Overview of Changes in Legislation on Appraisal Activity: July 2014

Cadastral valuation in St. Petersburg and Moscow shall be carried out no more than once every two years, but the term for administrative challenging of cadastral value was extended from 6 months to 5 years.

On July 22, 2014, Federal Law No.225-FZ, with the exception of certain provisions, took effect. Titled “On introducing amendments to Federal Law ‘On appraisal activity in the Russian Federation’” (hereinafter the “Federal Law”), this law clarifies the procedure for conducting appraisal activities state cadastral valuation.

The Federal Law makes provisions in particular for the following important changes:

• The list of responsibilities for the appraiser as well as for the legal entity in which the appraiser works under an employment contract, has been expanded. In particular, liability before the consumer has increased: now both the appraiser and the appraisal company must insure their liability in case of breaching contract or causing damage to the property of third parties. The term of insurance must be no less than a year and the amount of insurance should be no less than 5 million rubles;
• The market value, which is determined in the valuation report, is recognized as reliable and is recommended for real estate property transactions within 6 (six) months of the date of the report.
•  Limits were placed on the frequency of state cadastral valuation. Now, cadastral valuation is to be carried out no less than once every five years and no more than once in three years (in cities under federal jurisdiction, not more than once every two years).

Previously, the minimum threshold for the frequency of cadastral valuation did not exist, allowing public authorities in certain regions to conduct cadastral valuations once a year, making pointless the time-consuming legal proceedings of challenging the cadastral value and destabilizing turnover.

• The term for administrative challenging of the cadastral value has been extended: such an application can now be submitted to the commission under the Rosreestr Directorate of the relevant region of the Russian Federation in the period from the date the disputed cadastral value is entered into the state cadastral register until the new cadastral valuation. The only limitation is that you can appeal to the commission no later than 5 years from the date the disputed results determining the cadastral value were entered into the state cadastral register.
• Previously, the administrative procedure for appeals was available only during the 6-month window from the moment the results of the cadastral value were entered into the state cadastral register. By contrast, the new changes establish a practically unrestricted term, during which you can appeal to the commission.
• A mandatory pre-trial procedure for legal entities challenging the cadastral value was established. Owners of real estate are now entitled to appeal to the court only if the administrative commission rejected the application to revise the cadastral value or did not consider it within the prescribed period (one month).
• The opportunity is now provided to retrospectively apply the court or commission decision changing the cadastral value: the new cadastral value will be applied starting on January 1st of the calendar year in which the relevant request for review of the cadastral value was submitted, but no earlier than the date that the challenged cadastral value was entered into the state cadastral register.

This change is very important since previously a new cadastral value could be applied only to a future period, effectively depriving owners of the right to apply a smaller cadastral value for tax purposes during the calendar year in which the commission or court decided on the adjustment. At the same time, however, the new rule will be applied only to applications for revision of the cadastral value that were filed after the Federal Law took effect or which had not been considered by the Commission or by the court by that time.

In general, these changes are intended to eliminate significant gaps that previously existed in legislation and aim to improve the procedures of both the state cadastral valuation and the challenging of its results.

Federal Law No.225-FZ “On the introduction of amendments to Federal Law ‘On appraisal activity in the Russian Federation’” dated July 21, 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.