The principal source governing real estate matters in Latvia is the Civil Law of Latvia. It establishes the fundamental legal framework for property relations, regulating issues such as ownership rights, possession and the transfer of property, as well as the contractual relationships underlying real estate transactions.

Equally significant is the Land Register Law, which complements the Civil Law by setting out the core principles governing the registration and public recording of immovable property. This law ensures the legal certainty and transparency of property rights by defining how real estate is documented and recognised for third parties.

The Residential Tenancy Law regulates legal relationships between landlords and tenants in Latvia. It establishes the framework for concluding, modifying and terminating residential lease agreements, while defining the rights and obligations of both parties. The law aims to ensure a fair balance by protecting tenants’ rights to stable housing and, at the same time, safeguarding landlords’ interests, including the proper use and maintenance of the property as well as timely payment of rent.

Over the past 12 months, Latvia’s real estate market has shown a cautious recovery. Investment activity has improved compared to 2024, but remains selective, with demand focused on smaller transactions, grocery retail, logistics and industrial assets, and redevelopment opportunities. Large-ticket deals are limited, and local capital has become increasingly important, while foreign investors are often more active on the sell side. In Riga, office market activity has stabilised with renewed take-up, but interest is concentrated on prime and efficient assets as well as repositioning opportunities.

The most significant publicly reported deals over the last 12 months include the acquisition of SC Olimpia in Riga by Indexo Real Estate Fund for more than EUR40 million in Q1 2025, which Colliers identified as the quarter’s most notable Latvian transaction. Other publicly reported transactions include:

• the first Lidl sale-and-leaseback in Latvia (a newly commissioned Riga store sold to a local investor for EUR6.9 million);
• the purchase of Maxima Biķernieki by Madara 89 from Prosperus in Q2 2025;
• the sale of Rosme’s former factory site for residential conversion; and
• in early 2026, the pending SKY&More shopping centre transaction, EfTEN Capital’s disposal of the DSV logistics centre (about EUR9 million) and the acquisition of the Helio biroji office building near Riga Airport.

More broadly, Colliers reported that Indexo Real Estate Fund was among the most active buyers in 2025, acquiring three properties for a total exceeding EUR80 million. As Latvia is a relatively small market and some transactions are not fully public, these should be understood as the most significant publicly reported deals and not necessarily an exhaustive ranking of every closed transaction.

Macroeconomic conditions have gradually stabilised. While higher interest rates initially reduced liquidity and slowed pricing, monetary policy easing (ECB deposit rate at 2.00% as of 2026) has eased pressure. However, inflation remains present (around 3.4% year-on-year in March 2026), keeping the market disciplined. Financing remains cautious, with yields generally above 7% in regional reporting and strong lender focus on cash-flow stable assets.

Market participants have increasingly shifted towards redevelopment, conversion and value-add strategies, particularly for outdated office stock. Financing structures have also diversified, including sale-and-leasebacks, club deals, and selective use of private credit alongside traditional bank lending. At the same time, technologies such as PropTech and tokenisation remain in an early stage in Latvia, complementing rather than replacing conventional real estate structures.

Overall, the Latvian market today looks more resilient. The key themes are local capital, selective lending, redevelopment, and a preference for assets that can either deliver stable income quickly or be repositioned into stronger uses. Monetary conditions are much less punitive than at the peak of the rate cycle, but are not loose enough to restore the environment seen before 2022 (due to the war in Ukraine), so discipline on leverage, tenant quality and business plans remains central.

In Latvia, no major reforms are transforming the real estate sector at the moment. Instead, several smaller tax and regulatory changes are present – some already in force and others developing. Most of these factors are relevant for investors, owners and developers.

One key area is the ongoing reform of the immovable property tax system. The aim is to make it more predictable and better aligned with how property is actually used. Recent changes (including those from 2026) show a move towards more differentiated rates depending on property type and location, often set at the municipal level. This trend is likely to continue, although a full reform is still gradual and politically sensitive.

Another important change, in force from 1 January 2026, is the principle that “debt follows the property” in apartment transactions. This means that a buyer may become liable for certain unpaid obligations linked to the property, such as utility or management debts. As a result, proper due diligence has become more important.

Broader tax changes have also been introduced through the 2025–2026 budget (eg, income tax and other fiscal measures). While not specific to real estate, they affect investment returns, construction costs and overall market activity.

Overall, reforms in Latvia are gradual rather than radical. The main developments, such as property tax adjustments, stricter compliance and new transaction rules, are already in force or being introduced step by step, rather than through one major reform.

The Civil Law of Latvia essentially distinguishes between two principal forms of property ownership. A person may own property individually, or alternatively property may be held under a regime of co-ownership. In the case of sole ownership, one individual holds the entirety of the property rights. By contrast, under co-ownership, the property is divided into notional shares among multiple owners; for example, two co-owners would each hold an undivided one-half share in the property.

