TALLINN, 31 August 2004 - The State Audit Office found that approximately 37 per cent of the buildings owned by the state and standing empty and 80 per cent of the contracts of lease concluded are damaging the interests of the state.

In total, the state administrates approximately 3.1 million square meters of premises. 44% of the effective surface area of the buildings is used to gain revenues, 38% to exercise state authority and 18% for public purposes. Both the premises leased and standing empty are consolidated under the heading of gaining revenues. 31% or approximately one million square meters of the effective surface area is standing empty; 13% is being leased.

“The number of empty buildings demonstrates bad use of land and premises and inefficient administration of buildings, accompanied by large maintenance costs and foregone return on sales”, said Mr. Janno Veskimets, Senior Auditor of Performance Audit Department of the State Audit Office.

The audit conducted by the State Audit Office revealed that the buildings owned by state are decomposing. As a rule, the preservation of the main structures of buildings and utility networks is not provided for. The maintenance of the most important element of the main structure – the roof – is sufficiently assured only in 27% of buildings, in average.

The age of utility networks – heating system, water supply system and sewage – exceeds their critical lifetime in 40% cases. “The situation refers to the danger of accidents, the elimination of which may be by times more expensive than their replacement”, said Senior Auditor Mr. Janno Veskimets.

Due to poor maintenance of the buildings, 20% of building complexes have received prescripts due to their non-conformity with the standards.

The largest number of buildings owned by the state were built over the period from 1960–1975. the average age of the buildings is 34 years and more than one half of the buildings was completed before year 1975.

The analysis of the State Audit Office also revealed that most of the Contracts of Lease are damaging the interests of the state. 80% of the contracts of lease have been concluded at a value lower by 40% than the average; therefore, the state is estimated to lose approximately 4 million kroons of income received from leasing of residential premises. Only in one case the State Audit Office found a contract of lease with a value exceeding the average market price.

Also, several items inseparable of good leasing practice are being ignored. Often, the contracts of lease are not transparent; the calculation of accessory expenses (for example, for water, electricity, etc.) is often unclear. Also, neither the condition of a building at the moment of transfer nor the responsibility for the preservation of the building have been established in the contracts. The practice of regular reviewing of terms and conditions of contracts is rather scarce and the same goes for charging penalty fine for delayed rent payment..

The state owns approximately 6,800 buildings with different purpose. In 2003, approximately 1.6 billion kroons were used for the repairs and maintenance of those buildings. 65% of the buildings are owned by the Ministry of Defence, Ministry of Internal Affairs, Ministry of Education and Research and the Ministry of Environment.

The State Audit Office recommends the Government of the Republic to develop a strategy for good administration of buildings, accompanied with setting of specific goals for the administration of buildings, to decrease the costs on the maintenance of state-owned buildings and increase the revenues. Also, the buildings not being indispensable for the state should be relieved of whether by sales or demolishing.

The Government of the Republic has formed a position that all the ministers must devise actions plans regarding the real estate and buildings administrated by the respective ministry with the purpose to optimise the utilisation or assets while analysing the expedience of the transfer thereof to Riigi Kinnisvara AS.

Sven Soiver
Press Representative of State Audit Office
Telephone: (372) 640 0787
GSM: (372) 53 414464
E-mail: [email protected]

• Posted: 8/31/2004 12:00 AM
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