The results of cadastral valuation in St. Petersburg of retail and office real estate for calculating property tax starting from 2015 are approved

The Order of the Committee for land resources and land management of St. Petersburg on approving the results of cadastral valuation of premises with area of over 3,000 sq. m. and buildings in St. Petersburg was published on November 19, 2014.

The results of the new cadastral valuation for 109,802 buildings and 5,895 premises traditionally determined by the State Unitary Enterprise GUION (City Department of Real Estate Inventory and Valuation) are approved as of May 28, 2014. According to calculations of the GUION, average cadastral value of 1 sq. m. of buildings in St. Petersburg comprised 20,291 Rubles and 1 sq. m. of premises – 24,104 Rubles.

This is the second cadastral valuation of capital construction facilities in St. Petersburg, which was conducted for purposes of fixing errors and discrepancies that occurred during the previous valuation. The preparatory process, including inventory of the real estate facilities for updating the databases, gave hope that that this time the amount of cadastral value will be clear and fair. Meanwhile, the results obtained once again raise questions.

In comparison with the previous valuation, the cadastral value of certain retail facilities has grown almost two-fold, while the figures of neighboring facilities have dropped dramatically. That provided, if in certain cases the cause of the cost jump does not raise issues due to apparent errors previously made in technical documentation of the facility, in other cases the cause of fundamental cost change is not evident at all.

According to information provided on the GUION web site, new methods of selecting analogs for calculating the cost, accumulated depreciation and entrepreneur’s profit were used in conducting the new cadastral valuation. In some cases, the cost was affected by including in the calculation the cost of the building's underground part which was not taken into account in the valuation in 2012. Therefore, the cadastral value can be changed in any direction by merely changing at will the method of calculation and used figures.

Due to amendments in the tax law, the amount of cadastral value for the owners of the commercial real estate became decisive, as the property tax on the companies’ assets will be calculated based on the cadastral, rather than on the inventory value as before. The respective draft law on amending St. Petersburg law “On companies’ assets tax” is under consideration in the third reading and is likely to be adopted by the end of the year in order for the new rules to come into effect starting from 2015. According to the proposed amendments, the property tax rate will be 1% from the cadastral value of the facility.

The owners of the real estate facilities doubting whether the amount of the new cadastral value is justified, have an opportunity to contest the cadastral value in an administrative commission under the St. Petersburg Directorate of Rosreestr (Federal Service for State Registration, Cadastre and Cartography).

Pursuant to the effective legal regulation, appealing to the pre-court commission is now an obligatory stage for settling a dispute, and the period for appealing has considerably been extended – as compared to the previous six months, now the appeal can be filed within five years from the date the results of cadastral value are entered into the State Real Estate Cadastre if a new cadastral valuation has not been conducted before this period expires.

The dispute can be transferred to the court only in the event of disagreement with the decision of the commission or if the administrative commission dismissed the application for review of the cadastral value or did not examine it within the established one-month period.

Within the framework of the comprehensive program on supporting similar projects, our firm collaborates with a reliable valuation company capable of conducting an express assessment of the disputable facility and promptly determining whether the approved cadastral value is justified and assessing the prospects of its adjustment within the framework of administrative contesting.

Order No.390 “On approving the results of cadastral valuation of the premises with area of over 3,000 sq. m. and buildings in St. Petersburg” of the Committee for land resources and land management of St. Petersburg dated November 19, 2014

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Igor Gorokhov or Anastasia Kuzmina, St. Petersburg Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.