Earlier this year, the government committed itself to overhauling its property division and transforming the current department into an autonomous authority presided over by a board of governors. This pledge came in the wake of a controversial property deal, where the estimated values were put into question. Indeed, one of the main tasks of the new authority is to revisit current valuation methodologies.

Only last week, the subject of property valuations was brought once again to the fore – this time round by the president of the Chamber of Architects, who took umbrage over the envisaged repercussions should such valuations be carried out by property negotiators, citing conflict of interest as a key concern.

On the other hand, the president of the Federation of Real Estate Agents accused architects that their valuations are ultimately “very superficial”. Who is right?

Before delving further, it is important to understand what kind of value one is looking at. Is it the market value, in other words an estimate of the price that would be achieved if the property were to be sold in the open market? Is it a forced sale value, that is, the value which it would fetch in an auction? Or is it a speculative value based on the prospect of future changes in planning policy?

Consequently, the price of property is likely to vary, depending, of course, on the nature of the value being considered. Hence, asking what is the value of a building is more often than not a meaningless question.

On the other hand, it is undisputed that experienced estate agents are in the best of positions to provide a useful assessment of ‘worth’ on the basis of ongoing selling prices. Really and truly, property negotiators are more likely to be conversant with the ‘traded price’, having assisted their clients through the promise of sale and the eventual contract deed.

The price of property is likely to vary, depending on the nature of the value being considered

On the other hand, such information is not necessarily held by architects. That said, it would be very dangerous to simply rely on a comparative price index. Why?

First of all, the valuer must possess a thorough knowledge of planning legislation, building regulations and environmental policies. Policies vary according to site circumstances, even in the same street. Planning policies wield a significant influence on the ultimate value, dictating the prospect of potential development or redevelopment as the case may be.

Furthermore, planning policies control the use or activity which may be permitted. In the case of built development, one must also ascertain at the very outset whether the construction is in line with the relative permit drawings and conditions. In default, the valuer is required to establish whether the detected irregularities are likely to be sanctioned through a planning application, and at what cost.

Secondly, the assessor must be familiar with construction technology, as well as structural theory and design. Why? Structural considerations need to be factored into any value assessment. For example, the prospective value of any future construction depends very much on the stability and the bearing strength of the terrain, access restrictions and plot configuration, as well as the state of neighbouring property.

In the case of built development, one needs to establish whether the existing structure is structurally safe and cost any remedial action which may be necessary to achieve the required serviceability standards. Additionally, one may not overlook the energy performance of a building, which in turn has an impact on the eventual operational costs.

Therefore, the valuer must be able to factor in the design rating of the building (if the building is not yet constructed and finished) or the asset rating (if the building is already constructed and finished) and reflect the outcome in the value.

Thirdly, the assessor should be equally conversant with the law. A valuer cannot be unable to distinguish between sole ownership, common ownership and right of use.

When a property is not freehold, the assessor must be able to understand the relative restrictions emanating from the law.

For example, in the case of residential property which was leased prior to 1995, the valuer must take into consideration the applicable ‘cut-off dates’ for persons residing with the tenant for four years of the five years preceding the death of the latter.

Likewise, the valuer must be equally aware of the legal repercussions concerning the automatic conversion into a lease of a pre-1979 temporary emphyteutical grant, even though such legal arrangements were recently declared unconstitutional by our courts.

Tax considerations – namely property transfer tax and stamp duties – must also be factored into the value.

It emerges quite clearly from the above that property valuations may not be reduced to a simple comparative assessment.

Robert Musumeci graduated in law and is an architect by profession.