Real-estate appraisal glossary

Determination of the market value of a property at a given moment — that is, the price at which it could be sold under normal market conditions between an informed and unconstrained seller and buyer.

Open-market valuation is required for transactions, inheritances, partitions, mortgage guarantees and disputes. It is produced by an accredited expert after a site visit, documentary analysis and the collection of comparable transactions.

A term synonymous with open-market valuation, consistent with the International Valuation Standards (IVS — International Valuation Standards). The estimated amount for which a property would be exchanged on the valuation date between a willing seller and a willing buyer, in a transaction carried out without constraint, after proper marketing.

The annual rent that a property is likely to generate under normal letting conditions, regardless of any rent actually received. It is used for commercial leases, tax declarations, rental disputes and the valuation of investment properties.

Conclusion of a new lease between the same parties when the current lease expires. The rent of the renewed lease is negotiated with reference to the rental value of the property, which the expert can determine.

Adjustment of the rent during the lease, under the conditions provided for by the contract or by the applicable regulations. The rental value determined by an expert provides an objective basis for assessing the revised rent.

Indemnity owed to the occupant of premises who must vacate them following the non-renewal of their lease. Its assessment calls for appraisal, in particular the determination of the rental value of the property. The Firm acts in setting eviction indemnities.

Very long-term lease that confers extensive rights over the leased property on the lessee. In Madagascar, it is among the questions raised by investors, particularly foreign investors; its legal characterisation falls to the notary or lawyer. The expert can measure its economic impact on the value of the property.

A valuation method reconstituting the value of a property as the sum of the new-build construction cost, less the depreciation allowance, plus the value of the land. This approach is particularly suited to specialised properties (industrial, hospital, religious) for which comparable transactions are scarce.

A reduction applied to the new-build reconstruction value to account for the property’s physical wear (deterioration of materials), functional obsolescence (outdated equipment or layouts) and economic depreciation (changes in the neighbourhood or in usage).

A valuation method that estimates the value of a property from recent transactions involving comparable properties — located in the same area and sharing similar characteristics of floor area, condition and use — after applying adjustments for the differences identified.

This is the method most commonly used for residential properties and building land in urban areas.

A valuation method applied to rental or income-producing properties (offices, shops, multi-unit residential buildings), consisting of dividing the annual net rental income by a capitalisation rate representative of market conditions for that category of property.

Compagnie des Arbitres Rapporteurs et Experts Agréés près les Cours et Tribunaux de Madagascar. The professional body bringing together the experts officially accredited by the Malagasy judicial system.

Registration with the CAREA attests to the expert’s professional competence, independence and adherence to the Compagnie’s code of ethics: independence, impartiality, probity, competence and confidentiality.

A professional officially recognised by the Malagasy judicial system to produce valuations and appraisal reports carrying evidential weight in court. In Madagascar, this status is acquired by registration on the list maintained by the CAREA after examination of the candidate’s professional competence.

An appraisal document whose conclusions may be relied upon in the relationships between the parties to the engagement. Reports drawn up by an expert registered with the CAREA carry the evidential weight granted to that status; their effect with regard to third parties is assessed under the ordinary rules of law applicable to expert reports.

Probative value attached to a document. Reports drawn up by an expert registered with the CAREA carry the evidential weight granted to that status; the Malagasy courts assess their scope at their sole discretion.

An appraisal engagement ordered by a court (Court of First Instance, Court of Appeal, Supreme Court) in a dispute, and entrusted to an expert on the CAREA list.

The judicial appraisal report is intended to inform the magistrates on the technical questions of the case: contested inheritance partitions, divorces involving real-estate assets, expropriations, construction litigation, property seizures.

Procedure by which the Malagasy State acquires private property in the public interest, in return for compensation paid to the owner. The expert registered with the CAREA may be called upon to value the property and inform the determination of this compensation, within the applicable administrative or judicial procedure.

Procedure by which a creditor has a debtor’s property sold in order to obtain payment of the debt. Property seizures are among the disputes on which the judicial expert informs the magistrates.

A real-estate security whereby a property is pledged as collateral for a debt, generally a bank debt. The amount of the guarantee is based on a prior open-market valuation of the property, produced by an accredited expert in accordance with the requirements of credit committees.

A comprehensive audit of the value and risks of a real-estate asset prior to an acquisition. It covers verification of title deeds, analysis of easements and charges, planning compliance, the technical condition of the property and the assessment of latent liabilities.

Valuation conducted so as to allow the parties concerned to put forward their observations. It is used in particular for inheritances, gift-partitions and the liquidation of matrimonial property regimes.

Basis on which the duties payable on the registration of a deed are calculated, for example a sale, a gift or a partition. The reports of the expert registered with the CAREA are accepted by notaries as the basis for registration duties.

Document signed by the client, entrusting the assignment to the expert. The deadline for delivering the report runs from its receipt and that of the necessary documents. For private engagements, a written fee agreement is drawn up before any work begins.

An official document issued by the Malagasy Land Registry (service des Domaines), attesting to the right of ownership of a property. In Madagascar, a distinction is made notably between:

— the land title proper (TF), resulting from land registration and enforceable against third parties;
— the land certificate (CF), issued by communal land desks;
— untitled properties, based on possession or tradition, which call for specific analysis.

Charges burdening one property for the benefit of another property or a community. The most common easements in practice are the right of way, the right of light, water flow, plantations and party walls.

Identifying easements is a key part of the appraisal and can significantly influence the value of the property.