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Buying property in Latvia: scams and pitfalls

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Everything you need to know is included in our Latvia Property Pack

Latvia's real estate market is drawing the interest of foreigners, attracted by its affordability and potential for investment in the Baltic region.

Buying property in this area can be a complex journey though, particularly if you're not a local. There are many potential challenges and surprises to be aware of.

Our network of customers who bought properties and our on-site local advisors have highlighted several issues. We've listed them all in our Latvia Property Pack.

This article provides a brief overview of potential pitfalls that may arise during the property buying process in this country.

Is it safe or risky to invest in real estate in Latvia?

Overall, Latvia is considered relatively safe for real estate investments.

However, like any market, there are occasional incidents of scams and fraudulent activities.

Historically, there have been instances where naive buyers have been deceived with fake property listings or phantom opportunities, particularly online. To mitigate these risks, it's essential to work with reputed real estate agents or agencies, and always verify the authenticity of a listing or an offer.

Latvia boasts a robust legal and regulatory framework that protects the rights of property buyers. The Land Register Act of Latvia, for instance, ensures that once a property is registered under your name, the rights are absolute and protected by the state.

Foreign buyers will be relieved to know that there aren't any distinct challenges for them compared to local buyers. The process, while quite straightforward, does require various documentation, and having a local lawyer or expert can be immensely helpful.

Comparatively, Latvia's property buying process is more transparent than some countries, especially in its neighbouring Eastern European region.

Transparency International’s 2020 report ranked Latvia 44th out of 180 countries in terms of transparency and corruption, suggesting a relatively transparent environment.

In case of property disputes, the legal system in Latvia is deemed efficient.

Courts in Latvia are generally considered fair, though resolution can sometimes be time-consuming. Hiring local legal counsel is often advisable if embroiled in any disputes.

Potential foreign buyers should conduct thorough due diligence.

This includes verifying the property's title, ensuring no liens or mortgages are attached, checking its zoning and land use restrictions, and inspecting its physical condition. Again, involving a trusted local real estate expert or lawyer is crucial.

The Latvian government, over the years, has introduced measures to encourage foreign investments. One such policy was the "Golden Visa" program, offering residency permits to non-EU citizens who invest in real estate above a certain value.

While this has led to an influx of non-EU buyers, it has also raised property prices in prime areas.

Foreigners who have purchased property in Latvia often highlight the importance of understanding local customs and business practices. Some have reported bureaucratic delays, especially when not familiar with the local language.

A recurring recommendation is to hire a translator or a local representative to ensure smooth communication.

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Avoid these pitfalls when purchasing property in Latvia

The concept of the "žogs" (fence) in rural areas

One unique pitfall you might encounter when buying residential property in Latvia, particularly as a foreigner, is overlooking the significance of the "žogs" (fence) in rural areas.

In Latvia, especially in the countryside, the physical boundary of a property is often marked by a traditional fence known as a "žogs." This is not just a physical demarcation but holds cultural significance as well.

In this context, you should be aware that the state of the fence can be a point of contention among neighbors and may lead to disputes. It's not uncommon for property boundaries to be inaccurately recorded in official documents, leading to misunderstandings when a new owner assumes control of the land.

These disputes are more frequent in rural areas where properties have been passed down through generations, and the exact boundaries may not have been formally established or might differ from what's recorded.

Therefore, when considering a property purchase, especially in rural Latvia, you must verify the boundaries with the neighbors. Engage a local surveyor to ensure that the property's physical boundaries match those in the land registry. This step is crucial, as resolving disputes over property boundaries can be time-consuming and costly.

Additionally, understanding the local community's perspective on property boundaries can help in maintaining good neighborly relations, which is an important aspect of rural life in Latvia.

"Kadastrālā vērtība" or cadastral value of the property

Another specific pitfall to be aware of when buying residential property in Latvia, especially for a foreigner, relates to the "kadastrālā vērtība" or cadastral value of the property.

This value is crucial in Latvia as it is used to calculate property taxes and can significantly impact the overall cost of owning a property.

In Latvia, the cadastral value may not always reflect the market value of a property. This discrepancy can be particularly stark in areas undergoing rapid development or gentrification. For instance, in cities like Riga, where the real estate market can fluctuate significantly, the cadastral value set by the State Land Service might be out of sync with the current market conditions.

You should thoroughly investigate the cadastral value of any property you are considering purchasing. This is important not only for understanding your potential property tax liability but also for negotiating the purchase price.

Be aware that if the cadastral value is much lower than the market value, it could be subject to adjustment in the future, potentially increasing your tax burden.

