Compulsory Purchase of Property for Public Needs and Compensation –

Development of Procedures and the Role of Valuation in

Lithuania

Steponas DEVEIKIS, Albina ALEKSIENĖ, Birute GALINIENĖ, Vilnius, Lithuania

Joint Seminar, Helsinki, September 6-8, 2007

       

Contents of presentation

• Development of legislation on compulsory purchase in Lithuania

• Stages and procedures of compulsory purchase or expropriation of land for public needs

• Development of methodology and background of property valuation practice

• Good management of the process and role of the SE Centre of Registers – registration, database, GIS and cadastral maps…

• Valuation. Disputes and appeals procedures• Problems and suggestions. Final remarks

Legislation on compulsory…

• Constitution of Lithuania, 1992 (art. 23; 46) • Civil Code, 2000• Law on Land, 1994, 2004 (art. 37; 45, 46, 47)• Rules approved by the Government (2005)

for Application and Investigation of Land Expropriation for Public Needs

and Rules for Arrangement and Implementation of Land Expropriation Projects, 2005

• Law on Territorial Planning, 1995, 2005• Laws on Cadastre/Register,

Public needs are…• Defence and national boundaries, • Airports and harbours development,• Railways, roads, infrastructure of communication

and electricity, • Social infrastructure, recreational & leisure

infrastructure,• Territories of mineral resources mining, • Construction sites of waste treatment objects,• Cemeteries,• Natural and cultural heritage protection sites,• Business projects of state significance the

importance of which is recognised by the Government and the Seimas (Parliament).

Project examples and procedures Via Baltica development and road

construction; Klaipeda harbour development; FEZ and industrial parks development projects

• Two steps: 1. Application submitted by the

Municipal Council or State institution to the County Administration

2. Having investigated soundness and feasibility of an application, the Head of the County Administration makes a decision. When making such a decision, a plan of boundaries of the territory where land expropriation project is to be implemented shall be prepared; and when such a decision is made information is transferred to the Administrator of RPR.

GOVERNMENTGOVERNMENT

MINISTRY

OF INTERIOR

MINISTRY

OF INTERIOR

COUNTY MANAGERS’ADMINISTRATIONS

COUNTY MANAGERS’ADMINISTRATIONS

MUNICIPALITIESMUNICIPALITIES

STATESTATE ENTERPRISE ENTERPRISECENTRE OF REGISTERSCENTRE OF REGISTERSSTATESTATE ENTERPRISE ENTERPRISECENTRE OF REGISTERSCENTRE OF REGISTERS

CENTRAL MORTGAGE

OFFICE

CENTRAL MORTGAGE

OFFICE

MINISTRY OF AGRICULTURE

MINISTRY OF AGRICULTURE

NATIONAL LANDSERVICE

NATIONAL LANDSERVICE

NOTARIESNOTARIES

STATE LANDSURVEY INSTITUTE

STATE LANDSURVEY INSTITUTE

SURVEYORS(LEGAL PERSONS)

SURVEYORS(LEGAL PERSONS)

MINISTRY OFJUSTICE

MINISTRY OFJUSTICE

MINISTRY OF ENVIRONMENT

MINISTRY OF ENVIRONMENT

MINISTRY OFFINANCE

MINISTRY OFFINANCE

TAX INSPECTORATE

TAX INSPECTORATE

TERRITORY PLANNING DEPARTMENT

STATE CONSTRUCTIONINSPECTORATE

TERRITORY PLANNING DEPARTMENT

STATE CONSTRUCTIONINSPECTORATE

FOUNDER METHODICAL GUIDANCE EXCHANGE OF INFORMATION

Organisational structure of Lithuanian Real Property Administration System

Project of land expropriation

When a decision is made to start implementing the land expropriation project, the Administrator of RPR enters a note. From that moment property owner has no right to transfer this property, mortgage it or create any other encumbrances.

