Restitution Discussion Group Archives
| Sender: |
Jerry Margolius |
| Date: |
Fri, 17 Sep 1999 21:54:08 |
| Re: |
Bulgarian Restitution |
Dr Ivan Shopov
I was pleased to receive your article.
I am President of the South African Institute of Valuers.
For the past four years, I have consulted with the South African Government
in respect of land restitution and compensation. I have had much difficulty
in trying to communicate with other parties who are experiencing similar
problems to our Country. In particular, the restitution of land rights
lost during the apartheid era. The following is an address that was presented
by me some time ago. While it may NOT apply to your countries specific
problems, we may be able to share some ideas on common problems.
Please visit our Institute's Website www.saiv.org.za
I look forward to hearing from you.
Regards
SA Valuer magazine 01/99 article 01
The procedures to be followed by Valuers when dealing with Valuation
for land restitution purposes by Jerry Margolius, FIVSA
The solution to the problem is not so simple and I view one of the main
problems as being the lack of jurisprudence to enable us to follow the
guidelines laid down by our Land Claims Court. Yes, the process is slow
but, when operating within the system of restitution, you begin to understand
why, and as Valuers, we will have an important role to play. We will need
to assist the Government Departments in ensuring that cost effective valuations
are undertaken and where possible, suggest the batching of claims within
an area be included in your brief. Clearly, it is not cost effective for
single valuations to be performed.
The maintaining and most importantly, sharing of information amongst
your colleagues must be ensured. Compassion must be shown to the claimants,
yet objective valuations must be performed at all times. We will divide
this paper into two sections. Firstly, we will need to understand land
restitution, to whom it is applicable and the functions of the statutory
bodies.
Thereafter, we will discuss the valuation process, what can be expected
and the problems you are likely to encounter.
UNDERSTANDING RESTITUTION
Since 1913 and in fact prior thereto, rights to land have been controlled
by some form of racial discriminatory laws and practices. Why do we need
to understand this process from such early days? Well, the valuation of
land set aside by the Queen Victoria (Sir George Cathcart) by means of
Land Grant to little Namaqua Hottentots in about 1854 may very well have
been part of your valuation research. This would have resulted in extensive
Deeds Office search and land knowledge in order to perform what is inevitably
an historical valuation. We are all familiar with the term Group Areas
which will form the basis in the majority of urban valuation briefs. You
would be required to acquaint yourself with this legislation and many
other discriminatory laws in order to understand the process. These Acts
could include:
Native Land Act of 1913 In particular, the 1950 Group Areas Act addressed the provisions on how
to control ownership and occupation of land. However, it did not adequately
address the aspect as to how people were to be removed, as the Act simply
provided the title of disqualified persons and disqualified company for
those who resided in demarcated areas. Disqualified persons were able
to retain ownership of their property in their lifetime but their heirs
would be required to dispose of the inherited property to a member of
the applicable race group. Properties owned by disqualified companies
were required to be disposed of within ten years.
The Group Areas Development Act of 1955 was subsequently passed. This
Act dealt with the disposing and acquiring of disqualified properties
now termed affected property. The Act could apply to any group but its
application was not mandatory. However, once applicable all affected property
would at first have to be offered to the Group Areas Development Board.
Only when the Board waived its rights could a sale take place. The State
refused to acknowledge that disqualified owners were entitled to compensation.
The Board placed a basic value on the property. If the property was sold
below the basic value, the Board would pay 80% of the difference between
the basic value and the selling price. However, in the event of the selling
price being higher, an appreciation levy of 50% was payable.
The first group area proclamation after the Group Areas
Development Act was Proclamation No. 190 of 1957. The Department of Local
Government and housing has advised that the basic values prescribed by
regulation (Community Development Act, 1966 (Act 3/1966 Government Notice
R734 dated 11th May 1962) required this value to be the market value as
at 9th February 1961.
