Old song, new tune: cadastral valuation once again

New law on state cadastral valuation

Starting January 01, 2017, Federal Law No.237-FZ “On state cadastral valuation” (hereinafter the “Law”) became effective, setting out new and detailed regulations concerning issues of conducting state valuation of real estate. The most important changes are described below:

• The valuation procedure is the state’s prerogative

Under the Law, only special state budget institutions created within each Russian region can perform cadastral valuation. Earlier, commercial organizations could also perform valuation.

• Pretrial procedure almost not required

The rule that was in effect earlier concerning the mandatory pretrial query to special commissions under the real estate authority Rosreestr, for setting the cadastral value equal to the market value has been cancelled. Now not only individuals, but legal entities as well can file a claim with the court on contesting the cadastral value on these grounds without lodging a query with the special commission. However, if the cadastral value is being contested in connection with fixing errors that occurred in the course of valuation, then a query with the institution must first be lodged, and only afterwards can a court claim follow.

• Unscheduled cadastral valuation

Although there remains the restriction on the frequency of reassessment of the cadastral value (maximum every 2 years for cities of federal significance and every 3 years for other regions), it is now possible to conduct an unscheduled cadastral valuation if the real estate index in the relevant region drops by 30% or more since the previous valuation.

Due to the Law being adopted, a special transition period has been established until 2020, during which cadastral valuation can be performed using the new, as well as the old rules, at the discretion of the regional authorities.

Moratorium for revising results of cadastral valuation adopted and cancelled

In June 2016, simultaneously with the Law being adopted, a general ban (so-called moratorium) was placed up to 2020 for cadastral value established as of January 01, 2014 on cadastral value revisions if such would lead to an increase. This served as a general incentive for increase in the total number of queries for reassessment of the cadastral value, as owners strived to take advantage of the moment and get the most comfortable terms for paying taxes during the entire term of the moratorium.

However, on November 30, 2016 lawmakers unexpectedly introduced changed that in fact cancelled the moratorium: now it can be set only at the discretion of the Russian regional authorities, and such decision was to be made by December 20, 2016. As a result, most Russian regions decided not to introduce a ban on revising the cadastral value. Among such regions are, in particular, the more significant ones as regards the number of cadastral value disputes: Moscow, Moscow Region, St. Petersburg, Leningradskaya Region and Chelyabinskaya Region. At the same time, there are only 3 regions that resolved to introduce a moratorium: Chechenskaya Republic, Magadanskaya Region and Lipetskaya Region.

As a result, the passive behavior of the Russian regions will very likely lead to distrust on the part of business toward the dispute institute itself, since at first there were all the grounds to expect a decrease in the tax burden, but then the opportunity was lost due to another unilateral change in the game rules by the government.

Federal Law No.237-FZ “On state cadastral valuation” dated July 3, 2016

Federal Law No.135-FZ “On valuation activity in the Russian Federation” dated July 29, 1998

Federal Law No.401-FZ “On introducing amendments to the Parts One and Two of the Tax Code of the Russian Federation and certain legislative acts of the Russian Federation” dated November 30, 2016

Decree No.510 of the Lipetskaya Region Administration “On applying the cadastral value of real estate property” dated December 19, 2016