangement did not apply any

longer and that his existing qualification is not recognised.

On both constitutional law and administrative law grounds, this

action by the SACPVP is extremely harsh, especially where oth-

er professions allowed non-paying members to be reinstated on

payment of all arrears plus possible interest and administrative

handling penalties.

Writer does not know how many members of the Institute are

valuers who qualified in terms of the transitional clause, but they

should be advised that if for any reason, they fail to pay their an-

nual subscription to the SACPVP on time, they could lose their

livelihood."

At this point it may be prudent to refer to the following sections

of the Property Valuers Profession Act, 47 of 2000 (‘the Act’):

• section 43 which deals with the transitional provisions, inter

alia, the so-called "oupa" clause;

• section 20 which deals with qualifications for admission as a

valuer;

and which affected members are advised to read and study.

The SACPVP's view is as follows:

"Transitional provisions are by their nature for a given (reason-

able) time and can only be used during that time. The Council

cannot circumstantially use section 20 for some applicants and

section 43 for others.

If there was an expectation that the Council should determine

registration conditions such as qualifications for both sections

20 and 43, the wording of section 43(8) would not have been ‘(a)

ny person who at the commencement of this Act is registered

in terms of the Valuers' Act, 1982, is deemed to be registered’

in the corresponding category provided for in this Act. The sec-

tion could have alluded to the person having to be registered

de novo. The only criterion or condition of registration in terms

of section 43 was that one should have been registered at the

commencement of this Act. Therefore, there was no need for

the Council to determine a date from which to use section 20

and from which date section 43 would no longer apply, con-

sequently, no need to determine conditions, circumstances or

requirements for re-registration under transitional provisions."

Comments by the Legal Beagle

Although, at first blush, the decision by the SACPVP seems to

be harsh, having regard to the circumstances and the statutory

provisions, the decision appears to have been correct.

According to the SACPVP there are still persons who qualified

in terms of the transitional clause registered with the SACPVP.

There is legal opinion expressed by Fareed Moosa Attorneys

that grounds for a review/appeal exist, which may be a debate

for another day.

Working for a financial institution and requesting

valuations on a daily basis from independent valu-

ers, I come across some poorly executed valua-

tions which could place our company at great fi-

nancial risk.

I accept that valuers sit with a dilemma when accepting work

from financial institutions, as the fee that we are willing to pay

is low and valuers are pushed for an (almost) impossible turn-

around time. For the valuer to earn a reasonable income he/she

needs to do at least ten to twelve valuations per day. This may

seem impossibly high, but one must take into account that the

valuers doing financial valuations work mostly in a small concen-

trated area and should have a good knowledge of prices in the

area. They seldom have to inspect any comparable properties,

as it is likely that they carried out the valuations on the compa-

rable properties, and with proper record keeping will have all the

required information on hand.

Paperwork or administrative work is also cut to the minimum as

most (if not all) financial institutions have their own pro forma

report. This report is usually a one pager and the valuer needs

only to complete the relevant information.

In a valuation financial institutions need:

True market value based on the correct property

I believe that the most crucial part of any valuation is to ensure

that the correct property is valued.

The valuation may be technically 100% correct, with a superb

report and description of the improvements set out in a logical,

easy-to-read report with photos, depicting all the features as

well as negative points. If the valuation was done on the wrong

property it means nothing to anybody. It stands to reason that

the valuer will need the necessary ‘tools’ in order to identify the

property correctly.

Unfortunately a large number of valuers still rely on a door num-

ber to identify a unit, instead of having the sectional title plan

with him/her to identify the unit from the plan. Many sectional

title valuations come across my desk with the wrong unit valued!

Correct and full property description – erf number, complex

name, etc.

Once the valuer has satisfied him/herself that the correct unit

has been identified, the correct information should be given on

the valuation report, including the complex name spelt correctly.

A common mistake happens where the valuation comprises two

units, say the main building (unit 2) and the garage (unit 15), but

the valuation report only refers to unit 2. The report must clearly

state that unit 2 and unit 15 are included in the valuation.

It is important to ensure that the information given to the attor-

neys is correct to avoid wasting time. Delays in registration cost

banks a lot of money.

Accommodation offered by subject property, number of

bedrooms, etc.

Financial institutions are often challenged on the valuation (es-

pecially when a loan has been declined); should the information

regarding the accommodation offered prove to be incorrect this

causes embarrassment to the bank. (I have seen valuations de-

scribing a two bedroom unit as a three bedroom unit.)

A valuer taking pride in his/her profession as well as his/her work

will ensure that all the information given in the valuation report

is 100% correct.

True reflection of exclusive use areas

The valuer needs to identify correctly all exclusive use areas

linked to the specific unit.

When the bank has to buy in the property as a result of default

by the borrower, the bank advertises the property to re-sell. On

numerous occasions we have advertised units with the exclu-

sive use of a carport only to find out the unit does not have the

use of a carport. This is embarrassing to the bank and a waste

of money.

Banks also need to know whether the exclusive use areas are

rule-created (old rules) or registered exclusive use areas (new

rules). It is imperative for a financial Institution to know if any

exclusive areas constitute a real right or not, as a real right can

be sold separately from the unit.

Replacement value of unit

In order to protect the security offered for an advance, the finan-

S E C T I O N A L T I T LE VA L UAT I O N S

V

THE SOUTH AFRICAN


THE SOUTH AFRICAN


COMMERCIAL PROPERTY VALUATION

Presented by Dr Manya Mooya

This course is designed to introduce participants to the valu-

ation of properties which are purchased by investors for their

income potential, including retail, office, industrial and resi-

dential properties. Aided by state-of-the-art Argus Valuation-

DCF software, the course combines theoretical rigour and

practical relevance to provide participants with requisite skills

for the analysis of complex investment property.

