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Valuation of Real Estate with Archaeological Sites

Authors:
  • Calisia University - Kalisz Poland

Abstract and Figures

The paper outlines procedures for valuing a property in which there are ma-terial traces of past cultural heritage. In Poland, such traces are under broad protection. The authors discuss existing legal provisions and the types of archaeological research. The importance of archaeological heritage in the in-vestment process has also been highlighted.
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VALUATION OF REAL ESTATE WITH ARCHAEOLOGICAL SITES
Grzegorz Szczurek, M.Sc.
Real Estate Appraiser
Ph.D. Student, Institute of Prehistory, Adam Mickiewicz University in Poznań
Izabela Rącka, Ph.D.
Real Estate Appraiser
The President Stanisław Wojciechowski University School
of Applied Sciences in Kalisz
Abstract
The paper outlines procedures for valuing a property in which there are material
traces of past cultural heritage. In Poland, such traces are under broad protec-
tion. The authors discuss existing legal provisions and the types of archaeologi-
cal research. The importance of archaeological heritage in the investment pro-
cess has also been highlighted.
Keywords: archaeological research, heritage, valuation, investment.
1. Introduction
The prevalence of traces of historical and social phenomena, considered
worthy of legal protection for the benefit of the society and of transferring to the
next generation a sense of civilisational community, makes one consider their
impact on the value of the property and the method of valuation.
The issue of valuation of property with archaeological sites has not been the
subject of wider interest of appraisers and the subject was taken up in Poland
only occasionally (Szczurek 2002). The aim of the article is to present a proce-
dure for the valuation of the property, within which there are physical signs of
the archaeological heritage.
Achieving the goal was made possible by the following test methods: a re-
186
view of literature and legislation on cultural heritage and its impact on the in-
vestment process and the value of the property, case study.
2. The notion of an archaeological monument
Archaeological monuments are historic documents in their own right. For
archaeology, which is concerned with man’s past, archaeological monuments
constitute the sole foundations of knowledge, in the absence of written records.
By ‘archaeological monuments’ archaeology means the remains and traces of
human life in past ages which can be studied using archaeological methods
(Cleere 1984, p. 37).
In the Polish legal system, the supreme legal act is the Constitution of the
Republic of Poland. It defines the effective model for the protection of monu-
ments: ‘The Republic of Poland shall safeguard the independence and integrity
of its territory, ensure the freedoms and rights of persons and citizens, the secu-
rity of the citizens, safeguard the national heritage, and shall ensure the protec-
tion of the natural environment pursuant to the principles of sustainable devel-
opment. The most comprehensive regulations on the protection of monuments
and care of monuments have been recorded in the Act of 23 July 2003 on the
protection of monuments and care of monuments (Dz. U. No 162, item. 1568, as
amended), but the issues are raised in a number of other legal acts (Rącka 2015,
p. 71).
According to the art. 3 of the Act of 23 July 2003 on the protection of mon-
uments and care of monuments, an archaeological monument is an immovable
monument, which constitutes the surface, underground or underwater remains of
existence and human activity, composed of cultural stratifications and the crea-
tions or traces thereof. Its creation may also be a movable monument. In partic-
ular, archaeological sites include:
a) the landscape remains of prehistoric and historic settlement,
b) burial grounds,
187
c) barrows,
d) relics of commercial, religious and artistic activity.
The register of monuments in Poland includes three categories (Kowalska 2012,
p. 40):
register A: immovable monuments,
register B: movable monuments,
register C: archaeological monuments.
Figure 1. Archaeological monuments in Poland
Source: http://www.mapy.zabytek.gov.pl/nid/ (access: 11.09.2016).
188
Currently, the register of archaeological monuments in Poland lists 7,744 ar-
chaeological monuments. Archaeological sites entered into the register consti-
tute a small minority. These are most often sites with their own landscape form,
e.g. settlements, barrows, etc. Information on other archaeological sites, not in-
cluded in the register of monuments, may be obtained from the regional conser-
vator, the municipal authorities (records in local plans and other planning docu-
ments, the municipal register of monuments, planning permissions), as well as
from the National Heritage Board of Poland, which maintains a central database
of archaeological sites and creates the Archaeological Photo of Poland1. Since
1978, there has been a procedure established across the country for searching,
recording and mapping of archaeological sites, or material traces of human ac-
tivity in the past. The term ‘archaeological site’ describes a compact, separated
from other, segment of an area, within which there are archaeological sources,
along with the surrounding context. Currently, there are approximately 450
thousand archaeological sites in Poland (1.4 posts per 1 km2 of the country area).
