REPUBLIC OF LITHUANIA
LAW ON AMENDMENT
OF THE LAW ON BASES OF PROPERTY AND BUSINESS VALUATION
22 June 2011 No XI-1497
Vilnius
(Official Gazette Valstybės Žinios, 1999, No 52-1672; 2003, No 38-1673)
Article 1. The new wording of the Law on Bases of Property and Business Valuation of the Republic of Lithuania
The Law on Bases of Property and Business Valuation shall be amended to read as follows:
“REPUBLIC OF LITHUANIA
LAW
ON BASES OF PROPERTY AND BUSINESS VALUATION
CHAPTER ONE
GENERAL TERMS AND CONDITIONS
Article 1. Purpose of the Law
This Law shall establish the principles for measuring the value of property or business, the bases for and cases of measuring the value of property or business, the bases for and regulation of operation of property or business appraisers and property or business valuation companies, the rights, duties, and responsibilities of property or business appraisers and property and business valuation companies, and the requirements for property or business appraisers and property or business valuation companies. Other laws of the Republic of Lithuania shall apply to property or business appraisers and property or business valuation companies to the extent their operations are not regulated by this Law.
Article 2. Key Terms and Definitions of the Law
1. Replacement value of property is the estimated amount of money required to re-create, reproduce or reconstruct (outfit) subject property of the same physical and operational qualities.
2. Individual valuation of property or business means valuation of property or business, considering its individual attributes on a certain day, following an appropriate property or business valuation approach in the manner established in the Property and Business Valuation Methodology.
3. Movable property (movable item) means property (an item) that can be moved from one place to another without modifying its function and significantly reducing its value, unless the law provides to the contrary.
4. Mass property valuation is simultaneous valuation of homogenous property (items defined by their specific attributes), considering the condition of the property at a certain date, following an appropriate property or business valuation approach in the manner established in the Property and Business Valuation Methodology, and with reference to the legislation that regulates this type of valuation.
5. Immovable property (immovable item) means a land lot and items pertaining to it that cannot be moved from one place to another without modifying their function and significantly reducing their value, as well as property (movable items) that is recognised as immovable by the rule of law.
6. Non-compulsory property or business valuation means valuation of property or business done at the client’s initiative, on the basis of an agreement between the client and a property or business valuation company or an independent property or business appraiser.
7. Compulsory property or business valuation means valuation of property or business done in cases provided for in the legislation of the Republic of Lithuania in order to secure a public interest.
8. Special-purpose property is property that serves a special function, is of limited demand and therefore sells rarely, or is not marketable and therefore does not sell at all.
9. Property means tangible, intangible and financial assets that may be the subject of market transactions.
10. Market value of property or business is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s–length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.
11. Value of property or business (the value) means a unit of measure of usefulness of property or business at any given time, established on the basis of an appropriate property or business valuation approach, following the procedure and in the manner identified in the Property and Business Valuation Methodology.
12. Property or business valuation means establishing the value of property and/or business using an appropriate property or business valuation approach, following the procedure and in the manner identified in the Property and Business Valuation Methodology.
13. •Valuation of property or business for internal purposes means valuation of property or business carried out at the sole discretion of a legal entity or any other organisation incorporated in the Republic of Lithuania or another Member State, or any branches thereof, to safeguard performance of the direct functions of the legal entity or any other organisation incorporated in the Republic of Lithuania or another Member State, or any branches thereof, other than valuation of property or business under property or business valuation contracts with clients.
14. Property or business valuation company means a legal entity or any other organisation incorporated in the Republic of Lithuania or any other Member State, or any branches thereof, engaging in property or business valuations in the manner prescribed by the laws of the Republic of Lithuania.
15. Property and business valuation methodology means legislation adopted by the government of the Republic of Lithuania or any other institution authorised by it, which regulates the procedure and manner of application of property and business valuation approaches embedded in the International Valuation Standards and the European Valuation Standards in the Republic of Lithuania, in cases envisaged in said standards.
16. Client of the property or business valuation service (the client) means a private individual, a legal entity or any other organisation or its branches that, pursuant to their regulations, are entitled to enter into contracts, which have entered into a property or business valuation contract with a property or business valuation company.
17. Property or business appraiser means a citizen of the Republic of Lithuania or any other Member State or any other private individual, who exercises the rights of movement across the Member States vested to them by the legislation of the Republic of Lithuania and engages in valuations of property or business.
18. Qualification certificate of the property or business appraiser is a document issued to a private individual by a state regulator of property or business appraisers and property or business valuation companies commissioned as such by the government of the Republic of Lithuania that certifies the qualifications of that person as an appraiser of property or business specialising in a particular field.
19. Professional ethics code of property or business appraisers means legislation adopted by the government of the Republic of Lithuania or any other institution authorised by it that establishes the standards of professional conduct that apply to all property or business appraisers.
20. Price of property is the amount of money that has been asked, offered or paid for the property.
21. Property value in use is the estimated amount of money benefits that an asset generates for a specific owner.
22. Member State is a member of the European Union, a state within the European Economic Area, or the Swiss Confederation.