Dates: 5 - 7 September 2011

Venue: Chemical Engineering Building, Upper Campus, UCT

Cost: R7000

For further information on this course contact the CPD

programme at the University of Cape Town:

Tel: 021 650 5793

Email: [email protected]

Website: www.cpd.uct.ac.za

cial institution must know the replacement value of the subject

unit. The bank can then ensure that the body corporate has suf-

ficient insurance cover over the unit.

Condition of unit, with brief description of repairs if required

The valuer must comment on the condition of the unit and give

a brief description of any repairs required. A long description of

the condition is not needed. ‘Well maintained unit in need of new

carpets in second bedroom’ is sufficient.

Common property improvements and condition

The valuer should comment on the common property, letting the

bank know if there are improvements for the benefit of the oc-

cupants such as a swimming pool, communal braai areas, club-

house. The condition of the common property must be com-

mented on. This will usually be indicative of the effectiveness of

the body corporate. A run-down, neglected common property

area, may point to future financial difficulties; this will have a

negative effect on the marketability of the units.

General appearance of complex

A proper valuation will include a brief comment on the general

appearance of the complex; this will have a great influence on

the salability of the subject unit. Here banks expect some com-

ment on the curb appeal, design, etc.

General

These are only some of the more important points that most fi-

nancial institutions will require in a valuation report. Individual

banks will have their own criteria that will be given to the valuer.

As with any valuation it is important for the valuer to stand back

and go through the report and ensure that it makes sense and

fully describes the property to the client. The credit manager

who has to approve/decline the loan relies totally on the written

report from the valuer. In addition to the valuation amount there

are other considerations that the credit manager must take into

account, and those can only be found in a fully completed report.

Arie Mooiman

The SAIV has awarded two bursaries to deserving

candidate valuers.

Nathan Theron who is 21 years

old is a second year student at

the University of Cape Town and

is studying for a BSc in Property

Studies. Nathan wrote: “It was a

great blessing when I received the

news that I had been approved for

a bursary from the SAIV. An added

blessing was meeting some SAIV members who encouraged

me and were positive towards me. ”I went for an interview in

May this year with members of the Southern Branch of the SAIV,

and enjoyed meeting Mr Farrel October, Mr Patrick Bonzaaier

and Ms Ali Su Smith. During the interview, they went out of their

way to make me comfortable. I would like to thank Melanie Val-

lun, the Acting Secretary General of the SAIV, for her friendly

voice over the phone, and for all the effort she has put into final-

ising the bursary for me.

“I would like to acknowledge the help from the staff of the Con-

struction Economics and Management department of UCT, es-

pecially Mrs Betsie Koch for helping me make contact with the

SAIV, and Associate Professor Kathy Michell and Mrs Elmarie

Edwards who have both encouraged me during tough times and

who have gone beyond the call of duty.”

Patrick Katema is studying for the

National Diploma in Real Estate at

UNISA and is 22 years old. Patrick,

who lives and works in Pretoria wrote:

“I want to become a professional val-

uer and getting the bursary will help

me to attain this goal because I am

not able financially to fund my stud-

ies entirely on loans which I have to pay back by doing extra jobs

after work. Getting the bursary will help me to concentrate on

studying after work; the time that I now use to offer tuition and

chess classes to earn extra after hours will be used for study-

ing. This will improve my results and my knowledge in the area

of property valuation. A student needs to acquire knowledge,

not only to study to pass and have a certificate on the wall, but

when required to apply valuation principles is able to do so as

a professional.”

B U R S A R I E SV

c o v e r s t o r y

Because of the length of this paper, we are giving

only the Abstract, part of the Introduction and the

Conclusion. The full paper is available from the au-

thor: 021 915 5723, cell 082 460 1035, email tonyc@

absa.co.za or from the editor of The SA Valuer.

Abstract

This paper looks at risk from the developer’s viewpoint and

therefore, looks at risk over the development process. Further-

more, the development process is seen as a self initiated pro-

active process of procuring work with the tendering / bidding

for work seen as a possible alternative. This paper therefore,

covers the steps in the development process and discusses

risk at various stages in the development process. In addition,

because of the magnitude of this subject, the practical aspects

on how to speed up the decision making process for develop-

ing a property will be emphasised in this paper. Furthermore, a

rational approach to feasibility analysis is recommended with a

total approach view of the feasibility process using analysis by

computer spreadsheet.

Introduction

The Necessity for Investment Analysis

According to Greer and Farrel (1988, p. 4), prior to 1970 real

estate investors paid little attention to property investment anal-

ysis. Profitability was virtually assured by remarkable growth

and expansion in the housing, office, industrial and commer-

cial accommodation industry that experienced few financial dif-

ficulties and an almost insignificant failure rate throughout the

period. Furthermore, the back-log in housing demand from the

war years, combined with persistent inflationary increases in

the value of real property, led to even the most poorly planned

projects being reasonably successful. This was also a period

represented by unbounded enthusiasm on the part of investors.

In the United States of America this situation altered in the

1970’s when a great demand for borrowed funds on the part

of the federal government, coupled with increasing demand for

capital from rapidly expanding foreign industries, created com-

petition driving interest rates to record levels. The failures of real

estate related companies and financial institutions that followed

were expensive and painful experiences. Furthermore, during

the same period, existing properties also came under pressure

from escalating operating costs that were not cushioned by slow

W H AT EV ERY P R O P ER T Y P R O F E S S I O N A L

V

increases in rental rates. The consequent reductions in net oper-

ating income caused many investors to be unable to meet their

mortgage debt obligations, therefore, pressurising investors to

restructure their portfolios.

