[BUYING AND SELLING REAL ESTATE IN LATVIA]
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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 legal right of use, which was introduced on 1 January 2023 to replace the compulsory lease. The legal right of use is viewed as an easement in- rem on land. In the case of divided estate, the parties should agree on the size of the used area of the land and on the amount of payment for use, and, if the parties cannot agree on the mentioned, the dispute shall be resolved by the court. The building owner is obliged to pay the landowner a fee of 4% of the cadastral value of the
land per year, but not less than 50 EUR per year. Since 1 January 2023 a special legal mechanism can be applied to end the forced shared ownership between the apartment owners and the landowner of an apartment building, through a statutory right of redemption granted to the community of apartment owners over the land under the apartment building. This process is initiated by the community of apartment owners’ decision and is carried out without the landowner’s consent. Second form . Voluntarily established divided estate. Buildings built after September 1, 1992, when the Civil Law of the Republic of Latvia entered into force, based on a specific long term (at least 10 years) lease agreement providing the rights to the lessee to build buildings on the leased land plot as separate real estate objects. After 1 January 2017 it is no longer possible to establish a new voluntary divided ownership relationship. The separate ownership of the building (structure) is established only during the validity of the lease agreement. Amendments to the Civil Law entered into force on 1 January 2017, by introducing a new institute of build-up rights, which henceforward replaces the institute of specific long-term lease for the voluntary established divided estate. The build-up rights are rights in-rem, established based on the agreement entitling, during the validity of such rights, to build and use non-residential
ILN Real Estate Group – Buying and Selling Real Estate Series
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