Overall, Latvian law does not provide fundamentally different transfer regimes based on the type of real estate (such as residential, industrial, office, retail or hotel property). The same core legal regulating acts – mainly the Civil Law and the Land Register Law – apply to all categories of immovable property. However, certain specific laws and regulations may become relevant depending on the use or status of the property. For instance, a property that is rented out or leased may affect the transaction, if the agreement of rent or lease is recorded in the Land Register, since upon transfer of the property the acquirer is bound to respect the lease or rental agreement only if it has been duly registered in the Land Register.

In addition, the Law on Land Privatisation in Rural Areas and the Law on Land Reform in the Cities of the Republic of Latvia set out various additional restrictions on land transactions.

In Latvia, a lawful transfer of real estate is carried out through a two-step process under the Civil Law of Latvia and the Land Registry Law. First, the parties conclude a valid contract (which may be notarised if the parties mutually agree thereto). Second, ownership is transferred only upon registration in the Land Register, which has a constitutive effect. To this end, a corroboration request must be submitted and, as a general rule, the signatures on the corroboration request must be certified by a sworn notary.

All real estate is formally registered, and transfers of title are recorded in the Land Register, which ensures legal certainty and public reliability – ie, the register is publicly accessible. Title insurance is not common, as parties can rely on the accuracy of the Land Register.

Overall, due diligence is relatively fast and straightforward due to the reliability of public registers. In Latvia, real estate due diligence mainly involves reviewing public records and key legal aspects before purchase. Buyers typically start with the Land Register under the Land Registry Law to verify ownership and check for encumbrances such as mortgages or servitudes.

Depending on the type and location of the property, buyers also examine cadastral data and zoning rules under the Spatial Development Planning Law. In addition, buyers may conduct a basic technical inspection as well.

Additionally, anti-money laundering (AML) checks are a mandatory part of real estate transactions in Latvia, requiring verification of the parties, their beneficial owners, and the source of funds alongside standard property due diligence.

In Latvia, commercial real estate transactions are mainly governed by the Civil Law of Latvia.

Typically, the seller represents ownership, absence of undisclosed encumbrances, leases or disputes, compliance with law, and accuracy of key property data. Latvian law itself provides general protection – mainly liability for legal defects and hidden physical defects, rather than detailed statutory warranties. If the seller has fraudulently concealed defects or misrepresented the property, they are liable for all losses; otherwise, the buyer may request rescission or a price reduction. Statutory limitation periods are short: six months for rescission and one year for price reduction.

Buyer remedies for misrepresentation include damages (especially in cases of fraud), price reduction or termination.

Representation and warranty insurance is uncommon, and is mainly used in larger or cross-border transactions rather than standard, small-scale deals.

In Latvia, an investor purchasing real estate should focus on several key areas of law that together determine the legality, risks and usability of the property. For example, the Civil Law of Latvia and the Land Register Law are fundamental, as they govern ownership rights, transfer of title and registration. These ensure that the investor acquires valid and enforceable ownership.

Another key aspect is planning and zoning law, particularly the Spatial Development Planning Law and the regulations of the municipality in which the real estate is located, which is crucial to understanding how the property may be used or developed. This is especially important for commercial or development projects, as there are multiple restrictions for construction in areas close to the beach, endangered areas, etc.

Construction law, including the Construction Law of Latvia, regulates building standards, permits and compliance, which directly affects development potential and liabilities.

Finally, investors should consider tax law (eg, transfer taxes and capital gains), as well as environmental and compliance regulations, which may impose obligations or restrictions on the use of the property.

In Latvia, a buyer of real estate may, in certain circumstances, become responsible for soil pollution or environmental contamination, even if they did not originally cause it.

Under Latvian environmental law – the primary principle is that the polluter is responsible (“polluter pays”). However, if the original polluter cannot be identified or held liable, responsibility may shift to the current owner or possessor of the property. This means that a buyer can inherit environmental liabilities together with the land.

As a result, owners may be required to remediate contamination, limit environmental harm or comply with regulatory orders, regardless of fault. These obligations are typically administrative in nature and aimed at protecting public health and the environment. If the owner neither knew nor could have known about the polluting activities, it would be disproportionate to impose full liability for damages.

To sum up, while liability is not automatic in every case, buyers should assume that environmental risks can attach to the property itself and therefore to its owner.

In Latvia, a buyer determines permitted use mainly through local planning documents under the Spatial Development Planning Law.

The primary sources are municipal spatial plans and zoning regulations, which define allowed uses (eg, residential or commercial) and development conditions. These are publicly available, and buyers often obtain an official statement from the municipality for confirmation. More detailed rules may be found in local or detailed plans (detālplānojums).