Exploration of archaeological sites is mainly conducted via the fieldwalking
method (surface observation of ploughed fields in spring and autumn). Addi-
tionally, information from source documents and interviews with residents of
the village may be used. Fieldwalking is complimented by methods of aerial ar-
chaeology. The collected information is used for scientific and conservation
purposes.
Often, the discovery of archaeological sites takes place only after the com-
mencement of excavation works in the investment process.
Archaeological sites are particularly important, as they make up the cultural
heritage. The Convention on the Protection of the World Cultural and Natural
Heritage (UNESCO) from 1972, distinguishes between three types of cultural
heritage:
189
monuments: architectural works, works of monumental sculpture and
painting, elements and structures of an archaeological nature, inscriptions,
cave dwellings and combinations of these elements, which are of out-
standing universal value from the point of view of history, art or science,
groups of separate or connected buildings which, due to its architecture,
homogeneity or fusion with the landscape, are of outstanding universal
value from the point of view of history, art or science,
historical sites: works of man or joint works of man and nature, areas, ar-
chaeological sites, with a unique, timeless historical, aesthetic, ethnologi-
cal or anthropological value.
3. The privileged position of archaeological sites and its consequences
Specific rules for the protection and conservation in the field of archaeology
relate primarily to immovable monuments, however, an important exception re-
lating to movable archaeological sites is the issue of their ownership. All mova-
ble archaeological monuments found on Polish territory, regardless of the meth-
od of their discovery, are owned by the State Treasury and it is irrelevant wheth-
er the location of their find was state or privately owned.
Each archaeological monument or an object that may be one, is subject to le-
gal protection. The privilege stems from the duties which have been imposed on
explorers of archaeological monuments and investors who intend to work in an
area where there are monuments or in cases when they came across them while
already working. Regulations require stopping any work that could damage the
monument, securing the place of discovery and notifying the appropriate con-
servator or the commune head (mayor or president of the town/city). The con-
servator has a maximum of 3 days from the receipt of the notification to verify
the findings. If the time limit is exceeded, the investor can continue to work.
People who have discovered or accidentally found an archaeological monu-
ment, are entitled to a reward, provided that they complied with the statutory
190
obligations (Act 2003, art. 34.1). Non-compliance may result in criminal liabil-
ity: a fine or imprisonment for up to two years in case of unintentional miscon-
duct and up to 5 years for willful misconduct.
4. Valuation of real estate with archaeological sites
The issue of archaeological heritage is raised in the professional standard for
valuers on the valuation of historic real estate (Standard..., 1998). The term his-
toric real estate’ is understood to mean the property entered in the register of
monuments, listed in the monuments database or other property as long as it
meets special provisions confirming its significance for the cultural heritage.
Protected historic real estate, includes ‘archaeological sites and all the items dis-
covered during the archaeological research or chance finds, which are perma-
nently attached to the land (e.g. caves, prehistoric mines, castles, burial grounds,
barrows, etc.).’ (Standard..., 1998, section 1.3). A valuer is required to precede
any estimation activities with the collection of the relevant information on the
historic property and include it in the valuation process (Standard 1998, sec-
tion 3.1). This issue is also raised in the specific provisions for property valua-
tion (Regulation 2004, §44), which recommend consideration for not only the
material qualities of the real estate entered in the register of monuments, but also
for the decisions of the monuments protection service, as well as other circum-
stances related to the historic character of the property. The valuer should,
therefore, explore local plans, records of the municipal register of monuments,
view the national geoportal, taking into account the layer of INSPIRE: World
Heritage Properties List (UNESCO), Monuments of History, Immovable Mon-
uments, Archaeological Monuments and local geoportals. It would be inappro-
priate for a valuer estimating the value of real estate to only consider sites en-
tered into the monuments register. Such limited approach could result in false
estimation. Often, the sites registered during the fieldwalking activities under the
Archaeological Photo of Poland project, do not display any major cognitive ben-
191
efits and their negative impact on the value of real estate in this context is rela-
tively small. The situation is significantly different in the case of a site with in-
teresting historical substance. All the expenditure to conduct archaeological re-
search must be borne by the investor. Often, this may constitute a significant
share of the costs of the investment. The ability to anticipate and to take into ac-
count the consequences should be an essential element of the procedure of prop-
erty valuation.
