Government architects to use checklists

Government architects who inspect property to ensure it is not under-declared will be equipped with checklists to record the workings of their evaluation.

The checklists are aimed at ensuring more transparency and consistency in the pricing of property by government architects whose method of calculation was recently criticised in a report by the Auditor General.

"These checklists are to be used by the architects when they visit and inspect property. They are being discussed with the architects before being launched," a spokesman for the Capital Transfers Duty Department, within the Finance Ministry, said. The Auditor General criticised the lack of a set method to calculate the price of property on the market, which, in turn, led to under-declaring and loss of government revenue.

The Auditor's report consisted of a performance audit of the department that processes duty owed to the government when properties are sold.

Among other things, the document criticised the lack of technical expertise of an internal board and pointed out that property prices were gauged by using property publications that listed the asking price, which, very often, varied greatly from the market value.

A department spokesman said each year there were between 14,000 and 15,000 property transfers and it was impossible to visit them all. For this reason, the department had set up an internal board to decide which properties to inspect. Since December, the board had started using a different checklist in which it recorded the reasons for its decisions. These properties were then inspected by one of the team of 25 architects.

"The mere fact that the board takes cognizance of the advertised prices does not mean they rely solely on magazines... The fact that the internal board takes note of advertised prices increases not decreases the possibility of a property being visited by the appointed professional architects.

"For example, if the value shown on the contract is €60,000 while a property magazine puts the market value of a similar property at €120,000, then this could tilt the decision of the board members towards referring the same property to the architects," the spokesman said.

Industry experts feel the prevailing haphazard system of pricing property on the market needs to be overhauled and replaced with a standard method of calculation.

A set pricing system would reduce under-declaration of prices, which leads to millions of euros in income tax for the government being lost, according to an architect who wished to remain anonymous.

In 2008, half of the inspected properties were deemed to have been under-declared and their value was revised upwards following an inspection by government-appointed architects.

Kevin Buttigieg, director at estate agency Remax Malta, had harsh words for the reviewing system.

"Government architects are an absolute joke. They have no clue whatsoever about property prices. I've seen cases where they have valued the property 50 per cent higher than it's worth," he said.

Government architects' inflated valuations caused "lots of grief" to people who had to fork out more tax, he added.

A representative of the Chamber of Small and Medium Enterprises - GRTU, said the problem lay in the fact that, according to law, the tax was calculated on the market value rather than the selling price.

"We all know the market value can be subjective, so the solution would be to establish a real market value based on known and realistic parameters and not the asking prices shown on magazines or on what people say," he said stressing this was a job for experts.

The GRTU had long been proposing a property index that would give a minimum price, per square metre, of property according to location, he said.

Until the index was drawn up, he added, sellers and buyers should be able to consult government architects to determine whether the agreed price was acceptable to the department for taxation purposes in order to avoid surprises.

However, architect Robert Musumeci believes it is practically impossible to have a single method that would lead to architects setting the same prices.

Property value depended on a number of factors, many of which were subjective to individual architects and would affect the price. Location, size of building, street context, design, state of finishes, surrounding amenities and legal titles on the property all affected the price, he said.

Instead, Mr Musumeci said the property values set by government architects should be accessible to view the established price ranges for typical properties.

Also, when an objection was filed over a price given by a government architect, the property should be inspected again by a different architect for a second opinion, he suggested.