For development, investors may co-operate with municipalities and conclude administrative agreements, particularly in larger projects, to address planning conditions or infrastructure.

In Latvia, expropriation of real estate is possible, but is strictly regulated and used only in exceptional cases. The main legal basis is the Law on the Alienation of Immovable Property Necessary for Public Needs, together with constitutional protections of property rights.

Expropriation of immovable property in Latvia may take place for public needs, including State protection, environmental and health protection, and social security, as well as the construction of cultural, educational and sports facilities, engineering structures and communications, and the development of transport infrastructure or other public purposes, provided that the objective cannot be achieved by other means. It must be justified, proportionate and carried out in accordance with the law.

The process typically begins with an attempt to reach a voluntary agreement with the owner. If this fails, a formal expropriation procedure is initiated by the competent public authority. A decision is then adopted, often at government level, specifying the public purpose and the property concerned.

A key requirement is fair compensation, which must be paid to the owner. Compensation is usually based on the market value of the property and may include losses directly related to the expropriation. The owner has the right to challenge the decision and/or the amount of compensation in court, ensuring judicial protection.

Overall, while expropriation is legally possible in Latvia, it is relatively rare and subject to strict safeguards to protect property owners.

In an asset deal in Latvia, a state fee is generally payable for registration of title in the Land Register, together with a clerical fee for the relevant entry. The rates depend on the buyer type (individual or legal entity) and the form of submission (electronic or paper). Transaction costs are subject to agreement between the parties, but in practice are usually borne by the buyer.

From the seller’s perspective, individuals are subject to capital gains tax of 25.5% on the profit from the sale, while companies are taxed under a deferred regime, where corporate income tax is applied only upon profit distribution, such as dividends.

In a share deal, where shares in a property-owning company are transferred, no real estate transfer taxes are generally triggered, as ownership of the underlying property does not change. Instead, the change is recorded in the shareholders’ register, with lower registration costs payable to the Register of Enterprises. However, capital gains tax may still apply to the seller.

For partial transfers, fees may apply proportionally if only a fraction of the property is acquired, based on transaction or cadastral value. However, where only a change of control at company level occurs, real estate transfer taxes are generally not triggered.

State fees are typically calculated based on either the transaction value or the cadastral value, whichever is higher, and in the case of partial acquisitions they are reduced proportionally. Exemptions are limited, but may apply in specific cases, such as transfers carried out within the framework of corporate reorganisations, including mergers or demergers.              

In Latvia, foreign investors are generally allowed to acquire real estate, though certain restrictions apply depending on the type of land and the investor’s status.

Investors from EU, EEA, Swiss Confederation and OECD Code of Liberalisation of Capital Movements countries are largely treated the same as Latvian nationals and may freely acquire most types of real estate, including land. However, some restrictions may still apply to agricultural and forest land, where specific eligibility criteria (such as intended use or qualifications) must be met under Latvian land laws.

For investors from non-EU, non-EEA, non-Swiss and non-OECD Code of Liberalisation of Capital Movements countries, restrictions are stricter. Acquisition of land (especially agricultural, forest land or land in the border zone of the State and others) may be limited entirely or require additional conditions, and in some cases ownership is only possible through a locally registered company.

Since 2025, it is prohibited by law for citizens or entities from the Russian Federation or Belarus to acquire real estate in Latvia.

Overall, while Latvia is relatively open to foreign real estate investment, limitations mainly concern land ownership – particularly agricultural and forest land – and depend on the investor’s country of origin.

In Latvia, acquisitions of commercial real estate are typically financed through bank loans secured by a mortgage over the relevant property. Usually, the buyer contributes part of the purchase price as equity, while the remaining portion is financed by a credit institution. In addition to the mortgage, lenders often require supplementary security, such as a commercial pledge over the borrower’s assets or shares, and in some cases guarantees.

In larger transactions, such as acquisitions of real estate portfolios or companies holding real estate (share deals), financing structures tend to be more complex. These may involve syndicated loans (ie, financing provided by multiple lenders) and structured financing arrangements combining different instruments. Transactions are often carried out through special purpose vehicles (SPVs), with security granted both over the underlying real estate and over the shares of the acquiring entity.

Accordingly, while the basic principle of secured bank financing remains the same, larger and more complex transactions typically involve more sophisticated and layered financing structures.

In commercial real estate financing transactions in Latvia, the most common form of security is a mortgage over the relevant real estate. In practice, in the vast majority of cases, the lender (typically a bank) requires a registered mortgage in the Land Register as the primary security for the loan.

In addition to the mortgage, depending on the risk profile of the transaction, lenders may require additional forms of security. In higher-risk transactions, a guarantee from a third party may be required.

Where the property is acquired by a company (often an SPV), lenders will typically also require a commercial pledge over the shares of that company. This means that the lender obtains security not only over the real estate itself but also over the shares of the entity that owns the property.

