How to buy real estate in Latvia
Juris Raudseps, B2B legal office
To buy a house or apartment in Riga, Jurmala or any other nice place in Latvia is a pleasant but complicated task, especially for a non-resident. You will realize this upon reading a short guidebook written for buyers. A lawyer specializing in real-estate will help you, making this task easier
As you may know, there are various kinds of real-estate property in Latvia: privatized and non-privatized apartments, land, land with buildings, floor space and assumed shares of all above types of property.
First comes the Land Register
Before acquiring real estate, you should find out whether the property in question is subject to any encumbrance, including easements, right of common use, mortgage, endorsements on prohibitions for levy of the property without third party consent, pledges, etc. To check this, you have to turn to the respective Land Register (Zemesgramata) branch for a certified extract from the relevant Land Register department. The property can be identified at the Land Register by the number of it's Land Register section, cadastral number of the property, name of the property or its address.
Then it's the purchase agreement
After verifying the status of the property, you have to seek competent legal advice to draft a real estate purchasing agreement. The documents and information required to make such an agreement are as follows:
- particulars of both the buyer and the seller;
- Land Register deed of the real estate property;
- the amount of the property to be bought (entire property or assumed parts of it);
- the purchase price.
By way of security against any unforeseen circumstances, it is advisable to use for payment an escrow account at a bank of your choice. This will cost from 50 to 250 lats, depending on the bank and amount of the deal. Regardless of these costs, you will have a guarantee that the seller will not be able to withdraw money from this account if in case it turns out that the real estate is encumbered or subject to other prohibitions and so on. If no escrow account is used, a provision can be made under the purchase agreement, entitling the buyer to demand annulment of the deal if it turns out that the property is encumbered, burdened with tax debts or other liabilities, etc.
The purchase agreement must also specify persons authorized by both parties for submitting, receiving and signing documents related to re-registration of the property on their behalf.
The seller must state his right to dispose of the real-estate as specified under the agreement and undertake to reimburse the buyer for all damages and costs incurred by him if it turns out otherwise. To avoid any misunderstanding about the subject of the purchase agreement, the agreement must specify the address and cadastral number of the property, as well as the number of the Land Register section in which it was entered. If there are any buildings situated on the real estate, they all should be listed in the agreement.
It would also be advisable that both parties should state in the agreement that they are aware of the property's value and waive the right to claim annulment of the purchase agreement or adjustment of the purchase price due to excess loss. It should also be specified in the agreement that the property rights to the real-estate will pass onto the buyer upon signing of the purchase agreement, thus avoiding any claims the seller may make afterwards.
For the deal to take effect
For the deal with the real-estate to take effect in relation to third parties, it must be registered in the Land Register branch of the relevant district or city where every real estate has an individual section number.
One should also follow the signing of the corroboration request, as this request may contain provisions that the buyer and the seller had not included in the purchase agreement, for example, the prohibition to dispose of the real estate without the seller’s consent.
To register the change of real-estate ownership in the Land Register, the documents listed below have to be enclosed in a notarized corroboration request to be drawn up by the notary himself:
- an original document confirming the change in ownership (an agreement of purchase, donation, exchange). If the deal results in separating an independent part from the real-estate registered at the Land Register, a land border plan with cadastre number has to be submitted for both the separate and the remaining parts together with separate inventory files if buildings are to be separated.
- the Land Register deed, certificate held by the Seller;
- if the seller is a corporate entity, it must also submit notarized copies of its Certificate of Registration and statutes as well as documents confirming the signatory right of the official to sign for the company;
- a State Land Service certificate about cadastral evaluation of the real estate;
- a waiver of the right of first refusal by the municipality (if none of the exceptions below applies);
- a certificate on payment of real-estate tax issued by the municipality in the territory of which the property to be sold is situated;
- a notarized consent by a spouse or some third party, if required under the law (if the property is jointly owned by the spouses, if a person has a trustee or a guardian);
- receipts on payment of the chancellery fee and state dues.
Under the effective law, the chancellery fee for corroboration of new rights in the Republic of Latvia is 1/10 of the minimum monthly salary which at the moment equals 9.00 lats. In addition to the above mentioned, there’s a 2 percent state due if the real estate was acquired under a purchase agreement or a 3 percent state duty if the real estate was acquired under a donation agreement, the relevant percentage is calculated from the real-estate cadastral value or the purchase price under the purchase agreement, whichever of the two is the largest.
Right of first refusal
The existing law also states that upon disposal of a real-estate property one should also take into consideration the right of first refusal of third parties that may exist as primary rights to acquire the given real-estate under an agreement, law or will. Contractual right of first refusal can also arise not only from the purchase agreement, but also from the leasehold and other agreements. Contractual or statutory right of first refusal can be exercised within two months of the purchase agreement or respective notice on the same terms as specified in the purchase agreement.
As to statutory rights of first refusal, Article 78 under the law on municipalities grants local municipalities the right of first refusal if a real estate is being sold in the respective municipality’s administrative territory and it is needed for performance of municipal functions as stated under the law.
The said right of first refusal does not apply to:
- production facilities with all relevant equipment;
- real-estate that passes from one person to another without payment or by way of exchange;
- real-estate from which some assumed part is being sold but which will remain under joint ownership of the seller and the buyer;
- real-estate in respect of which the right of first refusal or redemption are held by third parties on the grounds of a law, an agreement or will;
- apartment property and also apartment owned through privatization before the entire residential building was put up for privatization by the municipality.
The municipality must exercise its right of first refusal within twenty days of the purchase agreement or respective notice. To avoid the right of first refusal of a municipality, you can acquire the real estate in parts.
Apart from municipalities, the statutory right of first refusal is also held by:
- co-owners, if another co-owner is selling his assumed part of the property to a third party, unless co-owners have waived their right of first refusal under the agreement;
- co-heirs who have not received their endowed share, if the co-heir who has received his share in nature is selling his property or any part of it before expiry of a ten-year limitation;
- the state in respect of land in protected areas as well as upon sale of real-estate located in border areas;
- the state in respect to real-estate deemed as cultural heritage if sold by its owner;
- the owner of the building or land, if the building and land belong to different persons and do not represent a single unit of real-estate;
- administrations of the Liepaja and Rezekne city special economic zones under the laws governing their operations.
Check for any debts
When acquiring an apartment, in addition to all the above mentioned rules and aspects, you also have to bear in mind that the seller may have overdue utility bills, therefore you must demand certificates about payment of all utility bills, as of the date of the purchase agreement. You also have to agree with the seller about the deadline by which he has to vacate the apartment and cancel registration of all persons currently officially registered as residing at the apartment. If the seller has failed to comply with this obligation of de-registration, the buyer will have to submit to the local housing management office a copy of the purchase agreement and the housing management office must de-register all persons registered as residing in the apartment within one month after receiving a copy of the agreement. After registration of ownership with the Land Register the new owner will have to sign a maintenance agreement with the organization or housing management office responsible for the building in question.