Transcript Standard Professional Fees by Dr. Geho

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 bylaws 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
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•
•
•
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.
1
2
3
4
Bid (Shs.)
Difference
from
Lowest Bid (%)
64,514,225
106%
54,260,0000
73%
40,475,000
29%
31,326,000
0%
Average Spread 69.3%
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