Loss of value (moins-value)

Moins-value (loss of value) is the name given, in the field of property loss, to the lasting fall in the value of a property. It is not measured in absolute terms but as a difference: between what the property would be worth if the harmful event did not exist and what it is really worth. A damp wall, a right of way discovered after the sale, a building erected opposite, contaminated ground, an energy performance worse than advertised: each of these facts can cause a loss of value, if the market penalises it.

That last point is essential. Loss of value is not a penalty that the expert would award according to the apparent seriousness of the defect: it is a market reality, which must be demonstrated by references or by reasoning based on the behaviour of buyers.

Where the rule comes from

The basis is the principle of full compensation, attached to article 1240 of the French Civil Code or to the contract depending on the case. The courts accept the “value before, value after” method to quantify the fall in value of a property, and require trial judges to give reasons for the amount adopted. In the case of a hidden defect (vice caché), article 1644 of the Civil Code allows the buyer to keep the property and recover part of the price, as assessed by experts, which amounts to measuring a loss of value.

The Charte de l’expertise en évaluation immobilière (the French property valuation charter, Title III, § 1.1 and § 2.1) defines market value and the comparison method, which are the tools for this calculation.

In a valuation report

I establish two values at the same date. The “before” value rests on ordinary comparables. The “after” value rests, where they exist, on sales of properties suffering the same drawback; failing that, on an analysis of the consequences for a buyer: cost of partial remedies, restriction of use, longer selling period, fewer prospective buyers. The report expresses the loss of value in euros and as a percentage, states the range of uncertainty, and distinguishes the part that would disappear with works from the part that would remain.

Example

A house bought for €290,000 in MORLAIX turns out, after the sale, to sit on an old unstable fill beneath the terrace and part of the garden, known to the seller. Consolidation works are quoted at €24,000, but even after the works, the history will have to be disclosed to future buyers. I value the house without the defect at €290,000 and with the defect repaired at €275,000. The residual loss of value is €15,000, to be added to the cost of the works in the claim for partial repayment of the price.

Not to be confused with

A capital loss for tax purposes, the negative difference between sale price and purchase price, which has nothing to do with a loss suffered; and a discount (décote), the generic term for any deduction applied to a value.