5. Archaeological heritage as part of the investment process
As part of the generally accepted practice, when preparing their cost esti-
mates, investors take into account mainly expenditure related to labour, trans-
portation, materials or purchase of land. However, cost estimates and investment
works timetable should also cover the matter of cultural heritage trapped under
the surface of the investment site.
In order to avoid delaying the commencement of the project with reference
to the emergence of an archaeological site, before buying land, investors should
check with the conservation office, that the area designated for the project does
not include an archaeological site listed in the monuments or conservation regis-
ter, and if so - require a clear specification of the conservation conditions ena-
bling the investment. It is on this basis only, that costs, and thus the profitability
of the implementation, can be fully evaluated. Should the real estate not be listed
in the records, there is still a possibility of accidentally coming across archaeo-
logical material in the course of construction work.
In the case of emergence of archaeological material, the appropriate Region-
al Conservator should be notified immediately. They would usually issue an or-
der suspending the work and commencing appropriate rescue exploration. It is
preferable therefore to examine the area designated for the project before it be-
gins. In the event of failure to report findings, in addition to criminal conse-
quences, the investor may be forced to reimburse the costs of conducting re-
search by the Regional Conservator, over the cost of which the investor has no
192
control. The archaeological expertise and research should therefore be of equal
importance for the investor as e.g. geological and hydrological surveys, legal
expertise, etc.
6. Case study Śródka in Poznań
6.1. Description of the real estate
The property on which the traces of cultural heritage were discovered is an
area of 663 m2 of undeveloped land. It is located in the downtown area of Poz-
nań, within the suburb of Śródka. The planning permission issued for this piece
of real estate allows for a residential and commercial building with five floors
above ground. The plot is located in an area covered by the archaeological site
listed in the register of monuments under the number 2355 / A / 95, decision of
27.04.1995. The real estate under valuation is highly likely to reveal relics of
past socio-cultural systems, which have already been registered on the neigh-
bouring plot.
Figure 2. Location of the real estate within the archaeological site
Source: http://www.mapy.zabytek.gov.pl/nid/ (access: 11.09.2016).
193
The archaeological site under discussion is one of the so-called multicultural
sites. Archaeological work conducted here since the mid 1990s (with interrup-
tions) allowed the registration of the following cultural layers:
Lusatian culture settlement,
Przeworsk culture settlement,
early medieval settlement - dating back to mid 10th century,
early medieval skeleton burial ground - dating back to the end of 10th cen-
tury or the turn of 10th and 11th century or end of 11th century,
proto-city and city settlement dating back to the mid 13th century until the
current times.
Such complicated site stratigraphy leads to difficulties in conducting archae-
ological rescue works and thus generating high costs. The uniqueness of the ana-
lysed object is determined primarily by early medieval necropolis constituting
one of the most interesting objects of this type within the country. The recorded
site was a burial ground for the population of Cathedral Island (Ostrów Tumski)
during the period of its greatest splendour, in the first decades of the Polish state.
During the seven archaeological seasons, a total area of only 180 m2 was tested,
where besides the said settlement layers, a total of 271 burials were explored.
Graves, often with wooden structures and ‘equipment, are located at a depth of
about 2.5 m and lower than the current usage level, underlying in a number of
layers (3-5).
6.2. Estimating the costs of archaeological research
Given the results of archaeological work carried out on the neighbouring
property (Rynek Śródecki 4), it may be assumed that below the surface of the
land under valuation, there are valued archaeological cultural layers, especially
early medieval skeleton burial ground. This assumption is confirmed by the reg-
istered grave trenches within the western wall of the building trench on the adja-
cent plot. The specific nature of archaeological research, however, relies primar-
ily on the unpredictability of the ultimate discovery of monuments. In these cir-
194
cumstances, it is difficult to determine to what extent the site coincides with the
boundary of the plot under valuation or how the horizontal and vertical stratig-
raphy of this part of the site is shaped (it may be more difficult or easier than the
adjacent property, it may differ in the number of burials per area unit, or the lay-
ers of prehistoric i.e. Lusatian and Przeworsk cultures, and possibly others, may
form a different image).
After analysing the results of previous studies, the nature of the site, prelim-
inary cost estimates prepared by the authors of the rescue works to date and fol-
lowing consultations with them, as well as entities conducting similar services
on the market, to estimate the cost of future research and consequently to pre-
pare the property for the intended investment activities in line with the planning
requirements, assumptions have been made about the potential costs of research
(Table 1).