The introduction and legislated provisions of the Group Areas legislation
could certainly not support the existence of an open market. But, it must
also be understood that sales of property owned by other race groups were
also controlled and therefore, the sales of all property in South Africa
until the 1990s were controlled.
WHO IS ENTITLED TO RESTITUTION
The Constitution of the Republic of South Africa, 1993 (Act No. 200 of
1993), provides for the restitution of a right in land to a person or
community dispossessed under or for the purpose of furthering the objects
of any racially based discriminatory law S25(7) A person or community
dispossessed of property after 19 June 1913 as a result of past racially
discriminatory laws or practices is entitled, to the extent provided by
an Act of Parliament, either to restitution of that property or to equitable
redress.
The Land Restitution Act 1994 provides for the restitution of rights
in land in respect of which persons or communities were dispossessed under
or for the purpose of furthering the objects of any racially based discriminatory
law; to establish a Commission on Restitution of Land Rights and a Land
Claims Court and to provide for matters connected therewith.
This legislation promotes the protection and advancement of persons,
groups or categories of persons who are disadvantaged by unfair discrimination,
in order to promote their full and equal enjoyment of rights in land.
THE TASK OF THE LAND CLAIMS COMMISSION
The Land Restitution Act provides for the establishment of a Land Claims
Commission. The task of the Commission for the Restitution of Land Rights
(CRLR) is to investigate and mediate land claims. It has drawn up guidelines,
procedures and requirements for the lodging of land claims and other related
matters. All land claims were to be lodged by 31 December 1998.
No one will be able to claim land without substance. A claimant will
have to prove that he or she was dispossessed after 1913 without adequate
financial compensation or alternative land. Where legitimate claims are
lodged for dispossessions that took place before 1913, the Minister of
Land Affairs will consider giving preference to such claimants in terms
of the redistribution programme.
THE LAND CLAIMS COURT
The Land Claims Court was set up in 1995, in terms of the Restitution
of Land Rights Act, 1994 (Act 22 of 1994). Where the CRLR fails for whatever
reason to successfully mediate a claim, it will be referred to the Land
Claims Court for a ruling. The Court has the status of the High Court,
and any appeal on a Land Claims Court decision will be handled by the
Constitutional Court. The Government will not be able to interfere with
the workings of the Court.
The Land Claims Court will be responsible for determining restitution
and compensation to those who lost land as a result of forced removals.
Requirements of the Court are that it must be accessible to the poor and
illiterate, and it must establish processes that will enable it to make
speedy decisions. In order for the court to function effectively, constitutional
rights to restitution must be guaranteed. In all cases of restitution,
the State, usually the Department of Land Affairs is the respondent. The
Department of Land Affairs also has a mandate to enter into negotiations
with the Claimants in order to reach a settlement on the issue of compensation
before proceeding with the matter to Court.
PROPERTY CLAUSE
A brief understanding of the property clause is essential. Unfortunately,
little jurisprudence has in fact been made and therefore, the negotiation
process will still continue.
Of particular importance to valuers will be S25 (3), which deals with
the circumstances relating to the compensation that was paid and other
factors which need to be taken into account when dealing with this issue.
You will note that the market value of property is only one of the factors
which needs to be taken into account.
Property Clause 25
(1) No one may be deprived of property except in terms of law of general
application, and no law may permit arbitrary deprivation of property.
(2) Property may be expropriated only in terms of law of general application
(3) The amount of the compensation and the time and manner of payment
must be just and equitable, reflecting an equitable balance between the
public interest and the interests of those affected, having regard to
all relevant circumstances, including (4) For the purposes of this section (5) The state must take reasonable legislative and other measures, within
its available resources, to foster conditions which enable citizens to
gain access to land on an equitable basis.
(6) A person or community whose tenure of land is legally insecure as
a result of past racially discriminatory laws or practices is entitled,
to the extent provided by an Act of Parliament, either to tenure which
is legally secure or to comparable redress.
