What is the issue?
Property valuation in Ukraine is carried out for many personal and business situations. In practice, however, there are three most common areas where the work of a professional valuer is most often required.
First, these are notarial actions. The most typical example is the sale of real estate. Before concluding a sale and purchase agreement, the notary needs confirmation of the value of the property. For this purpose, either a simple extract from the register is used, or a valuation report is ordered, on the basis of which the tax base is determined and the compliance of the value with market conditions is checked.
The second common area is accounting. Businesses often need to determine the value of various assets: real estate, vehicles, equipment, machinery, or other property. Valuation is used for putting assets on the balance sheet, revaluation, write-off, or other accounting procedures.
The third large category is court cases. Property valuation for court may be needed in a wide variety of situations. If we are talking about individuals, the most common cases are:
- Division of property between spouses during divorce or settlement of inheritance disputes.
- “Technical” issues without disputes over inheritance rights, when property documents were not properly executed or the deadlines for resolving the matter through a notary have expired.
Most lawyers and attorneys are used to thinking that the result of a valuer’s work is always a valuation report (Article 3 of the Law of Ukraine “On Valuation of Property, Property Rights, and Professional Valuation Activity”). Indeed, this is the document used most often. However, Ukrainian legislation also provides for other types of documents.
In particular, according to Article 4 of the Law of Ukraine “On Valuation of Property…”, the result of a valuer’s activity may be not only a valuation report, but also a consultation on issues related to determining the value of property.
This is an important point that not everyone knows about. In reality, there are quite a few situations where it is impossible to prepare a full valuation report because of legal requirements. For a valuer to have the right to prepare a report, two conditions must be met at the same time.
- The property must belong specifically to the valuation client. In other words, the person ordering the valuation must be the owner of the property or have legal grounds to act on behalf of the owner (Article 11 of the Law of Ukraine “On Valuation of Property…”).
- The valuer must have the opportunity to inspect the valuation object. A personal inspection of the property is a mandatory part of the value determination procedure when preparing a report.
In the case of notarial actions, there are usually no problems with these requirements. If difficulties arise with documents or access to the property, such issues are generally resolved through court. That is why only a valuation report is suitable for a notary.
In accounting practice and especially in court disputes, however, situations can be much more complicated. Cases often arise where it is impossible to prepare a valuation report on legal grounds. At the same time, it is still necessary to have a document that determines at least the approximate or probable value of the property.
It is precisely for such situations that a valuer’s advisory opinion is used — a special document in which the specialist analyzes the available information and determines the probable market value of the property.
When an advisory opinion on property value is needed
In practice, a valuer’s advisory opinion is used in cases where it is necessary to determine the value of property, but it is impossible to prepare a full valuation report because of legal requirements. Most often, such situations arise during court disputes or when resolving complex legal issues. Let us consider several typical examples where an advisory opinion becomes the optimal or even the only possible solution.
Recognition of inheritance rights in court
The first common case is entering into inheritance through court. In practice, situations often arise where ownership rights to property were not properly formalized during the owner’s lifetime. For example, a person lived in a house, used a land plot, or owned an apartment, but for various reasons the documents were never completed or were later lost.
After such a person’s death, the heirs may face a problem: the notary cannot formalize the inheritance because the proper title documents are missing. In such a case, the issue is resolved through court — the heirs file a claim for recognition of ownership rights to the inherited property.
To submit documents to the court, it is necessary to determine the value of such property in order to calculate the court fee. But here a problem arises: formally, the heir is not yet the owner, and therefore cannot order a full valuation report. It is precisely in such situations that a valuer’s advisory opinion is used, in which the probable market value of the real estate or other property is determined.
Valuation of marital joint property
The second typical example is division of property during divorce. During the dissolution of a marriage, conflicts often arise between spouses over jointly acquired property. This may include apartments, houses, vehicles, or other valuable assets.
In practice, situations often occur where one of the parties takes all the property documents or effectively controls access to the property. For example, a former husband or wife may continue living in the apartment and refuse to allow the valuer to inspect it. Under such conditions, it becomes impossible to carry out a full valuation of the property and prepare a report.
However, the court still needs to understand the approximate value of the property in order to determine the subject matter of the dispute and calculate the court fee. In this case, the valuer can prepare an advisory opinion using the available information: technical characteristics of the property, documents, photographs, data from open sources, and analysis of the real estate market.
Accounting
Another fairly common case in which an advisory opinion is used is related to accounting. In the activities of businesses, situations sometimes arise where it is necessary to determine the value of property that has been lost or destroyed.
