Land price tug-of-war

Owners of properties earmarked for acquisition by the state could find themselves pinned firmly in a corner when it comes to negotiating market-value prices.

The Property Valuation Act, passed by parliament in March, paves the way for the establishment of the Office of the Valuer-General - a supposedly independent statutory body - that will put prices on land wanted by the state.

Under the new law, the government will be under no obligation to pay the market value for earmarked properties.

The City of Joburg could be involved in the first test case of the new law.

The Times reported last week that the city had earmarked about 400 properties in Orange Grove, along Louis Botha Avenue, to make way for its so-called corridors of freedom, a series of planned mixed-use, high-density residential areas to be linked to transport arteries.

The properties would make way for construction of the bus rapid transit system along Louis Botha.

Residents along the route have said that estate agents representing the city have approached them to value their properties.

At present the Department of Rural Development and Land Reform uses private companies, close corporations and individuals registered with the Council of Valuers to price properties but the recently passed act allows the Valuer-General to do so.

It does not stipulate what method will be used to determine a property's value.

This is being seen by some as a way for the government to pay below market-related prices, using its own valuer to justify valuations while invoking Section 25 of the constitution.

Section 25 allows the state to expropriate property at below market value provided that the compensation offered is "just" and "equitable".

But others see the act as necessary to rid the land restitution process of what are believed to be artificial hurdles.

According to ANC chief whip Stone Sizani, the willing-buyer-willing-seller approach has been characterised by escalating land prices and this has put a serious brake on land redistribution since 1994.

The Office of the Valuer-General would provide compulsory valuation of land identified for reform by the government, and regulate the valuation process, he said.

But DA MP Mpowele Swathe said appointing an extrajudicial body to determine compensation would open the process to abuse.

"Where the state is the buyer, a state institution mandated to determine the value of assets is likely to distort asset values in its favour," she said.

A spokesman for the Department of Rural Development and Land Reform, Linda Page, said the Property Valuation Act gives owners the right to refuse compensation they deem not to be fair.

"In the event that an owner of a property that has been earmarked for acquisition does not agree with the valuation of the property, such owner is at liberty to refuse to accept the offer for the property."

But the owner would still have to contend with Section 25 of the constitution, which empowers the state to expropriate property without paying the market value, only "just and equitable compensation".

Said Page: "The determined value must reflect an equitable balance between the public interest and the interest of those affected by the acquisition, having regard to all relevant circumstances."

These circumstances include:

• Current use of the property;
• History of the acquisition and use of the property;
• Market value of the property;
• The investment in the property since acquisition to improve it; and
• Purpose of the acquisition.

The department - which conducts an average of 45 farm valuations a month (with more properties assessed at district level) - hopes to employ about 12 valuers when the new office is officially established. No date has been set for its establishment.