Furthermore, when buying older properties, especially in historic areas of cities like Riga or Jurmala, ensure that the cadastral value reflects any renovations or improvements made to the property.

Failure to update the cadastral value with these improvements can lead to legal complications and unexpected expenses later on.

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"Servitūts" or easements on the property

A unique and often overlooked aspect of buying residential property in Latvia, particularly for foreigners, is the potential existence of "servitūts" or easements on the property.

In Latvia, a servitūt is a legal right for someone else to use a portion of your property for a specific purpose, such as access to a neighboring land, utility lines, or even historical pathways.

For example, if you're considering purchasing a property in a historic area of Riga or in the countryside, there could be a servitūt in place that allows public access through the property to reach a nearby historical site, nature reserve, or common land. These servitūts are often established historically and may not be immediately apparent in the property's documentation.

You should diligently check for any existing servitūts before purchasing a property.

This information can usually be found in the property's land register record, but it's advisable to also discuss with the current owner and neighbors. Ignoring this step can lead to unexpected restrictions on your use of the property and potential legal disputes.

Moreover, servitūts in Latvia can be particularly complex if they involve access rights to natural resources, such as water bodies or forested areas, which are subject to specific environmental regulations and local customs.

"Saimniecības ēka" or farmstead classification

In Latvia, a unique and often unexpected issue for foreign property buyers is the historical "Saimniecības ēka" (farmstead) classification, which can be found especially in rural areas.

A property classified as a Saimniecības ēka typically includes not just the main residential building but also encompasses additional structures like barns, workshops, or storage sheds that are integral to the farmstead.

This classification can have several implications.

Firstly, there might be restrictions on the types of renovations or alterations you can make to the property. For instance, in areas where traditional Latvian architectural styles are preserved, you might be limited in how you can modernize or expand the buildings.

Secondly, the maintenance and upkeep responsibilities for these additional structures can be significant. If you're looking at a property in the countryside, be aware that owning a Saimniecības ēka often means committing to the maintenance of all structures on the property, not just the main house.

This can include traditional farm buildings that may require special care due to their age and construction materials.

You should thoroughly research the implications of the Saimniecības ēka classification for any rural property you are considering.

This includes understanding the specific maintenance requirements, any restrictions on property alterations, and the potential impact on property taxes.

Moreover, if you're not planning to engage in agricultural activities, owning a property with a Saimniecības ēka classification might not align with your lifestyle.

In such cases, exploring other types of properties or seeking legal advice on the implications of this classification would be prudent.

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Issues related to "Mantojums"

When buying residential property in Latvia, especially as a foreigner, you should be aware of the potential issues related to "Mantojums" (inheritance) laws and practices.

In Latvia, inheritance laws can be quite complex, and they might significantly affect property transactions, particularly in cases where a property has been passed down through several generations.

One common issue is that a property might be inherited by multiple heirs, which can lead to fragmented ownership. For example, a house in a city like Riga or a countryside property might be co-owned by several family members, each holding a partial stake.

This situation can become complicated if all co-owners do not agree on the sale or if some heirs are unknown or cannot be easily contacted.

Before finalizing a purchase, you should ensure that the seller has clear and unencumbered ownership of the property. This involves verifying that all potential inheritance claims have been settled and that there are no outstanding disputes among heirs.

Sometimes, this might require going beyond standard property records and conducting more in-depth investigations.

Additionally, be aware that Latvian law provides for mandatory inheritance shares for certain family members.

This means that a portion of the property might be legally claimed by the seller's relatives, even if it was not explicitly included in the will.

Complexities surrounding "Dzīvokļa īpašums"

Another unique consideration when buying residential property in Latvia, particularly for foreigners, involves understanding the complexities surrounding "Dzīvokļa īpašums" (apartment ownership) in multi-unit buildings.

This is especially relevant in urban areas like Riga, where apartment living is common.

In Latvia, when you buy an apartment, you're not only purchasing the individual unit but also acquiring a stake in the common property of the building, such as the hallways, elevators, and land on which the building sits.

This arrangement is governed by the Law on Apartment Ownership, which outlines the rights and responsibilities of apartment owners within these buildings.

A common issue arises with the management and maintenance of the common areas.

Each apartment owner is typically part of a "dzīvokļu īpašnieku biedrība" (apartment owners' association), which manages these areas. However, disputes can arise regarding maintenance responsibilities, costs, and decision-making processes.

You should be aware of the condition and management status of the common property before purchasing an apartment. Check whether there is an active and functional apartment owners' association and review any existing agreements or regulations governing the building.

