An owner challenged the cadastral value and lost 2 million rubles

Sergei Pivovarchik, managing partner at Consul Group, on how the new law on the cadastral value of real estate is applied in practice.

The current procedure for state cadastral valuation, and the way it is applied, is new to right-holders. There are many misconceptions about comments on a draft report. They come not only from right-holders not knowing the grounds on which an objection to a draft report can be made, but also from bad faith on the part of some firms in the valuation market.

Almost every comment comes down to the same point. The applicant had challenged the cadastral value before, and the Commission or a court had set a market value below the figure now shown in the draft report on cadastral value for 2019. One owner increased his own tax by 2 million rubles a year.

The owner of a building on Luzhnetskaya Embankment was not satisfied with a cadastral value of 566 million rubles. In 2017 he had already challenged the cadastral value of the building, and the Commission had set a market value of 434 million rubles. Taking the view that the figure in the draft report was higher than the market value set by the Commission, he filed a comment on the draft and asked for the final version of the report to state the challenged value.

The state budgetary institution, having considered the application and the valuation report supplied with it, clarified the functional use of the property and moved it into valuation group "6.1 Office and business properties (main territory)". Because the property had been moved into the most "expensive" group, the state valuers recalculated the cadastral value and raised it from 566 million rubles to 673 million rubles.

Two things explain that result. First, the state budgetary institution changed the permitted use of the building. In fact it was an office, and it had previously been valued as a warehouse. The institution had started from incorrect data, which is what made the building temporarily cheaper. The applicant himself confirmed that the building was an office, not a warehouse.

Second, Federal Law No. 237-FZ of 3 July 2016, "On State Cadastral Valuation", and the Methodological Guidelines do not require the new cadastral value to be set at the amount of the value established on an earlier challenge.

The earlier challenge concerned a cadastral value determined under the old rules, under Law No. 135-FZ, "On Valuation Activity", as at the valuation date of 1 January 2016. The current state cadastral valuation is carried out under the new rules, under Law No. 237-FZ, "On State Cadastral Valuation", as at 1 January 2018.

The challenged figures and the figures in the draft report have nothing in common, either under Law No. 135-FZ or under Law No. 237-FZ. The state budgetary institution is not forbidden to accept the result of a challenge and to adjust it by an index of a rise or a fall in the market price. It is not obliged to take the earlier challenge into account.

Disagreement with the cadastral value stated in the draft report, or in the final report, does not always mean that the data used in the state cadastral valuation were wrong. In almost every case the gap between cadastral value and market value is there because the methods of valuation are different,

Mr Pivovarchik says.

Cadastral value is set by a mass approach, which cannot be as accurate as a valuation of the particular property. To close that gap, the legislature, including in the Federal Law "On State Cadastral Valuation", provided a procedure for setting the cadastral value of a property at its market value, calculated for that property alone.

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