April 4, 2023
Appraisal activities in Uzbekistan
3. The concept of evaluation activities
5. The circumstances when the appraisal is compulsory
6. Requirements for the appraisal contract
Significant work has been done in Uzbekistan to develop the market for appraisal services and to strengthen accountability for the results and objectivity of the assessment work. To date, there are more than two hundred appraisal organizations in the market, which employ about thousand appraisers, who have a qualification certificate [PP-3764 dated 01.01.2018].
- Law of the Republic of Uzbekistan dated 19.08.1999, No. 811–I “On appraisal activity” (hereinafter referred to as “ZRU-811”)
- Decree of the President of the Republic of Uzbekistan dated 24.04.2008 No. 843 “On further improvement of the activities of appraisal organizations and increasing their responsibility for the quality of services provided” (hereinafter referred to as “PP-843“)
- Decree of the President of the Republic of Uzbekistan dated 01.01.2018 No. 3764 “On measures for further development of the market of appraisal services” ” (hereinafter referred to as “PP-3764“)
- Regulation on appraisal organizations and appraisers (Annex to Decree of the President of the Republic of Uzbekistan dated 24.04.2008 No. 843)
- Order of the Director of the State Asset Management Agency of the Republic of Uzbekistan dated 04.06.2020, No. 3239 “On approval of the unified national appraisal standard”
According to Article 3 of the ZRU–811, appraisal activity refers to the activity of the appraisal organization aimed at determining the value of the object. In contrast to current legislation, the previous version of ZRU–811 provided that individuals could also independently engage in appraisal activities as an appraisal organization. However, appraisal activities must be carried out exclusively by legal entities since July 1, 2008.
According to Article 4 of ZRU–811, an appraisal organization is a legal entity carrying out appraisal activities. An appraisal organization may be established in any legal form provided by legislation, with the exception of a joint stock company. At the same time, the following mandatory conditions must be met:
a) The director of the appraisal organization must be an appraiser.
An appraiser is a natural person holding an appraiser’s qualification certificate. According to Paragraph 12 of the Regulation “On appraisal organizations and appraisers” (hereinafter referred to as the Regulation), the qualification certificate of an appraiser is issued by the State Committee of the Republic of Uzbekistan on the condition that the applicant successfully passes the qualification exam. The organization, procedure and registration of the results of the qualification examination shall be determined by the Regulations approved by the State Committee of the Republic of Uzbekistan on the Qualification Examination. According to Paragraph 13 of the Regulation, an applicant for an appraiser’s qualification certificate must meet the following requirements:
1) higher economic, legal or technical education, with at least one year of work experience as an appraiser or assistant appraiser in the last five years; or
higher education, at least two years of work experience as an appraiser or assistant appraiser in the last five years; or
2) certificate of special education in appraiser training centre on the program approved in the prescribed manner by the State Committee of the Republic of Uzbekistan.
The qualification certificate of the appraiser shall be issued for a period of 5 years and its validity may be extended for five years.
b) The staff number of an appraisal organization and the amount of the statutory fund must be in accordance with the law.
Previously, appraisal organizations had to have statutory capital in the amount of up to 1500, 2000, and 2500 of the basic calculation value (BCV) depending on the type of appraisal activity. However, this requirement has been abolished with PP-3764. Now appraisal organizations may form their authorized capital on the basis of the chosen legal form of company.
In addition, the staffing of an appraisal organization depends on the type of activity of the appraisal organization. For example, appraisal organizations which carry out the valuation of immovable property, except for an enterprise as a property complex, must have at least three full-time appraisers, while organizations which carry out business appraisals must have at least four full-time appraisers.
c) The existence of an insurance policy for the appraisal company
According to paragraph 5 of PP-3764, the insurance amount within which the insurer undertakes to pay the insurance compensation upon the occurrence of the insured event may not be less than
2000x of the BCV- for the assessment of movable property, except for securities, shares, intellectual property objects and other intangible assets;
2500x of the BCV- for assessment of immovable property, except for enterprise as a property complex;
3000x of the BCV – for business valuation (enterprise as a property complex, all types of tangible and intangible assets ).
d) Membership in one of the professional public associations of appraisal organizations.