Table 1. Estimated cost of archaeological research
Item
Type of costs
Estimated
cost (PLN)*
1
field work: labourers (‘dig-
gers’), draughtsmen, stock-
takers, archaeologists
236,000
2
equipment: shovels, spatulas,
brushes, wheelbarrows, sta-
tionery, cardboard, etc.
15,000
3
scientific development of re-
search results
70,000
4
the necessary analysis and
maintenance
25,000
5
other costs related to the or-
ganisation of the field re-
search area
15,000
6
amount of contractor profit
51,900
Total
412,900
*1 PLN=0,232 EUR, average exchange rate of 15.10.2016.
Source: Own elaboration
195
In the light of the calculations and assumptions, the total cost of the archaeo-
logical rescue research on the appraised real estate is PLN 412,900.
Figure 3. Poznan Śródka. View of the skeleton burial ground from the early
Middle Ages, during exploration
Source: (Pawlak&Pawlak 2015).
6.3. Determining the market value of real estate
Stated preference valuation studies of non-marketed good have increased in
scale and scope over the last decades. Fewer studies have been undertaken with-
in cultural heritage and archaeological sites. Very few studies deal with hidden
archaeological artefacts (Lundhede, Bille, Hasler 2013). Valuation methods for
archaeological monuments include (Armitage, Irons 2013, p. 253):
willingness to pay,
shadow pricing,
cost benefit analysis.
196
In the case of archaeological sites located on undeveloped investment proper-
ties, it is difficult to estimate the market value of heritage, since it is often still
unexplored. The market value of the property should instead be determined, tak-
ing into account the presence of the relics of the past and the consequences of
their presence. It is therefore essential to take into account the costs of the nec-
essary archaeological research. An investor may apply for a subsidy to cover the
costs of the archaeological rescue research that exceeds 2% of investment costs
(Act 2003, art. 82a). Therefore, the expense incurred by the investor is a maxi-
mum of 2% of the estimated cost of the construction, which had been authorised
(in this case via a planning permission).
WM = WL WAR
WM market value of the property prior to carrying out archaeological research,
WL market value of the land after the archaeological rescue research; adopted
WL= PLN 1,425,000,
WAR costs of the archaeological rescue research in accordance with Article 82a
of the Act on the protection of monuments and care of monuments; adopted total
cost of archaeological research PLN 412,900 (Table 1)
where:
WAR = 2% C
C cost of the planned investment, adopted C = PLN 8,400,000.
Since the cost of conducting archaeological rescue research amounting to
PLN 412.900 represents 4.9% of the planned investment, only a part of this
amount should be regarded as cost, due to the opportunity to benefit from the
subsidy granted by the ministry responsible for culture and national heritage
protection. The Minister gives the investor a grant to carry out archaeological
research and prepare documentation, in situations where the cost of planned ar-
chaeological research and documentation is higher than 2% of the cost of the
planned activities (Act of 2003, art. 82a).
197
Therefore, WAR = 2% x PLN 8,400,000 = PLN 168,000.
The market value of the property prior the research is therefore:
WM = WL WAR = PLN 1,425,000 PLN 168,000 = PLN 1,257,000
7. Conclusions
The problem of the valuation of the property on which there are archaeolog-
ical sites is extremely important, but often completely overlooked by property
appraisers. Laws and valuation standards oblige valuers to search for infor-
mation about the possible presence of archaeological sites in the available
sources. The financial aspect encourages consideration of their possible occur-
rence also in a situation where no sites have been disclosed. Importantly, each
case requires an individual approach and detailed examination of the circum-
stances.
Notes:
1. As per the objectives of the programme Archaeological Photo of Poland, the
country has been divided into rectangles of 37.5 km2 each, which are successive-
ly tested via the fieldwalking method in order to record all observable archaeo-
logical sites. The progress of the program has now reached the level of approx.
90% of the country. Documentation of the results, containing the location of the
archaeological sites, is located at the office of the Regional Conservator of
Monuments for the given area and is made available to municipalities for the
purposes of recording the monuments in spatial development plans, preparing
the municipal register of monuments and other projects related to the preserva-
tion of monuments.
Information contained in the documentation determines the area of the site, its
character and its historical and cognitive value. This documentation gives an
overview mainly on sites not included in the register of monuments, and which,
due to their specific nature, are protected by law. It is not possible to include in
the register of monuments all the archaeological sites which are discovered only
198
on the basis of e.g. the presence of historical material on the surface of the field.