23. Business means activity of a private individual, legal entity or any other organisation or its branches, which is aimed at earning income and profit through using economic resources.
Article 3. Objects and Subjects of Property or Business Valuation
1. Objects of property or business valuation shall be property and business of any type.
2. Subjects of property or business valuation shall be:
1) clients;
2) property or business valuation companies;
3) legal entities or any other organisations incorporated in the Republic of Lithuania or another Member State, or their branches performing property or business valuation for their internal purposes;
4) property or business appraisers.
Article 4. Cases of Property or Business Valuation
Property or business shall be valued:
1) in cases provided for in the laws and legislation (compulsory valuation of property or business);
2) for internal purposes;
3) in other cases as per client’s request.
Article 5. Principles of Calculating the Value of Property or Business
1. The value of property or business shall be determined as follows:
1) based on the logics and criteria of market economy, the results of market and economic condition research and observation; the application of such results is covered in detail in the Property and Business Valuation Methodology;
2) adhering to the principles of equity, rationality, fairness, immunity of property, freedom of contract, impartiality and independence of valuation, legal explicitness and unacceptability of abuse of law;
3) using the criteria of legitimate, reasonable expectations and interests, prudence and caution, replacement of property or business and alternative use of property or business, which are covered in detail in the Property and Business Valuation Methodology.
2. The basis of property or business valuation shall be the benefit that can be obtained if the property or business is used, developed or operated sensibly.
3. The value of property or business may be determined on the basis of:
1) sales transactions;
2) the cost to create (re-create) property or business;
3) income that the property or business generates;
4) other bases of property or business valuation as established in the International Valuation Standards and the European Valuation Standards.
Article 6. Approaches to Property or Business Valuation
1. Valuation of property or business shall be carried out using the approaches established under the European Valuation Standards and in cases identified therein.
2. The procedure of application of approaches established under the International Valuation Standards and the European Valuation Standards in cases of property or business valuation as identified therein shall be thoroughly spelled out in the Property and Business Valuation Methodology.
CHAPTER TWO
PROPERTY OR BUSINESS APPRAISERS AND PROPERTY OR BUSINESS VALUATION COMPANIES
Article 7. Classification of Property or Business Appraisers
Property or business appraisers shall be classified as follows:
1) an independent property or business appraiser (an external property or business appraiser), an appraiser of property or business, an employee of a property or business valuation company or the owner of a private property or business valuation company or a real member of a property or business valuation partnership, who appraises property or business on behalf of such company under contracts made between the company and its clients, or in cases envisaged in the legislation of the Republic of Lithuania, or who is a holder of a private practice certificateand appraises property or business on the basis of contracts with clients and in cases envisaged in the legislation of the Republic of Lithuania;
2) an internal property or business appraiser, an appraiser of property or business, an employee of a legal entity or any other organisation incorporated in the Republic of Lithuania or another Member State, or branches thereof, or the owner of a private company or a real member of a partnership who appraises property or business for the interior purposes of a legal entity or any other organisation incorporated in the Republic of Lithuania or another Member State, or branches thereof.
Article 8. General Requirements for Property or Business Apparaisers
A property or business appraiser may be a private individual who:
1) is deemed to be of immaculate repute for the purposes of Article 9.13 hereof;
2) has a university degree in mathematics, statistics, or informatics in the field of physical sciences, general engineering, civil engineering, manufacturing engineering, engineering and building technology in the field of technological sciences, or economics, business, management, or business and management in the field of social sciences, or spatial planning to qualify as an assistant real estate appraiser (lowest-level qualification), appraiser (higher-level qualification), or expert appraiser (highest-level qualification); mathematics, statistics, and informatics in the field of physical sciences, general engineering, mechanical engineering, electronics and electric engineering, manufacturing engineering, land transport engineering, or engineering in the field of technological sciences, or economics, business, management, or business and management in the field of social sciences to qualifyas an assistant movable property appraiser (lowest-level qualification), appraiser (higher-level qualification), or expert appraiser (highest-level qualification); and economics, business, management, or business and management in the field of social sciences to qualify as an assistant business appraiser (lowest-level qualification), appraiser (higher-level qualification), or expert appraiser (highest-level qualification);
3) has experience relating to property valuations to qualify as an assistant property appraiser (lowest-level qualification), or experience relating to business valuations to qualify as an assistant business appraiser (lowest-level qualification);
4) has been qualified, for three years or more, as an assistant real estate or movable property appraiser (lowest-level qualification) to qualify as an appraiser of real estate or movable property, respectively, or a business appraiser (higher-level qualification), or has been qualified, for seven years or more, as a real estate or movable property or business appraiser (higher-level qualification) to qualify as an expert appraiser of real estate or movable property, or an expert business appraiser (highest-level qualification), and has at least three years of experience in conducting real estate or movable property or business valuations to qualify as an appraiser of real estate of movable property, respectively, or a business appraiser (higher-level qualification), or at least seven years of experience in conducting real estate or movable property or business valuations and has prepared at least 50 property or business reports, respectively, to qualify as an expert appraiser of real estate or movable property, or a business appraiser (highest-level qualification);
5) has passed the qualifying examination of property or business appraiser in the manner prescribed by the Rules for Holding Property or Business Appraiser Qualifying Examinations as approved by the minister of finance.