For example, a company may lose a vehicle as a result of a road accident, fire, or other circumstances. To properly reflect such events in accounting, it is necessary to determine the value of the property. However, in such cases it is no longer possible to physically inspect the object, while the requirement for mandatory inspection of vehicles is clearly stated in many sections of the Methodology of Commodity Examination and Valuation of Wheeled Vehicles.
A similar situation also arises when it is necessary to determine the value of property as of a past date. For example, there may be a need to value a vehicle or equipment as of several years ago. In such a case, the valuer cannot reliably verify the exact technical condition of the object at that time.
Even if some information about the condition of the property has been preserved, the valuer has no opportunity to personally verify that data. That is why preparing a full valuation report in such cases would contradict legal requirements.
In such situations, an advisory opinion allows the valuer to conduct a professional analysis of the available information and determine the most probable value of the property taking into account all known factors. Such a document often becomes important evidence in court cases or helps resolve accounting issues without violating legal requirements.
Key features of a valuer’s advisory opinion
In most cases, valuers’ advisory opinions on property value are prepared specifically for use in court cases. For this reason, fairly high requirements apply to such documents. Even if formally this is not a valuation report, the document must still be prepared professionally, in compliance with procedural law, the logic of valuation procedures, and with detailed justification of the conclusions.
That is why, when ordering an advisory opinion, it is important to choose the right professional valuation company. You should contact only specialists who have experience in preparing documents specifically for court cases. In court proceedings, any document submitted by the parties is usually examined very carefully by the opposing side.
The lawyers of the other side always analyze such documents literally “under a microscope,” trying to find inaccuracies, contradictions, or formal violations. If the document has weak points, the opponents may use this to cast doubt on the determined value of the property or even prove that the document was prepared improperly.
That is why an advisory opinion must contain a clear explanation of the sources of information, the logic of the market analysis carried out, and the justification of the results obtained. Even if the valuer did not have the opportunity to inspect the property or receive a full package of documents, they must describe in detail the data on which the conclusions were based.
Particular attention should be paid to the wording. Professional valuers always state in advisory opinions that the determined value is probable. This is not just a formality, but a requirement that follows from the practice of applying the regulatory documents of the State Property Fund of Ukraine.
The reason for this approach is quite simple. If the valuer was unable to inspect the property or did not have a full package of documents, they objectively cannot claim that the determined value is absolutely precise. Under such circumstances, it is correct to speak of the probable market value determined on the basis of available information and market analysis. Moreover, officials of the State Property Fund emphasize during advanced training courses for valuers that determining an exact value (rather than a probable one) within a valuer’s consultation may even be regarded as an attempt to mislead the court.
There is also another approach to presenting the result — determining a range of possible values. In such a case, the valuer does not name one specific figure, but determines the limits within which the market price of the property may fall. For example, this may be an interval between the minimum and maximum values obtained from market analysis.
However, in practice this approach is used much less frequently. Most often, it is applied in situations where it is necessary to verify whether a value previously determined by someone else falls within a certain market range. In most cases, advisory opinions still contain one approximate figure — the probable market value.
Once again about the court fee
It should also be noted separately that one of the most common cases of using an advisory opinion is determining the amount of the court fee when filing a claim in court. In many categories of cases, the amount of the court fee directly depends on the value of the property that is the subject of the dispute.
That is why the court needs at least an approximate understanding of the value of such property. In this case, an advisory opinion makes it possible to reasonably determine the value of the claim and correctly calculate the amount of the court fee.
If the document is prepared properly, with clear reasoning and understandable logic for determining value, the parties to the dispute often agree with the results obtained. In such cases, the court process may move much faster, since there is no need for additional expert examinations or other procedural actions.
If one of the parties does not agree with the valuer’s conclusions, the court has the right to appoint an expert examination. At the same time, it may oblige the parties to provide the expert with all necessary documents and also ensure access to the property for inspection. It should be understood that independent valuation and expert examination are not identical concepts.
Thus, a valuer’s advisory opinion often becomes the first step in determining the value of property in difficult legal situations. It helps the parties to the dispute and the court obtain a professional assessment of value even when preparing a full valuation report is objectively impossible.
Frequently asked questions
What is a valuer’s advisory opinion?
A valuer’s advisory opinion is a document in which a specialist determines the probable market value of property on the basis of available information when a full valuation report cannot be prepared because of legal restrictions.
When is an advisory opinion needed?
Most often: in court disputes, inheritance cases, division of property between spouses, as well as in accounting for valuation of lost property or valuation as of a past date.
Can an advisory opinion be used instead of a report?
No, an advisory opinion is not a full valuation report and is not suitable for notarial actions, but it may be used for court or accounting purposes when preparing a report is impossible.
What does “probable market value” mean?
This is an estimate of the property’s value determined on the basis of available information and market analysis. The exact amount is unknown because of limited access to the property or documents.