In addition, the land owner has the right to appeal to court against the decision to
include the site in the register, as the possession of a historic property brings
about a restriction of the right of ownership
References
1. Armitage L., Irons J., 2013, The Values of Built Heritage, Property Management, Vol.
31 Iss 3, pp. 246-259.
2. Cleere H., 1984, Approaches to the Archaeological Heritage, Cambridge University
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3. Kowalska M., 2012, Nieruchomości zabytkowe – inwestowanie i zarządzanie na
przykładzie krakowskiego Kazimierza (Historic Real Estate Investing and Manag-
ing, Based on the Kraków Suburb of Kazimierz), Krakowska Akademia im. Andrzeja
Frycza Modrzewskiego, Kraków p. 40.
4. Lundhede T., Bille T., Hasler B., 2013,, Exploring Preferences and Non-use Values
for Hidden Archaeological Artefacts: a Case from Denmark, International Journal of
Cultural Policy, 2013, Vol. 19, No. 4, 501530.
5. Pawlak E., Pawlak P., 2015, Serce miasta jest po prawej stronie. Archeologia o
przeszłości poznańskiej Śródki i Ostrówka (The Heart of the City Is on the Right. Ar-
chaeology of the Past Śródka and Ostrowek in Poznan), Wydawnictwo Kontekst, Po-
znań.
6. Rącka I., 2015, Historic Real Estate Valuation, Актуални Въпроси На
Оценителската Практика, Пауc, Варна, 2015, pp. 70-90.
7. Regulation of 21 September 2004 on the valuation of real estate and preparing a valua-
tion report.
8. Szczurek G., 2002, Problematyka wyceny gruntów obejmujących stanowiska archeo-
logiczne (The Issue of Valuating Land with Archaeological Sites), Biuletyn
Stowarzyszenia Rzeczoznawców Majątkowych Województwa Wielkopolskiego nr
1/3, 2002, pp. 12-15.
9. The Act of 23 July 2003 on the protection and care of monuments.
... The same process may be applied to art and artifacts, but the difficulty increases if there is nothing at all to compare the object with or if the item is unique in a way that a building is not [11]. Thus, the risks of incorrect valuation are the greatest; the value of an artwork is also affected by certain physical attributes such as age, size, historical importance, provenance, and complexity [2,12]. The art market is comprised of collectors or buyers who create the value of a piece on the basis of their own personal interpretation or perception of the piece [13]. ...
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on the valuation of real estate and preparing a valuation report
Regulation of 21 September 2004 on the valuation of real estate and preparing a valuation report.
Approaches to the Archaeological Heritage
  • H Cleere
Cleere H., 1984, Approaches to the Archaeological Heritage, Cambridge University Press.
Problematyka wyceny gruntów obejmujących stanowiska archeologiczne (The Issue of Valuating Land with Archaeological Sites)
  • G Szczurek
Szczurek G., 2002, Problematyka wyceny gruntów obejmujących stanowiska archeologiczne (The Issue of Valuating Land with Archaeological Sites), Biuletyn
Serce miasta jest po prawej stronie. Archeologia o przeszłości poznańskiej Śródki i Ostrówka (The Heart of the City Is on the Right. Archaeology of the Past Śródka and Ostrowek in Poznan)
  • E Pawlak
  • P Pawlak
Pawlak E., Pawlak P., 2015, Serce miasta jest po prawej stronie. Archeologia o przeszłości poznańskiej Śródki i Ostrówka (The Heart of the City Is on the Right. Archaeology of the Past Śródka and Ostrowek in Poznan), Wydawnictwo Kontekst, Poznań.
Nieruchomości zabytkowe -inwestowanie i zarządzanie na przykładzie krakowskiego Kazimierza (Historic Real Estate -Investing and Managing, Based on the Kraków Suburb of Kazimierz), Krakowska Akademia im
  • M Kowalska
Kowalska M., 2012, Nieruchomości zabytkowe -inwestowanie i zarządzanie na przykładzie krakowskiego Kazimierza (Historic Real Estate -Investing and Managing, Based on the Kraków Suburb of Kazimierz), Krakowska Akademia im. Andrzeja Frycza Modrzewskiego, Kraków p. 40.
Historic Real Estate Valuation, Актуални Въпроси На Оценителската Практика, Пауc, Варна
  • I Rącka
Rącka I., 2015, Historic Real Estate Valuation, Актуални Въпроси На Оценителската Практика, Пауc, Варна, 2015, pp. 70-90.