Law and Engineering Valuation

Law and Engineering Valuation

By Misbau A. Lateef

Although each belongs to different branch of knowledge, one, Law, and the other, applied science, the relationship between law and engineering is age-long. It is engineering technology as an applied science that is used to design and produce products that improve the quality of human life. In other words, 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 on the other hand regulates virtually everything that touches on human life, including the deployment of engineering technology to solve problems. Law pursues a host of divergent purposes which include: facilitating welfare-enhancing transactions, corrective justice system, preventing injury and disease, punishing crime, protecting human heritage – both natural and cultural, and promoting useful work in the arts and sciences. These divergent goals of law are developed and pursued in different institutional domains such as the courts, legislatures, administrative agencies, and private actors.

But the objective of this piece isn’t to examine the complex intricacies of law vis-à-vis engineering. It is also not an attempt to examine in details what engineering valuation is all about. That is a subject for a wider space and scope than the space here would accommodate. The focus here is to briefly weigh into the issues arising from the claim of engineering valuers that they have an exclusive expertise to put value on industrial property. Readers may well recall the supremacy debate, if not competition, between the Nigerian Society of Engineers (NSE), through its subdivision, the Institute of Appraisers and Cost Engineers (IA&CE), and the Nigerian Institution of Estate Surveyors and Valuers (NIESV), over the issue of whose responsibility it is to put value, and what nature of value, on industrial properties. I belong to neither side of this debate.

Engineering valuation, according to the engineers, is at once the art and the scientific process of estimating the value of a specific property or an asset where professional engineering knowledge and judgment are essential. Examples of such properties are industrial plant, equipment, machinery, mines, factories, building, engineering constructions of all kinds, public utilities, etc. To put simply, engineering valuation is the process of putting value on an industrial property by an engineer who has the requisite qualification.

No doubt, the above definition of engineering valuation by the engineers is the major source of conflict with other professionals, especially the estate surveyor and valuers. There are those who argue, for example, that the competence of engineering valuers is limited to assessment of technical or functional state of industrial property, whether real or personal, and that none of such role extends to or constitute valuation from the perspectives of financial transactions or investments the was an estate surveyor and valuer or a financial expert would do.

But the idea of a property, whether industrial or otherwise, could have different implications in law. At law, properties are basically classified into real and personal. A real property is basically a land and anything growing on, attached to, or erected on it, excluding anything that may be detached from it without injuring the land. A personal property is any movable or intangible thing that is merely attached to land and is subject to ownership but not classified as real property. In other words, personal property includes everything (capable of ownership) except real property. Personal property includes industrial plant, equipment, machinery, tools, bank deposits, proceeds from the sale of real property, notes, bonds, cars, and many more.

It line with the above classifications of properties at law, a line is also often drawn between the nature of the property that an estate valuer and an engineering valuer is competent to evaluate. Thus, an estate valuer is generally said to have competence to evaluate the value of a real property, while an engineering valuer is generally said to also have competence to evaluate personal property. Furthermore, the real property over which an estate valuer may exercise competence is regarded as an ‘income real estate’ while the personal property that an engineering valuer may put value on is not. An 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 plant, equipment and machinery, on the other hand, are generally not so freely or easily exchanged on the market. Thus, they are often evaluated based on what is regarded as “fair market value” which typically requires rigorous collation of data and an in-depth analysis of value chains which only a trained engineering valuer or valuation engineer can undertake. At any rate, it must be noted that 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 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 even though only trained engineers have the expertise and legal competence to put value on industrial plant, machinery and equipment. For example, mines, buildings and public utilities are form of real property over which only engineering valuers have sole, if not shared, expertise to evaluate.

Another aspect of valuation of property that is often glossed over and which is very important for professional valuers of whatever bent to understand is the issue of legal rights in the subject property. At law, the issue of legal right in any property essentially raises the issue of title and ownership of such property. That is, the question of who owns what or has the right in law to lay claim to the property. After all, it is only the owner or whoever he legally authorises that can lay claim to or dispose of a property as may become desirable. Thus, while it is tempting to always assume that valuation is all about the nature, physical features, and condition of the property, the issue of legal right in the property is as much important as those other considerations. For example, 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.

On the position of the Nigerian laws on engineering valuation therefore, it is important to first point out that it is the municipal laws of individual country that regulates engineering valuation in that country. Thus, there are no international laws in this regard. Even if there are, no international agreement (law) will have any force of law in Nigeria until such an agreement has been domesticated in the country as provided under section 12 of the 1999 Constitution (as amended). Although there is a body called the International Valuation Standards Committee (IVSC) which seeks to set the minimum standards or valuation requirements, it is still generally an exclusive preserve of each country’s legislations.

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. Therefore, both the Federal and the States Governments have the legislative competence to legislate on engineering and constructions matters generally. However, with respect to the specific issue engineering valuation in Nigeria, only Federal legislations seem to have touched on the matter. Even at that, none of the existing Federal legislations makes any elaborate provisions on the subject. At best, there are extracts of laws which merely recognise industrial plants and the role of engineers, among other professional, in valuation exercise generally. In other words, there is really none of the existing laws which specifically defines and assigns exclusive roles to definite professionals.

 

In conclusion, while there is no doubt that engineering valuers have exclusive expertise over the physical or condition value estimation of plant, equipment and machinery (industrial property), it is very uncertain, at least under the laws of Nigeria, whether such exclusivity also extends to economic or financial valuation of such property.

 

Misbau A. Lateef, LL.B., B.L. LL.M., M.Phil., Ph.D. (c), teaches at Obafemi awolowo University, Ile Ife, Nigeria

 

 

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There is 1 comment for this article
  1. OLUSOLA ENITAN at 2:52 PM

    Sir, may I please appreciate your effort in trying to make sense out of the engineers and valuers dichotomy. However, you have not done justice to the matter at all. Is it possible for the body of Engineering knowledge in all its ramifications practiced across the world be different from that which is practiced in Nigeria? Is Engineering in all its ramifications alien to Nigeria? Is Nigeria a thought Leader in the field of engineering globally? The answer is NO! We owe the public a duty to guide aright and advise in accordance with global best practices. If the Nigerian Engineering Law is just developing its body of knowledge today using Indians, it cannot claim that the meaning of valuation in its laws in 1970 is the same meaning of valuation in the ESVARBON law of 1974. There is absolutely no body of knowledge in the whole wide world known as engineering valuation, what is available in the engineering field is value engineering. Value engineering does not in any way relate to the standards of the International Valuation Standards Council, the only body related to ivsc is the professionals registered to practice Valuation in Nigeria under the esvarbon act LFN 13 . Globally, Nigerian Engineers have no comparative related organisation for its Engineering Valuation. This vexatious invention is nothing but a dilematic expression of a hungry soul seeking to vent itself in professional anomy. Thank You.

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