- CASE LAW ON JOINT OWNERSHIP ISSUES
- NEW LAW ON TERRITORIAL DEVELOPMENT PLANNING
- AMENDMENTS TO THE FOREST LAW
- CC PUTS AN END TO DISPUTE OVER PIT ON SALE OF REAL ESTATE
1. CASE LAW ON JOINT OWNERSHIP ISSUES
In late November 2011, the Supreme Court website published a summary of case law on topics related to joint ownership and apartment properties (to read the summary in Latvian, please click here). This summary of case law and other recent court rulings change existing real estate market practice. Inter alia, implementation of previously recognised transaction schemes is banned.
Two of the most significant case law findings are (SKC-1089/2011 and PAC-1209/2010):
- ban on recording a joint owner’s prior waiver of rights of first refusal in the Land Book; and
- doubt as to the possibility to record in the Land Book and apply joint owners’ agreement on divided use of joint property.
These decisions are based on the approach that the Land Book registers rights in rem, not liability rights. The consequences can be different – disputes about notes and entries already recorded in the Land Book. Likewise the need has arisen to choose a different transaction structure for new transactions.
Unfortunately, the problem mentioned does not have a uniform solution and parties involved will have to look for solutions that fit the circumstances of each particular case. The solution might be dividing a land plot, registering a servitude, entering a lease agreement or using another legal institution. Here, it should be noted that according to the court’s opinion even in the historic centre of Riga the size of a land plot as such should not be protected because it is not included in the composition of any cultural-historical value (historic planning structure) (A42739808/2011; SKC 374/2010; SKC-277/2008). Thus division of a land plot is allowed even in the historic centre of Riga, if the relevant regulations are observed.
Likewise topical is the court ruling (SKC-52/2008) determining that owners of apartments in a residential building being a divided property do not have rights of first refusal to the land plot under the building. At that time, the court decided that upon dividing a residential building into apartment properties the building should no longer be regarded as a building within the legal meaning (Section 14 (4) of the law “On term and procedure for coming into force of parts – Introduction, Inheritance Law, and Property Law – of the restored 1937 Civil Law of the Republic of Latvia”). This case law does not facilitate merging divided properties and keeps complicating relations between owners of buildings and land.
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2. NEW LAW ON TERRITORIAL DEVELOPMENT PLANNING
On 1 December 2011, the Territorial development planning law came into force. As a result, the 2002 Territorial planning law is no longer in force. In the previous law, developers of detailed plans could not sufficiently protect their legal interests. Moreover, the law did not set a deadline for when the minister in charge of territorial planning could suspend a municipality’s territorial plan (thus causing potential adverse consequences to persons who relied on a later-suspended territorial plan).
The following are the most important changes introduced by the new law:
- In future, a detailed plan will be approved by an administrative act instead of municipal binding regulations. As a result, the detailed plan can be challenged before the administrative court and challenging a detailed plan will suspend operation of the detailed plan until the court judgment comes into force.
- In future, development of a detailed plan can be combined with a building design to a certain extent (instead of developing the building design only after approval of the detailed plan) and, the municipality will be able to set a deadline to start implementing the detailed plan.
- An information system for territorial development planning will be established to gather documents at all levels (national, regional, local) of territorial planning and related information.
- New types of territorial planning documents have been introduced: a theme-based plan whereby several specific issues are solved in relation to development of separate industries (for example, transport infrastructure), and local plan – plan of part of the territory for a local solution of a particular task (problem) and a higher degree of detail of the territorial plan.
- A deadline and procedure to apply to the minister in charge for suspension of a territorial or local plan.
- The minister in charge of territorial planning will be entitled to issue an order to suspend binding regulations approving a territorial or local plan not later than within six months after the plan comes into force.
The new law provides for adoption of several new Cabinet Regulations in 2012. Moreover, the coming into force of some sections of the law is postponed until amendments to other related laws come into effect (for example, the section of the law on the term and procedure for challenging a territorial plan or local plan will come into force together with the coming into force of relevant amendments to the Constitutional Court Law). Thus it will be possible to fully assess the advantages of the new law only after more detailed regulation and amendments to other laws come into force.
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3. AMENDMENTS TO THE FOREST LAW
On 1 January 2012, amendments to the Forest Law adopted by the Parliament on 13 October will come into force. These provide both for immediate changes and gradual changes.
The aim of the amendments is to change the procedure for obtaining a felling confirmation, as well as to specify cases when confirmations are not necessary. The Cabinet of Ministers has to adopt regulations by 31 December 2012 regulating cutting trees in the forest, specifying a procedure for issuing felling confirmations and the term of validity of confirmations.
After the amendments come into force, a forest inventory is required every twenty years (instead of every ten years, as at present), unless Cabinet regulations provide otherwise. The first forest inventory will still be obligatory.
Under the amendments, as of 1 January 2013 forest transformation will be made easier; however a more detailed procedure for forest transformation to be called de-foresting under the amendments will be set by Cabinet regulations. Until 1 January 2013, forest land can still be transformed under the present regulation.
Starting from 1 January 2015, a forest owner must develop a forest maintenance plan if the total area of forest to be maintained exceeds 10,000 hectares.
Likewise, the Forest Law is supplemented by a new chapter stating the purpose and grounds of establishing parks and forest-parks.
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4. CC PUTS AN END TO DISPUTE OVER PIT ON SALE OF REAL ESTATE
On 14 December 2011, a decision of the Constitutional Court (CC) confirmed the opinion expressed several times publicly by SORAINEN that exemption from personal income tax (PIT) does not apply when a person sells several real estates and does so systematically with a profit motive. To read about the issue discussed in detail in a blog (in Latvian) by Jānis Taukačs, SORAINEN partner and regional head of the Tax & Customs Team, please click here.