Eesti kinnisvara ja ehituse valdkonna uudiskiri. Oktoober 2012
Uudiste lugemiseks eesti keeles, palun kliki siia: In Latvian

  Urmas Volens
 
Urmas Volens
Specialist Counsel
   
  Kaido Loor
 
Kaido Loor
Partner
   
  Anneliis Lett
 
Anneliis Lett
Senior Associate
   
  Kristjan Tamm
 
Kristjan Tamm
Senior Associate
   
  Paul Künnap
 
Paul Künnap
Senior Associate
Dear client and cooperation partner,

You have received the Estonian Real Estate & Construction newsflash, which focuses on the most up to date news related to construction, real estate and environmental law. Hopefully, these insights will be of use. We would also like to inform you of the restructuring of our Real Estate & Construction Team.

The new head of the SORAINEN Real Estate & Construction Team is specialist counsel Urmas Volens (dr iur). Before joining SORAINEN at the beginning of 2010, Urmas worked at the Ministry of Justice from 1998, most recently holding the position of deputy secretary general of the Ministry's legal policy department. Urmas participated in drafting all the basic acts of private and public law and was also involved in preparing codification of environmental, social, construction and planning, and economic administrative law.

The newest member of the SORAINEN Real Estate & Construction Team is senior associate Kristjan Tamm. Kristjan has been practicing law since 2004, when he started as a lawyer specialising in the construction industry. Prior to his legal studies Kristjan acquired a bachelor’s degree in civil engineering and worked as an engineer and manager of a building design and construction company. As a result he commands vast experience and competence in substantive building design and construction matters combined with broad legal knowledge in the field.

The former team head, partner Kaido Loor, will carry on as a member of the Real Estate & Construction Team, but will mainly be focusing on heading the SORAINEN Tax & Customs Team. Senior associate Paul Künnap and senior associate Anneliis Lett will continue as members of the team. Former team members Leho Pihkva and Kris Tammistu have left SORAINEN.

This newsflash covers the following topics:
Business breakfast: Main trends and developments in the field of real estate and construction law
 

The SORAINEN business breakfast on 27 November will concentrate on the main trends and developments in the field of real estate and construction law based on recent Supreme Court decisions and client practice. We will discuss how to prepare in advance for termination of a lease agreement and what risks to consider in order to secure against possible claims. Using practical examples we will suggest how best to exercise rights in a situation where lack of conformity under a construction contract becomes evident.

We will also take a closer look at sale-and-lease-back transactions, as only a few of Estonia’s largest companies have considered these as a means of possible leverage for company expansion or as a solution for current credit needs. A representative from Catella Corporate Finance will share experience on sale-and-lease-backtransactions, with further discussion focusing on key legal issues – how to ensure a reasonable solution for both parties as to their rights and obligations.

We will also shed light on an up and coming issue – what are the conditions for transfer of enterprise on purchase of an immovable where the buyer assumes the debts and other liabilities of the seller, seller’s employees and other related areas problematic for both buyer and seller. We will also be drawing comparisons with neighbouring countries.

Presentations on the agenda:

  • Why and when to use sale-and-lease-back transactions? An economic perspective
    Aavo Kokk, managing partner with Catella Corporate Finance
  • Sale-and-lease-back as a long-term debt transaction? Legal perspective
    Kaido Loor, partner with SORAINEN
  • Secure ways to terminate a lease agreement –  a lessor’s view
    Urmas Volens, specialist counsel with SORAINEN
  • How to act on discovering construction deficiencies?  
    Kristjan Tamm, senior associate with SORAINEN
  • When does transfer of an immovable also mean transfer of enterprise with related consequences 
    Paul Künnap, senior associate with SORAINEN

The business breakfast will be held on Thursday, 27 November from 9:00-12:00 at Meriton Grand Conference & Spa Hotel 2nd floor conference room K.J. Peterson, Paldiski mnt 4, Tallinn.