It's also important to understand your financial obligations towards common area maintenance, as these can impact the overall affordability of the apartment.

Moreover, in older buildings, particularly those built during the Soviet era, there might be issues related to the building's structural integrity and energy efficiency.

Ensure that you have a thorough understanding of any planned or ongoing renovations and how they will be financed.

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"Meliorācijas sistēmas" or drainage system issues

In Latvia, be cautious of "Meliorācijas sistēmas" (drainage system) issues, particularly in rural or agricultural areas.

Properties might be part of an old drainage system crucial for land productivity and maintenance.

Ensure the system is functioning well and clarify maintenance responsibilities, as neglect can lead to significant land and property damage. This aspect is often overlooked but crucial in Latvian property transactions.

Also, when you're buying property in Latvia, especially in rural areas, you need to be aware of the state and legality of "Meliorācijas sistēmas". These drainage systems, often established decades ago, are essential for managing water levels in agricultural and rural land.

If the drainage system is not functioning properly or has been illegally altered, it can lead to waterlogging or other land management issues, which can significantly affect the usability and value of the property.

You should verify the condition of any existing drainage systems and understand your responsibilities for their maintenance. This includes checking for any agreements or obligations regarding the upkeep of these systems.

In some cases, there might be shared responsibilities with neighboring landowners or local government entities.

Neglecting to assess the status of the meliorācijas sistēmas can result in unexpected expenses for repairs or legal issues if the system is found to be non-compliant with current regulations.

Given the potential impact on your property, it's advisable to consult with local experts or authorities to ensure that you have a clear understanding of the situation and your obligations.

Risks of "Kultūras pieminekļi"

In Latvia, a unique issue to consider when buying property, especially in historical or older urban areas like the center of Riga, is the presence of "Kultūras pieminekļi" (cultural monuments).

These are buildings or sites designated as having historical, architectural, or cultural significance.

If the property you're interested in is classified as a Kultūras piemineklis or is located in a historic district, there will be stringent regulations regarding renovations, restorations, and alterations. These rules aim to preserve the historical integrity of the structure and the surrounding area.

Before purchasing such a property, ensure you understand these restrictions.

Renovation or alteration plans may require special permits and adherence to specific architectural standards. Moreover, the process for obtaining these permits can be lengthy and complex.

Neglecting to consider these factors can lead to significant additional costs and delays.

Therefore, if you're considering a property that falls under this category, it's crucial to factor in these potential complications and costs into your decision-making process.

Consulting with a local expert in Latvian historical preservation laws is highly advisable to navigate these complexities.

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"Zemesgrāmata" or land registry discrepancies

When buying property in Latvia, especially as a foreigner, you should be particularly mindful of the issue of "Zemesgrāmata" (Land Registry) discrepancies.

The Zemesgrāmata is the official public registry where all real estate transactions and ownership details are recorded. However, due to historical reasons and administrative changes over the years, there can be inconsistencies or outdated information in this registry.

For instance, in some cases, the property boundaries recorded in the Zemesgrāmata may not match the actual, physical boundaries of the property.

This can be especially prevalent in rural areas or in properties that haven't changed hands for a long time. Similarly, the registry might not be updated with the latest ownership or lien information, leading to potential legal disputes after the purchase.

Before purchasing a property, ensure that you or your legal representative thoroughly reviews the Zemesgrāmata entries for any discrepancies or outdated information.

This review should include checking for any undisclosed liens, easements, or claims against the property.

Addressing any issues with the Land Registry records before completing the purchase is crucial.

Failure to do so can result in legal challenges, disputes with neighbors over property boundaries, or other unforeseen complications that could affect your ownership rights.

The concept of "Iedzīvotāju deklarācija"

Another important consideration for property buyers in Latvia, and one that is often overlooked by foreigners, is the concept of "Iedzīvotāju deklarācija" or resident registration.

In Latvia, residents are required to officially declare their place of residence, and this declaration is tied to various administrative and legal processes.

If you're buying a property in Latvia with the intention of renting it out, be aware that your tenants are required to register their residency at the address of your property. This registration is more than just a formality; it can have implications for local taxes, voting rights, and access to municipal services.

The issue arises when property owners neglect to monitor the registration of their tenants.

Over time, there can be a mismatch between the actual residents and those registered, leading to complications in legal and administrative processes. For instance, in situations where eviction or legal action is necessary, discrepancies in resident registration can pose significant challenges.

As a property owner, you should ensure that your tenants complete their Iedzīvotāju deklarācija promptly and accurately.

Regularly verifying the resident registration status of your property can help avoid potential legal and administrative issues down the line.

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