May 29, 2020

The legal part to any real estate purchase transaction is as important as the presence and technical condition of the property you are willing to acquire. A regular property purchase transaction in Latvia will normally consist of the following stages:

This step requires understanding of the legal status of a particular property. In the case with an apartment building the buyer needs to ascertain whether he or she buys the apartment in the form of a separate residential property or in the form of a share in the undivided joint property. If the apartment building was partitioned into separate residential properties, then the buyer gets the apartment as a separate property. However, there are many buildings in Latvia, which have not been partitioned, also among the so called new buildings. In the latter case the buyer becomes a co-owner of a share of the apartment building. Owning an apartment in the form of a share in a joint property has a number of disadvantages and associated risks, of which the buyer is recommended to become aware before entering into such a transaction.

Another common problem is the unauthorized reconstruction (lack of permission at the Latvian building authority). In case of any suspicions that there may have been reconstruction works carried out in the apartment, the buyer should request the seller to produce the documents confirming that all works have been performed in accordance with the law and all necessary approvals have been obtained. The correspondence of the cadastral survey file with the actual layout of the apartment does not necessarily mean that the reconstruction works were authorized by the local building authority in Latvia. If the reconstruction was not approved, the consequences of unauthorized works may become the responsibility of the new owner after purchase. Worth mentioning that in some cases certain reconstruction works within the apartment may require the permission of the owners of other apartments in the building, which may be impossible to obtain.

The property purchase transaction consists of a number of consequent steps. Failure to perform by one of the parties of the obligations related to a particular step may lead to disagreements and the termination of the transaction. Disputes will be heard through interpreting the terms and conditions of the purchase contract to which the parties at times do not pay proper attention. It is important, therefore, that the purchase contract takes account of your interests and possible risks.

Some of the important clauses to pay attention to are the termination conditions and the procedure for the payment of the purchase price. As for the payment procedure one needs to keep in mind that the registration of the buyer’s ownership right does not happen simultaneously with signing of the purchase contract. So should the purchase price be paid before or after the registration of ownership right? To protect both the buyer and the seller an escrow account opened at any Latvian bank or Latvian notary deposit can be used. Latvian non-residents who do not have a bank account with any Latvian bank should consider this well in advance because the opening of the escrow account may get delayed due to lengthy anti-money laundering checks.

As soon as the purchase contract and notarial request is signed, these documents can be submitted to the land book. A state fee is payable for the registration of the ownership in the amount of 2% of the purchase price (in some specific cases the amount of the state fee can be lower). Full list of documents required for submission will depend on the circumstances of a particular transaction. For instance, a permission to sell may be required from the spouse of the seller.