Such a security structure allows the lender flexibility in enforcement: in the event of default, the lender may choose to enforce either against the real estate (through the mortgage) or against the shares (thereby acquiring control of the company and indirectly the underlying property).

In Latvia, there are generally no specific restrictions on granting security over real estate in favour of foreign lenders. Foreign banks and financial institutions may take security, such as mortgages, on the same basis as domestic lenders. Likewise, repayments to a foreign lender under a loan agreement or security document are generally not restricted.

However, limitations may arise under sanctions regimes. Transactions involving sanctioned persons or suspicious funds may be restricted or prohibited.

More broadly, foreign investors often benefit from additional legal protection. Latvia has entered into bilateral investment protection agreements with various countries – for example, the United States (among others) – which provide safeguards against adverse state actions. As a result, foreign investors are often placed in a relatively secure legal position from a state protection perspective.

Security over real estate is created by registering a mortgage in the Land Register. In such case, the state fee is 0.1% of the loan amount or of the amount of the principal claim secured by the mortgage. In the event of an amendment of the secured obligation, a transfer of the loan to another creditor or refinancing, the 0.1% rate also applies, but only to the amount by which the new loan amount is increased.

In most cases, a notarial certification fee of EUR23 is payable for certifying the signature on the corroboration request. In addition, the notary charges a separate fee for preparing the corroboration request, if the notary is asked to draft it.

Notarial or orphan’s court certification is not required, however, if the person submits the corroboration request in person to the district/city court and the request is based on:

• a court ruling;
• a notarial act;
• an administrative act;
• a contract for the acquisition of real estate through privatisation of state or municipal property; or
• a building authority certificate regarding the status of the building together with the act on commissioning the building.

Latvian law also allows claims secured by a mortgage to be enforced through uncontested compulsory enforcement proceedings. For an application for uncontested compulsory enforcement where the claim exceeds EUR25,000, the state fee is EUR500. In addition, the certified bailiff’s remuneration includes a fixed fee, which in recovery matters ranges from EUR18 to EUR308 depending on the amount claimed, plus a percentage fee calculated from the amount actually recovered, but it is mainly covered by the debtor.

The main legal requirements that must be complied with before an entity can validly grant security over its real estate are as follows.

• The company and its representatives must possess the legal capacity and requisite authority to enter into the transaction, including proper authorisation to conclude legal acts. This is particularly relevant for representatives or management board members where the articles of association require supervisory board consent for significant matters, including the encumbrance of property with rights in rem.
• A management board member must perform their duties as a respectable and accurate manager, which also includes restrictions on entering into transactions with related persons. If a management board member breaches these rules, the transaction remains valid; however, the board member may become liable for damages.
• Joint-stock companies (akciju sabiedrības) are expressly prohibited from granting a loan or otherwise directly or indirectly financing a third party, which may also include the granting of security, for the purpose of acquiring that company’s shares.

Latvian law allows enforcement of mortgage-secured claims either through court/arbitration or via uncontested compulsory enforcement. In practice, creditors often first obtain a court judgment or arbitral award and then enforce it through a sworn bailiff, including against the mortgaged property. If the mortgage is provided by a third party, that party must also be included in proceedings to enable enforcement against the pledged asset. Where standard litigation is used instead, proceedings typically take around six months to several years, depending on complexity and court instances.

As an alternative, uncontested compulsory enforcement allows a creditor to apply to court, with a judge deciding within seven days. If granted, the decision becomes an enforcement order submitted to a sworn bailiff, who can proceed with sale of the property at auction. This process usually takes two to four months.

Mortgage priority is determined by registration order in the Land Register, with earlier registrations ranking first.

Existing secured debt may be subordinated by agreement. In practice, subordination typically occurs with the consent of the existing creditor, through a subordination agreement. Where the debt is secured by a mortgage, any change in priority requires registration in the Land Register to be effective.

The law does not provide for the liability of the pledgee. The person liable for environmental damage is the one who caused the damage; in exceptional cases where identifying the direct perpetrator is impossible or would require disproportionate resources, the landowner may be liable.

In the event of the debtor’s insolvency, a claim secured by a mortgage remains in force until the creditor’s claim has been satisfied. Upon the sale of the debtor’s encumbered property, the proceeds are applied with priority to the satisfaction of secured creditors’ claims.

No existing, forthcoming or proposed legal or regulatory framework requires the payment of recording or analogous taxes by either lenders or borrowers in connection with real estate mortgage or mezzanine loans.

Land use and development in Latvia is governed by the Spatial Development Planning Law, which sets the framework for planning at national, regional and local levels based on principles such as sustainability, transparency and coherence. National planning is defined by strategic documents such as the Sustainable Development Strategy of Latvia and the National Development Plan, while regional planning is implemented by planning regions together with municipalities. At the local level, municipalities adopt and administer binding planning documents, including development strategies and territorial plans, all of which must comply with higher-level plans.

