Valuation Of Lands in Ukraine

Which type of land valuation do you need: expert or normative?

What is the difference between expert and normative valuation? There are two main types of land valuation:

1. Expert monetary valuation. This is the service most frequently requested from professional appraisers. Its purpose is to determine the market value of a specific land plot. The market value of land may be required for:
   • Re-registration of property rights during a notarial transaction.
   • Submission to a court in connection with a property dispute involving a land plot.
   • Accounting and tax purposes.
2. Normative monetary valuation. It is calculated under a state-approved methodology separately for land within settlements, agricultural land, and other categories of land. Its result is not the market value of a specific plot, because it is determined using statutory standards and a system of established coefficients. Normative monetary valuation is used, in particular, for:
   • Calculating land tax.
   • Calculating state duty in certain cases involving an exchange, gift, or inheritance.
   • Determining rent for land owned by the state or a municipality.

The differences between expert and normative valuation are described in Article 5 of the Law of Ukraine “On Land Valuation”.

Where to obtain the normative valuation of a land plot

In most cases, there is no need to contact an appraiser to obtain information about the normative monetary valuation of a land plot. You can use the Public Cadastral Map, find the plot by its cadastral number, and request an extract containing its normative monetary valuation.

This can be done remotely, quickly, and conveniently.

How much does an expert land valuation cost?

As mentioned above, expert valuation is most often required for a notarial transaction or for use in court proceedings.

Although market value is determined in both cases, the procedures for preparing documents for a court and for a notary differ significantly. For this reason, the cost of our services depends on the purpose of the valuation.

• Expert land valuation for a notarial transaction. The service costs UAH 1,500 and is completed within one day.

• Determination of a land plot’s value for court proceedings. The service costs from UAH 3,000 and is priced individually depending on the plot’s characteristics and whether the client has a complete set of documents. The completion period starts from two days.

Which documents should be provided to the land appraiser?

In most cases, the appraiser will only need a document confirming ownership of the land plot.

Several years ago, the most common documents of this kind were state certificates of land ownership. These documents are no longer issued, but they still confirm ownership together with more recent sale and purchase agreements, gift agreements, and other title documents. An extract from the State Register of Rights to Immovable Property may also be used for the valuation.

If you have relatively old documents, make sure that they contain the cadastral number of the land plot. Without a cadastral number, the notary will not be able to complete the transaction. Obtaining a cadastral number is not particularly difficult, but it is a separate procedure performed by private land management companies.

How can a valuation be performed if the ownership documents are unavailable?

In practice, our appraisers often encounter situations in which an expert land valuation is required, but the client does not have documents confirming ownership.

A common example occurs during divorce proceedings. A land plot may be jointly owned and form part of the disputed marital property. However, one spouse may refuse to provide copies of the property documents in an attempt to prevent the other party from supporting their position in court.

This situation is not unusual and has practical solutions. If you are facing similar circumstances, please contact us. Our land appraisers will suggest an appropriate approach depending on the characteristics of the plot and the information that is available to the client or can be obtained from public sources.

How is the market value of land determined?

Different approaches and methods may be used to calculate the market value of land. In most cases, however, the basic principle is quite simple: a land plot is worth approximately the amount for which a plot with the most similar characteristics can be purchased.

The market value of land is primarily affected by the following factors:

• location, including transport accessibility and proximity to the infrastructure of the settlement;
• the legal status and designated use of the land plot;
• the availability of utility connections;
• physical characteristics, including area and configuration;
• conditions of sale, including an ordinary or urgent forced sale.

If, for example, recently subdivided holiday-home plots located in the same area are being valued, the situation is usually straightforward. There may be many offers for the sale of virtually identical plots, making it relatively easy to determine the market value of the subject property.

Valuation becomes more complex when the land plot is unusual. This may apply to land occupied by an individual residential building in Kyiv, where there may be no offers for the sale of vacant plots. Industrial land and plots intended for other specialised commercial uses can also be difficult to value. Our appraisers have extensive experience in completing such non-standard assignments and can determine an appropriate approach for a specific property.

Sometimes it is necessary to determine the market value of leasehold rights rather than ownership of the land itself. One example is the lease of a coastal strip between a private house and a body of water. Under Ukrainian law, such land cannot be privatised, so only a lease may be arranged. Access to the water can have a positive effect on the value of the residential property. In a court dispute, the appraiser may therefore need to determine both the market value of the property, including the house and land, and the value of the leasehold rights to the additional plot.