(7) A person or community dispossessed of property after 19 June 1913
as a result of past racially discriminatory laws or practices is entitled,
to the extent provided by an Act of Parliament, either to restitution
of that property or to equitable redress.
(8) No provision of this section may impede the state from taking legislative
and other measures to achieve land, water and related reform, in order
to redress the results of past racial discrimination, provided that any
departure from the provisions of this section is in accordance with the
provisions of section 36(1).
(9) Parliament must enact the legislation referred to in subsection (6).
In addition, Section 33 of the Restitution of Land Rights Act, 1994 (Act
22 of 1994) provides for the Land Claims Court in addition to relevant
provisions of the Constitution, to have regard to the following factors:
(a) The desirability of providing for restitution of rights in land or
compensation to people who were dispossessed of their rights in land as
a result of or in pursuance of racially based discriminatory laws;
DEPARTMENTAL RESEARCH
Once a claim has been received and researched, it will be validated by
the Commission. Researchers will conduct a research into the ownership
of the property and the dispossessed parties. This will usually include
obtaining copies of Title Deeds and meeting with the claimants to discuss
their individual claims. They may identify the problems in the area but
will almost certainly confirm the racially based legislation that gave
rise to the claim and dispossession of the property.
Documentation which is likely to be available in the research reports,
although not essential will include:
Title Deed of the dispossessed party prior to dispossession; I have endeavoured to arrange that the original GC 169 valuations indicating
how the basic value was determined etc. to be included in the research.
VALUATION TENDERING AND THE BRIEF
The brief that you will receive will set out exactly what is required
from you. If there is any uncertainty at this stage you should discuss
this with the instructing party.
I would suggest that should you feel that the brief falls beyond your
expertise, that you decline to accept it. Remember you will always be
respected for declining a brief due to the complex nature thereof rather
than accepting one that could be to your detriment and that of our profession.
This must also be borne in mind when tendering.
On the issue of tendering, the Department maintains a database using
a Props system. You should ensure registration with the Department and
I refer you to the September 1998 issue of the SA VALUER which possibly
lies unopened on your desk, for further information. Incidentally there
is also an article on Land Reform.
VALUATION RESEARCH & SUGGESTED PROCEDURES
Having accepted your brief, you should endeavour to obtain a copy or
at the very least peruse the applicable files pertaining to your valuation
assignment. These files are either with the Land Claims Commission or
the Department of Land Affairs.
The first item you need to confirm is the effective date of the valuation.
Beware, researchers have often used the date of registration as the date
of dispossession. Secondly, an area map would need to be obtained. Some
Local Authorities would be able to assist you with the old historical
cadastral maps will prove most helpful. I usually try and make tracing
copies thereof. Aerial photographs, zonings and town- planning schemes
in place at the time of dispossession will prove useful. Municipal records
including field forms or building records as well as building plans should
be obtained. If not available from the Authorities, try the Archives where
you will usually find the old valuation records. You may also try and
view some of the old photos that they have in their files.
Familiarise yourself with the legislation that was applicable at the
time. A visit to the Surveyor Generals office will enable you to note
the Group Area boundaries that were applicable. You may also need to locate
the properties you are valuing and therefore, noting sheets and site diagrams
will be included in your research.
Inspect the property, hopefully it still exists. If not try and locate
similar properties in the vicinity to enable you to appreciate the buildings
that existed at the time. Peruse the research report and obtain a description
of the property therefrom.
At this stage, you may like to interview the claimant. Prepare yourself
for what could be a very emotional interview. The Claimant is likely to
be extremely subjective, understandably so. I usually ask the claimant
to draw a rough sketch of the property which I feel often helps. Ascertain
the condition of the property as at date of dispossession and whether
there was any other potential highest and best usage that needed to be
considered.
It is my opinion that cities usually have a natural growth. Certainly,
superstores, shopping malls, sectional title schemes etc., were not the
norm of development in the 1960s. As such, the site potential or plottage
that may have followed 10 years later should be pursued with caution.
