Presentation on theme: "TOWARDS THE SETTING OF STANDARD REAL ESTATE PROFESSIONAL FEES: VALUING THE VALUER AND OTHER REAL ESTATE PROFESSIONALS IN TANZANIA Presenter Dr. Medard."— Presentation transcript:
TOWARDS THE SETTING OF STANDARD REAL ESTATE PROFESSIONAL FEES: VALUING THE VALUER AND OTHER REAL ESTATE PROFESSIONALS IN TANZANIA Presenter Dr. Medard Geho Ardhi University Dar Es Salaam
Introduction Objectives of the presentation Nomenclature/Terminology Real estate profession and progression Nature of real estate and real estate markets Intermediaries - Role of real estate professionals Who is a professional? Esoteric knowledge! Professional fees
Fair Competition Commission Fair Competition Act (FCA), 2003 Objective: competition in trade and commerce FCC – ‘Institution of first instance’ + FCT – Appellate body S.8: ‘A person shall not make or give effect to an agreement if the object, effect or likely effect of the agreement is to appreciably prevent, restrict or distort competition.’ Exemption from FCA Does FCC oppose the charging of standard fees?
Professional Real Estate Consultancy Fees in Tanzania + Elsewhere Tanzania United Kingdom Law Society of Kenya. Fees raised by 40% in 2014. Fine Ksh.100,000 ($1,176) or jail term Estate Agents (Remuneration) Rules, 2002 Kenya. Architects and Quantity Surveyors (Registration) Act, 2010
Professional Real Estate Consultancy Fees in Tanzania + Elsewhere Architects and Quantity Surveyors (Registration) Act, 2010 S. 51:- Every Architect, Quantity Surveyor and every firm shall be bound by the scale of fee prescribed by the Board notwithstanding any provision in any other law, regulations or by- laws of the authority, association, institute, society or organisation to which he is a member.
Arguments in Disfavour of Standard Fees Anti-competitive behaviour, cartel, price fixing Every profession is a conspiracy against the laity? ‘The way in which professions acquire prestige, power and wealth is by taking unto themselves a body of knowledge and expertise and only reliquishing it in doses in exchange for payment. The creation of dependency is an intrinsic part of that process.’
Arguments in Disfavour of Standard Fees Large firm conspiracy Extortionate fees may result Advalorem fees and inflated values Fees set in ‘tablets of stone’
The Case for Standard Fees Tripartite beneficiaries: Professionals, profession + consumers Corollary to the ‘Principle of Substitution’ ‘When several commodities or services with substantially the same utility are available, the one with the lowest price attracts the widest demand and the greatest distribution.’ Predictability of fees ROCE and Peers. Valuing the Valuer!
The Case for Standard Fees Fairness Gamblers! Undercutting. Who said ‘money is the root of all evil’? Fee variance
Valuation Bid-price Spread (January, 2015) Firm No. Bid (Shs.)Difference from Lowest Bid (%) 164,514,225106% 254,260,000073% 340,475,00029% 431,326,0000% Average Spread69.3%
Conclusion Real estate professionals need to provide a unified front and speak with one voice on the issue of charging standard real estate consultancy fees. The determination of what level of fees to charge is a delicate matter that requires sufficient knowledge + dedication from real estate professionals so that the resulting fees are beneficial to the professionals, the profession and consumers of real estate services. Policing matters: NCPS and TIVEA This paper has served to stimulate debate on the need to charge standard real estate consulting professional fees