Specific features of land valuation for a notarial transaction

For tax purposes, income from the sale of land is determined on the basis of the price specified in the sale and purchase agreement, but it may not be lower than the appraised value calculated by the module of the Unified Database or the market value stated in a registered valuation report.

Before completing the transaction, the notary verifies either the electronic certificate of appraised value or the registration of the valuation report in the Unified Database of Valuation Reports.

The Unified Database includes a module for the electronic determination of appraised value. If the owner disagrees with the automatically determined result, they may engage an appraiser to determine the property’s market value. The appraiser’s report is then entered into the Unified Database and assigned a unique registration number.

A report can be registered if the market value stated in it falls within the permitted 25% price range for comparable properties recorded in the Unified Database. If the system refuses to register the report, we inform the client in advance and explain the available options.

What taxes are payable when land is sold?

Under certain conditions, income from the sale of a land plot may be exempt from personal income tax and the military levy. The relevant factors include the type and area of the plot, the period of ownership, the way in which it was acquired, and the number of sale transactions completed during the reporting year. The applicable area limits are set out in Article 121 of the Land Code of Ukraine, while the taxation procedure is established by Article 172 of the Tax Code of Ukraine.

The applicable land area limits are shown below:

Depending on the circumstances, income from the sale of a land plot may be exempt from tax or subject to personal income tax at a rate of 5% or 18%. If personal income tax applies, a military levy of 5% is also payable. The exact amount of tax should be determined with regard to all the circumstances of the particular transaction.

It should also be noted that when residential or other real estate is purchased, the buyer usually pays a 1% mandatory state pension insurance levy. This levy is not charged when a land plot is purchased separately, because land plots are not included in the list of properties to which this levy applies.

Which valuation is used for tax purposes: normative or expert monetary valuation?

These two types of valuation are used for different purposes.

The most common use of an expert monetary valuation is the execution of a land sale and purchase agreement before a notary. Taxes and mandatory payments are calculated on the basis of the price stated in the agreement, but not below the appraised value determined by the module of the Unified Database or the market value stated in a registered valuation report.

Expert monetary valuation is also required for certain transactions involving land owned by the state or a municipality, in accordance with Part 2 of Article 13 of the Law of Ukraine “On Land Valuation”. It may be used for a sale, insurance, transfer into a mortgage, contribution of land to the authorised capital of a company, reorganisation, bankruptcy or liquidation of an enterprise, determination of compensation for losses suffered by owners, and pursuant to a court decision.

Normative monetary valuation is generally used to calculate rent for state-owned or municipally owned land and to determine land tax.

Land valuation for private individuals

The most common reason for engaging a land appraiser is the sale and purchase of real estate. Many people associate real estate primarily with buildings and structures. Legally, however, land itself is immovable property, regardless of whether any buildings or other improvements are located on it.

When a residential house or holiday home is sold, the notary will usually require separate documents for the house and the land plot. This is because ownership rights to the building and the land are documented separately. There are, however, exceptions to this rule. You can read more in our article explaining when a separate land valuation may not be required.

Private individuals most frequently order expert land valuation for the following purposes:

• sale and purchase agreements, gift agreements, and other civil-law transactions, including lifetime maintenance agreements;
• inheritance through either the standard notarial procedure or a court decision;
• submission to a court in property disputes involving the division of property or calculation of court fees;
• use of the land plot as collateral under a mortgage.

Land valuation for companies and other legal entities

Expert monetary valuation of land for legal entities has a number of specific features. Such land plots may have non-standard designated uses, including commercial or industrial use, or may be unique small plots in Kyiv intended for multi-storey residential development. In addition, legal entities may need to determine the value of rights to use land held under a lease.

Legal entities most frequently order land valuation for the following purposes:

• civil-law transactions of all types, including lease agreements;
• submission to a court in property disputes involving the division of property or calculation of court fees;
• use of land as collateral under a mortgage;
• recognition of the value of land plots and land-use rights in accounting records, which is often required by state institutions;
• bankruptcy, liquidation, or reorganisation of an enterprise;
• contribution of land or land-use rights to the authorised capital of a company;
• preparation of a business plan to attract investors.

What documents must a legal entity provide? In most cases, title documents for the land and a registration document of the client organisation are sufficient. When rights to land used by a state institution are being valued, the required documents are determined individually.

To order an expert valuation of a land plot or clarify which documents are required, choose a convenient way to contact us on the Real Expert contact page.