VALUATION METHODS & CALCULATIONS
The purpose of this item is not to teach you how to value property merely
to highlight some of the pitfalls when carrying out the valuation and
applying the method which you have selected. Comparable method is always
the first prize. Beware of selecting sales of property that may not have
been at arms length transactions. Sales between the same and different
race groups should be carefully analyzed especially when utilising sales
within the affected areas. Although the comparable market method of valuation
approach has wide implications as a method of estimating value and is
of primary importance where applicable, there are factors that may limit
its usefulness. Examples of these are the following:
No provision is made for arriving at an estimated value in cases where
there are no current sales or comparable properties or where there is
no active market. In this regard we would need to establish if at the time the owners were
informed sellers or the buyer an informed buyer, either being aware of
the current market value. Many motivations lead to the transfer of real
property at figures unrelated to the property market value. Tax situations
may affect the sale price. Transfers between relatives or even auctions
may not give a true indication of market value. The adjustment process
is subject to many inter-relationships among the factors considered and
may over or under account for dis-similarity.
(Source: Appraisal of Real Estate).
We will need to deal with the exceptional circumstances that affect the
property. Prices are affected by the abundance of property becoming available
on the market and sales taking place within the period of dispossession.
Therefore, it remains extremely difficult when investigating into the
circumstances of utilising comparable sales to ascertain whether there
were any voluntary sales that were made or sales made under or within
normal or usual terms and conditions. One assumes that a valuation in
the open market is conducted under the normal or usual terms and conditions.
Prices are however affected by exceptional circumstances. Justice Rosen
in Groenewald and others versus Van Rooyen en andere (1960 (1) 244 C.P.D)
held that the circumstances of exceptional nature would only relate to
events such as war or major political unrest. Therefore, we consider properties
which are affected by exceptional circumstances should not be used as
comparable sales.
Certainly, the dispossession of property in my mind under
the then Group Areas Act could fall into this category. The Judge did
however point out that price fluctuations caused by normal economic cycles
would not be treated as exceptional circumstances. In the case of Todd
vs. The Administrator of the Transvaal (1972 (2) S.A.876.A.D on page 881H:
It is obvious that when the situation arises where there is only one
potential purchaser that is the expropriating authority itself, there
can hardly be seen to be open -market in which the value of the property
can be determined.
On page 882
The only possible answer it seems to me is that the arbitrator who determined
the value of the property, with such potential as it has, did so in the
same way as he would have done had there been several possible purchases
Bearing the above in mind, I am clearly of the opinion that where exceptional
circumstances exist and clearly certainly no open market from which suitable
comparable sales could be obtained alternative methods will have to be
investigated. I have found the replacement cost method less depreciation
a good guideline in calculating values in areas where the properties have
all been demolished e.g. District 6 in Cape Town and/or the area has changed
identity. In establishing land values, work on the outer boundaries and
try to establish a range within which the values will fall. When calculating
the depreciation, work to tables such as McMichaels which is internationally
accepted. You will exclude all the political influences that existed in
South Africa. If you are likely to have to adjust, adjust in favour of
the claimant. Historical building cost indices are of great assistance.
Even housing price sales may help you in your calculations. Based upon
the construction of a solid house, the following table based on the expected
life of say 75 years, the recommended depreciation factors would be as
follows:
The above table is estimated structural depreciation for a building kept
in an ordinary state of repair. Buildings still in use are not depreciated
more than 75% of the cost of present day reconstruction.
Allowances for obsolescence are not included in the schedule. McMichaels
Appraising Manual is an international valuers handbook and used for the
purpose of endeavouring to ignore political influences on depreciation
factors.