In South Africa, institutional investors without exception are now

insisting on a professional approach when being offered proper-

ties for purchase in order to avoid the pitfalls so common with

wrong decisions concerning property investment. This attitude

should be adopted by all developers to avoid the roller coaster

ride they often experience, earning good profits on some proj-

ects interspersed with losses on other projects. However, in

South Africa we are fortunate to have good publications which

assist with macro and micro economic decision making such as

the “Rode Report” and the “Stellenbosch University Bureau of

Economic Research Report”. “Figure 1” illustrates some of the

controllable and uncontrollable economic factors to consider.

Fortune Magazine, 18 May 1992, (pp. 46 - 59) also sounded a

warning against injudicious over-development of the property

market, by reflecting vacancy rates averaging 18,8 percent in

the United States of America, whereas in 1981, the average va-

cancy rate was 4,8 percent. Furthermore, in isolated cases new

office complexes had individual vacancy rates of between 50

and 100 percent. Investors and financiers would do well to heed

the warning signs and do their homework properly with respect

to market analysis. “Figure 2” is a diagrammatic representation

by Maritz (1983, p. 288) of the steps in the investment process:

A Rational Approach to Investment Analysis

Of utmost importance to all investors in this process according

to Greer and Farrel (1988, p. 17) is that the investor is faced with

an array of alternatives that differ according to amount, timing

and certainty of receipt and therefore, the determination of rela-

tive values of investment alternatives also differs.

Approaches of investors to investment analysis vary from being

cautious and analytical, to seat of the pants / gut feeling type

management decisions. Furthermore, the investor, according to

Mckeever (1968, p. 5) “may be gifted with strong hunches and

good horse sense, but he is better equipped when he has defi-

nite facts at hand” and according to Barrett and Blair (1987, p.

6) “the market study is perhaps the most important single ele-

ment in the planning process,” which is often neglected whereas

THE SOUTH AFRICAN


THE SOUTH AFRICAN


OUGHT TO KNOW ABOUT RISK, FEASIBILITY AND PROPERTY DEVELOPMENT

it is often the most difficult element to conduct and also the

one element which should be dealt with most thoroughly, since

property developments must be market driven. Therefore, what

is required is a rational approach to investment analysis incor-

porating a series of steps for the gathering of information, the

analysis of the information and the taking of a decision on the

basis of this analysis. The result is that the characteristics of

an investment property are considered objectively and related

directly to an investor’s needs.

It should however, be noted that the approach adopted and the

steps involved (as well as their sequence), can vary from one

investor to another and from one set of circumstances to an-

other. In addition, as a point of departure it is assumed that there

is a specific buyer in search of a certain type of property or

an investment opportunity. Furthermore, once the approach to

investment analysis is agreed upon, the next phase of gathering

the required information can be commenced with.

Tony Collins MSc (QS), PMAQS, PrQS, B Com (Hons) (Real Estate)

(Cum Laude), MIVSA, Professional Associate Valuer (5475), Prop-

erty Analyst, Quantity Surveyor, Valuer, Commercial Property Finance,

ABSA Corporate and Business Bank, South Africa

This paper was written for the CIB Business Conference in Montreal,

Canada in 1997 that never materialised; the subject matter was then

lectured on at the SAIV Mykonos Conference in 2010.

THE SOUTH AFRICAN


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Figure 2 - Maritz ‘s Steps in the Investment Process

(a) Analysis of the needs, requirements, objectives and resources of the investor

(b) Investigation of the availability and price of borrowed capital (financing possibilities)

(c) Physical inspection of a selected property, or selected properties.

(d) Qualification of the Productivity of a Selected Properties or Selected Property

(e) Calculation of the Investment Value to the Specific investor of one, or more Selected Properties

(f) Evaluation of the market and of External Factors that influence the value of a selected property, both now and in the future.

(g) Decision making

Figure 1 - Micro and Macro Economic Factors Affecting the Property Market

World economic situation National socia-political factors

National economic factors Government legislation

Property type and quality Property location

CONTROLLABLE FACTORS

Price, rent, costs Timing and promotions

Financial position & size of

company at a fixed point in timeLegal factors

Short and long term

business confidenceTown planning & local

building legislation

UNCONTROLLABLE FACTORS

UNCONTROLLABLE FACTORS

Source: Adapted from Horne, L G. 1978. Marketing Property.

The professional team and the professional builder

The choice of the professional team and the builder are so im-

portant a factor in reducing risk that it is worth repeating the

obvious namely; choose the players for the development team

according to their abilities, experience and expertise related to

the type of development in mind.

An overview of the development process

The key stages in the development process according to Barrett

and Blair (1989, pp. 5 - 9) comprise

Stage 1. Initial planning stage of the project embraces four

phases

Phase 1 Formulation of the developer’s objectives

Phase 2 The conducting of a market analysis

Phase 3 The preparation of a financial feasibility study

Phase 4 Taking a decision on whether to continue with the proj-

ect, shelve it until a later, or abort it completely

Stage 2 Acquiring the land

Stage 3 Developing the land

Stage 4 Constructing the building / s

Stage 5 Marketing and leasing space and / or units

Stage 6 Setting up a property management and maintenance

system.

Conclusion

Risk and the property development process is so vast and var-

ied a subject that one almost does an injustice to it to attempt to

write an overview. A thesis would probably be more appropriate.

However, certain aspects of the process deserve highlighting.

