Madise: Property owners should not pay for state compensation disputes

Ülle Madise.
Ülle Madise. Source: Siim Lõvi /ERR

On Wednesday, Chancellor of Justice Ülle Madise will propose an amendment to the Acquisition of Immovables in Public Interest Act to the Riigikogu. The proposed change would ensure that in situations where the state acquires property in the public interest, property owners are not forced to pay for a comparative valuation out of their own pocket should there be a dispute about the amount of compensation offered.

The amendment will affect those who are deprived of their property, whether it be land, forest or home, by the state in the name of public interest and are offered compensation in return.

According to Madise, the current law does not include the provision of remuneration for property owners to commission a comparative valuation report, even though one is legally required should they wish to challenge the amount of compensation offered by the state. Under the law, a simple reference to the market prices of similar properties is not considered sufficient.

"Article 32 of the Constitution protects property, and the transfer of property without the owner's consent is only permitted on the condition that the owner is fairly and promptly compensated," explained Madise.

"Section 2(3) of the Acquisition of Immovables in Public Interest Act states that all costs associated with the acquisition are to be borne by the acquirer of the property. Under the act, the amount (reimbursed to the property owner) consists of the value of the immovable property and compensation for the material damage and loss of income, should there be any, directly resulting from the acquisition of the immovable property. Once the property has been transferred, the previous owner should not be in a situation where they have suffered any material damage," Madise wrote in a letter to the Constitutional Committee of the Riigikogu.

According to Madise, the current law puts the owner in the position of having to choose between accepting the price offered by the state or local government, even if it seems to be below the market value of similar properties, or paying for an independent evaluation of the property at their own expense and thereby risking financial losses.

The cost of commissioning an expert evaluation report can be significant. "The Ministry of Finance has indicated that valuations of small plots of land containing no buildings may cost between €600 and €800, while more complex valuations can amount to several thousand euros," Madise wrote.

Madise added, that up to now, only a small proportion of the situations in which the state has offered compensation for the acquisition of property in the public interest have been challenged in court. "Considering that owners are currently not in a position to verify the state's price offer without suffering financial losses, this is understandable,". he said.

Speaking before the Riigikogu on Thursday, Madise suggested that one possible way to resolve the situation would be to amend the Acquisition of Immovables in Public Interest Act so that property owners could claim reimbursement for the cost of ordering a comparative valuation report. It could also be an option to set a reasonable limit for the amount to be reimbursed for the valuation.

Another solution, according to Madise, would be to explicitly include the price of commissioning an expert valuation of the property into the administrative costs of the procedure.


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Editor: Michael Cole

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