LAW AND ENGINEERING VALUATION

DR M.A LATEEF
DEPT OF JURISPRUDENCE & PRIVATE LAW
INTRODUCTION

 Engineering is the practical application of science to proffer solutions

to societal problems, in a safe, healthy, economical, socially
acceptable and environmentally sustainable manner.
 Law regulates virtually everything that touches on human life,
including the deployment of technology to solve problems.
 The lecture focuses basically examining what the laws of
Nigeria say about engineering valuation and what implications
there are, if any, for Nigerian engineers in that special branch.
ENGINEERING VALUATION
 For the engineers, engineering valuation is said to be at once a science
and an art.
 The scope of Engineering valuation according to the Institute of
Appraisers and Cost Engineers (IA&CE) in its Principle of Valuation Practice
and Code of Ethics (2003) include amongst others determination of the
value of property/assets.
 Estate Surveyors and Values disagree with engineers and opine that
competence of engineering valuer is limited to assessment of technical or
functional state of industrial assets, whether real or personal.
 They also argue that engineering valuer’s role cannot extend to or
constitute valuation from the perspectives of financial transactions or
investments.
LAW AND PROPERTY VALUATION

 At law, properties are basically classified into REAL (REALTY) and PERSONAL
(PERSONALITY).
 REALTY - a land and anything growing on, attached to, or erected on it
 REAL PROPERTY- It can be CORPOREAL – soil and buildings on it
 REAL PROPERTY – It can also be INCORPOREAL- an interest in the land owned
by another person, consisting in the right to use or control the land, or an
area above or below it, for a specific limited and definite purpose such as for
mining or crossing it for private or public purpose
LAW AND PROPERTY VALUATION (cont)

 PERSONALITY- is any movable or intangible thing that is

merely attached to land and is subject to ownership but
not classified as real property.
 PERSONAL PROPERTY- Personal property includes
factories, industrial plants, machineries, tools, bank
deposits, proceeds from the sale of real property, notes,
bonds, cars, and many more
 PERSONAL PROPERTY- everything capable of ownership
except real property.
BETWEEN AN ESTATE VALUER AND
ENGINEERING VALUER
 ESTATTE VALUER- an estate valuer is generally said to have
competence to evaluate the value of a real property (estate) such as
land and the buildings on it
 ENGINEERING VALUER- an engineering valuer is generally said to also
have competence to evaluate personal property such as industrial
plants, machineries and equipment.
 Estate valuer competence to value ‘income real estate’.
 Engineering valuer puts value on ‘industrial property’.
ESTATE AND ENGINEERING VALUER
(Cont)
 Income real estate entities such as land or building are
freely exchanged in the market based on what is often
regarded as their “open market value”.
 Industrial properties such as plants and machineries, on
the other hand, are generally not so freely or easily
exchanged on the market.
 Evaluation of industrial property often requires rigorous
collation of data and an in-depth analysis of value chains
which only trained engineering valuers can do.
CONT

 While the above distinction between real and personal

property is basic, it does not really mean that the role or
expertise of an engineering valuer of industrial assets or
property is restricted only to personal property while that
of an estate surveyor valuer is restricted only to real
property.
 There is fluidity in these roles and classifications even
though only trained engineers have the expertise and legal
competence to put value on industrial plants, machineries
and equipment.
LEGAL RIGHT IN PROPERTY

 At law, the issue of legal right in or over any property raises the issue
of title and ownership over the subject property.
 It is only the owner or whoever he legally authorises that can lay
claim to or dispose of a property as may become desirable.
 A defective title in a property is definitely an issue that goes to the
value of the property and the benefit or loss of one party against
another.
 The discipline of valuation of plant, equipment and machinery is at
best a multi-disciplinary exercise.
NIGERIAN LAW AND ENGINEERING
VALUATION
 It is the municipal laws of individual country that regulates engineering
valuation in that country.
 No international law will have effect in Nigeria except such a law is
domesticated in line with constitutional provisions.
 In Nigeria, the legislative competence to enact laws on engineering and
constructions generally are within the concurrent legislative list under the
Second Schedule of the 1999 Constitution (as Amended) of the Federal
Republic of Nigeria.
CONT

 Engineers (Registration, etc.) (Amendment) ACT CAP 110

LFN 1992.
 The Act defines “practice of engineering” as including any
professional service or creative work requiring the
application of special knowledge of mathematics, physics
and engineering in form of construction, invention,
discovery, valuation…
 The Industrial Inspectorate Act CAP 18 LFN 2004
 The Act refers to engineering valuation as one of the
duties of the Inspectorate. [Section 2(1)–(3) of the Act]
CONT

 The subsidiary regulations/scheme of service outlines the

qualifications of the Director and Inspectors that legally constitute
the department. They must be engineers and engineering
technologists. What this clearly suggests therefore is that only
engineers, and not estate valuers, are recognized by this Law for the
purpose of valuation of industrial properties.
 In section 162 of the Companies and Allied Matters Act (CAMA),
engineers are generally recognized also as professional valuers in
relation to the valuation of assets of a company.
CONT

 Estate Surveyors and Valuers (Registration, Etc.) Decree No. 24 of

1975, now CAP E. 13 LFN 2007.
 This law is the major source of the perennial conflicts between the
Nigerian Institution of Estate Surveyors and Valuers (NIESV) and the
NSE through the Institute of Appraisers and Cost Engineers (IACE).
 Estate Surveyors and Valuers Registration Board of Nigeria
(ESVARBON) as the regulatory body for the profession is by section
1(2)(d) of the Act vests with responsibility (amongst others) : “(d)
regulating and controlling the practice of estate surveying and
valuation ….in all its aspects and ramifications.”
CONT.

 The Institute of Appraisers & Cost Engineers

 There is little or no help in the above Nigerian
legislations or any other existing law for that
matter concerning specific definition of terms and
specification of roles in engineering valuation
practice.
CONCLUSION

 While there is no doubt that professional engineers have

exclusive expertise over the physical or condition value
estimation of plant, equipment and machinery (industrial
property), it is very doubtful, at least under the laws of
Nigeria, whether such exclusivity extends to economic or
financial valuation of such property.
THANK YOU