The Cost of Exemption from Encumbrance of Property Ownership (on the Example of the Cost Indicators of Land Plots)

This article is devoted to the study of cost indicators in relation to “problematic” land plots which have been built with unauthorized construction, contain emergency buildings, or are polluted by waste. Bringing these plots to the appropriate environmental and sanitary-epidemiological standards will lead to significantly higher costs than the cost of this land plot in a condition suitable for commercial or other use. The purpose of this study is to identify the financial principles behind the negative values of property indicators, and how these negative values can become obligations for the owner. To achieve this goal, the author has identified several key tasks: defining the basic principles behind negative value occurrence, describing the economic indicator “cost of exemption from encumbrances on property”, and exploring how negative values can become obligations for property owners; a financial toolkit for the use of negative values in valuation activities is proposed. In the course of the research, methods of analysis, generalization, synthesis, comparison, as well as the method of regulatory regulation were used. The author shows and justifies the need to improve the tools of valuation activities, raising the question of the ambiguous understanding and interpretation of such an economic phenomenon as the negative value of property. The study provides recommendations for transforming negative property value into corresponding liabilities of the asset owner. It concludes that negative asset value should be transformed into informal liabilities that are not subject to accounting. It is reasonable to determine the amount of such informal obligations in the amount of the cost of exemption from encumbrance of ownership of property, property rights. The conclusions obtained can be used in the course of evaluation activities, in the implementation of financial analytical procedures during the analysis of the company’s activities, in making management decisions, etc.