Assessment

Term and significance of valuation in the legal context

Die Valuation is a central element in the legal system. Valuation refers to the methodical assessment of the value, quality, or relevance of an object, legal interest, or fact based on legal criteria. Valuation processes occur in numerous areas of law and serve, among other things, to determine prices, the extent of liability, the assessment of tax and duty burdens, and the imposition of sanctions.

Legal foundations of valuation

Civil law valuation

In civil law, valuation plays a key role in determining the value of items and rights. Typical applications include:

• Valuation of items: For example, in purchase contracts, calculation of damages, and the distribution of jointly owned property (e.g., inheritance communities).
• Valuation of receivables and rights: In the context of attachments, compulsory enforcement, or assignments, it is necessary to determine the value of a claim or right.
• Valuation in family law: In the event of divorce, assets acquired jointly are valued for the purpose of equalization.

Civil law valuation procedures often rely on external expert reports. Legal foundations can be found, among others, in the German Civil Code (BGB), particularly in connection with the determination of value for damage compensation (§§ 249 ff. BGB) and the distribution of communities (§§ 2042 ff. BGB).

Tax law valuation

Valuation in tax law is governed in Germany primarily by the Valuation Act (BewG) which defines the uniform and binding valuation bases for the various types of taxes.

• Real property valuation: The value of real estate is determined using special valuation methods for the assessment of real property tax and inheritance/gift tax.
• Business valuation: Business assets, shares in corporations, and positive economic assets are valued to determine the taxable value for inheritance, gift, and income tax purposes.
• Valuation of other assets: The Valuation Act contains rules for the valuation of bank deposits, securities, and intangible economic assets.

The objective of tax valuation is the consistent determination of tax liability and the creation of legal certainty between citizens and the tax authorities.

Commercial law valuation

In commercial law, valuations are carried out in particular within the framework of accounting and balancing.

• Balance sheet valuation: The German Commercial Code (HGB) contains rules for valuing assets and liabilities in the context of preparing commercial balance sheets (§§ 238 ff. HGB).
• Valuation regulations: Provisions such as the lower-of-cost-or-market principle, the principle of prudence, as well as detailed regulations for specific balance sheet items (e.g., inventories, liabilities), determine the valuation methodology to be applied.

Valuation in public law

In public law, valuation plays a central role, among other things, in construction planning law, environmental law, and expropriation law.

• Expropriation compensation: When the state takes possession of private property, the constitution guarantees that adequate compensation is paid on the basis of a justified valuation (Art. 14 Basic Law in conjunction with the relevant special legislation).
• Environmental law valuation: Valuation procedures for assessing adverse environmental impacts, e.g., in the approval process for major projects or for environmental protection, are based on legal standards and methodological requirements.

Valuation methods and legal requirements

Expert opinions

For many valuation matters, the law requires the involvement of an expert opinion. The court or an authority can appoint experts to neutrally determine the value of an item, a right, or a loss.

Statutory standards for appraisal

Often, there are established valuation standards that are decisive in particular cases:

• Market value (for real estate according to § 194 Federal Building Code)
• Current value (especially for car damage; typically the current market value)
• Fair market value (generally applicable to tax and commercial law valuations)
• Partial value, income value, or intrinsic value (primarily in tax and commercial law)

Binding effect and reviewability

Legal valuation decisions are generally subject to judicial and administrative review. In civil and administrative proceedings, valuation decisions can be reviewed by the courts if they have been made incorrectly.

Valuation in criminal law

In criminal law, valuations are carried out, for example, when determining the amount of damages, establishing the value of a pecuniary advantage in financial crimes, or for determining value in confiscation and forfeiture proceedings under § 73 ff. German Criminal Code.

International valuation standards and their impact

With increasing globalization, international valuation standards are becoming more important. For the valuation of companies, real estate, and financial instruments, international guidelines (e.g., International Valuation Standards IVS) are often used for cross-border valuations. Whether these are recognized and applied in German law depends on the individual case and the relevant legal basis.

Legal consequences of faulty valuations

Faulty valuations can have significant legal consequences:

• Rescission of contracts
• Amendment of tax assessments
• Invalidity of administrative or judicial measures
• State liability claims for valuation errors by public institutions

Summary

Valuation is a multifaceted concept deeply anchored in law. The accurate determination of the value of objects, rights, or damages is essential for the lawful and comprehensible application of the law. Numerous laws, principles, and methods govern the valuation process, with the specific objective and area of law determining the valuation methods. Faulty valuations can have significant financial, procedural, and liability consequences.