COMPENSATION
Compensation must be based on the principles of justice and equity. Where
land is expropriated the Claimant should not profit at the expense of
the public but should instead be fairly compensated for what was paid
and invested in the property. Special benefits will be taken into account
and this could include low interest loans, rates exemptions etc. Certain
guidelines were contained in the 1995 Ministerial report regarding the
determination of Land Values. The following may apply in particular circumstances:
the actual prices paid by the present owner at time of acquisition; market
value of the land at time of acquisition; present day value of the land,
excluding the improvements made by the owner; the contribution value of
beneficial improvements (i.e which adds to the value of the property)
made to the property by the owner since time of acquisition; the value
of any special benefits which the owner received from the State (e.g low
interest rates, subsidies etc)
VALUATION REPORT
In concluding the following are some of the data you may consider including
in your report.
CONTENTS Lastly, remember that your valuation is likely to be reviewed by other
valuers and your peers needless to say, the Land Court Judges and Commissioners
will also peruse same. Most importantly ensure that your work is of an
acceptable standard.
Jerry Margolius
Jerry Margolius
Native Administration Act of 1927
Development Trust and Land Act of 1937
Asiatic Land Tenure Act of 1946
Group Areas Act 1950 & 1966
Rural Coloured Areas Act of 1963
Community Development Act of 1966
(a) for a public purpose or in the public interest; and
(b) subject to compensation, the amount of which and the time and manner
of payment of which have either been agreed to by those affected or decided
or approved by a court.
(a) the current use of the property;
(b) the history of the acquisition and use of the property;
(c) the market value of the property;
(d) the extent of direct state investment and subsidy in the acquisition
and beneficial capital improvement of the property; and
(e) the purpose of the expropriation.
(a) the public interest includes the nations commitment to land reform,
and to reforms to bring about equitable access to all South Africa's natural
resources; and
(b) property is not limited to land.
(b) the desirability of remedying past violations of human rights;
(c) the requirements of equity and justice;
(d) the desirability of avoiding major social disruption;
(e) any provision which already exists, in respect of the land in question
in any matter, for that land to be dealt with in a manner which is designed
to achieve the goals contemplated in section 8(3)(a) of the Constitution;
any other factor which the Court may consider relevant and consistent
with the spirit and objects of the Constitution and in particular the
provisions of section 8 of the Constitution.
Transfer to the relevant purchaser which could be the Department of Community
Development;
Subsequent sales (if available);
A research report including an interview with the claimant
Details of the property prior to dispossession.
No two properties are identical since they vary in location even if they
are alike in other respects.
All differences must be considered. The more factors to be compared and
adjusted the greater the number of decisions and judgements necessary.
Minimal adjustments tend to increase reliability.
Intangible qualities are difficult to compare.
Ascertaining the exact conditions applicable to each sale is essential
so that the validity of the sale as comparative data may be established.
AGE
RECOMMENDED DEPRECIATION FACTOR
1
2%
2
3.8%
3
5.6%
4
7.4%
5
9.1%
6
10.7%
7
12.3%
8
13.9%
9
15.5%
10
17.0%
11
18.5%
12
20.0%
13
21.4%
14
22.8%
15
24.2%
20
30.8%
25
36.8%
30
42.49%
35
49.5%
40
52.2%
45
56.5%
50
60.5%
55
64.1%
60
67.3%
65
70.3%
70
73.0%
75
75.0%
Instructions
Date of Valuation
Format, Procedure & Technique used in the Appraisal of the Property
Details of Claimant
Title Deed Description
Deed of Transfer
Details pertaining to property as at date of Dispossession
Surveyor General Information
Local Authority Information
Physical address
Property Reference Number
Map Numbers
The Municipal Valuation
Historical Background
Recorded Municipal Valuation
Determination of Site and Building Values: Site Value and Building Value
Zoning Locality and Physical Description
Locality
Physical Description
Highest and Best Use
Commentary on Group Areas Act in relation to subject property
Market Value
Methods of Valuation
The Market Data Approach
The Income Approach Method
Application of Market Data
The Use Of Comparable Properties
The Application of Municipal Valuation vs Market Valuation
Sales Record
Approach and Adjustment of Market Data
Summary & Conclusion
Valuation, List of Annexures, References
© 1999 The South African Institute of Valuers. All rights reserved
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