SORAINEN active clients are cordially invited to attend the business breakfast free of charge (up to 2 representatives). For other participants a fee of 49 EUR + VAT applies. To attend, please register by Tuesday, 20 November 17:00 at the latest by filling in a registration form or sending an e-mail to seminars-estonia@sorainen.com.

For organisational purposes, we ask you to swiftly notify us if you cancel your participation at the event. Individuals participating for a fee are asked to notify us of cancellation by 20 November 2012 17:00 at the latest (in case of not notifying by the given deadline or non-attendance without prior notification, the fee applies).

 

Euromoney again places SORAINEN regional Real Estate Practice in top rankings

Euromoney, the leading financial magazine worldwide, has announced the winners of the Real Estate Awards 2012 – the eighth time since the awards began in 2004. For the third year in a row SORAINEN takes 1st place in Estonia and Latvia, and 2nd place in Lithuania among the best real estate legal service providers. SORAINEN was also ranked among the top overall real estate advisors and consultants, this year placing 3rd in Estonia, 4th in Latvia and 6th in Lithuania.

“The real estate market in the region is still weary of the ongoing debt crisis. Fears over collapse of the euro are still looming. This impacts adversely on investor confidence, so that deals are hard to close. On the other hand, we are pleased to see that despite the still fluctuating economic and business environment, the Baltic real estate market is showing sustained economic growth and that interest in project development is returning after the crisis and lack of real estate market activity – several large transactions are under way or are at the planning phase, some of these advised by SORAINEN. Our regional Real Estate Practice is still one of the largest SORAINEN practices, as confirmed by the biggest projects in the past year involving SORAINEN: advice to Nord Stream on two potential new gas pipelines under the Baltic Sea in Estonia, advice to Belveron Holdings Limited in a EUR 15.6 million acquisition of 353 flats in Riga, Latvia, and work with Hitachi on the Visaginas nuclear power plant project in Lithuania,” comments Ģirts Rūda, regional head of the SORAINEN Real Estate Practice.

The results of the real estate survey are ascertained by Euromoney inviting all companies involved in the real estate sector to submit information about their activities, achievements and market opinions. The awards are then decided on the basis of information provided by poll respondents, the opinions of real estate developers, advisors, investment managers, corporate end-users and banks worldwide. The survey for 2012 was conducted from 5 March to 21 May. The Belarus market has not so far been evaluated by researchers.

For results of other researched countries and areas, please visit the Euromoney website.

 

WTS 2012 survey: International Taxation of Real Estate Investments

 
   

WTS, a worldwide independent consulting group, has recently published a survey on International Taxation of Real Estate Investments carried out in Europe, Brazil, China and Russia. The international real estate tax guide provides a comprehensive overview of tax regimes in 38 countries as particularly relevant for real estate investments.

SORAINEN contributed to the guide in all Baltic States and Belarus. See the whole International Taxation of Real Estate Investments for relevant insights.

 

Supreme Court clarifies contractor liability

Recently the Supreme Court of Estonia clarified the issue of contractor liability where lack of conformity under contract becomes evident. As a novelty, the Supreme Court ruled that parties of the construction contract may derogate by mutual agreement from the liability regulations provided in the Law of Obligations Act and Building Act The judgment makes it clear that the warranties established by the Building Act may be varied by agreement between the parties, thus excluding some legal remedies. Additionally, the parties may grant the contractor an opportunity to rely on circumstances that restrict its liability. The Supreme Court also ruled that contractor liability arising from a construction warranty does not limit the contractor’s general contractual liability for non-conformity arising by law. Unless the construction contract sets limitations in this regard, the contracting party may raise claims against the contractor for removal of defects to the building regardless of what the parties have previously agreed and assumed under the warranty as an additional responsibility.

Therefore, in construction contract practice and for future construction contracts the need is clear for increased attention to contractor’s liabilities arising by law, and separate and independent warranties agreed by the parties. In particular, contracts should thoroughly regulate the following aspects:

  1. what liabilities the contractor assumes under the warranty,
  2. what their conditions of fulfilment are, and
  3. what objections the contractor can submit. 