Construction is primarily regulated by the Construction Law, which defines the legal framework for construction activities and the division of competences between the State and municipalities. Local governments are required to establish building authorities responsible for supervising construction and ensuring compliance with applicable requirements.

To obtain development rights, a person must submit an application and the required documentation to the building authority. A building permit is issued if:

• the construction proposal conforms to the spatial plan, local plan and detailed plan;
• the construction proposal has been co-ordinated with the owner of the land plot; and
• a building design has been developed in accordance with the requirements of construction laws and regulations.

Depending on the nature of the project, additional procedures may apply, including public consultation and, where required, an environmental impact assessment. Any failure to take into account opinions expressed during public consultation must be specifically justified. In environmental matters, any person may, by way of an actio popularis, challenge an administrative act for non-compliance with environmental requirements. A refusal to issue a building permit may be contested by the developer in administrative proceedings. Planning and zoning restrictions are enforced primarily through the building permit process.

Investors can hold real estate assests through the following main types of entities:

• a limited liability company (sabiedrība ar ierobežotu atbildību);
• a joint-stock company (akciju sabiedrība);
• a sole proprietorship/individual merchant;
• a limited partnership;
• a co-operative society; and
• a capital company registered in another EU member state or country of the EEA, the Swiss Confederation, or state party of the OECD’s Code of Liberalisation of Capital Movements.

In practice, however, not all of these forms are commonly used for real estate holding. The predominant market standard is a limited liability company, while in larger or more institutional structures a joint-stock company may also be utilised.

The private and public limited liability companies in Latvia are considered capital companies and legal persons. The liability of their shareholders is separated from the liabilities of the company, since the company itself is liable with all of its assets, while a shareholder generally is not liable for the company’s obligations. The main difference is that a limited liability company is a closed company whose shares are not objects of public circulation, whereas a joint-stock company is an open company whose shares may be objects of public circulation. The activities of these companies are governed mainly by the Commercial Law. There are no material tax advantages in choosing one of these entities over another, since corporate income tax is, in essence, applied in the same way in both cases.

Latvia does not have a specific statutory framework under which a vehicle qualifies as a “real estate investment trust” (REIT) in the classic sense used in some other jurisdictions. Instead, real estate investment is usually structured through ordinary companies or, where collective investment is intended, through an alternative investment fund (AIF) under the Law on Alternative Investment Funds and Managers Thereof. An AIF may be established as an aggregate of assets, a limited partnership or a joint-stock company.

The main advantage of an AIF is that it provides a regulated structure for pooling capital from multiple investors and investing it in accordance with a defined investment policy. This may be attractive where professional management, a clearer governance framework and greater credibility in the eyes of investors are important. By contrast, where there is no need for a regulated multi-investor structure, an AIF will often mainly involve more supervision, higher costs and more formal requirements than an ordinary company. In such cases, a standard company structure may be more practical.

For limited liability companies, the minimum capital is EUR2,800. However, for a joint-stock company, equity capital may not be less than EUR25,000.

For a limited liability company, the mandatory governance bodies are the shareholders’ meeting and the management board. A supervisory board is optional. The shareholders’ meeting has exclusive authority over the most important matters. The management board, as the executive body, acts in accordance with the Commercial Law and the company’s articles of association, and represents the company.

For a joint-stock company, the governance bodies are the shareholders’ meeting, the supervisory board and the management board.

Across both forms, there is a beneficial ownership disclosure requirement. Changes relating to the beneficial owner must be filed with the Latvian Register of Enterprises within 14 days, and such information is publicly accessible.

Annual maintenance and accounting compliance costs in Latvia depend on the volume and complexity of the vehicle’s activity. For a simple limited liability company used to hold real estate, outsourced accounting and annual reporting typically cost approximately EUR1,500 to EUR5,000 per year. For a joint-stock company, the annual cost is usually higher, commonly around EUR3,000 to EUR8,000 per year, reflecting more formal governance and reporting requirements. These figures exclude statutory audit or review costs, payroll costs for management, tax advice and other transaction-specific legal or compliance expenses.

Under Latvian law, a person, company or other organisation may be entitled to occupy or use immovable property for a limited period under a lease agreement, an agreement granting usufruct rights, or a loan for use (ie, use without compensation), and may also acquire specific rights in another person’s immovable property, such as superficies rights or servitudes.

There are no different types of commercial leases in Latvia.

Rent and lease terms are regulated by the Civil Law, though the default rules may be varied by agreement, provided that they do not contradict mandatory provisions. However, the regulation of residential lease agreements is enshrined in a separate legislative act, namely the Residential Tenancy Law.