Article 9. Qualification of Property or Business Appraisers
1. A private individual who has passed the qualifying examination of property or business appraiser shall be awarded the qualification of assistant appraiser (lowest-level qualification), appraiser (higher-level qualification), or expert appraiser (highest-level qualification) of real estate, movable property, or a business area (“property or business appraiser’s qualification”) and shall have a qualifying certificate of a property or business appraiser issued, with the exception of the case spelled out in Article 11 of this Law. The property or business appraiser’s qualification shall be awarded and the qualifying certification of a property or business appraiser shall be issued by a state regulator of property or business appraisers and property or business valuation companies commissioned as such by the government of the Republic of Lithuania (“the Regulator”), following the procedure prescribed in the Rules for the Issuing and Effect of the Qualifying Certificate of Property or Business Appraiser as approved by the minister of finance. The list of property or business appraisers who have a valid qualifying certificate of property or business appraiser shall be published by the Regulator on its website.
2. The qualifying certificate of property or business appraiser shall bear the following details:
1) the number of the qualifying certificate of property or business appraiser;
2) the full name of the property or business appraiser;
3) the area of real estate or movable property or business valuation;
4) the qualification of an assistant appraiser (lowest-level qualification) or an appraiser (higher-level qualification) or an expert appraiser (highest-level qualification);
5) the date when property or business appraiser’s qualification was awarded;
6) the state regulator of the property or business appraiser and the issuing institutions.
3. The qualifying certificate of property or business appraiser shall be signed by the manager of the issuing institution and shall be endorsed with the seal of the institution.
4. The qualifying certificate of property or business appraiser shall also bear an image of the property or business appraiser’s face.
5. Property or business appraisers shall be examined by the qualifying examination panel for property or business appraisers (“the examination panel”). The examination panel shall have 5 members, including its chairperson (three members being proposed by the Regulator and one by the Ministry of Finance of the Republic of Lithuania (“the Ministry of Finance) and higher schools of the Republic of Lithuania (“higher schools”) each).
6. To have one member of the examination panel appointed by the Ministry of Finance, the Regulator shall approach the Ministry of Finance, which shall provide it with a list of three candidates – state officials – for the examination panel.
7. To have one member of the examination panel appointed by higher schools, the Regulator shall approach umbrella organisations of higher schools to provide a list of three candidates for the examination panel.
8. Representatives nominated by the Regulator may be members of an exclusive umbrella association of property and/or business appraisers, and/or property or business appraisers employed with an exclusive umbrella association of property or business valuation companies, or the owners of private companies – members of this association, or real members or partnerships who have the property or business appraiser’s qualification. Exclusive umbrella associations of property and/or business appraisers and/or property or business valuation companies shall, by mutual consent, nominate three of their members who have the property or business appraiser’s qualification in each area of property or business valuation as candidates to be nominated by the Regulator, provided written consent from such members.
9. A separate examination panel shall be made up for the qualifying examination of each area of property or business evaluation. The constitution of the examination panel shall be approved and its chairperson appointed by the finance minister from among the individuals specified in the summary list of candidates for the examination panel as provided by the Regulator, observing the proportions spelled out in paragraph 3 of this Article. The same individual may be a member of the examination panel for the qualifying examinations of property or business appraiser in several areas of property or business valuation. Upon resignation, removal or revocation of a member of the examination panel, the Regulator shall update the summary list of candidates for the examination panel in the manner laid down in paragraphs 6, 7 and 8 of this Article.
10. The term of office of a member of the examination panel shall be two years. The term of office of a member of the examination panel shall commence on the effective date of the order regarding the approval of the panel or the appointment of another member from the minister of finance. The same individual may only be appointed member of the examination panel for two consecutive terms of office. A member of the examination panel may resign or be removed for reasons specified in paragraph 14 of this Article, or revoked on the basis of a revocation appeal from the institution that nominated such member of the examination panel, prior to expiry of their term of office. To fill the position of a member of the examination panel who has resigned, been removed or recalled, the minister of finance shall appoint another member from the summary list of candidates for the examination panel, observing the proportions specified in paragraph 5 of this Article.
11. 30 days to the end of the term of office of a member of the examination panel, new candidates to sit on the examination panel for the next term of office shall be proposed in the manner stipulated in paragraphs 5, 6, 7 and 8 of this Article. For the purposes of nominating members of the examination panel for the next term of office, unless the associations spelled out in paragraph 8 of this Article do not propose their candidates to serve as members of the examination panel to the Regulator, shall be nominated by the Regulator from among the members (property or business appraisers) of the most numerous exclusive umbrella associations of property or business appraisers and/or property or business valuation companies, provided consent from such members.