Real Estate Guide 2015: Purchasing real estate in Estonia
This guide will give you an overview about the key requirements for purchasing or selling real estate in Estonia. This summary is not complete or exhaustive, since each particular category of property has its own specific requirements in the legal regulation. Therefore, whenever you deal with the matter of purchasing real estate it is strongly recommended to consult a lawyer in order to avoid possible inconveniences arising from the matter.
When it comes to the purchase of real estate and the associated costs in today's Estonia, foreign citizens and companies generally stand in an equal position with Estonian citizens and companies registered in Estonia.
In certain instances the acquisition of real estate by non-residents is restricted, inter alia:
- Purchasing real estate situated in the border regions of Estonia is available only for Estonian citizens and legal persons of the EU / EEA (excluding the four biggest Estonian islands, i.e. - Saaremaa, Hiiumaa, Vormsi, Muhu). Other persons may be granted the right to acquire the abovementioned real property only for reasons of national significance by the Estonian Government.
- Purchasing forest and agricultural land in Estonia is available generally only for Estonian citizens without specific restrictions. Legal persons established in the EU / EEA are subjected to a special regime of regulation only if the total area of the purchased land exceeds 10 hectares. Legal persons not established in the EU / EEA may granted the right to purchase the abovementioned land areas only by the permission of the County Governor.
Purchasing or selling an apartment is the most common real estate transaction in Estonia. The settlement process in Estonia is relative straightforward and to a great extent dependant on the timeframe in which an appointment with a notary can be arranged. The process of purchasing an apartment in Estonia can be divided into following stages:
Examining the real estate and collecting data:
- Once the desired apartment has been found, and the potential purchaser has become introduced its qualities and actual conditions, it is important that all the relevant information available concerning the property shall be checked. Here, consulting a relevant construction specialist is often strongly suggested.
- A confirmation is needed about the form of ownership and whether the seller is also the owner of the apartment. In cases of apartment ownership, the land is registered and the apartment forms a physical share of the residential building.
- In Estonia some apartments may be treated as ‘movable’ property, if they are not registered in the Land Register. Thus, the Land Register should be consulted.
- It should be verified also from the Land Register whether the apartment was for sale as whole or in part. In the latter case it may be possible to purchase a legal share as a co-owner having legal rights to and interest in the apartment. Moreover, clarifications should be made about marital regime possibly influencing the ownership of the asset, and the existence of mortgages and other real rights potentially encumbering the apartment.
- The seller should be checked for having any possible debts for apartment utilities, taxes and other services. This information is not expressed in the Land Register extract, and thus the relevant apartment association of the building should be consulted. The potential buyer should become hereby informed about the obligations and possible debts of the apartment association.
- A confirmation should be done concerning the monthly expenses related to the apartment, and the absence of any conflicting tenant contracts or interests in the asset.
Concluding a reservation agreement
After successfully examining through the relevant information and documents, the next step is to conclude a reservation agreement, which shall reserve the potential buyer’s right to purchase the apartment e.g. when the buyer is unable to be physically present in Estonia. A reservation agreement itself does not oblige the buyer to purchase or seller to sell the apartment, but the seller becomes prevented from selling the apartment to a third party during the agreement’s period of validity. Upon the exhaustion of a reservation agreement, may the seller choose freely again to whom sell the apartment.
To secure the property by a way of a reservation agreement, a reservation fee must be paid, and such an agreement should be concluded when the buyer is not absolutely sure about the purchase and wishes to preserve the freedom to look for other options available. Making a reservation agreement may be skipped altogether and replaced by a pre-purchase agreement instead, if the buyer is fully certain about purchasing the given asset.
To be continued.
For more information regarding the sale or purchase of immovable property in Estonia, please contact our English speaking solicitors and tax consultants to firstname.lastname@example.org.
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