Legislation on the cadastral valuation of real estate has been significantly amended

Pepeliaev Group advises that, on 11 August 2020 Federal Law No. 269-FZ dated 31 July 2020 “On amending certain items of the legislation of the Russian Federation” came into force. This federal law provides for amending the rules of state cadastral valuation and the procedure for challenging the cadastral value of real estate facilities.

Rules of cadastral valuation

According to the adopted amendments, state cadastral valuation is carried out simultaneously with regard to all land plots and/or buildings, premises, structures, construction-in-progress facilities, and parking lots registered in the Unified State Register of Real Estate (the “Real Estate Register”) in a constituent entity of the Russian Federation.

The first ‘massive’ state cadastral valuation according to the new rules should be carried out in all constituent entities of the Russian Federation with respect to land plots in 2022, and in 2023 with respect to buildings, premises, structures, construction-in-progress facilities, and parking lots.

Subsequently, state cadastral valuation will be carried out each four years. In cities with federal status the frequency of the state cadastral valuation may be reduced up to two years based on the decision of regional authorities. The provisions concerning non-scheduled state cadastral valuation have been excluded from the law.

State cadastral valuation is carried out by a specialised state institution under the constant surveillance of the Federal Service for State Registration, Cadastre and Cartography (known under its Russian acronym ‘Rosreestr’). Heads of the corresponding institutions are personally liable for the quality of the cadastral valuation, up to dismissal.

The procedure for correcting errors made when the cadastral value was determined has been changed. The application to correct errors made may be filed by any (not only interested) legal entities and individuals, but also by state bodies and local authorities within five years from the date when the information regarding the respective cadastral value was entered into the Real Estate Register.

Misrepresentation of information about the real estate facility based on which the cadastral value was determined is also considered an error, including wrong determination of conditions that influence the price of real estate facility and/or the use of incorrect information about its characteristics.

The decision on whether the cadastral value should be recalculated owing to errors made when the cadastral value was determined, may be adopted by the competent authority of the constituent entity of the Russian Federation even without the corresponding application.

An important amendment is that if errors are identified that have been made during cadastral valuation (irrespective of whether they were identified by the institution which carried out the cadastral valuation, by Rosreestr, or by third parties), an audit must be performed in terms of whether such an error can be applied to other real estate facilities, including neighbouring, adjacent facilities, and facilities of the same type. When the corresponding need is identified the cadastral value of such facilities must also be recalculated.

The procedure for challenging the cadastral value

The commissions for the resolution of cadastral value dispute have been abolished.

According to the new terms of the law, the procedure for establishing the cadastral value in the amount of its market value provides for:

1. an application to set the cadastral value in the amount of the market value shall be filed by an interested person (directly or via the Multifunctional Centre for the Provision of State and Municipal Services) with the institution that performs state cadastral valuation, and shall be considered by this institution;
2. the application must be accompanied with the report concerning the market value of the real estate facility; this report must be drawn up by the person who is not an employee of the institution that performs state cadastral valuation;
3. the application may be filed within six months from the date when the market valuation of the real estate facility was carried out;
4. the decision adopted by the institution with regard to the application to set the market value may be challenged in administrative proceedings. Simultaneously with challenging the institution’s decision in court, it is also possible to file a claim to set the cadastral value of the real estate in the amount of its market value.

The new procedure for setting the cadastral value in the amount of the market value will come into effect from 1 January 2023; regional authorities can pass a decision concerning an earlier commencement date with regard to their territory.

The period of application of the cadastral value

The period of application of the cadastral value is to be specified for the purposes provided for by legislation (first of all, in terms of taxation) as follows:

• according to the general rule, the cadastral value applies from 1 January of the year following the year in which the resolution to approve the results of cadastral valuation came into force;
• if the cadastral value has changed upwards, the new cadastral value applies from 1 January following the year in which the resolution on approving the results of cadastral valuation came into force;
• the adjusted cadastral value applies from the date when the initial cadastral value started to apply (this means it has retrospective effect) in cases when:

1. a technical error is corrected in the information from the Real Estate Register that has influenced the cadastral value;
2. the resolution on approving the results of the cadastral valuation has been amended adjusting the cadastral value downwards;
3. the cadastral value was adjusted downwards owing to the correction of the error which was made during its valuation;

• the cadastral value was amended in connection with the amendment of the facility’s characteristics recorded in the Real Estate Register, the new cadastral value applies from the date when the information concerning such a change of characteristics was entered into in the Real Estate Register;
• the cadastral value was adjusted upwards owing to the correction of the error made during its valuation, the new cadastral value applies from the date when the information is entered into the Real Estate Register;
• the cadastral value set in the amount of the facility’s market value applies from 1 January of the year in which the corresponding application was filed with the institution that carries out cadastral valuation;
• the real estate market index drops by at least 30%, the cadastral value is to be changed in accordance with the market index from 1 January of the year for which the corresponding index was calculated (real estate market indexes are calculated by the cadastral chamber annually, the procedure of their calculation is to be determined by subordinate legislation).

If there are several cadastral values applied at the same time (and set at the same date), the smallest of such values shall be applied.

What to think about and what to do

The current version of amendments contains a number of unclear provisions. In fact, the period until 2023 will be a transition period during which the system of the state cadastral valuation will be reconfigured, including the regulatory framework. Holders of title to real estate should analyse current amendments and monitor the adoption of regulations and clarifications of the competent bodies.

Help from your adviser

Pepeliaev Group’s lawyers are ready to provide legal support to companies on issues associated with the application and challenging the cadastral value of real estate facilities, including among other things representing in court, and providing support in determining tax consequences of amending the cadastral value of real estate facilities and reforming the legislation in this area.