Frequently asked questions

Who is legally authorized to perform a valuation?

Only certain specially qualified individuals are generally authorized in Germany to perform legally recognized valuations—for example, of real estate, companies, or movable property. These include, in particular, publicly appointed and sworn experts, officially recognized appraisers, or specially trained professionals with the relevant state license or professional qualification. The legal foundations can be found depending on the valuation object, including the Real Estate Valuation Ordinance (ImmoWertV), relevant specialist laws, as well as the Code of Civil Procedure (ZPO), which sets out requirements for appointing experts in court proceedings. Private individuals or companies may carry out valuations for internal purposes, but these generally lack legal binding force. For tax matters, court disputes, or other official purposes, the valuation of a recognized expert will be required if in doubt.

What legal requirements apply to the traceability of a valuation?

A valuation must always be comprehensible, objective, and verifiable under German law. Section 407a ZPO and numerous subject-specific regulations (for example, ImmoWertV, valuation laws) require that the methods used, valuation bases, data sources, and calculation procedures are presented transparently in the written expert opinion. The rationale for the value assumptions applied must be provided so that third parties, such as courts or contracting parties, can examine the substance of the valuation. Inadequate documentation means the valuation is legally vulnerable or even disregarded in the event of a dispute. In addition, the valuer must maintain independence and neutrality; conflicts of interest can lead to the legal inadmissibility of the valuation.

When can a valuation be legally challenged?

A valuation can be challenged for various legal reasons. The most common grounds for challenge include incorrect information, methodological errors, bias of the expert, violation of participatory rights (e.g., lack of hearing or access to files), breaches of mandatory statutory provisions, or lack of traceability and transparency of the expert opinion. In court proceedings, the requirements are stipulated in Sections 406 ff. ZPO; in administrative proceedings, the principles of the Administrative Procedures Act (VwVfG) apply. In tax law, a taxpayer may also object to an unfavorable value determination by means of an appeal or a lawsuit. In the event of serious errors, the entire valuation procedure may be repeated.

What are the legal consequences of a faulty valuation?

A faulty valuation can have significant legal consequences. For example, if a faulty valuation is used as the basis for a decision in legal proceedings, this may lead to the judgment being overturned and remitted. In tax law, an incorrect valuation can result in additional tax assessments or improper property tax assessments. The valuer may also be civilly liable for damages if gross negligence or intent is present (§§ 280, 823 BGB). In cases of intentional false valuation, criminal consequences (such as fraud or official misrepresentation) may also arise. Since valuations often have far-reaching financial and legal effects, substantive accuracy and legal diligence are essential.

To what extent are valuation procedures legally mandatory or typically regulated?

In Germany, there are detailed legal provisions for many objects of valuation. For real estate valuation, these include, for example, the ImmoWertV; for business valuation, the IDW Standards (e.g., IDW S1) and various tax provisions (Valuation Act, Inheritance and Gift Tax Act). In the case of damage claims or market value reports, the relevant valuation procedure specified by court decisions and administrative guidelines must usually be applied. Failure to comply with these rules may result in the valuation being inadmissible or give rise to liability consequences for the valuer.

How long is a valuation legally valid or effective?

The legal validity of a valuation is not generally regulated, but depends on the object of valuation, the purpose of the valuation, and the dynamic development of the valuation object. In the real estate sector, for example, a valuation report loses its relevance if market conditions or circumstances (modernization, tenancy agreements) change significantly. For tax valuations, statutory deadlines (e.g., in the Valuation Act) and case law govern when a new valuation may be required. In judicial proceedings, a valuation generally remains valid as long as the decisive circumstances remain unchanged or until the court orders a revaluation.

What data protection requirements apply in the preparation and use of a valuation?

Data protection plays an important role in valuation procedures. According to the General Data Protection Regulation (GDPR) and the German Federal Data Protection Act (BDSG), personal data collected or used in the course of valuation processes must be treated with strict confidentiality. Anyone who commissions or prepares a valuation is obliged to inform the affected persons of the data collection and ensure the secure processing of the data. Disclosure to third parties—for example, for judicial or administrative purposes—is only permitted under statutory requirements. Violations of data protection provisions may result in civil law consequences as well as significant fines.