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LIMITATIONS SET ON PURCHASING AND LEASING AGRICULTURAL LAND
Amendments in force as of 1 November 2014
Amendments to the law On Land Privatisation in Rural Areas provide for imposing limitations on the acquisition of agricultural land. It has been determined that one natural person or legal entity can obtain up to 2,000 ha agricultural land and associations and establishments listed in the register of associations and establishments of the Republic of Latvia can obtain up to 5 ha. In addition, in their binding regulations, municipalities can also determine a smaller maximum area of agricultural land that can be obtained by one person. Groups of persons must likewise meet these additional conditions before obtaining agricultural land. These conditions are verified when the person buys the real estate; however, there are no regulations and consequences for when a person who has already obtained agricultural land fails to meet any of the conditions or does not fulfil any of the future promises.
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Terms and conditions |
A natural person |
must be registered in Latvia as a business operator |
- must have received uniform area payments or direct payments during at least the last three years; or
- must have an income from agricultural production comprising at least one-third of the person's total business income during at least the last three years; or
- has a degree in agriculture
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must confirm in writing that he or she will start using the land for agricultural operations within one to three years as of the purchase date |
must not have tax debts |
must obtain a waiver of the rights of first refusal from the joint owner of the land, the lessee of the land, if a land lease agreement has been registered at the municipality, and the administrator of the Land Fund of Latvia |
must receive consent from the regional municipality to obtain possession of the agricultural land |
A legal person |
- must have received uniform area payments or direct payments during at least the last three years; or
- must have an income from agricultural production comprising at least one-third of the person's total business income during at least the last three years
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must confirm in writing that the person will start using the land for agricultural operations within one to three years as of the purchase date |
- is such that at least one owner or permanent employee of the legal person needs to have a professional qualification in the field of operation; or
- is such that at least one owner's income from agricultural production comprises at least one-third of the total business income for that owner during at least the last three years
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must confirm that the beneficiaries are citizens of the Republic of Latvia or citizens of other member states of the EU, or citizens of EEA and Switzerland |
must not have tax debts |
must obtain a waiver of the rights of first refusal from the joint owner of the land, the lessee of the land, if a land lease agreement has been registered at the municipality, and the administrator of the Land Fund of Latvia |
must receive consent from the regional municipality to obtain possession of the agricultural land |
These additional conditions can be ignored only in special cases:
- acquirers of agricultural land who own or legally possess agricultural land that does not exceed 10 ha in total for natural persons and 5 ha for legal persons;
- for agricultural land that is obtained in insolvency proceedings or by inheritance;
- for agricultural land obtained by the person under the Law on Alienation of Public Person's Property;
- for transactions of agricultural land between spouses, and relatives of the first and second degrees;
- joint owners of the land if the right of first refusal is used.
Despite these limitations, persons still can lease agricultural land. However, the lease term cannot be shorter than five years and the lease agreement needs to be registered in the register kept by the municipality.
The amendments introduce a special regulation also in relation to the rights of first refusal. They state that the rights of first refusal are provided for joint owners, as determined in the Civil Law, and also for the lessee if the lease agreement has been registered at the municipality. In turn, the Land Fund of Latvia obtains the rights of first refusal only if neither of the mentioned parties uses them.
The Land Fund of Latvia, which aims to facilitate protection and availability of agricultural land resources, as well as the rational and sustainable use and maintenance of agricultural land, will begin operating on 1 July 2015 at the latest. The fund will own the agricultural land accumulated at the national level.
By 30 October 2014, the Cabinet of Ministers must issue regulations that will specify in detail the process of transactions for agricultural land. The regulations that give a procedure to calculate income from agricultural production must be adopted by 30 June 2015.
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INCREASED REQUIREMENTS FOR OBTAINING RESIDENCE PERMITS IN LATVIA
Amendments in force as of 1 September 2014
On 1 September 2014, amendments to the Immigration Law will come into force. Transaction amounts for the purchase of property will be increased, which entitle foreigners to claim temporary residence permits in Latvia. Additional requirements have been introduced for these permits. You can read more about these amendments in our previous newsflash here.
The main differences that should be noted when purchasing immovable property with the aim of receiving a temporary residence permit are:
- the value of the immovable property must be EUR 250,000 at least, and the cadastral value EUR 80,000 at least;
- one functionally related immovable property with constructions must be bought;
- an additional 5% of the purchase value of the immovable property must be paid to the state budget.
The new regulation will not apply to previously issued temporary residence permits, because if title to an immovable property has been registered before 1 September 2014, then the previous regulation will be applied when deciding on issue, registration or extension of a residence permit.