The end goal of the individual developer differs according per-

sonal requirements and the size, nature, complexity and timing

of the development as well as the quality and type of in-house

expertise the developer has will dictate the kind of expertise re-

quired to be obtained from consultants. However, the first step

in the process is to define the developer’s goals and objectives

which are obtained through discussion prior to establishing uses

for sites or sites for uses. Furthermore, developers objectives

will differ as the private developer will be driven primarily by the

economic principle while government bodies and welfare organ-

isations will consider the social costs versus the social benefits

as well, since for the private developer “To plan, design, and

build outside the constraints of market-determined supply and

demand forces is to court disappointment and financial disas-

ter, for both the developer and the consultant (Barrett and Blair,

1987, p. 9). In addition, even though the developer, according

to Mckeever (1968, p. 5) “may be gifted with strong hunches

and good horse sense, but he is better equipped when he has

definite facts at hand” and as per Barrett and Blair (1987, p. 6)

“the market study is perhaps the most important single element

in the planning process.” and also the most difficult and there-

fore should be thorough. Therefore, the process must be market

driven.

The next important stage is the feasibility analysis and according

to Graaskamp (AIREA, 1977, p. 215), “The essence of a feasibil-

ity determination lies in correctly defining the objectives which

the solution must serve, and the context or standards wherein

an acceptable solution must be found.” Only then is the analyst

in a position to take a decision on the degree of consensus be-

tween external factors affecting the decision to be made and the

internal ability to achieve individual objectives in the real estate

enterprise.

The importance of selecting the right contractor, consultants and

form of contract to ensure that the this building development

period is completed within the planned time period and budget,

goes without saying if the feasibility originally projected is to stay

true and clearly another important stage is the marketing and

leasing stage where to market the product and close the deals

before development, or at least before the construction of the

building is completed, thus keeping vacancies to a minimum

is of utmost importance since, if this stage is neglected all the

work put in to research and feasibility studies can be derailed.

Efficient and effective property management is the final stage

and often explains why two similar buildings perform differently,

or why a building which is performing with mediocrity suddenly

performs well when purchased by another company.

A last word, on the subject would be the warning the 18 May

1992 volume of Fortune magazine sounds against injudicious

over-development of the property market, which could lead to

the same sort of chaos that presently reigns in parts of the Unit-

ed States of America due to a massive excess of space to rent.

Finally, with all the calculations to be made a computer spread-

sheet model assists with accurate and fast decision making.

I V S C N EW SV

PROPOSED NEW INTERNATIONAL VALUATION STANDARDS

At its meeting on 4 March the Standards Board con-

sidered a series of amendments to the Staff Draft

that had been proposed by members of the Board

and others. The time taken to discuss and resolve

these issues required the meeting to be adjourned

and continued on 5 March.

Subject to the changes agreed during this meeting, the Board

unanimously approved all of the standards included in the Staff

Draft except for IVS 232, Trade Related Property. The Board

considered that further consultation is required on the interac-

tion between this proposed standard and IVS 200 Businesses

and Business Interests and IVS 230 Real Property Interest. Since

elements of each of these standards appear in the draft Trade

Related Property Standard it is questioned whether a separate

standard is necessary.

Some late representations from a number of North American

Real Estate institutes indicated that the real estate community

in the US and Canada may have an understanding of the appli-

cation of the Cost Approach to real estate that is different from

the way it is applied to other asset types and in other world re-

gions. The Board agreed to remove some of the paragraphs that

described the application of the cost approach in IVS 230 Real

Property Interests pending a further project to identify the nature

of the differences, whether these have the potential to result in

a materially different conclusion and consulting on proposals

for resolving any diversity. This project needs to be undertaken

in conjunction with the current consultation on the Depreciated

Replacement Cost method being undertaken by the Profes-

sional Board.

The Board also agreed that the approved standards would be

effective from 1 January 2012, with earlier adoption encouraged.

The printed version of the standards should be available in early

July, with an electronic subscription service to follow. Details of

the price of the new standards and how they may be ordered will

be announced closer to the publication date.

THE VALUATION OF FINANCIAL INSTRUMENTS - UPDATE

In their examination of the causes of the financial crisis during

2007 and 2008, politicians and financial regulators had identi-

fied that valuation, and in particular a lack of understanding of

the valuations of complex financial instruments by investors

and other users of financial information, had been a significant

contributory factor. In the summer of 2009 the IVSC formed a

Financial Instruments Expert Advisory Group (FIEAG) to assist

in identifying valuation problems in the financial markets and

projects that the IVSC could usefully include in its work plan as

a contribution to rebuilding confidence in the valuations of finan-

cial products, particularly for over the counter (OTC) instruments.

The FIEAG met on four occasions between mid 2009 and mid

2010. It confirmed that there had been little collaboration on

best practices in the financial sector, and that this was caus-

ing difficulties for both those with responsibility for producing

valuations and also for auditors. The group contributed to the

production of a new high level standard, specifically for financial

instruments (IVS 250), that following due process was approved

for publication in June 2011 as one of a completely revised suite

of standards. It also had significant input into the IVSB’s project

on identifying and disclosing valuation uncertainty. This project

is continuing, with a remit that extends to uncertainty in valua-

tions generally, not simply those of financial instruments.

OPPOSITION TO IVS ALLOWANCE OF FIRM CERTIFICATIONS

The International Valuation Standards Board’s decision to allow

valuations to be certified by firms, as opposed to individuals,

gives the Appraisal Institute “great pause” and may result in an

enforcement nightmare, Appraisal Institute President Joseph C.

Magdziarz cautioned in an April letter to the IVSB. The letter is

in response to the IVSB’s acceptance of firm certifications in the

9th edition of the International Valuation Standards at a meeting

on 5 March in London.

“We regret the IVSB’s decision to accept firm certifications in

lieu of individual certifications, because such compliance state-

ments are critical to the valuation process,” the letter stated.

“Specifically, individual certifications are the preferred way that

an appraiser takes responsibility for his or her work and certi-

fies independence. If the Staff Draft, as amended by the IVSB

in March, is adopted, IVS will be largely incompatible with other

valuation standards throughout the world.”

