NIESV FEM key terms

The reasonably probable, legally permissible, physically possible and financially feasible use of a property that produces the highest present value, supported by market evidence.

The estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing.

The amount that a property would realistically fetch if sold within a shortened marketing period, where the seller is under pressure and buyers are aware of the constraint.

A valuation approach that capitalises the net income a property is expected to produce, using a yield or multiplier derived from comparable investment sales.

The rate used to convert a property's expected net income into a present capital value, reflecting risk, growth expectations and prevailing investment returns.

A multiplier expressing how many years of net income equal the capital value of an interest; it is the reciprocal of the capitalisation rate.

A development appraisal technique that deducts all development costs and an allowance for developer's profit from the completed value to arrive at the land value.

A cost-based approach that values a specialised property by adding the current cost of replacing it and deducting accrued depreciation, where direct market evidence is scarce.

The total loss in value of an improvement from all causes, including physical deterioration, functional obsolescence and external or economic obsolescence.

A reduction in property value caused by factors other than physical wear, such as outdated design, poor layout or adverse neighbourhood changes.

The measurement of a building taken to the outside face of external walls, commonly used for industrial, warehouse and some commercial property assessments.

The usable floor area of a building measured to the internal faces of perimeter walls, excluding common areas, plant rooms and structural intrusions.

A statutory document issued by a state authority confirming that a completed building complies with approved plans and is fit for occupation.

The interest in land granted by a state governor under Nigerian land law, conferring rights of use and occupation for a defined term and purpose.

A right to use and occupy land conferred by local customary law and evidenced by accepted traditional usage rather than by a formal statutory grant.

Land held collectively by a lineage or family under customary tenure, where decisions on alienation generally require the consent of principal members.

A written instrument by which the holder of an interest in land transfers that interest to another party, subject to any conditions stated in it.

The approval required from a state governor before a holder of a statutory right of occupancy may validly alienate that interest by assignment, mortgage or lease.

The process of completing all legal steps, including obtaining consent and registering the instrument, so that a land title becomes valid and enforceable against third parties.

A consolidated state property tax levied on land and buildings, combining elements of tenement rate, ground rent and neighbourhood improvement charges.

An annual payment made by the holder of a right of occupancy to the granting authority as a condition of the grant.

The income remaining from a property after deducting operating expenses from gross rental income, before financing costs and income taxes.

The ratio of a property's sale price to its gross annual rental income, used as a quick screening tool for comparing investment opportunities.

The discount rate at which the present value of a project's expected cash inflows equals the present value of its outflows, giving a zero net present value.

The difference between the present value of a project's expected cash inflows and its initial and ongoing outflows, discounted at a required rate of return.

An investment analysis method that projects periodic cash flows and discounts each to present value to assess the worth of a property investment.

The return earned by an investor's own equity in a geared property investment, reflecting the effect of borrowing on the overall return.

The use of borrowed funds to finance a property acquisition, which magnifies both potential returns and potential losses to the investor's equity.

The proportion of a property's value that is financed by debt, calculated by dividing the loan amount by the appraised property value.

A document prepared by a quantity surveyor listing measured work items and quantities, used for tendering, cost planning and valuing work in progress.

A periodic assessment of the value of work executed and materials on site, used to determine progress payments to a contractor during construction.

A percentage of each progress payment withheld by the client as security for defects, released in stages after practical completion and the defects liability period.

The stage at which construction works are substantially finished and the building can be occupied for its intended purpose, apart from minor outstanding items.

A defined period after practical completion during which the contractor must rectify defects appearing in the works at no extra cost to the client.

A formal instruction issued by the client or its representative to alter the scope, quality or timing of works, with consequent adjustment to cost and programme.

The total amount payable to the contractor under a building contract, as stated in the contract or adjusted by variations and other contractual mechanisms.

The allowance for the entrepreneur's return in a development appraisal, usually expressed as a percentage of development value or total cost.

The cost of rebuilding or replacing a property in its existing form for insurance purposes, excluding land value and often including demolition and professional fees.

Insurance covering a professional against claims for negligence, errors or omissions arising from services rendered, protecting both the practitioner and the client.

The obligation of a professional to act in the client's best interest with loyalty, confidentiality and full disclosure, placing the client's interest above personal gain.

A situation where a practitioner's personal, financial or other interest could improperly influence professional judgement, requiring disclosure and often withdrawal from the engagement.

A failure to exercise the degree of care and skill reasonably expected of a competent practitioner in the same field, resulting in loss to the client.

A published schedule of charges recommended by a professional body, indicating the basis on which fees for valuation or estate agency services are computed.

A fee arrangement in which a client pays a professional a fixed sum, often periodically, to secure availability of services over a defined period.