In the first part, using the specific example of the ‘Zarya’ hotel being put up for privatisation, we highlighted a number of issues raised by the valuation of this property.
But the problem is systemic in nature. And it is important to understand where its roots lie.
The law leaves the matter to the discretion of the court
In Moldova, a Council for the Verification of Valuation Reports is due to be established from 1 January 2027. This is provided for in the draft Regulations prepared by the government.
The official justification for the need for this body is the usual one: quality, standards and European practices. Yet a first glance at the draft gives the impression that this will be a body which is forbidden to identify errors, but authorised to strip professionals of their licences for making them.
The problem with the Moldovan valuation market has never been the lack of yet another commission.
Article 12 of Law No. 989/2002 establishes a presumption: the value stated in a report drawn up in accordance with the law is deemed to be accurate, unless otherwise established by legislation or a court ruling.
Article 13 is even more explicit: disputes regarding the accuracy of the appraised value are resolved by the courts.
Both provisions are in force in their 2002 version and have not been affected by the latest amendments.
Now turn to Appendix No. 6 to the draft Regulations – the standard form for a non-compliance report. It contains a mandatory field: whether the discrepancies significantly affect the value of the asset or do not. This is not an optional but a mandatory requirement.
Paragraph 73 declares such a report to be mandatory, giving rise to legal consequences, and explicitly not advisory in nature.
The statement ‘the deviations have materially affected the value’ has exactly one meaning: the stated value cannot be trusted. This is precisely the question of reliability, which the law has entrusted to the court.
The five-member panel, established by order of the agency’s Director-General, is neither a legislative body nor a court of law.
There is also a detail that is evident regardless of any dispute over methodology. Paragraph 73 renders the report enforceable against both the client and the user of the valuation. Paragraph 85 stipulates that it must be sent only to the applicant and the valuer. The bank, identified in the report as the user, will find itself bound by a binding act of which it has not been notified, with a thirty-day period for appeal from the date of notification.
Administrative sleight of hand
The Council is expressly prohibited from carrying out a new valuation, establishing an alternative value, determining the extent of the impact of the breach, calculating the percentage deviation, or specifying the monetary value of the error.
However, it is entitled to state that the breach has materially affected the result and to suspend the certificate for up to six months.
The magnitude of the error is unknown, the correct value is unknown, and there is no control calculation – yet the guilty party has been identified.
How can one determine that the capitalisation rate has materially altered the value without performing the calculation? How can one establish the impact of the composition of comparables without testing the result on a different sample? How can one assess the consequences of an erroneous revenue forecast without constructing an alternative cash flow?
It is impossible.
Instead of evidence, there is the commission’s opinion, which immediately becomes binding. Liability is imposed not for proven inaccuracy of the valuation, but for the administrative body’s disagreement with professional judgement.
Six months without a certificate means losing clients, staff and your practice. Even if a court overturns the decision a year later, no one will bring the market back.
To verify the methodology, one must understand the subject matter
The whole structure rests on an unspoken assumption: that verifying the methodology is a technical procedure separate from the valuation itself, akin to cross-referencing against a checklist.
This is not how valuation works.
The choice of approach is derived from the subject matter, not from a reference guide. One can only say that the comparative approach has been wrongly rejected if one knows whether there are any transactions in that segment. One can only say that the cost approach has been applied incorrectly if one knows the planning status of the site. One can only say that income should have been capitalised after determining whether the company’s financial statements reflect the market or the quality of management.
None of these issues is procedural. They all concern the property itself.
Consequently, reviewing a report is just as much an act of professional judgement as the valuation itself. There is one difference: the valuer signs the conclusion personally and is liable under Article 22 of the Act. The board votes – three votes out of five; in the event of abstentions, three members present; in the event of a tie, the chairperson from the agency has the casting vote. A dissenting opinion is optional. No one bears personal responsibility for the methodological conclusion.
Methodological truth is not established by a show of hands.
There is oversight, but no provision for competence
Clause 8 defines the composition of the Council as comprising specialists in the valuation of movable and immovable property, whilst clause 89 extends the procedure to valuers of movable property.
However, paragraph 14 requires all three external members to hold a property valuer’s certificate, whilst paragraph 14.5 requires at least fifteen years’ practical experience specifically in property valuation. This requirement is repeated separately for each category, including the academic category.
And in none of the one hundred and seventeen clauses is there a requirement for a Council member to have experience working with the type of property for which the report is being considered.
The valuation of a hotel business, an industrial complex, an equity stake, plant and machinery or an intangible asset will be assessed by someone whose qualifications are recognised for flats and plots of land.
The mere presence of walls does not turn a specialist in walls into a specialist in business economics.
Independence on paper
Two out of five members are employees of the Agency for Geodesy, Cartography and Cadastre. The three external members are selected by the same agency. The chairperson is appointed from amongst its representatives. The secretariat, agenda, funding and preliminary appeals remain within the agency. The standards are approved by its own order.
The agency drafts the rules, chairs the body that adjudicates on compliance with those rules, and decides on sanctions.
Add in the staffing requirements: fifteen years’ practical experience, a valid certificate, a list of all reports covering the past three years, a ban on providing paid services to the client or the appraiser under scrutiny for the past two years, and a fee of 17,400 lei per meeting, with twelve meetings per year.
A practising valuer of this calibre will be recused on the grounds of a conflict of interest in the majority of significant cases – major clients in Moldova are common to all. Those who are formally eligible will turn out to be the least active professionally.
The closer a person is to actual practice, the fewer cases they are entitled to hear.
What this will mean for the market will be discussed in the third part.
Dmitri Taraburca,
expert in property valuation and development
This story was translated with the assistance of artificial intelligence.The translation was also reviewed by the Logos Press editorial team.
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