The letter raised several concerns over enforcement, compe-

tence and professional assistance involving firms over individu-

als and called into question why no rationale was provided for

a change of such profound significance. The letter also clarified

that certain business valuation standards cited during the IVSB

THE IVSC HAS PUBLISHED ITS 2011-2013 STRATEGY AND

OPERATIONAL PLAN

The IVSC successfully completed a major restruc-

ture during 2008 with the ‘new’ organisation com-

ing into effect in January 2009 in the midst of the

global financial crisis. The crisis provided an impe-

tus for the development of the IVSC, leading as it

has to greater recognition of the critical role played

by valuation in today’s global financial system and

global economy. The first two years of operation

of the new IVSC show that the original objectives

behind the restructuring were sound. The new Plan

builds on this success but seeks to increase mo-

mentum, seize new opportunities and establish

sufficient resources for the organisation.

The Trustees have agreed that the IVSC will focus on four stra-

tegic areas:

DISCOUNTED CASH FLOW METHOD

The comments that were recieved on the Discounted Cash Flow

(DCF) Method – Real Property and Business Valuations have

been published on the IVSC website.

A P P R A I S A L I N S T I T U T E N EW SV

meeting as accepting firm certification actually require individual

certifications in compliance with the Uniform Standards of Pro-

fessional Appraisal Practice.

IMPLEMENT EFFECTIVE QUALITY CONTROL REVIEW

PROCESSES

In times of heightened appraiser accountability, internal qual-

ity control is essential for a successful appraisal business. In-

side Exceeding Expectations: Producing Appraisal Reports and

Services That Delight Clients, author Scott Schafer presents an

accessible overview of the quality control principles developed

for manufacturing and other industries and applies them to the

appraisal profession. This guide provides

• details of an internal quality control review process

• valuable pointers on verbal communication, active listening,

and effective writing

• tips for gathering client feedback and using it effectively.

• To be the international standard setter for the valuation profession

• To lead the development of the global valuation profession

• To be an influential voice on behalf of the global valuation

profession

• To enhance the IVSC’s governance and operations.

As the environment in which the IVSC is operating is changing so

rapidly, the Board of Trustees will keep the Plan under constant

review. It would also welcome comment by all stakeholders on

the proposed strategy and actions to implement that strategy.

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THE SOUTH AFRICAN


LAUNCH OF REVISED CODE OF ETHICAL PRINCIPLES

The IVSC has launched revised proposals for a Code of Ethical

Principles aimed at providing better regulation of the global valu-

ation profession. These follow an initial set of proposals issued

in mid-2010.

The chairman of the IVSC Professional Board, Jean-Florent Rérolle,

explained that the Board had studied the comments received on

the earlier proposals and made a number of significant changes:

“While there is widespread support for an internationally recog-

nised benchmark for the ethical conduct of valuers, we received

feedback that our original proposals were too narrowly focused

and that we should concentrate on identifying the fundamental

principles that define ethical conduct rather than the detail.”

The Board member responsible for the project, David Faulkner

added: “Although there are some well-established professional

bodies around the developed world that have robust conduct

rules for their members, these often differ in detail. By identify-

ing the principles that should be reflected in any code designed

to regulate valuers, the IVSC can help both the convergence of

existing rules and provide a sound basis for the development of

new rules in emerging economies.”

S A I V AT H O M EV

The first branch to hold its AGM this year was the

Southern Branch – on 30 March. The chair, Jenny

Falck, said that her branch executive worked “like a

well-oiled machine”. Membership of the branch de-

creased by 30 during the past year to 307 members

and student members. Jenny stressed the need to at-

tract young members, to empower and guide those

who are the future of the profession. She reported

that a closer relationship had been forged with CPUT

and UCT; meetings and workshops had been held to

discuss the future of valuation education.

The three workshops held by the branch were well attended, the

highlight being the Country Seminar at Langebaan. The work-

school did not take place in 2010 because there was no demand

for it. Feedback from the SACPVP is awaited as a new policy is

currently being investigated.

Jenny reminded members that the SAIV website now offers the

IVSC Guidelines. The Guidelines give a valuable insight into in-

ternational valuation practice which is important for remaining

relevant in a rapidly changing property environment. Jenny ex-

pressed her concern about the general quality of work which

“seems to be getting poorer, with some valuers opting to give

clients the values that they require, irrespective of what reality

reflects”. She warned against acting unprofessionally and not

carrying out necessary market research. “A professional learns

every aspect of the job. An amateur skips the learning process

whenever possible (CET points, workshops, DVD’s?). A profes-

sional carefully discovers what is needed and wanted. An ama-

teur assumes what others need and want (subjective valuations,

poor reporting). A professional produces more than expected.

An amateur produces just enough to get by.”

The Northern Branch held its AGM on 14 April. The chair,

Lientjie Ackerman, reported that membership of the branch had

increased by 12 over the past year, even though student num-

bers had dropped by 17. She also stressed the importance of

education as a branch activity. A workshop, a one-day semi-

nar and a country seminar had been held, as well as the an-

nual practical workschool, in co-operation with the SACPVP. The

workschool was well attended – the 165 learners achieved an

80% pass rate.

b r a n c h a n n u a l g e n e r a l m e e t i n g s

The Guideline Professional Fees in terms of section 35(2) of the

Property Valuers Profession Act, 2000 (Act No 47 of 2000) were

published in Government Gazette No 33614 (Board Notice 138

of 2010) dated 15 October 2010 effective 1 October 2010. In

terms of section 35(2), the SACPVP must, annually after consul-

tation with the voluntary associations, representatives of service

providers and clients in the public and private sector, determine

professional fees and publish those fees in the Gazette.

Lientjie referred members to the Institute’s official event regis-

tration page, www.saiveventregistration.org.za which must be

used to register for any SAIV event. Registration forms are no

longer completed by hand.