Under the previous version of ZRU-811, appraisal activities were carried out on the basis of a license. According to the current legislation, it is not required to obtain a license for valuation activities. However, an organization must acquire membership in one of the professional public associations of appraisal organizations. Professional public associations of appraisal organizations are non-governmental non-profit organizations based on a membership of at least fifty appraisal organizations. They act to promote and maintain the professional level of appraisers, to protect their professional interests, including in the courts.
Pursuant to Article 5, the objects of valuation are:
- separate tangible objects (items); and
- individual tangible objects (things);
- the things constituting a person’s property, including the property of a certain type (movable or immovable);
- ownership and other proprietary rights to property or individual items of property;
- rights of claim, obligations (debts);
- works, services, information;
- objects of intellectual property and other objects of civil rights, in relation to which the law establishes the possibility of their presence in civil turnover.
Also, an appraisal organization may provide the following additional professional services:
- examination of the reliability of valuation reports;
- development and analysis of investment projects, preparation of business plans;
- automation of the valuation process and implementation of information technologies in valuation activities;
- carrying out research activities in the field of valuation and dissemination of their results.
It is important to note, ZRU-811 does not exclude other additional professional services which are in compliance with the legislation.
In accordance with ZRU-811, the appraisal is compulsory in the following respects:
- determining the value of valuation objects for the purposes of their denationalization, privatization, transfer into trust management or lease;
- the use of valuation objects as collateral;
- the sale or other disposition of valued items;
- assignment of debt obligations associated with valued items;
- transfer of valuation objects as a contribution to the statutory funds of legal entities.
An appraisal is also obligatory in the event of a dispute over the value of the valuation object, including:
- nationalization of property;
- mortgage lending;
- division of marital property at the request of one of the parties;
- redemption or other statutory seizure of property from owners for public needs;
- monitoring the correctness of taxes and other compulsory payments.
- Requirements for the appraisal contract
The basis for the assessment of the object is the contract concluded between the valuation organization and the client or a court ruling in cases stipulated by law. ZRU-811 establishes mandatory requirements for the contract on the appraisal of the object, according to which the contract must contain:
- the name of the object of evaluation;
- the purpose of the evaluation;
- type of the assessed value of the assessed object;
- the period for carrying out the evaluation of the object;
- the amount of payment for carrying out the evaluation of the object.
- availability of an appraiser’s certificate
- insurance policy
It is important to take into consideration that the amount of money for the assessment is determined by the contract and cannot depend on the value of the object. The results of the appraisal are documented in an appraisal report. The appraisal report is signed by the appraiser(s) carrying out the appraisal and is approved by the director of the appraisal organization. Article 17 of ZRU-811 establishes a number of requirements for the content of the appraisal report that may affect the reliability of the organization’s report. Appraisers may also engage other appraisal organizations, appraisers and specialists with whom the appraisal organization has a contract of civil law nature. However, an appraiser cannot be engaged by an appraiser on the basis of a civil law contract if he/she is employed by another appraisal organization.
(a) Non-permissibility of appraisal of the object
Article 16 of ZRU – 811 lists the circumstances that do not allow the assessment to be carried out according to which:
- the customer is the owner, founder (participant), creditor, insurer, and appraiser of the appraisal organization;
- the appraisal organization and (or) the appraiser is the owner, founder (participant, shareholder), a creditor of the client;
- an appraisal organization and (or) an appraiser have a proprietary interest in the object of appraisal;
- the appraiser is in a close kinship or affinity with the persons who have an interest in the object of appraisal.
(b) Liability
Pursuant to Article 19 of ZRU – 811, the appraiser is liable to the client for the damage caused by the non-performance or improper performance of the contract. Losses, including loss of profit, incurred by the client shall be compensated by the appraiser in the manner prescribed by law. In addition, the appraiser shall be liable to the appraisal organization for the damage caused as a result of a defective or improper appraisal of the object, disclosure of confidential information or other actions that caused loss to the appraisal organization.
