The Market Value Of The Debtor’s Property

  • Thus, the bailiff in the process of valuation of the debtor’s property must determine the market value of the debtor’s property for its subsequent sale at the market price.

According to Art. 3 of the Federal Law “On appraisal activity in the Russian Federation”, the market value of the appraisal object is the most likely price at which the appraisable object can be alienated on the open market in a competitive environment, when the parties to the transaction act reasonably, have all the necessary information, and transaction prices do not reflect any extraordinary circumstances, i.e. when:

One of the parties to the transaction is not obliged to dispose of the object of evaluation, and the other party is not obliged to accept execution;

  1. The parties to the transaction are well aware of the subject matter of the transaction and act in their own interests;
  2. The object of valuation is represented on the open market by means of a public offer, typical for similar objects of valuation;
  3. The transaction price is a reasonable reward for the object of evaluation and coercion to make a transaction with respect to the parties to the transaction;
  4. Payment for the property being valued is expressed in cash.

It should be noted that in theory and judicial practice on the issue of determining the market price in the enforcement proceedings there were different points of view. These include the following:

1) The market value in the enforcement proceedings should be defined as the liquidation value [347] . Liquidation value is understood as

Estimated value that reflects the most probable price at which a given object of valuation may be alienated during the exposure period of the object of valuation, less than the typical exposure period for market conditions, in conditions when the seller is forced to make a transaction for the alienation of property. In determining the liquidation value, as opposed to determining the market value, the effect of extraordinary circumstances is taken into account, forcing the seller to sell the object of valuation under conditions that do not correspond to market value 1 . It should be noted that the determination of the liquidation value is fully consistent with the conditions for the implementation of the object of evaluation in the framework of the enforcement proceedings;

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2) the market value in the enforcement proceedings means a special value, which is also a market value established for the purposes of the enforcement proceedings, but with the use of a reduction factor, taking into account the forced and forced nature of the sale of property 2 ;

3) in determining the market value of the seized property in the enforcement proceedings, no specifics exist. A number of courts believe that the market value in the framework of enforcement proceedings should be determined in full compliance with Art. 3 of the Federal Law “On valuation activities in the Russian Federation” 3 .

☆ So, for example, in the Decree of the FAS of the Urals District of June 28, 2007 No. Ф09- 4910/07-С1 in case No. А71-9719 / 06 4 it is expressly stated that the arguments on the legality of its liquidation value when determining the market value of the seized property contrary to the provisions of the Law on Enforcement Procedure.

We believe that the bailiff or appraiser, determining the market value of the seized property in the enforcement proceedings, should take into account not only the individual characteristics of the subject property, such as: improvement or deterioration of the property, its encumbrance, but that it is affected by such factors such as compulsory sale, urgency of sale (Article 87 of the Law on Enforcement Proceedings set a short deadline for implementation), the possibility of disputes, etc.

Thus, it is obvious that a certain value and the selling price of the debtor’s property at which it can be sold as part of the enforcement proceedings is always slightly lower than the price at which the property could be alienated by the debtor .

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