Buying property in Latvia


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Initial agreement between the seller and the buyer - Before Contract

What form can this agreement take? Preliminary contract?

When a seller and a buyer have agreed on the sale of a real estate property, they may enter into a letter of intent (or a pre-contract) or a so-called speculative purchase. A pre-contract is an agreement between the parties about another agreement to be entered into in the future. A pre-contract with the purpose of entering into a contract shall take effect as soon as the essential elements of the contract have been established.  A pre-contract only gives ground to ask for a contract to be drawn up and signed. 

A speculative purchase is a purchase of an object (a real estate property), that does not belong to a seller at the moment of occurrence, and it is not certain whether it will become a property of the seller in the future. In practice, speculative purchases are very rare.  

With whom must the parties (buyer/seller) formalize the initial agreement? Is a legal form imposed?

In both cases, pre-contracts can be entered into either as a notarial act (this form is however not obligatory) or by a private agreement.

In the case of a private agreement, a real estate agent, a legal consultant or a lawyer will draft the pre-contract. In the case of a notarial act, the parties can use the services of a notary.

In practice, most of the clients request an assistance of a real estate agent, a legal consultant or a lawyer. 

What are the legal effects of this preliminary contract? Is a preliminary contract necessary?

Liability for violation of the pre-contract applies to non-entering into the contract, not to the failure to hand the case in the liability can take the form of compensation of the costs.    

It is not mandatory to sign a pre-contract.

Are there amounts to be paid, and to whom? Can these amounts be repaid? 

There is no obligation to pay, nor any minimum amount to pay. However, the force of an obligation may be reinforced by an earnest-money. The earnest-money is an additional contract entered into in order to secure its performance. The amount thereof shall be determined by the mutual agreement of the parties. This money is paid at the moment of the signing of the preliminary contract.

If a contract is not performed either because it was revoked by a mutual, voluntary agreement, or because its performance became impossible through no fault of the giver of the earnest-money, then the earnest-money must be returned to the latter.

If a contract is not performed through the fault of one contracting party, then if the recipient of the earnest-money is at fault he/she must give twice the sum to the giver; but if the giver of the earnest-money was at fault, he/she shall lose the right to request its return. 

Are there any consumer protection measures (cooling-off period, rights of withdrawal)? 

Every creditor has the right to waive his/her claim in a mutual agreement between the creditor and the debtor, i.e., an obligations cancellation agreement shall be necessary for such purpose. 

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