During the full-scale military aggression of the Russian Federation against Ukraine, we constantly receive requests for an evaluation of real estate in the temporarily occupied territories. Such an evaluation is needed in particular when registering an inheritance or dividing property in court during a divorce. Although there are many more cases when it is necessary to evaluate property in the uncontrolled territories of Ukraine. For example, such certificates may be required from Ukrainian citizens abroad to provide assistance to internally displaced persons.
Let’s figure out whether it is even possible to determine the market value of real estate in the temporarily occupied uncontrolled territories of Ukraine. What would seem to be the problem? Unfortunately, not everything is as simple as it may seem at first glance.
The Ministry of Reintegration of the temporarily occupied territories of Ukraine regularly publishes List of territories where military actions are (were) being conducted or temporarily occupied by the Russian Federation. If the locality where your property is located is one of such territories and you need a property valuation, this article may be useful to you.
Appraisers in Ukraine do not conduct independent property valuations in temporarily occupied (not controlled by Ukraine) territories for at least three reasons.
1. The principle of utility and market value.
National Standard No. 1 “General Provisions for Valuation of Property and Property Rights” stipulates that an independent valuation must be carried out taking into account the principle of utility. The principle of utility is based on the fact that property has value only if there are benefits from owning it for a potential owner or user. Utility should be understood as the ability of the property to satisfy the owner’s needs (including generating income or benefit) for a certain period of time. Since the owner cannot freely use and dispose of property in the occupied territories in accordance with the Laws of Ukraine, determining the market value of such property is impossible.
It turns out that where the legal field of Ukraine does not work, it is impossible to determine the market value of property, including real estate.Since all transactions with such real estate are regulated not by the laws of Ukraine, but by the immediate decisions of local occupation authorities. And since the owner cannot freely own, use and dispose of his property, then its market value cannot be determined.
2. Condition and availability of property.
According to the requirements of the legislation and in particular National Standard No. 1, an independent property valuation is preceded by a preparatory stage, during which familiarization with the object of valuation is carried out. That is, inspection of the object, if we are talking about real estate. During the armed aggression of the Russian Federation, appraisers cannot go to the temporarily occupied territories to conduct such an inspection.
Accordingly, specialists are unable to determine not only the condition of the property, but also its physical presence. After all, as is known, many different buildings were significantly damaged or even completely destroyed as a result of military operations.
Everyone understands that the physical condition of any real estate directly affects its value. Therefore, without the ability to conduct an inspection, appraisers accordingly cannot determine the market value of such property.
3. Real estate market in the occupied territories.
Not everyone knows that during martial law, notaries do not conclude alienation agreements for real estate in the occupied territories. However, this is a fact. Conducting such transactions is technically impossible, since the register of the State Property Fund of Ukraine does not generate certificates of automatic valuation and does not register appraisers’ reports if the property is located in the territory not controlled by Ukraine. And without this certificate or registration of the report, it is impossible to conclude a notarial agreement. What is the value of real estate that cannot be officially sold? The question is rhetorical.
You can look at the question from a different angle. If the property cannot be re-registered by a notary, then there is no real estate sales market. It is known that the main calculation method for determining market value is the comparative approach. It is based on the analysis of asking prices for similar property. But where do such offers come from if notaries do not conduct transactions? Well, since there are no advertisements for sale, there is simply no source data for the assessment. And it is not possible to determine the value of real estate in the occupied territories.
Conclusion
Based on the arguments given above, appraisers are not able to determine the market value of real estate if it is located in the uncontrolled temporarily occupied territory of Ukraine.
If tax authorities or social services abroad require an assessment of your property, you can justify the impossibility of providing it with the arguments given in this article.
