How to appeal the assessment of property in enforcement proceedings?

In enforcement proceedings, the stumbling block between the debtor and the debt collector is the assessment of property. The debtor's interest is to overestimate the value of the property and stop the process of its sale, and the debt collector's interest is to sell the debtor's property and collect his debt faster. What are the grounds for appealing the valuation of the property and how to properly appeal it? I share my own experience of appealing the assessment in enforcement proceedings.

Grounds for appealing the assessment

Independent property valuation report.

Debtors often disagree with the market value of the valuation and consider it understated. Collectors, on the other hand, consider the assessment to be overstated. In practice, in support of their arguments, they submit an independent assessment report, commissioned by the complainant, together with the complaint. The value of the property in such a report differs significantly from the assessment made to order by the contractor. However, not all courts take such reports into account. Example The Supreme Commercial Court of Ukraine in the decision of 17.08.2017 noted that the courts of previous instances lawfully did not take into account the report, as it was made at the request of the debtor without the consent of other participants in the enforcement proceedings.

Therefore, the report commissioned by the complainant cannot serve as the sole basis for challenging the assessment. However, such a report can be used to substantiate a request for an examination to determine the value of the property.

Violation of the method

The reason for appealing the assessment may be a violation of the methodology of its conduct.

When conducting an appraisal, the subjects of appraisal activity in particular use the National Standard № 1 “General principles of property appraisal and property rights”. In most cases, appraisers use a comparative valuation method, the essence of which is that the appraiser selects similar objects for comparison and equalizes market prices.

However, when choosing analogues for comparison, appraisers often choose incomparable objects. For example, real estate that is being valued is located in another area and has other technical characteristics. Wrong choice of analogues is a direct violation of the comparative method and as a consequence a reason to cancel the valuation of the property.

Formal violations.

No less important are the formal aspects of the assessment. For example, the already mentioned National Standard stipulates that an independent valuation of property is preceded by a preparatory stage, which includes, in particular, acquaintance with the object of valuation.

However, in practice property valuation is often carried out without inspection. This may also be a reason to cancel the assessment. For example, he expressed such a position The Supreme Commercial Court of Ukraine in its decision of 20.07.2016.

Who are they suing?

The Law on Enforcement Proceedings (Article 57, hereinafter also the Law) stipulates that the parties in enforcement proceedings may appeal the valuation of property in court if they do not agree with its results within 10 days of receiving notification of the valuation.

The law does not tell us how to appeal the assessment. Judicial practice on this issue is quite different. Some courts believe that the appraiser should be sued, while others believe that the assessment should be appealed in the context of appealing the decisions and actions of the executors.

The Supreme Administrative Court in the decision of the plenum № 3 of 13.12.2010 noted that the assessment is the result of the appraiser, not the state executor, and therefore a claim to appeal the assessment should be filed with the appraiser.
However, on 17.10.2012 in the decision of the Plenum № 9 the Supreme Commercial Court of Ukraine indicated that determining the value, valuation of the debtor's property is a procedural action of the state executor, regardless of which person (the state executor or the subject of appraisal) assessment. Therefore, it is necessary to appeal the assessment in the order of appealing the decisions of the performers.

A similar position was expressed by the Supreme Specialized Court of Ukraine for Civil and Criminal Cases in the decision of the Plenum № 6 of 07.02.2014.

Today in the register you can find many "fresh" court decisions based on different positions. Although in most cases the assessment is challenged, just like the actions of the performers. Example Resolution of the Supreme Economic Court of Ukraine dated 01.08.2017.

However, there are no court decisions in the register where the defendants or co-defendants are the subjects of evaluation activities. Example  Decision of the Borodyansky District Court of the Kyiv Region of February 16, 2018.

In practice, complainants often apply to two courts at once, especially those who missed the 10-day deadline to appeal the assessment. However, I take the position that it is necessary to appeal the assessment within the framework of appealing the decisions and actions of the executors. After all, it is the executors who are responsible for conducting the assessment, and although the new version of the Law does not provide for the possibility of reviewing the assessment or influencing the assessor in any way. However, in my opinion, there is nothing to prevent the contractor from reassessing, if there are doubts, say about the market value of the property. In addition, the evaluation report is not an independent legal act that can be revoked or declared invalid. A similar conclusion is contained in Resolution of the Grand Chamber of the Supreme Court of March 13, 2018.

Is it possible to stop the implementation?

As I mentioned, in most cases, the assessment is challenged only to stop the sale of property. Article 57 of the Law stipulates that an appeal in court against the results of determining the value or valuation of property does not stop the transfer of property for sale, except in cases of suspension of the transfer of property for sale by the court.

That is, the court can stop the transfer for the sale of property, and not the sale itself, if the property has already been put up for auction. In practice, debtors who challenge the actions of the state executor and ask to cancel the assessment are also asked to provide a complaint and stop the sale of property. Sometimes courts grant such motions by referring to the rules on securing a claim.

However, this is not entirely correct. The Supreme Specialized Court of Ukraine for Civil and Criminal Cases in the decision of the plenum of № 6 of 07.02.2014 indicated that courts considering complaints against the actions of executors are not entitled to take measures to ensure the complaint (similar to securing the claim) by suspending enforcement proceedings, suspending the contested decision, etc. .

In my opinion, the court should decide on the suspension of the transfer of property for sale in the decision to open proceedings and assign the case for consideration. For example, how he did it The Commercial Court of Ternopil region in the decision of 31.08.2018.

The main reason for suspending the transfer of property for sale is, of course, the protection of the complainant's interests. Because after the sale the property will become the property of third parties at a non-market price. However, as practice shows, courts take into account not only this circumstance, but also take into account the validity of the complaint itself and the grounds for revoking the assessment.

As we see, to challenge the assessment in the enforcement proceedings it is necessary to find sufficient grounds. This can be either a violation of the evaluation methodology or formal errors made by the contractor or the evaluator. As for the suspension of the transfer for sale of the seized property, it is better to ask the court before the property is put up for auction.

Andriy Gevko, partner, lawyer

The article is published on League. Blogs.