Deprecated: Methods with the same name as their class will not be constructors in a future version of PHP; filesystem has a deprecated constructor in /data01/virt20245/domeenid/www.triniti.ee/htdocs/newsletterV3/lib/fs.lib.php on line 47
Uudiskiri
 
25. November 2013

Restrictions on the Purchase of Land in the Baltics

As land is one of the limited commodities, countries have from time to time enforced different safeguards on its ownership and use. The foreign investor is often treated differently from the citizens, border areas have been historically considered sensitive for alien ownership, agricultural land considered a strategic asset, etc. Below is a comparative overview of the restrictions regarding acquisition of land in Estonia, Latvia and Lithuania.



*Until the 1st of May 2014, EU citizens and EU citizens’ owned legal persons may acquire agricultural and forest land only in case they fulfil quality and experience criteria.
**Until the 1st of April 2014, foreign subjects are not entitled to any direct ownership of agricultural land or forests in Lithuania.
*** Certain exemptions are made for citizens and legal person owned by the citizens of states counterparties to the investment protection agreements of the Republic of Latvia.

Estonia

As of March 2011 both legal persons and citizens of countries which are contracting parties to the European Economic Area (EEA) or are member states of the Organisation for Economic Cooperation and Development (OECD) have the right to acquire immovables on the same grounds as Estonian legal persons and citizens. 

In Estonia the restrictions are regulated in a special Restrictions on Acquisition of Immovables Act. According to the act there are only a few restrictions remaining for the individual citizens. Rest of the limitations are valid only to legal persons. 

The restrictions regarding acquisition of land are only in force for acquisition of immovables used as profit yielding land (i.e. agricultural land). The specific purpose of profit yielding land must be entered into the land register for the restrictions to be valid. For example, for plots with specific purpose of business land or residential land, the restrictions are not valid. Land with specific purpose of yielding land constitutes 89,54 % of entire area of immovables registered in Estonia.
 
All legal persons of Estonia or Contracting states have the right to acquire an immovable which contains less than 10 ha of agricultural or/and forest land without restrictions. If the legal person would like to buy an immovable containing more than 10 ha of agricultural or forest land, then there are two options:
- the legal person has to have been engaged in production of agricultural products (if acquiring agricultural land) or in forest management (if acquiring forest land) for three years preceding the transaction; or
- receive an authorisation of the county governor of the location of the immovable. 

A citizen of a third country has the right to acquire an immovable which contains agricultural or forest land only with the prior authorisation of the county governor. 

There are also some restrictions in force for non-EEA citizens or legal persons on acquiring immovables on some Estonian islands and rural municipalities located on the border with the Russian Federation.  

Latvia

The regulation concerning the right to acquire land in the Republic of Latvia is provided in the Law on Privatization of Land in Rural Areas, which as is part of a so-called “land reform” legislation. 

Restrictions to buy land in the Republic of Latvia refer only to a certain type of land, i.e. land in the border zone of the State, land in nature reserves and other protected nature areas in zones of nature reserves, land in the protection zone of coastal dunes of the Baltic Sea and the Gulf of Riga, land in the protection zones of public reservoirs and water courses, except sections, in which a group of constructions is intended in conformity with the territorial planning of local government, agricultural and forest land in conformity with the territorial planning of local government and land in the mineral deposits of national significance. Other type of land as dwelling or profit yielding land may by acquired without restrictions. Though consent of the municipality is needed in case of non citizens or legal persons, where more than a half of shares belong to the non citizens of the Republic of Latvia.

After Latvia has entered the European Union, the applicability of restrictions to the citizens and legal entities of the European Union countries were limited to the transitional period until May 1, 2014. Within the transitional period the restrictions to acquire land in Latvia for the citizens and legal entities of the EU apply only as regards agricultural and forest land. At the same time citizens of the EU may acquire land without restrictions in case they want to start business as self-employed farmers, provided that they are living in Latvia at least three consecutive years and at least three consecutive years they are actively engaged in farming. 

The regulation on restrictions is included in the Law “On Land Privatisation in Rural Areas” and provides that land in Latvia without any restrictions can acquire:
- citizens of Latvia;
- state and local governments, state and local government undertakings;
- legal entities registered in the Register of Enterprises of the Republic of Latvia, with more than half of the share capital belonging to Latvians, the State or local government;
- legal entities registered in the Register of Enterprises of the Republic of Latvia, with more than half of the share capital belonging to persons from states with which the Republic of Latvia has entered into international contracts regarding the promotion and protection of investments;
- legal entity registered in the Register of Enterprises and which is a public stock company if the shares thereof are quoted in the stock exchange.

Lithuania

The right of foreign citizens and legal entities to acquire land in Lithuania is governed by a special Law on implementation of Article 47 of the Constitution. It provides that the title to the land, inland waters and forests of Lithuania may be acquired by foreign individuals or entities domiciled or incorporated in:
- the EU Member States,
- the countries that have concluded an association agreement with the European Community and its Member States,
- the Member States of the OECD
- NATO Member States
- the countries being parties to the European Economic Area Agreement

Persons of the specified foreign countries may acquire land, inland waters and forests on the same terms and conditions as the nationals and legal persons of the Republic of Lithuania. 

However, the said national law has established the exemption, according to which the entities of the specified foreign countries are prohibited from acquiring agricultural land and forest land until 1 April 2014. 

Despite the prohibition, persons of the specified foreign countries had been acquiring the agricultural and forest land in Lithuania indirectly, namely by setting up a company in Lithuania and acquiring desirable land or forest parcels on its behalf. The same scheme of acquiring the land in Lithuania was attempted to be used by the nationals of the countries not meeting the given criteria of the European and transatlantic integration (e.g. Russian Federation). However, in 2012 the Supreme Court of Lithuania established the case law stating that the transactions concerning transfer of the land to the companies established in Lithuania, which are owned by the persons not eligible to acquire land in Lithuania, are in conflict with mandatory legislative provisions and are therefore to be considered null and void. In this way the evasion of statutory prohibitions and direct acquisition of the land by the foreign persons not meeting the European and transatlantic integration criteria was prevented.

After the expiry of the established transition period, i.e. after 1 April 2014, the persons from the countries meeting the European and transatlantic integration criteria would be able to acquire land of any use on the same grounds and in line with the same procedure as the nationals and legal persons of the Republic of Lithuania. This means that they will become subject to the same restrictions on the acquisition of land as the Lithuanian nationals and they will not be able to acquire the land belonging to the State of Lithuania by the right of exclusive ownership, i.e. the land that, in line with the established provisions, was designated to transportation, nature protection, cultural objects or border guarding. 

The Provisional Law on the Acquisition of Agricultural Land provides that the general area of the agricultural land to be acquired by a person and persons related thereto from the state shall not exceed 300 ha, whereas the total area of the agricultural land to be acquired from the state and other persons shall not exceed 500 ha. Related persons shall include a spouse, and parents with their minor children, as well as legal persons in which they either directly or indirectly hold the majority of votes, or directly or indirectly exercise a decisive influence. 

Siim Maripuu, lawyer at TRINITI Tallinn
Anri Leimanis, partner at TRINITI Riga
Vytautas Kalmatavicus, partner at TRINITI Vilnius

« back

 
OUR TEAMS AT YOUR DISPOSAL
TALLINN RIGA VILNIUS
Any information in this newsletter is provided as a general guide only. It should not be relied upon as a substitute for specific legal advice. If you would like any further information on any of the matters raised in this newsletter please contact Law Firm Tamme Otsmann Ruus Vabamets.