ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN LATVIA]

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the exploitation of the residential building, as well as the auxiliary buildings and structures belonging to the residential building). The joint property also includes the land plot, on which the respective residential building is located, unless it is owned by another person ( please see Section C. Divided estate , in this paragraph).

In case of the divided estate, namely, if the building (structure) is located on the land plot, which does not belong to the owner of the building (structure), but is owned by another person, the status of such building (structure) and therefore the legal consequences, which depending on the status of the building (structure) may vary, should be evaluated. There are two forms of divided estates, depending on the status of the building (structure) on the land plot: First form . Compulsory divided estate Generally, a building (structure) built during the Soviet time and until September 1, 1992, when the Civil Law of the Republic of Latvia entered into force. The divided property was formed when the ownership rights of the land plot under the building (structure) were renewed to the previous owners or their heirs during the land reform, or the land belonging to the state or local government, or building (structure) was acquired by privatizing the state or municipal undertakings or separate real estate objects. The owner of the building (structure) is entitled to use the part of the land plot functionally related to the building on the grounds of the so-called compulsory lease. In case of a compulsory lease, the parties should agree on the size of the leased area of the land and on the amount of lease payment, and, if the parties cannot agree on the mentioned, the dispute shall be resolved by the court. The usual practice is to establish a lease payment of approximately 6% of the cadastral value of the leased part of the land plot per year. In turn, from 1 January 2022, when amendments to the law will come into force, the building owner will be obliged to

B. Undivided share of the real estate It is possible to acquire not the entire real estate, but an undivided share of the real estate, i.e., to acquire the undivided share of the joint property ( Note: do not mix up with the joint property included in the composition of the residential estate). The joint property is the undivided real estate owned by several persons – joint owners of undivided shares so that only the substance of the rights is divided. A joint owner owns the undivided share of the joint property; therefore, the joint owner is entitled to deal with the undivided share, including alienating or pledging the respective undivided share. However, to deal with the joint property itself, either in its entirety or with respect to a part of it, the consent of all the joint owners shall be obtained. The joint owners can agree on divided use of the joint property proportionally to the amount of the undivided shares by signing a respective agreement. C. Divided estate The general principle provided by Latvian law is that buildings and structures located on the land plot are part of the land plot and therefore owned by the landowner, and only in exceptional cases, buildings and structures as separate building property could be owned by another person, who is not the owner of the land plot – the so-called divided estate.

ILN Real Estate Group – Buying and Selling Real Estate Series

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