We have been asked on a number of occasions whether estate agents are allowed to do valuations for capital gains purposes and if so, whether they may charge for the service.



3 October 2001 We are very pleased to confirm that : You may do such valuations ; You may charge for such service. We regret to report that there has been much confusion over this issue. This confusion includes the Estate Agency Affairs Board and even practicing attorneys who have been providing public education to your industry on this topic. In the light of the contradictory statements made on this topic, we will take the trouble to properly motivate our opinion: 1. In terms of Section 17 (1) (a) of The Valuers' Act No. 23 of 1982 no person who was not registered as a valuer in terms of the Act was permitted for reward to perform any work reserved for valuers in terms of Section 9 (1) of the Act. 2. Section 9 (1) of the Act provided for the creation of regulations which would prescribe the list of work reserved to valuers registered in terms of the Act. Such list could only be finalized in consultation with the Competition Board. 3. Due to ongoing difficulties which the Council for Valuers experienced with the Competitions Board, the list of reserved work was never promulgated and accordingly even in terms of this Act, the job of valuing property was not excluded from activities which estate agents could do for reward or for free. 4. This Act was however repealed in its entirety by the Property Valuers Profession Act 47 of 2000 and accordingly the information contained in paragraphs 1 through to 3 of this memo has been provided for information purposes only. 5. Section 27 of the new Act provides that the new Council for Valuers created in terms of the new Act may, after consultation with bodies/industries/persons that may be affected by the matter, identify the "type of property valuation work which may be performed by persons registered" in terms of the new Act. Such process has not even begun and there is accordingly no list of reserved work in terms of this Act yet. Our enquiries lead us to believe that it will be a significant period of time before such list is ever agreed and promulgated. Your profession through your Estate Agency Affairs Board will no doubt be consulted in the process and you will have adequate notice of any change in the position. 6. SARS (The Receiver of Revenue) has not prescribed the identity / qualification of any person who does valuations which will be relied upon by a tax payer when trying to work out the capital gain which has accrued on any asset affected by Capital Gains Tax. The only guidance which is given is that the motivation/calculations depended on in arriving at the valuation must be capable of being produced. The taxpayer accordingly accepts the risk of his valuation being challenged by SARS if found to be inadequate. In final analysis therefore, we suggest/advise that you deal with requests for Capital Gains Tax valuations as follows : 1. You must include in your valuation your reasons for your valuation (a comparative market analysis would ordinarily suffice). 2. You should include a disclaimer in terms of which the client cannot sue you for damages should the Receiver challenge the client's valuation and charge the client penalties for incomplete declarations of tax payable. The suggested wording for the disclaimer which should be included on the valuation is as follows : "Although every effort has been made to ensure that this valuation fairly reflects the market value of the property to which the valuation refers, we will not be liable for any loss and/or damage which you might suffer (howsoever such loss/damage may occur) should our valuation prove to be inaccurate in any way. You accordingly will rely upon this valuation entirely at your own risk." 3. You can charge for the valuation and the work associated with its preparation and motivation such amounts as you believe is reasonable and acceptable to the market. Your Institute will no doubt in due course recommend a fee for this work. 4. You may not in the process of advertising for such work or in the valuation document itself, describe yourself directly or indirectly as a Valuer registered as such in terms of the new Act referred to above. In as much as the valuers profession will in due course (even if it takes them some time) probably succeed in closing the door which is currently open for you as an estate agent to earn revenue from this source of work, it might be advisable to consider registering as a valuer in terms of the new Act and undergoing the training that is part and parcel thereof. If you have any queries about this memorandum, please feel free to contact us. MILTON KOUMBATIS MILTONS INC. ATTORNEYS