A disgruntled landlord or tenant can report a valuer to the Australian Property Institute (API) to take disciplinary action against the valuer, if the valuer is believed to have engaged in professional misconduct.
What you need to know
- Disciplinary action can be taken against a valuer who has failed to carry out professional duties with competence.
- A valuer needs to ensure that it sets out in detail the steps in its reasoning in determining a valuation, to minimise any prospect of any claim of a breach of professional duties being successful.
In our July e-Alert, Valuers beware – invalid rental valuation upheld by Supreme Court, we alerted you to the Supreme Court of Victoria decision in which we acted for Ladro Greville St Pty Ltd (Tenant), which sought to have a valuation set aside. The valuation was set aside by VCAT and the decision upheld in the Supreme Court of Victoria.
The Tenant (without our legal representation) issued a complaint to the API against the valuer on grounds including a breach of the API’s Code of Professional Conduct.
The valuer had an opportunity to respond to the claim and importantly advised the API that the valuer had advised both parties that they could provide submissions from independent valuers, which neither party chose to do. Further, the valuer highlighted that the decision at VCAT (which was upheld by the Supreme Court of Victoria), which set aside the valuation, did not hear evidence from the valuer who was not given the opportunity to participate in the VCAT hearing.
The API committee found that the valuer had engaged in a breach of the Code of Conduct based essentially upon relevant parts of the VCAT judgement and the Supreme Court of Victoria judgement, which levelled criticism of the valuation. Essentially, the criticism was that the valuer had failed to set out the steps in his reasoning to arrive at the market rent determination. Further, in using a trading profits methodology, in which the valuer had determined that the business should achieve a 26% increase in gross annual turnover, the valuer had failed to specify how a 26% increase in gross annual turnover was possible and had not provided adequate calculations to justify the valuer’s reasoning.
The API committee imposed the following sanctions against the valuer:
- the valuer to undertake 30 CPD points training within 12 months;
- the valuer refunds the fees paid by the Tenant;
- the valuer pays to the API an amount of $3,000 towards the cost of the investigation and the hearing; and
- the report is to be published on the API’s website.
If a valuation is set aside (which rarely happens), it seems that the API will rely heavily upon the determination made by VCAT, and if applicable, the Supreme Court of Victoria. In such circumstances, it seems that a valuer will be sanctioned if the valuation has been set aside and a complaint is made by the landlord and/or tenant. In order to avoid any such complaint being made, it is important that valuers set out the steps taken in arriving at a market rent valuation and not to make any assumptions in the valuation without adequately explaining the reasons. As mentioned in our July e-Alert, we strongly recommend that valuers insist upon the parties providing a survey of the premises, to which both parties agree and can be relied upon by the valuer.