On 1 January 2022, a new law regulating use of land in shared ownership entered into force.
The legal relationship between the owner of a land plot and a person owning a property built on the same land-plot has caused many legal uncertainties in the past. Now, this obvious shortcoming of Latvian legislation has been dealt with by introducing the legal concept of a compulsory lease (legal land use right). A compulsory lease puts an end to the “forced lease” relationship prevailing so far and aims at creating a fairer balance between the parties involved.
The compulsory lease will be implemented gradually, starting from January 2022. If there is a valid land lease agreement (or court decision) in force on 1 January 2022, and the exact land plot in use is clear and it does not belong to a public person, the compulsory lease begins on this date. In the absence of an existing agreement or a court ruling, the new regulation will apply as of 1 January 2023.
The law still leaves space for contractual arrangements between the parties, though. This is especially important for the one loophole left by the law: it is still up to the parties to decide on the exact area of the land used for the purposes of the building erected upon it. The new legal arrangement presupposes that the owner of the building is using the entire unit of land on which the building is located, unless otherwise agreed by the parties or determined by a court.
The reform also sets a compulsory lease payment in the amount of 4 % per annum of the cadastral value of the land plot, but not less than EUR 50 a year. At the same time, in order to ensure a balance between the owners of the building and the owner of a land plot, the reform envisages much more active involvement by the owner of the building in taking care of the land plot used.
The compulsory lease ends if the building and land-plot are merged into a one immovable property, or if the building is demolished.
Amendments to the Law “On the Time of Entry into Force and Application of the Introductory, Inheritance Rights and Property Rights Part of the Revised Civil Law of the Republic of Latvia of 1937” adopted on 30 September 2021.