The Supreme Court also clarified that under the Law of Obligations act a contractor is not liable for non-conformity of work resulting from instructions given by the customer, defects in material supplied by the customer or preliminary work performed by third parties if the contractor had sufficiently checked the customer instructions, the materials and the preliminary work. Therefore, the contractor must be able to prove that it has sufficiently checked instructions, materials and preliminary work. A contractor that fails to present sufficient evidence in this regard cannot rely on deficiencies in instructions, materials or preliminary work.

 

Supreme Court clarifies obligations of lessor and lessee

The Supreme Court recently clarified the issue of return by the lessee of leased item. The Court took the view that the lessee fulfilled its obligation to return the item upon actual handing over of the item regardless of signing a delivery-acceptance statement between the parties. If a lessee does not return an item after termination of the contract, the lessor may demand as compensation the rent agreed in the lease agreement.

The Court clarified that a lessor who maintains that the lessee has damaged a leased item beyond damage resulting from proper use and natural wear must present sufficient evidence. By law, upon return of a leased item, the lessor must inspect the condition of the item and promptly notify the lessee of any defects for which the lessee is responsible. A lessor who fails to do this loses the rights attached thereto based on defects in the item unless these are defects which cannot be identified by ordinary inspection.

The judgment clarifies that upon return of a leased item, the lessor shall inspect the condition of the item and promptly notify the lessee of any defects for which the lessee is responsible because defects identified at a later stage will not accepted as a basis for claims.

 

Supreme Court explains rules for determining boundaries of immovable properties

The Supreme Court also recently clarified the issue of determining boundaries of immovable properties. The Court ruled that upon formation of a cadastral unit accurate border relations on the ground should be mapped either by survey or based on plans and maps. The Court found that the lower courts in previous border disputes have exaggerated the legal effect of entries in the land cadastre. This means that cadastral maps should describe the current actual mapping situation, and the actual borders of immovable properties should not be determined by desk survey prepared on the basis of plans and maps.

The judgment is also important as the Supreme Court confirmed that if during the proceedings the boundaries of an immovable property are changed, i.e. part is transferred or acquired, the act is regarded as a disposition of immovable property which requires a notarial real right contract and an entry in the land registry.

Therefore, it is clear that a notarial contract must be signed for transfer of immovable property from one person to another. Otherwise transfer of an immovable property in the process of determination of its borders, a process widely practiced previously, will not be considered lawful.

 

Apartment ownership Act and Apartment Association Act to be merged: new act in drafting process

This summer, the Ministry of Justice put forward a draft Apartment Ownership and Apartment Association Act for public opinion and proposals. The aim of the amended Act is to clarify procedures for administration of apartment ownership and to make the activities of apartment associations increasingly transparent. Upon entry into force the draft Act will replace and merge with the Apartment Ownership Act and Apartment Association Act currently in force. The Act will regulate all aspects related to apartment ownership and bring about fundamental changes to administration and management of apartment buildings. 

First and foremost, merger of the two Acts aims to bring clarity to the current web of legal acts regulating these matters as well as to clarify and streamline issues concerning apartment ownership. As the draft Act is likely to be presented to the Parliament before the end of 2012, it is high time to submit opinions and proposals to the Ministry. In addition, the Ministry is currently preparing amendments to the Building Act and Planning Act. We will provide further information on these amendments in our next newsletter.

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Please note that SORAINEN newsflashes are compiled for general information purposes only, free of obligation and free of legal responsibility and liability. They do not cover all laws or reflect all changes in legislation, nor are the explanations provided exhaustive. Therefore, we recommend that you contact SORAINEN or your legal advisor for further information. Electronic versions of SORAINEN newsflashes are available and can be subscribed to on the SORAINEN website – www.sorainen.com.

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