Property valuation in Lithuania
Kęstutis Kristinaitis,
Chairman of the Board,
Lithuanian Association of Property and Business Valuation Enterprises,
Lithuania
Before the restoration of independence in 1991, Lithuania had political, economic, and property systems common to other Soviet Republics. As an independent country, Lithuania aimed to strengthen democracy and establish a market economy. This required major transformations to immovable property institutions. Acts in support of reforms were introduced over several years. After 1994 the elements of new legal, economic and institutional structures, accompanied the inception of and organized property market, began to form more clearly. The property valuation profession and business started developing upon the initiative of private enterprises and public professional organizations – Lithuanian Association of Property Valuers and Lithuanian Association of Property and Business Valuation Enterprises, which have been instrumental in drafting and promoting acts, developing training courses, educational materials, professional qualifications, and standards.
The formation of the legal base for property valuation began in 1995. By 1999, the national legislation regulating property valuation activities has been developed, including the following legal acts:
- The General Property Valuation Principles, (Government Resolution,1995);
- Property Valuation Guidance Notes, (Government Resolution, 1996);
- Terms and Conditions of Granting of the Qualification of Valuer, (Government Resolution, 1998);
- The Law on Fundamentals of Valuation of Property and Business, 1999, amended in 2012;
- The Code of Professional Ethics of Valuers (approved by the Board of the Lithuanian Institute for Audit, Accounting and Valuation, Resolution, 2000);
The Law on Fundamentals of Valuation of Property and Business provided for the definitions, valuation procedure (including description of the main approaches and their application), documentation, etc. The adoption of the law and by-laws completed a certain stage in the development of the legal framework, in which professional organizations and their individual members took an active part. Subsequently, the institutional structure of the property valuation system gradually changed: certain functions were taken over by other institutions. Vilnius Gediminas Technical University has become the centre of academic training for valuers, although some disciplines are taught at other universities.
The mandatory certification of valuers has been introduced in 1996. The General Property Valuation Principles that the Government approved in 1995 provided a framework for specifying the skills required of professional (licensed) valuers. Shortly thereafter, the Ministry of Finance began certifying valuers (in 1998 this responsibility was assumed by the Institute of Audit, Accounting and Property Valuation). By 1998, there were up to 200 certified valuers.
The functions of the Institute as supervisory authority has gradually grown and expanding. In 2016 the Institute has been reorganized into the Authority of Audit, Accounting, Property Valuation and Insolvency Management under the Ministry of Finance. The Authority also includes the Court of Honor of Valuers and Examining Boards of Valuers.
A Law provides for three-level scheme for the certification of valuers: a natural person who has passed property or business valuer qualification exam is granted the following qualifications: real property, movable property or business valuer-assistant, valuer or valuer-expert. The qualification scheme is based on two main criteria: education and professional experience. Property or business valuation enterprises or property valuers, acting under the certificate of individual activity, and having civil liability insurance are included in the List of External valuers under decision of the Supervisory Institution.
Currently there are 271 valuers and 170 valuers’ assistants in Lithuania. 116 companies are engaged in property valuation activities. For over 20 years in Lithuania property valuation activities can only be performed by suitably qualified property valuers, who comply with the Code of Ethics and have civil liability insurance. Most financial operations in Lithuania that require property valuation are performed only by certified valuers.
The Law states that property or business valuation is performed applying valuation methods defined in the International Valuation Standards and the European Valuation Standards in cases set out in therein. The concepts defining values are also similar to ones used in the international standards. The Lithuanian property valuation institutions cooperate with international organizations such as the European Group of Valuers’ Associations (TEGoVA) and the International Valuation Standards Council (IVSC) and publishes international standards in the Lithuanian language.
Lithuania has established a well-thought-out real property cadastre and registration system managed by the state-owned Center of Registers. It also has developed and maintains a successful mass valuation system. A computer-assisted mass valuation has been developed for the whole country, and it is used for land and real property taxes based on market value and other public needs since 2005.
Expert article 2626