At the same time, requirements for other investment situations have been increased. A subordinated loan to a credit institution cannot be less than EUR 280,000, and an additional EUR 25,000 will be payable to the state budget.
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AMENDMENTS TO THE LAW ON PRIVATISATION OF STATE AND MUNICIPALITY RESIDENTIAL HOUSES
Amendments in force as of 1 September 2014
Amendments to the law are expected to ease privatisation procedures to allow privatisation of property where the land plot is partially located on the red lines or containing other objects that are not privatised at the same time. An option is further provided to perform a real division of a land plot so that any territory affected by the red lines, as well as the parts of the land plot required for other objects, can be divided from the territory of the land plot to be privatised. In turn, if this division is impossible, for a land plot owned by the state or municipality, the lease rights are determined for 99 years.
At the same time the amendments determine that from 1 January 2015, owners of apartments and artists' workshops will not have to provide compensation for the real estate tax paid by the landowner.
Likewise the amendments will determine a procedure for how to calculate and change the land plot functionally required for a residential house to be privatised. The area of land functionally required by a residential house to be privatised will be determined by the municipal council or its authorised institution. A land lease agreement will be concluded only for a land plot that has been determined to be functionally required for the house under the appropriate procedure. The law has been supplemented by a new regulation providing for a procedure to review the land plot functionally required for a residential house and a procedure to determine the costs of the revision and who should cover the costs. Municipalities are instructed to determine a procedure for reviewing the area of a land plot functionally required by a residential house after a request from any owner of an apartment. The municipality must start the revision within six months of receipt of the application. In turn, the revision must be finished within two years and six months as of the date of starting. The costs of this revision are covered by the person who initiated the revision in proportion to their share in the property, except in some exceptional cases.
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LAINE SKOPIŅA JOINS SORAINEN REAL ESTATE TEAM
In August, Laine Skopiņa joined the SORAINEN Latvia office, becoming the 25th SORAINEN partner; she will bring with her 23 years of experience and will head the Latvian office Real Estate & Construction Team. Together with Laine, four experienced professionals joined the Latvian office, thus increasing the total number of lawyers and tax specialists in Latvia to the unprecedented number of 42. The real estate and construction team welcomes senior associates Viktorija Smirnova-Čerkasa and Jevgēnija Andronova, and associate Andris Vilisons.
Laine has a vast experience in the field of real estate formed through required consultations to clients in real estate purchase transactions, financing security, development, construction, lease and sale. Laine has been recognised and recommended as a highly qualified specialist of real estate also by international directories – The Legal 500, Chambers Global and Chambers Europe.
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LAST MONTHS' LANDMARK TRANSACTIONS
- The SORAINEN Latvian office took part in one of this year's largest real estate transactions in Latvia – the sale of shopping centre Damme by consulting Plesko Real Estate, a subsidiary of the Swedish food retailing group ICA, which operates in the Baltics through the Rimi brand. Shopping centre Damme is located in Imanta, Riga, and its gross leasable area (GLA) is 12,912 m2. In the completed transaction, the business related to leasing the shopping centre was separated from the other business of the company and contributed to the share capital of a newly established company. The shares of the newly established company were sold to Norwegian New Agenda Partners. During the transaction, SORAINEN provided a full range of legal assistance to the client, including assistance in structuring the transaction, development of transaction documents and negotiations.
The M&A aspects of the transaction were handled by a team led by senior associate Jānis Bite; the real estate aspects were handled by a team led by partner Ģirts Rūda.
- The SORAINEN Estonian office consulted and represented a real estate investment fund managed by Vicus Capital Advisors, for a shopping centre sales transaction in Estonian city Tartu.
- The SORAINEN Lithuanian office advised MG Valda on the purchase of construction land (1.24 ha) and the buildings of the former Vilija textile factory in the Lithuanian city Užupis, which will be used to construct a prestige complex of residential buildings.
The team in the SORAINEN Lithuanian office undertook preliminary legal due diligence of the property, prepared transaction documents, participated in negotiations and organised the transaction processes. The client consulted SORAINEN partner Aušra Mudėnaitė, and senior associate Giedrė Frolenkienė.
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SORAINEN INVITES TO THE CONFERENCE “INTERNATIONAL REAL ESTATE INVESTMENTS IN LATVIA 2014”
Important note for SORAINEN clients: we will offer you an additional 10% discount to attend the conference. Information about the event, agenda and registration form are available here. |
