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ACQUISITION PROCESS:
KEY STAGES
Negotiations
• The negotiation phase of larger transactions may include
signing of a letter of intent by the parties. The letter of intent
may include a non-disclosure clause in order to allow access
to the property, information and documentation.
Due diligence
• The public electronic registers provide adequate information
on the immovables and applicable limitations established by
real right or by law. There is however some information that
is not publicly available (such as contractual obligations not
entered in the Land Register, certain limitations established
by general or detailed plan, limitations established for the
protection of nests of species of highest protection category
etc.) that should be verified separately.
• The entries of the Land Register are public. The purchaser
may verify the real rights encumbering the immovable and
the real rights established for the purpose of enabling use of
the immovable (such as road servitudes). The public registers
provide adequate information on applicable limitations:
nature protection areas, limitation zones established by
law (such as building restriction areas on the shoreline of
a water body, limited management zones around roads,
major utility lines) and heritage conservation limitations. The
larger municipalities hold public registers with data on valid
territorial plans and procedures initiated planning procedures.
The public Building Register provides information on issued
building permits and detailed data on erected buildings.
Preliminary contracts
• The preliminary contracts must be concluded in the same
legal form as the principal contract. The preliminary contracts
concluded for transfer of an immovable or establishing real
right must be notarised. Therefore the preliminary contracts
are not common.
• The transaction may be concluded in two phases. The parties
may conclude a notarised sales agreement of the immovable
and postpone concluding of the real right contract. In such
case the sales contract includes the conditions and time of
signing the real right contract. By concluding the real right
contract the ownership of immovable is transferred and
entered in the Land Register.
Deed of sale
• According to the deed of sale to the ownership of a property
is transferred from the seller to the buyer. The contract
transferring ownership of an immovable or establishing a
real right must be notarised. The transfer of ownership of an
immovable shall be registered at the Land Registry and the
relevant documents are ordinarily passed to the registrar by
the notary.
Limitations to acquisition of an immovable
• The right of a foreign entity to acquire agricultural or forest
land are limited. A legal entity registered in the European
Economic Area or an OECD member state may acquire
an immovable consisting of more than 10 ha of forest or
agricultural land, if the legal entity has been engaged in forest
management or agriculture or has acquired a permission
from the county governor. A legal entity registered in a third
country may acquire an immovable consisting of more than
10 ha of forest or agricultural land, if the entity has obtained
a permission from the county governor, the branch of the
entity has been registered in Estonia and the entity has been
engaged in forest management or agriculture for a year. A
legal entity registered outside the European Economic Area
may not acquire an immovable located in certain border areas
specified by law, unless permitted by the Government of the
Republic. The above limitations do not apply to acquiring
shares of a legal entity who owns relevant immovables.
COMMERCIAL LEASES
• Leases of buildings used for commercial purposes are
covered by the Law of Obligations Act. The legal framework
established by law may in majority be negotiated by
the parties and agreed otherwise. The provisions of the
commercial leases may be freely agreed by the parties,
such as the amount of rent (which can be fixed or variable),
the term of the contract (with or without a set term) and
the accessory charges. The commercial leases commonly
regulate the division of maintenance and repair obligations,
improvements and the removal or compensation of
improvements after termination of the contract.
Term and termination of the lease contract
• The lease contract may be concluded for a set term or without
a set term. Unless agreed otherwise, a contract concluded
without a set term may be terminated by both parties by a
three-month notice.
• The contract may be terminated by both parties on the
grounds of good reason established by law (such as
termination by the lessee if the premises do not correspond
to agreed conditions and the lessor does not fulfil relevant
obligations). The parties may agree on more precise or
different grounds for termination.
• A notice of unilateral termination of lease contract of business
or residential premises must be submitted in writing. The
notice submitted by the lessor must include provisions set
forth by law.
Transfer of business
• If the lessor is substituted as a result of transfer of ownership
or encumbering of the immovable, the new lessor of business
premises may terminate the agreement if the new lessor
urgently needs the premises for own use. The lease contract
may not however be terminated on this ground if a notation of
the lease agreement has been entered in the Land Register.
Energy-performance label (energiamärgis)
• New buildings and leased premises must hold an energy-
performance label describing the projected or actual energy
use of the premises.
Adjustment of rent
• Rent is usually adjusted annually in the amount agreed by
the parties or on the basis of an agreed index. The changes in
the consumer price index published by the national statistics
authority Statistics Estonia is the most commonly used
base index for commercial leases. The amount of rent is not
regulated or capped by legislation.
30 Investors Guide to Europe 2015