Real Estate And Project Development News - May 2021

• Published date: 22 July 2021
• Subject Matter: Real Estate and Construction, Construction & Planning, Real Estate, Landlord & Tenant - Leases
• Law Firm: Cobalt Legal
• Author: Ms Dace Silava-Tomsone and Dita Bu'a

During the last few months number of laws and regulations have been passed in Latvia which have an impact on construction processes, investment in the Latvian real estate and project development.

Below is our summary of the most significant developments.

Overhaul of the Residential Tenancy Law

New Residential Tenancy Law entered into force on 1 May 2021 overhauling the old significantly outdated law on lease of residential premises which was in operation for more than 20 years. It is expected that the new law will provide a fair balance between lessors and tenants thus facilitating the availability of housing and encouraging developers to invest in residential buildings. According to some projections, an annual inflow of investments in range of EUR 100 million is expected in the Latvian residential tenancy sector.

The most significant changes concern the obligation to conclude the tenancy agreement with a fixed end date. In parallel the lawmaker has considerably eased the corroboration of tenancy agreements with the Land Register by making registration free of charge, and stating that the entries shall automatically cease on the fixed end date without any involvement by the parties. The agreements not registered with the Land Register will not be binding to the new owner in the event of change of title.

The agreements registered with the Land Register shall be subject to undisputed enforcement of obligations under the Civil Procedure Law, thus significantly relieving process of recovery of tenancy debts and eviction of debtors. According to calculations by the Ministry of Justice, the period required for debt collection and eviction shall be decreased from current 5 years to 6 months.

Along with encouraging future developments, one of the aims of the new law was termination or modernization of the rental agreements entered with tenants of denationalized buildings. Those agreements often were entered for indefinite period of time and on unreasonable financial terms thus distorting the rental market and precluding proper maintenance of the denationalized buildings. The new law introduces a transition period until 31 December 2036 at which point the old tenancy agreements will be automatically terminated, unless amended between the parties or claim for ordering amendments filed with the court before 31 December 2026.

Amendments to the Construction Law

The latest amendments to the Construction Law have become effective in the second part of May introducing a...