Procedure for extraordinary valuation of immovable property
The extraordinary valuation of immovable property is regulated by the Land Valuation Act and, on the basis thereof, by the "Procedure for the Extraordinary Valuation of Immovable Property" established by a regulation of the Government of the Republic. This regulation applies to the following purposes when performing valuation activities:
- granting the use of immovable property belonging to the state, alienation, exchange, and transfer of immovable property as a non-monetary contribution to a private legal entity;
- performing land consolidation activities;
- acquisition of immovable property containing a protected natural object;
- other cases provided for by law.
The appraisers are primarily professional real estate appraisers and the Land and Spatial Development Board, and in cases specified by law, also the administrator of state property or the administrative body conducting the proceedings and their authorized agencies.
The main criterion for assessing the value of immovable property is its usefulness, which is why the overall objective of the assessment is to determine the usefulness of the immovable property being assessed and to give it a financially measurable assessment, i.e. to assess its value. The valuation takes into account all legal, physical, functional, economic, and environmental factors that affect the value of the immovable property.
The valuation is based on the best use. The best use is the most likely use that is legally permissible, physically possible, reasonably justified, financially viable, and results in the highest value for the property being valued.
Assessment methods
The valuation of immovable property and the choice of valuation method are influenced by the value being assessed, the data available, and the way in which the immovable property is used and how it is normally traded on the market. The three basic methods of valuing immovable property are:
- market-based approach, or comparative method, which assesses value by analyzing transactions involving similar real estate;
- income-based approach, or income method, which assesses value as immediate income or the present value of expected income;
- cost-based approach, or cost method, which assesses the costs incurred for the immovable property.
Stages of assessment
The assessment process includes activities aimed at reaching an assessment result, which is formalized in an assessment report. The assessment process consists of the following stages:
- ordering an assessment report;
- data collection and analysis;
- selection and application of assessment methods;
- preparation of the assessment report;
- acceptance of the assessment report.
Assessment report
The valuation report must be clear and as comprehensive as possible. The theoretical basis used in the valuation report and the descriptions of the various stages of the valuation process must be consistent with each other. In order to assess the timeliness of the valuation result, the valuation report shall indicate the following dates:
- the value date is the date as of which the valuation result is presented;
- the date of the valuation report is the date on which the valuation report was signed;
- the inspection date is the date on which the inspected immovable property was inspected, if an inspection is required.
The valuation result presented in the valuation report is an estimate of the value or usage fee of the immovable property expressed in monetary terms. The valuation result is not presented with greater precision than the lowest precision of the source data used in the valuation procedure allows, provided that the effect of rounding does not exceed one percent of the value. The valuation result shall be presented with an accuracy of no more than one euro, and the valuation result per unit of area shall be presented with an accuracy of one cent.
Upon receipt of the valuation report, the processor shall verify its compliance with the terms of reference and the provisions of legislation. In the event of non-compliance, the processor shall have the right to demand that the valuation report be brought into compliance with the aforementioned.
Principles and objectives of extraordinary valuation of immovable property
- In order to assess the fair value, a market value assessment is generally commissioned from a professional appraiser.
- The Land and Spatial Development Board may assess the fair value by analyzing sales transactions.
- The processor may determine the value through market analysis if the expected appraisal result is less than ten times the average gross salary for the previous year published by Statistics Estonia.
- The usage fee is a market-based usage fee or at least a usage fee that covers the costs of economic preservation.
- In order to assess the market-based usage fee, a market rent assessment is generally ordered from a professional appraiser. The market-based usage fee may be determined by the Land and Spatial Development Board or the processor.
- The usage fee is assessed based on the terms and conditions of the usage agreement to be concluded. The usage fee includes the cost of all services that remain the responsibility of the grantor. If part of the immovable property is granted for use, the costs are assessed in proportion to the scope of the right of use.
- When encumbering with a usage agreement, it is not necessary to assess the entire immovable property, but only the part to be encumbered with the usage agreement.
- Immovable property is valued for compensation purposes if, pursuant to legislation or a transaction, the owner of immovable property or a limited real right must be placed in a situation that is as close as possible to the situation in which they would have been if the acquisition had not taken place.
- The value of the immovable property is determined when appraising it for compensation purposes. If the value of the immovable property does not characterize the entire financial loss incurred by the person, the directly related financial loss and lost income are added to the value.
- The valuation report describes what would have happened if the circumstance giving rise to compensation had not occurred and the situation taking into account the circumstance giving rise to compensation. The differences between the two situations are clearly highlighted in the valuation report.
- Where possible, the valuation result distinguishes between the value of the immovable property (or part thereof), the direct financial loss and the loss of income.
- Valuation for compensation purposes is also covered by the Immovable Property Acquisition in the Public Interest Act (KAHOS), including sections 12–14.
The value of immovable property covered by forest is assessed:
- as a whole, without distinguishing between the value of the land and the growing forest, or
- in parts, as the sum of the value of the land and the value of the forest growing on it, based on the methodology described in the procedure for extraordinary assessment of immovable property.
The value of standing timber is assessed using the income method for each forest compartment presented in the inventory data as follows:
- the normal value of standing timber, based on the total stock available at the time of assessment, without growing the stand to maturity and without discounting cash flows;
- the value of standing timber assessed for compensation purposes, based on the future income from the forest, i.e. the theoretical growth of the forest to maturity and the discounting of cash flows.
If necessary, a person with a forest management license and a forest manager's professional certificate shall be involved in assessing the value of growing forest. The value of growing forest may be assessed by the processor if inventory data is available.
Procedure for extraordinary valuation of immovable property
- The procedure for extraordinary valuation of immovable property will apply from 18 March 2023.
- The regulation does not regulate the procedural processes or principles on the basis of which transactions are made and damages are compensated.
- The new legislation consolidates and harmonizes the provisions regulating valuation that were previously contained in various regulations and clarifies the basis for valuation.
- Provisions concerning valuation for compensation purposes and provisions concerning the valuation of growing forests have also been added, allowing the use of models for calculating the assortment and value of forest material in forest valuation.
The regulation replaces several previously valid regulations and repeals:
- Regulation No. 260 of the Government of the Republic of 25 October 1996 "Approval of the Procedure for Extraordinary Valuation of Land";
- Regulation No. 79 of the Government of the Republic of July 14, 2016, "Procedure for the Assessment of the Use Fee and Fair Value of Immovable Property, Requirements for Assessment Reports and Their Ordering";
- Government of the Republic Regulation No. 242 of July 8, 2004, "Procedure for the acquisition by the state of immovable property containing a protected natural object and for the processing of proposals, and criteria on the basis of which the protection regime of an area is considered to significantly restrict the intended use of immovable property, and the procedure and basis for determining the value of immovable property";
- Legal acts concerning assessment established by order of the Director General of Land and Spatial Development Board, which are essentially covered by the new regulation.
Last updated: 06.11.2025
