On Tuesday, 30thof April, a new draft of the Cabinet Regulations “Cadastral valuation regulations” will be submitted for public consultation. The draft regulations are developed with the aim of improving the cadastral valuation methodology, providing the public with high-quality and fair cadastral value of all real estates determined in accordance with the real estate market information.

The Minister of Justice Jānis Bordans emphasizes that the improved methodology will ensure objective calculation of the cadastral value for each property – citizens must understand the real value of their property and the state should understand the total economic value of real estate.

What does it mean? A fair evaluation system that takes into account the year of the building construction, its type, mode of use and location. A fair approach to the building lands of multi-apartment means that in the valuation, the standard area (the land under the house and the adjacent functionally necessary land) is separated from the rest of the area, which is used by the residents of other houses as well and which further will be valuated as green areas. It is of particular importance in cases of forced lease, admits the Minister.

“The new improved cadastral valuation methodology may be implemented only if the government-forming parties agree on the property tax reform – the state must have access to objective information on the cadastral value but it must not disproportionately increase the tax burden on the primary home of each resident” says J. Bordāns.

The calculation of the real estate tax is based on a fair and market-compliant cadastral valuation methodology; at the same time, there should be excluded the possibility that the Ministry of Finance and local governments do not take into account the population solvency when reviewing the real estate tax policy and setting the tax rates, admits the Minister. The public will be informed about the projected cadastral values in a timely manner. Approval of the cadastral value base is planned for the middle of 2020; the cadastral value of each property will be calculated as of 1 January 2021. In turn, it is offered to apply it to the real estate tax needs from 2022, to give the Ministry of Finance and local governments the opportunity to re-evaluate the real estate tax policy, knowing the new cadastral value base and its impact on the population solvency.

The draft regulations intend to address land valuation for multi-apartment house land by establishing a comprehensible cadastral valuation system and a single methodology for determining depreciation of buildings. So far, two methods were in force: buildings constructed until the year 2012 were valuated only visually while buildings constructed after the year 2012 were valuated both visually and by technical parameters – improvement and depreciation. In turn, the new rules provide for the valuation of all buildings both visually and technically. The introduction of the new valuation criteria will eliminate the possibility of malpractice with cadastral value data. Among the rest, the new cadastral valuation rules also provide for a more efficient circulation of information.