The typical terms of a lease of business premises are outlined below:

• the lease is usually a fixed term but can be an indefinite one as well;
• the tenant is generally responsible for routine maintenance and minor repairs of the leased property, while the landlord is responsible for major repairs and capital improvements; and
• rent is typically paid monthly in advance for the following month.

By default, the amount of rent payable remains unchanged, though the parties may agree on a mechanism for adjusting the rent without amending the contract.

The parties may agree that the rent is indexed – for example, to the Latvian Consumer Price Index or the Harmonised Index of Consumer Prices (HICP). In any case, the adjusted rent is determined in accordance with the mechanism agreed upon in the contract.

Commercial rent is generally subject to VAT at the standard rate of 21%. However, under Latvian law, the rental of residential premises to residents is VAT-exempt (excluding short-term accommodation services such as hotels, guesthouses and similar establishments).

Other than rent, a tenant will typically pay only those additional amounts that are expressly agreed in the lease, most commonly a security deposit and any advance utility or service charge payments. However, it must be noted that, in the case of residential rentals, a security deposit may be required only in an amount not exceeding two months’ rent.

Common areas such as parking areas, access roads, gardens and landscaping are typically maintained by the landlord or building manager, though the related costs are commonly recharged to tenants as part of service charges or common area maintenance charges, usually on a pro rata basis if the lease so provides.

Where a property is occupied by multiple tenants, the lease typically provides that the costs of utilities and telecommunications be apportioned among them, with each tenant bearing charges either pro rata to the area it occupies or based on its estimated share of usage derived from the common supply.

The Civil Law provides that the obligation to pay immovable property tax, as well as other charges encumbering the property, rests with the owner rather than the tenant. In practice, however, it is often observed that the parties agree otherwise.

Real estate is, as a general rule, insured by the party possessing an insurable interest in preventing or mitigating loss, namely the owner of the property. Given that the parties are entitled to agree on the rent, it is permissible for the rent to include the cost of the insurance policy. As regards the scope of coverage, real estate insurance policies typically extend to a range of insured events, including (inter alia) fire, natural disasters, flooding, water damage resulting from leaks in pipes or household appliances, theft and acts of vandalism.

During the COVID-19 pandemic, companies sought to recover rent payments as a result of the disruption. However, there is no publicly available information indicating that tenants have successfully recovered rent payments or related costs under business interruption insurance policies due to COVID-19-related office closures.

As a general principle, the purpose for which the real estate is to be used is determined by the parties in the lease agreement. Accordingly, pursuant to the Civil Law, the use of the property for purposes other than those agreed upon is not permitted. The property may be subleased only with the prior consent of the owner and may not, in any event, extend beyond the duration of the lessee’s own lease.

As a general rule, the tenant may carry out alterations or improvements to the real estate only with the prior consent of the landlord. An exception may apply where the improvement is “necessary”, in which case the tenant must be compensated. However, in the case of “useful” improvements, the landlord is obliged to compensate the tenant only to the extent that they increase the value of the property and provided they were made in good faith, whereas the costs of “luxury” improvements are reimbursed solely if they were undertaken at the landlord’s request.

The lease agreement typically lays down the conditions governing the performance of such works, including (for instance) the time periods during which the works may be performed, the type and quality of materials to be used, etc.

Specific regulations apply to residential leases, as set out in the Residential Tenancy Law. These rules are largely aimed at protecting the tenant as the weaker party to the contract.

The main rules include the following:

• the contract must be in writing;
• the lease must be concluded for a fixed term;
• the security deposit is subject to a statutory cap;
• there are specific rules governing who may reside in the premises; and
• the landlord’s rights of termination are specifically limited by law.

The mentioned law also sets out specific obligations for each party.

As a general rule, where a tenant becomes insolvent, and an auction of their property is announced, the parties are entitled to unilaterally withdraw from the lease agreement. In order to safeguard the interests of the insolvent tenant, this right to withdraw is exercised by the insolvency administrator. In such circumstances, the landlord is entitled to submit a creditor’s claim in the insolvency proceedings.

As a general rule, upon the expiry of the lease agreement, the tenant no longer has any right to remain in possession of the leased property and is therefore under an obligation to vacate the premises without delay. For additional information regarding the actions available to a landlord if the tenant does not vacate the premises voluntarily, see 6.21 Forced Eviction.

As the law does not specifically regulate the measures a landlord may take to ensure that the tenant vacates the premises in a timely manner, such matters are typically governed by the lease agreement. In practice, the parties often include provisions stipulating, for example, that any property not removed by the agreed deadline may be deemed to become the property of the landlord.

Under the Residential Tenancy Law, if the tenant fails to vacate the residential space, the tenant shall compensate the lessor or the acquirer for any losses and also pay compensation for the use of the residential space.

