Court Experts and Appraisers Respond to the Constitutional Court’s Decision

The Croatian Society of Court Experts and Appraisers (HDSViP) has sent a Statement regarding the Decision of the Constitutional Court of the Republic of Croatia rejecting the proposal for the assessment of the constitutionality of the Law on the Valuation of Real Estate (ZPVN). We are transmitting the Statement in full:

On May 10, 2021, we were informed about the statement of State Secretary Željko Uhlir, who that day announced at the meeting of the Ministry of Physical Planning, Construction and State Property (MGPI) to Minister Horvat and all present that the Constitutional Court of the Republic of Croatia would reject all three requests for the assessment of constitutionality (ZPVN).

After that, we waited for the official response from the Constitutional Court until June 23, 2021, believing that it would be resolved correctly according to the already made decisions of the EU Court in Strasbourg in expropriation cases, which are mentioned in the proposals for assessing the compliance of ZPVN with the Constitution of the Republic of Croatia. After we received the decision of the Constitutional Court of the Republic of Croatia, which does not accept the proposals for initiating the procedure for assessing the compliance of ZPVN (NN 78/2015) with the Constitution of the Republic of Croatia, we found that out of a total of 25 pages of text of that decision, only less than five pages were written in 13 points of shorter explanations, in which there is obviously a complete lack of knowledge of the issue.

Everything else is a transcription of parts of ZPVN and parts from the proposal for the assessment of constitutionality, and the most controversial is the statement from MGIPU dated March 28, 2017, which is mentioned only in June 2021, regardless of the fact that the first request for the assessment of constitutionality was submitted at the end of 2015, the second at the beginning of 2017, and the third in May 2020. In the majority of the review, the Constitutional Court of the Republic of Croatia distances itself and states that it is not competent to assess whether the legislator has not arranged something in the Law or has failed to arrange it. The same distance is also related to the procedure for controlling the constitutionality of the law: the Constitutional Court is not competent to assess its application in specific cases. This is stated despite all the listed cases resolved by the European Court of Human Rights where Croatian citizens won lawsuits and compensations.

In the voting on the rejection of the proposal for the assessment of constitutionality, two judges were excluded: Josip Leko and Davorin Mlakar.

The Need for Establishing Standards for Real Estate Valuation and an Ethical Code

It is a fact that we from HDSViP have been advocating for the establishment of standards in the field of real estate valuation, as well as the standardization of condominium ownership, since the First Croatian Consultation on Real Estate Valuation held in 2005, before entering the EU, considering that these regulations had to be in accordance with European standards for real estate valuation. However, our comments, as well as those from the profession and other participants, were not accepted by the dissolved remainder of the Working Group. This is clearly seen in complaints, mostly in expropriation, enforcement, and bankruptcy proceedings, leading to tragedy, i.e., to a murder in Šibenik precisely due to the assessed value of real estate in bankruptcy proceedings. Unfortunately, our regulations are not in accordance with European valuation standards (EVS), and our proposal for the adoption of an ethical code was not accepted, so it is clear how much a person who copied parts from German guidelines cares about ethical norms and standards.

Key Problems in Expropriation Valuation

According to Article 8, paragraph 4 of the Expropriation and Compensation Law for the North Rhine-Westphalia province, which served as a model for the Croatian legislator, the day of quality and the day of valuation coincide since the condition of the property at the moment the competent authority decides on the proposal for expropriation is relevant for determining compensation under the mentioned German law. The Constitution of the Federal Republic of Germany and the Constitution of the Republic of Croatia contain completely different provisions regarding the right of expropriated persons to compensation for expropriated properties, and these are key problems, along with all others. ZPVN is certainly unconstitutional in Article 50 because if the same land owned by the state or local (regional) unit is sold to a natural or legal person, it has one – market price, and in the reverse ‘direction’ – if the state or local unit takes it (expropriates), it usually has a lower price due to the previous effect – which is therefore not the market price, guaranteed by the provision of Article 50 of the Constitution of the Republic of Croatia.

Valuation Committees and the so-called High Valuation Committee

Members of Committees in Germany are the most qualified appraisers in certain territorial communities, and the Committees are responsible for verifying purchase agreements and defining the elements necessary for making valuations (by regions and cities), while in the existing Croatian Valuation Committees, only one member is an expert (without legally established criteria regarding their knowledge and verification of the quality of their valuations), while the others are individuals from various professions without a license for valuations, without insurance, without responsibility for actions taken in that process, and all are paid by the cities and counties for which they must work to verify the compliance of the prepared valuation reports with legal provisions (Article 12, paragraph 1, item 3 of ZPVN)!

The law defines the obligation to provide an opinion from the High Committee for the review of the real estate market beforehand. Such an opinion is not part of the review, nor is it available on the MGIPU website. In general, the work of the High Valuation Committee and the city and county committees is not publicly available.

With what right is this allowed and who dares to keep it secret – so that the earnings of the valuation committees might not be seen? Is this really a professional and independent committee? Can the High Valuation Committee, declaring the valuations of other experts as poor, without anyone’s control, simply take over and make valuations – thus arranging jobs for themselves while working in the Ministry of Construction, Physical Planning, and State Property and thus violating Article 7 of the Law on Preventing Conflicts of Interest?