Professionalism was also a concern; Lientjie said: “Before I

close my report, I need once again, to bring to your attention

disciplinary matters that are a great concern to us. It is unfortu-

nate that we have to read in the media about misconduct and

unprofessional conduct of members of our profession. I believe

that there is no area of specialisation more demanding than that

of property valuations. Like many areas of life, property valua-

tion has for a long time involved, and still involves, continual and

accelerating change, higher professional standards, increasing

diversity and complexity, as well as greater intellectual demands.

My plea to you today is that you treat our profession with the

dignity and respect it deserves, and please, don’t compromise

yourself, you’re all you’ve got!”

The Central Branch AGM was held on 15 April. The branch is

the smallest of the five branches, with 59 members (including

17 students). Bernie Davies, the chair, pointed out the advan-

tages of being a member of the Institute: “Networking - this is

a source of communication with fellow professionals; updating -

we communicate changes in the profession which will affect you

the member – timeously; making a difference (MAD) - we liaise

with the statutory bodies, share innovations with other branches

and represent our profession within the built environment.” He

urged members to encourage friends and colleagues to join up

and advance the mission of the Institute, so that they too can

be MAD!

One major event was held during the year under review – a semi-

nar at Lechwe Lodge in Kroonstad in November – which was a

THE SOUTH AFRICAN


THE SOUTH AFRICAN


1. Northern Branch Back row left to right: Russel McGregor, Carel Nolte, Derrick Griffiths, Andre Zybrands, Dirk Coetzee,

Nardus Janse van Rensburg, Tracey Meyers. Front row left to right: Anton Swanepoel, Melanie Vallun, Hein Hartman,

Lientjie Ackerman (Chair), Dada Erasmus-Nel, Ben Espach

2. Eastern Branch Left to right: Mark Bakker (Chair), Alan Moyce, Penny Lindström

3. Southern Branch Back row left to right: Patrick Boonzaaier, Peter Burmeister, Anita Cilliers, Dean Ward, Marc Prins,

Henre Hablutzel, Jerry Margolius. Front row left to right: Ali Su Smith, Jenny Falck, Farrel October (Chair), Alison Stober, Heather Donald

4. KwaZulu-Natal Branch Back row left to right: Trevor Richardson, Stephen de Klerk. Scott Aldridge, Ken Jones, Darran Kuppan

Front row left to right: Roshinee Naidoo, Patrick O’Connell (Chair), Dianne de Wet. Inset: Paul Robinson. Absent: Zenzele Gina

5. Central Branch Left to right: Tertia Noordman (sec), Pierre de Klerk, Bernie Davis (Chair), Kit Carson

1

2

3

4 5

Branch committees 2011/2012

great success. A workshop on title deeds was hosted in April

2010. Bernie also emphasised the importance of assisting stu-

dents: “Many students will be in limbo if they have not complet-

ed their studies in 2011. We must prepare ourselves to counsel

and guide them. Make sure that you are aware of institutions

and courses to which they can be referred. We will be losing

many students with a wealth of practical experience but there

is also a pool of qualified individuals with little or no experience

who we can help.”

The AGM of the KwaZulu-Natal Branch took place on 20 April

at the Assagay Hotel in Hillcrest. The branch chair, Trevor Rich-

ardson, said that the SAIV was finalising its plans to restructure

the Institute and offer members improved services – the new

website, the appointment of a KZN firm of accountants to man-

age the Institute’s financial affairs so that members in arrears

now receive monthly statements, and the creation of an online

payment portal where members will be able to make payments

by credit card.

He thanked Celia van Staden (who retired in October 2010) for

her dedication and many years of service to the Institute, and

was an invaluable member of the KZN team. The membership of

the branch was 227, plus 58 student members, compared with

237 the previous year. A one-day seminar held was a resounding

success, with 90 members attending. At the request of mem-

bers, bi-monthly workshops or talk shops will be held this year.

Trevor spoke of education and the student sub-committee: “My

special thanks to Ken Jones for offering his time to the students.

I have again received comments from students who tell me that

these sessions were crucial to their academic successes. I also

assisted the University of KZN during the past year. The uni-

versity intends closing the BSc Property Studies course. I am

happy to report that industry role players are to meet with the

university to seek ways to resuscitate this programme.”

The Eastern Cape Branch held its 14th AGM at the Port Eliza-

beth Golf Club on 28 April. Branch membership (including stu-

dents) was 84. The branch chair, Mark Bakker, said that the im-

portance of Continuing Education and Training (CET) is that the

profession and members are kept abreast of the market and the

environment. He reminded members: “With effect from 1 April

2008 – in terms of the provisions of the Property Valuers Profes-

sion Act, the SACPVP imposed continuing educational training.

Registration of a professional valuer, professional associated

valuer or a single residential property assessor will be for only

five years, but it will be renewed if the Council is satisfied that

the conditions relating to CET have been complied with.” He

urged members to visit the Institute’s website to get more infor-

mation on CET. The branch held 13 workshops during the past

year (in Port Elizabeth and East London); a member would have

earned 22 CET hours if all of these had been attended.

This article is intended to highlight and answer

some issues and questions that are often raised.

For more information on CET contact the SACPVP

on (012) 348 8643 or email [email protected].

CET hours are a statutory requirement

The Valuers Act requires all registered persons Continuously to

Educate and Train themselves. The registered person is respon-

sible to ensure that she or he adheres to this requirement. If not,

the person’s registration may be cancelled by the SACPVP.

Who must adhere to this requirement?

All qualified persons registered with the SACPVP. This excludes

candidate valuers because candidate valuers are not qualified;

CET means continued (after qualification) education and training

- even though a valuer is qualified he or she must continuously

educate and train him/herself.