Subletting of the leased property is permissible only with the prior consent of the landlord. In such cases, the tenant must observe the principles of good faith, refrain from using the property for purposes other than those agreed upon, and ensure that the duration of the sublease does not exceed the term of the tenant’s own lease.

The establishment of a sublease does not transfer the tenant’s rights and obligations under the original lease to the subtenant; instead, the original lease and the sublease exist as separate and independent legal relationships. However, the subtenant is entitled to satisfy the tenant’s obligations by making payments directly to the original landlord, up to the amount of the tenant’s outstanding debt.

Either party is entitled to terminate the contract in cases of excessive loss, provided that the other party’s bad faith is established.

In addition, the landlord may request the termination of the contract where:

• the tenant fails to comply with contractual obligations;
• the tenant causes damage to the property,
• the tenant subleases without consent;
• the property requires substantial repairs of such a magnitude that it is not possible to keep the contract in force; and
• the landlord has a legitimate need to use the property personally.

Conversely, the tenant may request the termination of the contract where:

• the landlord delays delivery of the property;
• the landlord fails to carry out necessary repairs;
• the premises cannot be used due to construction works; and
• the property poses a risk to health.

However, should such circumstances arise, the parties are entitled to seek rescission of the contract by way of court proceedings, rather than effecting a unilateral withdrawal.

Furthermore, it should be noted that a different regime applies to residential leases: the tenant is generally entitled to terminate the agreement at their discretion, whereas the landlord’s right of termination is limited to specific grounds expressly provided for in the Residential Tenancy Law.

Although the Civil Law does not require a lease agreement to be in written form, a written agreement is necessary for registration in the Land Register. Registration itself is not mandatory; however, it is recommended, as it grants the tenant (lessee) a right in rem that is enforceable against third parties. If the parties choose to register the lease, certain formalities must be fulfilled, including the submission of a written request for corroboration.

The registration fee is typically EUR15, though it may vary depending on whether the request is submitted electronically or by other means. This fee is usually paid by the tenant, as registration primarily serves their interests.

An exception applies under the Residential Tenancy Law, which governs agreements between landlords and residential tenants. In such cases, the written form is required for the agreement to take effect, but registration in the Land Register is not mandatory.

The Civil Law prohibits arbitrary eviction of a tenant, even in cases of non-compliance with the lease agreement. However, this does not mean that eviction is impossible. A party entitled to withdraw from the contract must notify the other party and allow a reasonable period to vacate or comply. The required notice period depends on factors such as whether the lease is for a fixed or indefinite term. Where the tenant fails to vacate the property voluntarily notwithstanding receipt of notice, the landlord may initiate legal proceedings seeking the tenant’s eviction.

Although COVID-19 eviction restrictions – such as Cabinet Regulations No 662 on epidemiological safety measures – were previously in force and affected tenants, they are no longer applicable.

Lease agreements in Latvia generally cannot be terminated by third parties. However, an important exception applies in cases of expropriation for public needs under the Law on the Alienation of Immovable Property Necessary for Public Needs. Upon registration of ownership rights in the Land Register, the expropriated property passes to the State or municipality free of all encumbrances, including lease and rental rights, unless the authority has expressly agreed to assume them. An exception applies to residential lease agreements, which remain binding on the authority if it was aware of them at the time of valuation.

The duration of the expropriation process is not strictly fixed and may vary from several months to over a year, depending on the complexity of the case. Compensation is payable and is covered by the State or municipality carrying out the expropriation. While compensation is primarily directed to the owner, tenants may be entitled to compensation for losses in certain cases, although this depends on the circumstances and applicable legal provisions.

Under the Civil Law, if a tenant withdraws from a lease without legal grounds before the agreed term, they may be required to pay the full lease amount. However, if early termination is justified, the tenant must pay only for the period during which the premises were actually occupied.

The Civil Law follows a compensatory damages model, meaning the tenant may be liable for the landlord’s losses. Although there are no fixed statutory limits, damages are generally confined to the landlord’s actual losses and may include both direct and indirect damages, as well as lost profits.

Landlords typically require a security deposit to secure the tenant’s obligations, and it is common practice for the security deposit to be in the form of cash.

Private contractors are generally free to agree on pricing for construction projects; however, it is advisable to prepare a detailed estimate covering all planned works. Such an estimate sets out the price of each component. Contract terms, including pricing, may still be amended if the agreement allows it.

In public procurement, construction costs must be specified in estimates and classified into defined cost categories. Accordingly, contractors perform agreed tasks for a predetermined price.

Each expert is responsible for their part of the project within their competence. For example, the building designer is responsible for ensuring that the structure is implemented in accordance with the design from completion of the design phase until commissioning. The construction work manager, appointed by the contractor, is responsible for ensuring that construction works comply with the design and applicable laws and regulations. Supervision of the construction work shall not release a performer of construction work from the liability regarding quality of the construction work, conformity thereof with the building design, and laws and regulations governing the construction.