Projects of land expropriation for public needs are considered as special territorial planning documents, which must be prepared in accordance with the Law on Territorial Planning. The stages of this process/ project are as follows:

• Project preparatory stage;• Project arrangement stage;• Project solution impact assessment stage;• Project finalisation stage (discussing and approval)

After approval of the project new cadastral land parcels are formed which are registered in the cadastre and Real Property Register. Property and other losses need to be valued. Value is calculated according to Article 47 of the Law on Land and the Law on the Basics of Property and Business Valuation.

Single property valuation and mass appraisal development in Lithuania

Year

20021999

Single property appraisal / valuation

Mass appraisal

1993

Normative values Transition to market values

Mass appraisal system development

Starting point -

System development

System improvement

2006

Methodology & background of valuation

The Law on the Basics of Property and Business Valuation (BP&BV) provides for property valuation methods used in the international practice (IVSC Standards, European Valuation Standards).

Article 6 of the Law on BP&BV establishes definite principles for setting value of a property, wherein it is stated that:

i. Property value is determined in accordance with market economy logics and criteria, and the results of the analysis of market and economic conditions;

ii. Property value is determined with precaution and reserve so as to avoid violating the rights of land owners, and in keeping with property exchange and alternative property use principles;

iii. The basis for determining property value considers the foreseeable income and profit from using the property or its sale-purchase, or the satisfaction of personal needs;

iv. Property value may be determined according to sale-purchase trade agreements, property creation or acquisition costs, and the income generated through using the property.

Web-site Centre of Register – database for valuations

Role of the Centre of Registers

Good practice in cadastre and real property registration in Lithuania is a background for good practice in compulsory purchase.

Information on market transactions is very relevant and important in the real property valuation, particularly in valuation in case of expropriation.

Access to the latest information on market transactions is possible for all Lithuanian valuers.

One hopes that with the Law on Real Property Tax (2005) and mass valuation results coming into force, the process of compulsory purchase will be coordinated with valuation regulations. More definite regulation of mass valuation and individual valuation remains a very important issue from both a methodical and legal point of view in expropriation.

Market transactions database system

Fair compensation and appeals

According to laws and legal acts, the types of fair compensation are as follows:

• Monetary compensation based on market price (ad valorem);• Land plot of equal value.

Lithuanian legal acts entitle each landowner, whose land plot was expropriated for public needs, to make an appeal against the type and amount of compensation.

Fair compensation = fair and objective valuation? When agreeing to undertake work in this field, Lithuanian valuers must also be prepared for long appeal and court processes.

If the landowner of the expropriated land does not agree with the amount of compensation, i.e. the value determined by the property valuer, the expropriated land rights may not be registered, nor may the expropriation procedure be terminated. The appeals process in many cases takes a long time.

Final remarks• In practice, the process of land expropriation for public

needs in Lithuania is quite long. Legal acts establish fair procedures on compensation for land and other real property expropriated for public needs.

• The appeals process is more instrumental in securing property owners’ rights than public interests. If the expropriated landowner disagrees with the offered compensation (i.e. the sum of money), the land expropriation procedure is not finalised and public rights are not registered.

• Property valuation as a prerequisite of fair compensation for expropriated land, must be always based on the latest information and updated databases. The Real Property Register and Cadastre system and the market transactions database of the Centre of Registers constitute a solid base for the implementation and administration of land expropriation for public needs.

• Legislation on expropriation will be developed safeguarding against possible abuse of the land expropriation procedures.

Thank You for your attention

Invitation to next Baltic Valuation Conference ’2008

BVC’2008 will be held in Klaipeda, Lithuania in September 2008 The theme of this Conference will be“Recreational & Leisure Property Valuation Around

Baltic Sea”This Conference will be organised in co-operation LTVA

and Klaipeda University, and other bodies.

Social programme will include a walk in the Old town of Klaipeda, other

city places and Palanga Park with the Amber Museum

We look forward to meet you in Klaipeda - Palanga, Lithuania, September 2008