Buying a property in Latvia

Foreigner’s rights to acquire property in Latvia

Foreigner’s rights to acquire a property in rural areas

Attorney at Law Liga Macuka explains that pursuant to Section 28 of the Law “On Land Privatisation in Rural Areas” (hereinafter – the Law on Land Privatisation in Rural Areas) the land may be acquired into ownership by:

1. natural persons – citizens of the Republic of Latvia and citizens of other European Union Member States, and also citizens of the countries of the European Economic Area, the Swiss Confederation, and the Member States of the Organization for Economic Co-operation and Development.
2. legal persons – legal persons also may acquire the land into ownership – a capital company registered in the Republic of Latvia, and also a capital company registered in another European Union Member State or country of the European Economic Area, the Swiss Confederation, or Member State of the Organization for Economic Co-operation and Development which, in accordance with laws and regulations, is a taxpayer in the Republic of Latvia, and :

• all shareholders of which are citizens of the Republic of Latvia and citizens of other European Union Member States as well as  citizens of the countries of the European Economic Area, the Swiss Confederation, and the Member States of the Organisation for Economic Co-operation and Development each individually or several jointly,
• all shareholders of which are natural or legal persons from countries with which the Republic of Latvia has entered into international agreements for the promotion and protection of investments approved by the Saeima until 31 December 1996,
• all shareholders of which are several abovementioned subjects jointly,

(hereinafter – all jointly the “Subjects in rural areas”).

Rules for foreigners on acquisition of agricultural land

In order that a foreigner may acquire agricultural land into ownership, he or she should observe the provisions of Section 28.¹ of the Law on Land Privatisation in Rural Areas, which stipulate that the foreigners may acquire the land used for agriculture and the land, in the composition of which the dominant category of use of land is agricultural land, if they are:

1. natural persons, who conform to all following conditions:

• are registered as economic operators in the Republic of Latvia,
• certify in writing that the use of such land for agricultural activity will be commenced within a year after its purchase and will be ensured henceforth, if land in the previous or current year has been applied for direct payments, or will commence within three years and ensure henceforth, if land in the previous or current year has not been applied for direct payments;
• the total amount of their tax debts in Latvia or in the country where their permanent place of residence is located does not exceed EUR 150;
• have received a document on proficiency in the official language of at least B2 level, if they are citizens of other European Union Member States, citizens of countries of the European Economic Area, the Swiss Confederation, or the Member States of the Organization for Economic Co-operation and Development, and the registration certificate of the Union citizen, if they are citizens of other European Union Member States, countries of the European Economic Area, or the Swiss Confederation;

2. legal persons, who conform to all of the following conditions:

• certify in writing that the use of such land for agricultural activity will be commenced within a year after its purchase and will be ensured henceforth, if land in the previous or current year has been applied for direct payments, or will commence within three years and ensure henceforth, if land in the previous or current year has not been applied for direct payments;
• the beneficial owners may be indicated and it may be certified that all beneficial owners are persons specified by law – citizens of the Republic of Latvia and citizens of other European Union Member States, as well as citizens of the countries of the European Economic Area, the Swiss Confederation, and the Member States of the Organisation for Economic Co-operation and Development,
• the total amount of their tax debts in Latvia or in the country where these persons are registered does not exceed EUR 150,
• is the owner or owners of its capital shares (stocks) or owners who jointly represent more than half of the voting capital shares in the company, and all persons having the right to represent the company, if they are citizens of other European Union Member States, citizens of countries of the European Economic Area or the Swiss Confederation, have received the registration certificate of the Union citizen and the document on proficiency in the official language of at least B2 level,
• is the owner or owners of its capital shares (stocks) or owners who jointly represent more than half of the voting capital shares in the company, and all persons having the right to represent the company, if they are not citizens of other European Union Member States, citizens of countries of the European Economic Area or the Swiss Confederation, but are citizens of Member States of the Organization for Economic Co-operation and Development or the countries and other subjects specified in the Law on Land Privatization in Rural Areas.