Under Cabinet of Ministers regulations, the main contractor is responsible for organising the works in accordance with the work organisation plan and the overall construction execution plan. Accordingly, the main contractor must engage only suitably qualified subcontractors.

Risk management in construction projects primarily depends on the terms of the construction contract. However, liability for intentional misconduct cannot be excluded, whereas excluding liability for gross negligence may also be problematic. Liability limitations are typically used to address risks such as delays, non-performance or defective work. Various legal mechanisms can be used to secure performance, such as bank guarantees or insurance policies.

Schedule-related risk is managed through contractual deadlines and detailed work programmes set out in a time schedule. Construction contracts typically include penalties for delay, non-performance or defective performance.

Accordingly, parties may agree that the owner is entitled to monetary compensation if milestones are not met or work is not completed within the agreed timeframe. This is standard practice in construction projects to ensure compliance with contractual obligations.

Typical forms of security include performance bonds, bank guarantees and parent company guarantees, particularly in larger or higher-risk projects. Retention amounts (withholding a portion of the contract price) are also widely used.

Latvian law sets minimum statutory warranty periods depending on the building category. During this period, the project owner may require the contractor, at its own expense, to remedy defects identified after commissioning. The minimum warranty period is one year for first-category buildings and three years for second- and third-category buildings.

In practice, warranty security is typically set at up to 5% of the contract price for the first two years and up to 2% for the remaining period. Performance bonds are also commonly required, usually capped at 10% of the total contract price.

According to Latvian law, contractors or designers are not entitled to directly unilaterally encumber immovable property in the event of non-payment. Any such rights must arise from the contract. In the absence of such contractual provisions, contractors and designers may seek protection of their interests through judicial proceedings, including (inter alia) securing their claim, such as requesting the registration of an encumbrance in the Land Register.

Under the Construction Law, a building may not be used until it is accepted for commissioning, although exceptions apply. For example, a building may be commissioned in stages if the design provides for partial use during construction and the relevant regulatory requirements are met.

Commissioning is initiated by the developer, who must ensure that as-built measurements, cadastral surveying and, where applicable, an energy performance certificate are completed before submission. Upon request, authorities that issued technical conditions must provide an opinion on readiness for commissioning within ten working days. Once all documentation is received, the competent building authority, in co-ordination with the developer, sets the commissioning date, which must not exceed ten working days from submission.

VAT in Latvia is charged on the consideration for transactions involving new (unused) immovable property. Where reconstructed immovable property is sold, VAT applies to the value added by the reconstruction – ie, the difference between the sale price and the property’s value before reconstruction or before the works began. The standard VAT rate is 21% where VAT is applicable and the obligation to remit VAT rests with the seller.

By contrast, the transfer of used immovable property is generally exempt from VAT.

There are several methods that may be used to mitigate tax liabilities in acquisitions of large real estate portfolios. A common approach is the use of share deals instead of direct asset transfers. However, it should be noted that, although share transactions may mitigate transfer taxes, they may still be subject to income tax, depending on the structure and circumstances of the transaction.

There is no separate municipal tax in Latvia for the occupation of business premises. Instead, businesses are subject to an annual real estate tax set by municipalities, generally ranging from 0.2% to 3% of the cadastral value. A higher rate (up to 3%) may apply to dilapidated or improperly maintained property, while lower rates or reliefs may apply depending on the property’s use and municipal rules.

Enterprise income tax is withheld at 3% of the consideration on the disposal of immovable property and 5% of rental or lease payments made to non-residents. The tax must be withheld by Latvian resident companies (excluding individuals) and permanent establishments, unless personal income tax has already been applied.

An exemption applies where the payer is not required to withhold tax under the Enterprise Income Tax Law. In such cases, the non-resident must declare the income and pay 3% tax within 30 days of the disposal. Additional exemptions apply in specific situations, such as payments to private pension funds or distributions by investment or alternative investment funds to their investors.

Gains from the disposal of real property are subject to personal income tax. However, exemptions may apply, particularly depending on the length of ownership and the use of the property (eg, as a primary residence).

Real estate may be classified as a fixed asset that is used in the course of economic activity. In such cases, the taxpayer (if it is a physical person) may apply depreciation in accordance with the applicable tax regime: where the declining-balance method is elected, a depreciation rate of 5% per tax period applies, whereas under the straight-line method the asset is depreciated over a period of 35 years. Where a building (or part thereof) is used only partially for the purposes of economic activity, depreciation must be calculated on a pro rata basis, by reference to the proportion of the total area that is so used.

Furthermore, a taxable person registered in the Republic of Latvia is entitled to deduct input tax incurred on the acquisition or construction of immovable property, provided that such property is intended to be used for the purposes of taxable transactions.