The current CET cycle

The first cycle has been implemented by the SACPVP to es-

tablish a culture of “knowledge improvement” for all registered

persons. These valuers need to obtain 40 CET hours within this

first five-year cycle which started on 1 April 2007 and ends on

31 March 2012. There is a possibility that more hours will need

to be obtained during the next cycle.

The cycle runs concurrently with a person’s SACPVP registra-

tion certificate and ends on the expiry date stipulated on the

certificate. A new registration certificate will only be issued by

the SACPVP once the Council is satisfied that sufficient hours

have been obtained to validate re-registration.

If the required hours are not earned

The Council’s record of an individual’s CET hours is sent to each

registered person with the annual fee invoices. A warning is

also sent stipulating the shortfall in required hours and the time

frame left to obtain these. Should an individual not adhere to the

warning, he or she is in danger of losing his or her professional

registration.

Responsibility of the registered person

It is the responsibility of each registered person to inform the

SACPVP on an annual basis of any CET activities attended.

c o n t i n u e d e d u c a t i o n a n d t r a i n i n g : s h e d d i n g l i g h t o n C E T

How to inform the SACPVP

The Council sends out annual registration renewals together

with an update on the total CET hours accumulated since 1 April

2007. This is accompanied by a CET form on which each reg-

istered person should indicate CET activities attended and CET

hours earned during the preceding year. The SACPVP keeps an

electronic record of the information sent to them.

The SAIV’s role

The SAIV keeps attendance registers of all (and only of) events

and seminars presented by its branches, on behalf of its mem-

bers. Records are kept for members only and not for student

members. During April of each year letters are sent to each

member indicating the total number of hours earned by the

member during the preceding year.

It is important to note that the SAIV is not responsible for inform-

ing the SACPVP of members’ CET hours. It is the responsibility

of each individual to inform the SACPVP.

Please note: No record is kept by the SAIV of DVD purchases

and no CET hours are allocated for these by the SAIV. The rea-

son for this is that the SAIV has no control mechanism in place

to ascertain whether a person has in fact watched the DVD or

not. Members should, however, indicate this on the SACPVP

form to allocate the appropriate CET hours.

Lecture preparation time and actual lecture time should also be

indicated on the SACPVP form as the SAIV does not keep a

record of these.

Agreement between the SAIV and the SACPVP

The SACPVP has agreed to accept letters from the SAIV as proof

of CET hours earned during SAIV activities.

What to do with CET letters from the SAIV

Attach the letter to your annual SACPVP registration renewal.

On the CET form write ‘SAIV’ and ‘see attached’.

ACTIVITIES THAT COUNT TOWARDS CET HOURS

With proper motivation any hours spent by an individual in order

to improve his or her professional knowledge, counts as con-

tinuous education and training.

The SACPVP has indicated that the following activities count to-

wards improving professional skills: seminars, workshops, lec-

tures, property courses, reading publications, watching DVDs

and lecturing, to name but a few. For example

• Your client base has expanded to include Zulu-speaking people. If you

attend Zulu classes to improve your language skills, this is seen as

being done to improve your business and will count as CET hours.

• You read The South African Valuer, or more specifically, a certain

article. You can claim CET hours for this by stipulating the ar-

ticle title, the time spent reading it (15 or 30 minutes), and giv-

ing a short summary of the article.

• CET hours may be claimed for preparing and/or presenting

lectures. If you are a lecturer by profession, however, you can-

not claim CET points for lecturing. So Mr XYZ, a registered

professional valuer, who is employed by UCT as a lecturer on

a permanent basis and presents the subject Property Valua-

tion 1 to students, cannot claim CET hours for these lectures.

If Mr XYZ decides to improve his knowledge and enrols for a

masters degree, he is allowed to claim hours for time spent on

his studies. Should you already be registered with the SACPVP

as a professional valuer or professional associated valuer and

you enrol to study for a further degree to improve your profes-

sional skills, you may claim the hours involved.

Please contact the SACPVP directly if you are uncertain whether

an activity qualifies for CET hours or not.

How to calculate the hours

The SACPVP has provided the following guidelines:

Subjects enrolled for: 8 hours per subject

Class attendance: 4 hours per class

Assignments: 4 hours per assignment

Preparing for an examination: 4 hours

One-year certificate obtained: 40 hours

Each year of study: Maximum of 40 hours for each year

One-day conference: 6 hours

Two-day conference: 10 hours

Three-day conference: 16 hours

Attend dinner/cocktails before the seminar: 2 hours extra.

Remember: CET is not a burden; it was implemented for the

benefit of every registered person and therefore for the benefit

of the valuers’ profession as a whole.

THE SOUTH AFRICAN


THE SOUTH AFRICAN


In the November 2010 issue and in the President’s

letter in the March 2011 issue of The South African

Valuer we reported that the SAIV’s General Office

had been temporarily moved to Pretoria, with me at

the helm. A Natex decision was then taken in Feb-

ruary 2011 to re-locate the General Secretary’s Of-

fice to Pretoria permanently and I continued as the

Acting General Secretary on a full time basis.

Business synergy came into play with the Northern Branch’s de-

cision to terminate the secretarial services of Hennie Uys and

move the Northern Branch secretary’s office and combine it with

the GS Office. The termination of Hennie Uys’ secretarial con-

tract is by no means a reflection on the service provided but,

from an Institute’s point of view, a necessary step to improve

service to our members. It presented a challenge to the North-

ern Branch because Lynne Brookshaw was in the employ of

Hennie Uys. We are, however, pleased to announce that Lynne

has since been appointed as the Northern Branch Secretary, ef-

fective 1 June 2011.