Within the meaning of the Law on Land Privatization in Rural Areas the agricultural activity is growing and production of plant produce (also growing of tree plants, mushrooms, wild berries), stock farming produce (also rabbit-breeding, poultry farming, apiculture and fur-faming), internal water fish farming produce (pisciculture in private bodies of water) and horticulture produce (also floriculture, greenhouse farming), including pre-processing and post-processing, if it is carried out in the farm itself, and also the provision of rural tourism services and maintenance of agricultural land for pasture or crop farming in an adequate state.

Restrictions on transactions with land properties in the rural areas for the foreigners

Specific restrictions for the foreigners are also set forth in the regulatory enactments of Latvia. The persons from countries outside EU, EEA and the Swiss Confederation are prohibited to acquire the land used for agriculture and the forest land. They are entitled to acquire property in almost any place except for the borderland area of the State, the protection zone of coastal areas of the Baltic Sea and the Gulf of Riga, the nature reserves, the protection zones of public water courses etc. in compliance with the provisions set out in Section 29 of the Law on Land Privatization in Rural Areas. However, with regard to the foreign nationals who are not citizens of the countries of EU, EEA, special permits are necessary as set forth by the Immigration law.

The above restrictions on transactions with land properties do not apply to acquisition of land by means of inheritance.

Approval is required to be obtained from the local government

The persons who are not the Subjects in rural areas (except for non-citizens) who wish to acquire property in ownership, shall lodge an application with the council of the municipality, in the territory of which the relevant land is located.  The objective of further use of such land shall be indicated in the application. A true copy of the deed of transaction shall be attached to the application pursuant to Section 30 of the Law on Land Privatization in Rural Areas.

The municipality council examines the application. If the objective of further use of land, as specified in the application, does not contradict to the municipal spatial plan or local plan, and the restrictions referred to in Section 29 of the Law on Land Privatization in Rural Areas are observed, the municipality council shall give a consent to the acquisition of land into ownership within 20 days. The consent shall be drawn up as a statement, and it shall be signed by the chairperson of the municipality council.  The objective of use of the land to be acquired into ownership as the result of a transaction shall also be indicated in the statement. The deed of transaction shall be valid for entering into the Land Register only if the abovementioned statement is attached thereto. Parties to the transaction have the right to appeal the refusal of consent to the court.

Foreigner’s rights to purchase property in cities

In accordance with Section 20 of the Law “On Land Reform in the Cities of the Republic of Latvia” (hereinafter – the Law on Land Reform in the Cities) the land property can be acquired in ownership in accordance with the Civil Law and other laws by:

• Latvian citizens and citizens of other European Union Member States;
• State and local governments, State and local government undertakings (incorporated companies);
• an incorporated company registered in the Republic of Latvia or another European Union Member State:
• more than a half of the fixed capital of which belongs to Latvian citizens, citizens of other European Union Member States, the State of Latvia or local governments – to each subject individually or to several such subjects jointly,
• more than a half of the fixed capital of which belongs to natural or legal persons from states, with which the Republic of Latvia has entered into international agreements regarding the promotion and protection of investments, which the Saeima had approved until 31 December 1996. The referred to shall also be applicable to natural or legal persons from states, with which international agreements have been entered into after 31 December 1996, if such agreements provide for the rights of natural and legal persons registered in the Republic of Latvia to purchase land in the relevant state;
• more than a half of the fixed capital of which belongs to several subjects referred to in this Clause etc. jointly (hereinafter all jointly referred to as the “Subjects in the cities”).

Restrictions on transactions with land properties in the cities

Other natural and legal persons who are not referred previously to as the Subjects in the cities, may acquire land into ownership with restrictions, set out in the Law on Land Reform in the Cities, they cannot acquire into ownership:

• land in borderland areas of the State;
• land in the protection zones of costal dunes of the Baltic Sea and the Gulf of Riga and in the protection zones of other public reservoirs and water courses, except for the cases when they are intended for building pursuant to the master plan of the city;
• agricultural and forest land pursuant to the spatial planning of the municipal government.

However, the above restrictions relating to transactions involving land properties shall not be applicable to the acquisition of land by means of inheriting a property.

