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Stricter rules to be applied on separate ownership of buildings and land

Latvia: Changes to Latvian law restrict separate legal ownership of land and buildings.

Current Latvian law allows shared property rights in a rather wide sense: buildings and the land under them may have different legal owners. The reason for this rule was uncertainty about ownership of real estate during the time of transformation.

This peculiarity applies mostly on lease contracts with a validity of not less than 10 years if it expressly allows erection of a building. In this case the lessee will become the legal owner of the new building notwithstanding the lessor’s ownership of the land plot. However, ownership after expiration of the contract leads to certain problems.

As of 1 January 2017 unified ownership of both buildings and land plots will generally apply. This is due to changes in the Latvian Civil Code that restrict the possibility of other forms of ownership.

One exception is acquisition of buildings or constructions via privatization of property owned by the state or municipality.

The main exception that buildings and the land plot under buildings may have different legal owners will be the stipulation of a “building right” if the right is expressly agreed upon in the lease contract. The contract again has to be valid for not less than 10 years, it has to foresee a fee for the right and that the right will be registered in the land book.

During the validity of the contract the lessee is then entitled to legally own newly erected buildings and constructions notwithstanding the legal ownership of the land.

After expiration of the contract the ownership of the building will be transferred to the owner of the land free of charge. Furthermore the owner of the land is entitled to remove any non-residential building.

However, it is possible and strongly advisable to agree on compensation for transfer of ownership.

Source: Amendment to the Latvian Civil Code No. OP 2015/56.5