Auction participation fee: Why is it fair that participants contribute to the organization of the auction, rather than taxpayers?

State land can be sold or made available for use (usually leased) through a public auction. Preparing, conducting, and formalizing each auction involves real financial costs—from collecting and analyzing important data related to the land, to conducting and formalizing it involves real financial costs – from collecting and analyzing important data related to the land, appraising the property and preparing it for auction, determining the preemptive rights of individuals, to confirming the results of the auction and concluding contracts.

The participation fee helps to cover the costs of preparing the land parcels and organizing the auction. In addition, the Land and Spatial Development Board incurs costs for maintaining and developing the IT solution for the entire auction system. As the state budget is very tight, all institutions are reviewing their expenses and sources of funding. The law has already provided for the possibility of charging a participation fee for auctions, but the Land and Spatial Development Board has not used this option until now. Therefore, in May of this year, we decided to introduce a participation fee to partially cover the procedural costs associated with auctions, maintain the relevant information systems, ensure the continuation of high-quality service, and mitigate the impact on the state budget. As this is a service aimed at a specific interest group, we at the Land and Spatial Development Board felt that its costs should not be covered by taxpayers as a whole.

How much are the auction participation fees?

The Land and Spatial Development Board has decided to apply the 2% participation fee permitted by the State Assets Act to partially cover the costs associated with conducting auctions. For example, if the starting price of the auction is €1,000, the participation fee is €20. The participation fee is calculated from the starting price of the bid, applying the participation fee limit, which is €5,000 in the case of a sale and €500 in the case of land use. The application of the maximum participation fee means that if the starting price of the land is over €250,000 in the case of a sale, the participation fee is still €5,000. In the case of land leasing, if the starting price of the immovable property is over €12,500, the participation fee will still be €500. Therefore, when applying the limit, we are still talking about the sale or lease of relatively expensive plots of land.

In 2025, there have been 155 auctions with participation fees for the sale of immovable property and 504 for leasing. At sales auctions, the participation fee for 58 immovable properties has been less than €300 and for 39 immovable properties more than €1,000. The lowest participation fee (€46) was for a residential plot in the village of Tsirguliina in Valga County, which sold for €3,210. The highest participation fee (€1,470) was for an industrial plot in the Mustamäe district of Tallinn, which sold for €73,900. In lease auctions, 464 properties had participation fees of less than €20 and only 27 properties had participation fees of more than €100. The highest participation fee (€307) was for a leased property, which was approximately 93 ha of agricultural land located in Anija parish and whose lease fee at auction was €15,362 per year.

What types of state land auctions does the Land and Spatial Development Board organize?

Auctions are mainly held electronically in the state land auction environment Auction objects.

Sales auctions (disposal of agricultural and other state land). Land and Spatial Development Board sells land belonging to the state land reserve at auction, which the state does not need to retain in the public interest and which it is not practical to lease out. For example, agricultural land is not generally put up for auction, except in exceptional cases where the agriculturally usable part of the property is very small, fragmented, or where the land has fallen out of agricultural use and restoring it to farmland would require disproportionately large investments. By not selling agricultural land, the Land and Spatial Development Board ensures that the land continues to be used for agriculture, which is important for our food security.

Similarly, land whose value may increase significantly in the future due to its size, location, or quality is generally not put up for sale. Where possible, such land is put up for auction until a more specific use for it is identified.

Lease auctions (granting of land use rights). Lease auctions primarily involve land with agricultural potential. Lease agreements concluded as a result of an auction are generally valid for five years, and tenants for the next period are again determined by auction. In a lease auction, the previous user has the right of first refusal to conclude an agreement, unless the agreement with the user has been terminated due to a breach.

Special-purpose auctions (e.g., renewable energy development areas where long-term rights of use are established). In 2024, auctions began on state-owned land suitable for wind energy development, where developers are granted land use rights to construct and operate the facilities necessary for energy production.

Results of sales auctions in recent years

Viimaste aastate rendioksjonite tulemused 

What are the costs associated with organizing auctions for the Land and Spatial Development Board?

Organizing an auction involves a long process and a chain of different tasks, each of which has its own financial cost:

1. Preparation and inspection of the property – collection and analysis of restrictions and planning information; cadastral surveying and boundary adjustments, if necessary; coordination of environmental and infrastructure objectives; appraisal of the property and determination of the terms and conditions of sale or use; if necessary, tidying up the property (disposing of any rubbish, demolishing potentially dangerous buildings).
2. Auction environment management and development – ongoing maintenance and upkeep of the information system developed for conducting auctions, making improvements and ongoing development.
3. Conducting auctions – announcing auctions in newspapers and notifying persons with preemptive rights; conducting the auction process, answering participants' questions. If the auction is successful, the results are checked, the application of preemptive rights is analyzed, the results are confirmed, and entries are made in various registers.
4. Follow-up activities – a successful auction is followed by the conclusion of a sale or lease agreement for the property, transfer of possession, and monitoring of the performance of the agreements (in the case of a lease) and resolution of any issues arising between the contracting parties.

Even if the auction does not result in a transaction, the costs of organizing the auction remain with the Land and Spatial Development Board. The participation fee helps to cover these costs.

The need to establish a participation fee:

• It partially covers the costs of organizing auctions (preparation and conduct of auctions, maintenance of the auction environment, supervision of contracts, etc.).
• It disciplines participation by preventing people from joining the auction out of mere curiosity.
• It saves taxpayers' money, as the costs of the auction are not borne entirely by the state budget, but by the person interested in acquiring or leasing the land.
• It ensures the continuation of high-quality service, including user support during the auction.

Summary

State land auctions generate significant revenue for the state each year and help to make the best use of land in the state land reserve. In order to ensure the quality, transparency, and technical reliability of the auctions, the Land and Spatial Development Board has deemed it reasonable to establish a participation fee that covers the direct unavoidable costs and supports the professional organization of the auctions without placing an excessive burden on taxpayers as a whole.