Approval is required to be obtained from the local government

The persons who are not the Subjects in the cities (except for non-citizens) who wish to acquire property in ownership, shall lodge an application with the council of the municipality, in the territory of which the relevant land is located where they shall indicate the objective of further use of land on the basis of Section 22 of the Law on Land Reform in the Cities. A true copy of the deed of transaction shall be attached to the application.

The Chairperson of the council of the city of the municipality shall examine the application. If the objective of further use of land, as specified in the application, does not contradict to the master plan of the city, which was approved in conformity with the Spatial Planning Regulations issued by the Cabinet of Ministers, and the restrictions referred to in Section 21 of the Law on Land Reform in the Cities are observed, the Chairperson of the council of the city or the municipality shall give a consent to the acquisition of land into ownership within 20 days. The deed of transaction shall be valid for entering into the Land Register only if the referred to statement is appended thereto, except for a judgement of a court regarding approval in inheritance rights or also a will with a note regarding the coming thereof into legal force, which shall be entered into the Land Register also in case if a refusal of consent has been received. Parties to the transaction have the right to appeal the refusal of consent to the court.

Statistics on the foreigners’ transactions with real properties in Latvia

The table below presents the statistics on the real properties acquired by the foreigners in Latvia from 2016 to 2019 in the below table

Type of property acquired by the foreigner,

number of transactions

Source: Netkariga, data.gov.lv, apart from acquisition of joint property with a Latvian citizen or a legal person

[1]

Real property acquisition procedure for foreigners in Latvia

Mrs.Mačuka clarifies that property acquisition procedure for foreigners does not differ essentially from the Latvian citizens. Before acquisition of  property it is necessary:

1. To perform investigation of the real property – to check whether encumbrances, prohibitions, debts or any other encumbrances are not registered on the property which make difficult further use of the real property. The investigation of the real property should be entrusted to a lawyer, who could assist to perform the investigation of the property in order to avoid unnecessary problems in future.
2. Preparation of preliminary agreement or earnest money agreement – the parties prepare the preliminary agreement or the earnest money agreement by which they agree on the deadline for conclusion of the purchase contract and agree on other essential elements of the purchase contract. It should be remembered that Section 1730 of the Civil Law stipulates if the earnest money agreement is not performed through the fault of one contracting party, then if the recipient of the earnest money is at fault, he or she must give twice the sum to the giver; but if the giver of the earnest money was at fault, he or she shall lose the right to request its return. Moreover, the party at fault shall compensate the opposing party for all losses. This provision should be borne in mind before conclusion of the earnest money agreement, but it also disciplines the parties not to withdraw from conclusion of the purchase contract.
3. Preparation of the purchase contract – the parties prepare the purchase contract themselves or entrusts its preparation to a lawyer, by agreeing all essential elements of the contract in the purchase contract. The purchase contract shall be prepared in the Latvian language and the language understandable to the foreigner. If the contract is prepared in a foreign language, the translation of the contract in the state language is necessary. The documents are submitted to the state authorities in the Latvian language. The contract shall be prepared in 3 copies, one goes to the buyer, one for the seller, one for submission to the Land Registry.
4. Obtaining local government permit – the foreigner shall request the local government for the permit for purchase of the real property, if it is necessary.
5. Opening of escrow account with a credit institution– the parties open an escrow account with a credit institution, by concluding trilateral agreement between the bank, the seller and the buyer. The application on transfer of the purchase price for safekeeping may be submitted to the notary instead of the escrow account, and the buyer transfers the purchase price to the notary trust account, the notary shall pay out above purchase price after registration of the ownership rights in the buyer’s name.
6. Delivery of documents to the notary for preparation of the request for corroboration – the notary prepares the request for corroboration, which shall be submitted to the Land Registry for re-registration of the ownership rights.
7. Submission of documents to the Land Registry, the Land Registry takes decision within 10 days.
8. Registration of ownership rights in the Land Registry, delivery of the property.

[1] Foreigners buy up Latvia, 02.07.2020., Ilze Steinfelde https://neatkariga.nra.lv/izpete/318574-arzemnieki-izperk-latviju