The SAIV is also in the process of appointing a half-day debtors

clerk who will work in the Pretoria office. This roll was previously

filled by Zakithi, an employee of Peter Cottrell Business Support

and who worked in their Durban offices. As with the Northern

Branch Secretariat, it makes business sense that the day-to-day

bookkeeping duties be undertaken under direct supervision of

the General Secretary; Reshma of Peter Cottrell Business Sup-

port will oversee the monthly management accounts.

What has happened since February?

We started off by looking for suitable premises for our Pretoria

office and then signing a lease agreement. This was when we

really came to understand a lease agreement – because it is for

own ‘own’ premises. Every clause was scrutinised - the NCA

and CPA did not make the signing of the lease agreement any

easier.

Once the lease was finalised, the new office had to be furnished

and fitted from scratch! Office layouts were designed, tenant in-

stallations started and - with a little extra motivation and plead-

ing - Telkom came to the party. Tenant installations were affect-

ed to make the offices suitable for occupation by the Northern

Branch, General Secretary and a debtors clerk.

Because most secretarial services were outsourced in the past,

the SAIV did not have any office furniture and equipment to

speak of, apart from a laptop and a printer. The old desk now

f r o m t h e g e n e r a l s e c r e t a r y ’s o f f i c e

houses the printer in the IT / storeroom. We discovered that

compared with shopping for furniture, finding premises, sign-

ing a lease agreement and obtaining telephone lines was a walk

in the park! We obtained the cheapest options, matched tables

and chairs, purchased from different suppliers and, needless to

say, managed to have everything delivered timeously as prom-

ised - an extremely exhausting exercise! One would imagine

that suppliers, during this time of economic instability, would be

delighted to make a good sale and go the extra mile to provide

an excellent service. This was not the case. Nothing in the cata-

logues was in stock and the first delivery consisted of chairs and

‘loan’ desks - no filing cabinets, no credenzas. The desks we

ordered were only delivered two weeks later. Our best shopping

experience was at Mr Price Home. We walked in, chose and

paid, loaded the trolley, jumped into the car and were back in

the offices in no time - quick and easy! Shopping at Game for

the electrical appliances was also simple, apart from the fridge

which, as promised, was delivered the next day.

Most importantly, the new offices were officially ‘ready’ on 16

June and we are delighted to announce that they are now prop-

erly furnished and equipped, functional and operational on a

much better level than a year or so ago.

The SAIV’s new General and Northern Branch Secretaries Of-

fices are located at Unit 11, Rynlal Building, 320 The Hillside

Street, Lynnwood, Pretoria.

Lynne and I wish to invite all our members to visit us. It is impor-

tant that you, our members, are proud of the new SAIV offices.

To those who come from far and require a desk or computer to

catch up on some work or emails, or just need a good cup of tea

and a chat - we will be happy to accommodate you!

To every Institute member who assisted in establishing the new

offices: THANK YOU!

The National Executive at the past Natex meeting appointed me

to fill the position of Acting General Secretary on a full time basis

for a further twelve-month period. This will give the SAIV extra

time to sort out the running of the Institute and its daily admin-

istration. This will also allow us to achieve our short term goals

relating to the administration functions and to ensure that within

a year we can lift member service to an even higher level.

Contact details are as follows:

General Secretary: Melanie Vallun (Acting)

PO Box 35500, Menlo Park 0102


Landline: 012 348 2757

Alternative landline: 086 100 SAIV

Fax: 086 657 3164

Account queries: [email protected]

KwaZulu-Natal Branch Secretary: To be appointed


Landline: To be advised. Please feel free to contact the General

Secretary.

Fax: 086 657 3031

Northern Branch Secretary: Lynne Brookshaw


Landline: 012 348 1752

Fax: 086 657 3201

Southern Branch Secretary: Henre Hablutzel


Landline: 021 762 3313

Fax: 086 730 9193

Central Branch Secretary: Tertia Noordwyk


Landline: 051 448 9431

Fax: 086 657 3023

Eastern Cape Branch Secretary: Mark Bakker


Landline: 041 396 1400

Fax: 086 657 3003

We are also establishing a LIBRARY at the offices in Pretoria.

Students are most welcome to come to the offices to do re-

search and use some of the available literature. Watch out for

more information on the library in the next issue of The SA Valuer.

Melanie N Vallun

Acting General Secretary

Central Branch Two-day Seminar • 25 and 26 August

Northern Branch Country Seminar • 16 and 17 September • Venue: Mabalingwe Nature Reserve near Bela Bela, Limpopo Province

Northern Branch One-day Seminar • 4 November • This seminar is being held in conjunction with the WAVO “International Valu-

ation & Appraisal Week” to take place from 1 to 7 November • Venue: Still to be determined • Invitations will be sent out by email.

For more information visit the Institute’s website or call Lynne Brookshaw on 012 348 1752.

u p c o m i n g e v e n t s

THE SOUTH AFRICAN


THE SOUTH AFRICAN


Lynne in her new officeThe boardroom

m e m b e r s h i p a s a t 1 j u n e 2 0 1 1

Central Eastern KwaZulu- North South General Total

Cape Natal Secretary per category

Members

Fellows

Life members

Retired members

Retired fellows

Life fellow members

Retired life fellow

members

Non-practising members

Affiliate members

Non-resident members

Retired non-resident

member

Active members

Total

Honorary members

Students

Inactive members

ALL MEMBERS TOTAL

30

4

4

38

14

14

52

52

2

14

1

69

21

21

90

129

6

30

3

1

169

1

63

64

233

394

20

66

1

1

1

1

484

6

199

205

689

182

16

31

5

3

237

2

73

75

312

3

12

7

22

0

22

787

48

0

145

9

4

1

3

3

12

7

1019

9

370

379

1398

THE SOUTH AFRICAN


THE SOUTH AFRICAN


THE SOUTH AFRICAN


THE SOUTH AFRICAN


THE SOUTH AFRICAN


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