Leasing property in Latvia
The process of leasing property in Latvia can follow different paths, depending on what kind of real estate you are interested in. However, the general procedure can be summarised in the following steps (assuming you have already found a property you are interested in):
- performing due diligence
- signing documents
- arranging payments
Also, a note on terminology - the words ‘leasing’ and ‘renting’ can both mean either exchanging the right to use your property for money or giving your money in exchange for such a right. For the purposes of this article the term ‘leasing’ will refer to the process of paying someone in exchange for the right to use their property. In this context, a person that leases a property is called a tenant.
Due diligence is a process of acquiring information about the property with the aim of making sure that it is legally safe and sound. It involves checking relevant documents, as well as whether the piece of real estate is registered with all the necessary government agencies, such a Land Book. This type of legal assessment also checks if all the parts of the property have been properly legalized, e.g. whether the buildings on a land plot have been built in accordance with all the rules. You can read a detailed description of the procedure in the dedicated article on due diligence.
While due diligence when leasing property is not as vital as it is when you buy it, it is still recommended to perform a document check. Also, the importance of due diligence grows with the complexity of your intended usage of the leased property. For residential real estate it may be less, but for industrial and commercial usage due diligence is almost as important as in cases when you buy a property. Whatever the degree of importance, if something is not right with the property in the legal sense and it attracts the attention of authorities, the owner might be forced to terminate any contracts with you because of it. While you do not hold any liability for these faults, the fact that the contract is terminated prematurely is surely a problem, because you would need to look for another property and go through the leasing procedure once again.
Taking all this into account, it is recommended that any tenant orders at least some form of document assessment from a real estate guidance agency.
The main document for leasing a Latvian property is, of course, a lease agreement. It is prepared by the owner of the property. It is in every tenant's best interests to study the contract thoroughly, or, better still, employ a real estate legal support professionals to do that for you. While all the points of the contract are important, it is advisable to pay special attention to what kinds of actions you are allowed to take while using the property, the payment schedule, and how incidents like damages to property are dealt with. It should be remembered that the lease contract is legally recognized as the basis of the tenant-landlord relationship, which means that, in case of a conflict, the contract will determine the final decision.
How you arrange the payments to a landlord largely depends on what is stipulated in the lease contract. In this, two aspects can be distinguished:
- payment mode
- money transfer mode
The payment mode determines how often and what sums are transferred to a landlord. Rent is usually paid monthly, with some landlords asking that the first payment is made for several months in advance, as a security against the termination of contract by the tenant (or by the landlord because of the tenant's actions). In any subsequent months, the tenant can usually voluntarily pay in advance as well, but whether the money is returned in case of premature contract termination depends on what a particular contract states.
The money transfer mode determines the way of transferring the payments to a landlord. In general, leasing a property does not require extra secure, and thus complex, methods, a simple bank transfer or cash will suffice. It must be noted, that in Latvia many landlords favour payments in cash, especially in case of leasing residential real estate.