The State Secretary and other employees in MGIPU, as well as members of the Committees, should not do anything regarding valuations, nor should they be the president of the High Valuation Committee because they have access to all data before others, which is an abuse of personal position and achieving undue property gain – (Article 6 of the Law on Preventing Conflicts of Interest NN 26/11, 12/12, 124/12, 48/13, 57/15). Differentiation in the availability of data for individuals employed in MGIPU, in counties and cities in comparable situations generates inequality, which is contrary to Article 14, paragraph 1 of the Constitution of the Republic of Croatia. Furthermore, there is an evident conflict of interest for cities and counties that review the prepared valuations, as they themselves are from the ranks of expropriation users, which is unacceptable and in their interest is to establish the lowest prices in various procedures of expropriation and sales where they should not be involved at all!

Reviewing expert opinions – real estate valuation is unknown in the EU, and in European chambers, institutes, and professional associations where they are astonished by such an idea and its implementation, as there control is carried out exclusively through self-regulation of the profession. The same is true in Slovenia, where the Commission of Independent Appraisers reviews all prepared valuations and calls their colleagues if any irregularity is found.

According to Article 17, the so-called High Valuation Committee is appointed for four years, the costs of the high committee are borne by the Republic of Croatia, except in cases of a second valuation. The costs of the second valuation, according to the appraiser’s price list, are borne by the client and paid in advance.

In reality, there is no official and published price list for real estate valuations! Namely, the proposal of HDSViP to adopt a unified price list for all appraisers along with ZPVN was rejected in consultations with the interested public, and in this article, some price list is mentioned: namely, it is only ‘their’ price list where members of that committee achieve enormous amounts of undue property benefits because their prices are 10 to 12 times higher than those of other appraisers (the valuation of larger land by an expert averages 5,000 HRK, while the Committee charges 55,000 HRK + VAT.

The ‘expertise’ of the High Committee is clear, which fails to approve an illegally made valuation of construction land in the R zone (recreation) in the narrow center of Osijek – Pampas, near all infrastructure and trams, and values it as agricultural, which causes damage to the budget of the city of Osijek by that valuation and the valuation of relevant colleagues from Osijek of as much as eight million kuna! When asked by journalists what is with that – it is easily answered that the so-called High Valuation Committee said that everything is fine. Such a Committee would be immediately suspended in any organized state because it does not know that land in the narrow center of the city that has been in the recreation and sports zone for years is construction land within the GUP!

It would also not be possible for the database eRealEstate to contain data: about the price of an apartment in the center of Split at 100 – 150 euros per square meter, about the price of construction land in Pantovčak ranging from 186 to 1167 euros per square meter, for apartments from 101 to 2,518 euros per square meter and houses from 136 to 1,468 euros per square meter, or apartments of the same area in a building by the sea ranging from 400 to 1,800 euros per square meter, etc.

The interference of legislative and executive power – MGIPU, in the calculations that experts and appraisers received based on professional knowledge, experience, and freely chosen realized prices of real estate represents illegal pressure on the independence and impartiality of court experts and court appraisers!!!

MPGI in its announcement on the website from June 23, 2021, states that ‘through the work of only the high valuation committee, to date, valuation reports have been corrected in the absolute amount of 1.9 billion kuna’.

Is MPGI working for or against its citizens and companies if the goal is to significantly reduce the value of their real estate? The damage to the state is immeasurable, and if such diminished values have been forwarded to tenders for the sale of state real estate – for whom are these properties intended with such reduced values? How many complaints are there at the EU court due to expropriation and how much compensation has been paid?

They do not state how much cities and counties have been harmed by entering unverifiable data into the eRealEstate database when assessing property taxes, as numerous unsustainable and completely nonsensical data are entered into the database.

Therefore, one can only ask the question: how much enormous funds that could be in the state, or city and county budgets, are lost on such inaccurate and unverifiable entries of prices considering that the Commission of the Tax Administration that assesses the tax on real estate transactions does not have in its composition experts who will visit all properties and determine their value according to age, condition of the property, and according to all other numerous important characteristics of each type of property, based on their knowledge, sworn oath, criminal and material responsibility, with insurance for damages, which all of us who do this job must pay every year.

Conclusion

We have previously advocated for expertise in the preparation of valuations, as we do now and as we will always advocate, and therefore we, authorized experts and appraisers by the judiciary, are not and will never be against ZPVN, but it must be assessed on a professional basis, on an independent and fair selection of comparable properties, for the real purpose of real estate valuation, which is REAL MARKET VALUE, and not the value that the legislative or executive power approves or does not approve, at its discretion and its needs. In all of this, complete transparency of the price list, and the minutes of these committees must be ensured, as well as information about the income of members of all Valuation Committees and the so-called High Valuation Committee that achieves enormous undue property benefits by doing business at enormously high prices. For this reason, it would be interesting for the Croatian public to know how much income all these Committee members have earned since the adoption of ZPVN in July 2015 to date. If former Minister Anka Mrak Taritaš had to report income from professional exams, then there is no reason not to report the income of all these individuals.