Protection from Deprivation of Property

17.JULY.09

Editor: As we continue with the public education and discussion on the proposed changes recommended to the constitution, I would like to add my voice to the discussion. Chapter 3 of the proposed constitution “Protection of Fundamental Rights and Freedom” is proposing to make changes as outlined in section 30 (1) on page 19 “protection from Deprivation of Property”. From the existing constitution, this section states that where the Government is taking possession or acquisition of a property, payment must be made within reasonable time, of adequate compensation. The proposed change to this section is to qualify reasonable time to mean twelve (12) months.{{more}} However, because of the vagueness of “adequate compensation”, persons are also calling for the qualification of adequate compensation to mean “paying market value”. Editor, adequate compensation, while being vague, does not exclude paying market value or any other value, but I am afraid that if we make this change as some are asking because of the subjectivity in the use of the term “market value” and the different methodologies in computing market value, some persons could be in a worse off position from the acquisition.

To determine the value of a property, a valuation or an appraisal must be completed. This process is not a science but an art to express an educated guess or opinion. There are several types of valuations of which market value is one. The International valuation Standard (IVS) defines market value as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing where the parties have each acted knowledgably, prudently and without compulsion. Some other common forms of value for assets includes; Value in Use- the Net Present Value (NPV) of a cash flow that an asset generates for a specific owner under specific use. Also, the Investment Value- the value an asset earns to one investor and is usually higher than market value. There are normally three (3) methods in calculating these values, the Cost method or the cost to replace the property, the Sales Comparison method by comparing similar sales in the area, and the Income method which is the income earning capacity of the property.

Editor, without being technical, if you have a business and the Government wants to acquire your property, thereby affecting your business, would you want Market Value or the Investment value for your property/ business, especially when you consider the future income generating capacity of that investment? We are currently experiencing a global economic downturn, properties are difficult to sell and lenders are curtailing lending to minimize their risk, the net effect, especially in countries like the USA and England, is a large fall in market values of properties. While we have been experiencing generally an appreciation in property values because of market demand, we could see a reverse in trend later where property values could also decline based on market conditions. In a declining market, where no one really wants to sell his or her home, but Government wants to acquire for the public good, would you want to be paid market value based on a comparison method when property values are declining or at minimum the cost of relocating? Also, consider the possibility of a declining property market and having to go and rebuild your home and facing the high cost of labour, finding a piece of land and the high cost of building materials. Therefore, one could see the subjectivity of using market value and more so placing market value in the supreme law of the land as the method of compensation for property acquisition, which could put some in a worse off position because of the different methodology in computing. Editor, I am in support of leaving “Adequate Compensation” in the Constitution because while it may be vague it does not limit the Government from using any form of valuation or methodology to adequately compensate persons based on the situation, but limiting adequate compensation to mean market value could disenfranchise some. Remember, no Government when acquiring property should put their citizens in a worse off position. What is most important to note is that subsection 2 of the same section 30 on page 20 is from the current constitution and outlines the process an individual could take in seeking redress through the High Court if he feels he was not adequately compensated. This is what is most fundamental in securing our rights to deprivation to property that there is a process that is objective in securing redress.

In closing, I want to emphasise a point made by social commentator Renrick Rose several months ago when he called on us as a people to show maturity especially at this critical juncture of constitutional reform. We need to educate our people and encourage all to voice their opinion on the changes recommended. Now is the time for educating and lobbying, not seeing people’s opinion as “nonsensical and stupid”.

Cerlian “Maff” Russell