54 | Investor Guide to Europe 2014
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An owner of land has pre-emptive right in case of sale of buildings
located on the land which are owned by another person.
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Zoning Requirements
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The permitted and intended use of a land plot is subject to muni-
cipal zoning regulations, which may reserve certain parts of the
land for future infrastructure development plans. Such “reserved
territories” are not always identified in the records of the Land
Register or the plans of the land plot. Careful examination of the
territorial planning documents is especially advisable in case of
acquisition of development properties/projects.
aCQuISITIon PRoCESS:
KEY STaGES
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Although in general foreign investors from EU wishing to carry
out real estate transactions do not need any prior authorisation,
certain restrictions do exist, namely :
- until April 30, 2014, citizens of other EU Member States
and legal persons registered in the other EU Member States
(with certain exceptions) are prohibited to acquire ownership
of agricultural land and forest land in Latvia. There is a politi-
cal debate on extending this term and/or providing specific
eligibility criteria for qualified owners of agricultural and
forest land.Foreigners from non-EU countries are prohibited
to acquire:
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Foreigners from non-EU countries are prohibited to acquire:
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Urban land: in state frontier areas, protected coastal areas of the
Baltic Sea and Riga Bay, and other public bodies of water; agricul-
tural and forest land;
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. rural land: land in state frontier areas, nature reserves, agricultu-
ral and forest land, protected coastal areas of the Baltic Sea and
Riga Bay, mineral deposits of national importance;
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Note: Foreign (non-EU countries) persons are not prohibited to
acquire shares in a company which owns real estate in Latvia.
However, there are certain restrictions on the companies them-
selves in connection with making new acquisition of land in Latvia.
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Foreigners from non-EU countries wishing to acquire urban land
(other than the restricted territories specified above) need to
report the acquisition documents and intended use of the pro-
perty to the respective municipality.
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negotiations
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This stage is not regulated by law, but rather based on a custo-
mary practice
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As a preliminary step, a confidentiality and non-disclosure agree-
ment is usually proposed by the seller/agents in order to allow
access to the property, information and documentation;
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Exclusivity period can be agreed during which the due diligence
exercise is carried-out and at the expiry of which the would-be
purchaser is expected to provide an offer or confirm its initial
indicative offer.
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Preliminary contracts
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Preliminary contracts are common in Latvia, but are not statutori-
ly required. Preliminary contract is a conditional agreement aimed
at conclusion of the purchase agreement in the future.
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Parties are free to choose the extent of regulation in the prelimi-
nary contracts, however, more detailed provisions ensure higher
certainty and less negotiation in the stage of the final purchase
agreement.
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Preliminary contract commonly provides for contractual penalties
if the other party refuses to conclude the purchase agreement for
unjustified reasons.
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Liability of a party for failure to comply with the preliminary
contract may arise not for the failure to deliver the property or
for failure to pay the purchase price, but rather for the failure to
conclude the final purchase agreement.
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As a specific form of preliminary contract the law provide for a
downpayment agreement, although also the preliminary contract
may include provisions on paying in advance a small portion of
the purchase price.
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It is not customary to structure the preliminary contracts as call
option arrangements, however the parties may freely choose to
structure their relations this way.
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agreement of Purchase and Sale
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Only real estate registered with the Land Register can be sold and
transferred, and only by its registered owner.
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There is no statutory requirement that the purchase agreement
itself should be notarized. Nevertheless, the parties must execute
a notarized registration application to the Land Register in a statu-
torily designated form.
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Usually there is no re-negotiation of the terms and conditions of
the sale which have been agreed at the stage of the preliminary
contracts, except if subject to due diligence findings;
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Transfer of ownership must be registered with the Land Register.
Registration with the Land Register has to be made within 10 days
from the receipt of all appropriate documentation.
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By law, the seller is liable for the defects that the seller has
concealed or not disclosed in bad faith, and for the lack of qualities
of the property that the seller has expressly warrantied. In case of
breach of warranty, the buyer has a claim for either: (i) annulment
of the purchase agreement which expires in 6 months from the
date of purchase; or (ii) reduction of the purchase price which
expires in one year from the date of purchase.
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Unless agreed otherwise, all risk in relation to the property is
transferred to the buyer as of the moment of the purchase.
off-plan sales
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No such specific type of agreement or legal relationship is
regulated under Latvian law, however, the land together with
design documentation and/or construction works can be sold at
any stage, including by retaining the obligation to perform and
finalize the construction works. The parties are free to agree on
the terms, conditions and transfer of risks that regulate their legal
relationship.
CoMMERCIaL LEaSES
There is no special regulation or codification of provisions appli-
cable to commercial leases, i.e. leases of buildings or parts thereof
used for commercial purposes.
