Purchase a Property in Estonia
Purchase a Property in EstoniaUpdated on Thursday 27th May 2021
Buying a property in Estonia can be attractive to foreign investors as well as foreign nationals who have relocate dot the country and are ready to acquire their own home. Likewise, foreign companies willing to establish their business operations in the country may be interested in acquiring a property such as an office space, rather than renting it.
Regardless of the motives behind the purchase, whether for residential or commercial reasons, buying a property in Estonia is subject to a number of mandatory steps, such as signing the needed agreements, as well as a set of steps that are taken to ensure the viability of the purchase, such as property verifications.
In this article, our real estate lawyers in Estonia answer some of the most important questions related to property purchase. This article is for informational purposes only and we encourage all those who wish to purchase property or land to reach out to a team of experts, such as our real estate attorneys, in order to gain a comprehensive understanding of the legal requirements and implications.
Who can buy real estate properties in Estonia?
Estonia provides good investment opportunities when it comes to real estate properties mainly because foreign citizens or companies have the same possibilities to purchase properties as Estonian citizens do. There are only few restrictions when it comes to foreign entities wanting to purchase a real estate property in Estonia. Foreign investors or citizens residing outside the European Unions are not allowed to buy real estate properties on four Estonian islands (Saaremaa, Hiiumaa, Vormsi and Muhu) and are not allowed to purchase over 10 hectares of forest or agricultural land plots.
Our team of lawyers in Estonia can give you more details about the Restrictions on Acquisition of Immovables Act, the law that stipulates the restrictions to purchase property in the aforementioned sea islands for national defense reasons. We can also help you with information about other requirements or conditions imposed by the Estonian Ministry of the Interior.
What are the pre-purchase steps?
The most important step when purchasing real estate property in Estonia is to verify the owner and the property to be bought. The buyer is advised to check if the property is registered with the Estonian Land Register. According to the Estonian laws, real estate properties not registered with the Land Register are considered movable properties. The property must also be checked for encumbrances, such as mortgages. The buyer is also advised to verify if the owner has any unpaid bills or debts with the authorities.
Some of the issues that can be checked when purchasing an apartment in Estonia include the following:
- the true ownership of the property and whether or not the seller is indeed the owner of the apartment;
- whether or not the apartment is part of the residential building constructed on the land that is duly registered;
- the energy performance certificate for the house;
- whether or not the residential building has an apartment association;
- a verification to make sure that the apartment has no tenants; as the new owner you will be able to make legitimate demands if you find that the apartment has persons that were registered of whom you had no information.
An apartment association is created by the owners of the apartments in the building for the purpose of managing the ownership and representing common interests.
Our Estonian lawyers can help you with a thorough real estate due diligence process before making your purchase.
What does the sale/purchase agreement include?
After checking the property to be bought, a reservation contract will usually be concluded between the seller and the buyer. The reservation agreement does not compel any of the parts to sell, respectively to buy the property but it offers the buyer priority if other persons are interested in purchasing the same property. A pre-purchase contract can be concluded in front of a public notary in case the final agreement cannot be concluded right away. This way the buyer makes sure the Estonian property will enter in his or her possession after concluding the final purchase contract. The pre-purchase agreement will usually contain the terms of the sale, the price of the property and if any deposit has been made. When signing a pre-purchase contract a sum ranging between 10-20% of the total price of the property must be paid. The final step for buying the Estonian property is to sing the purchase contract. The contract must be signed in front of a public notary.
Some of the relevant documents when concluding such an agreement include the following:
- the identification documents for both parties;
- the marriage certificate of the seller (if the property that is being sold was purchased during the marriage);
- the marriage certificate of the buyer (if the property is purchased with the help of a bank loan).
It is clear from the documents presented above that when the purchase/sale take place, the role of both spouses is important. Both of them participate in the agreement and both of them need to approve the sale of the property.
When the buyer or the seller is a legal person (or they both are) the following documents are relevant:
- the identification documents for at least one of the Board members (in general, one member will suffice);
- the shareholder’s decision to sell the property, a document that will include important information about the transaction that will take place such as the location of the property, the price and details about the seller.
How can you register the property with the Estonian Land Register?
Once the new owner has purchased the property, he or she must pay the registration fee and then register the property with the Estonian Land Register. The application form to be submitted with the Land Register must be notarized. According to the Estonian laws, a real estate property tax will be levied depending on the value of the land plot the property is built on and it ranges between 0.1 and 2.5%.
Real estate statistics and prices in Estonia
According to data from 2018 and 2019, new apartments have prices around the value of €2,300 to €5,000 per sq. m. in central locations in the city and €1,500 to €2,200 per sq. m in residential districts. The price can also vary according to the apartment’s actual location and facilities, such as proximity to public transport or shops.
Property process have increased modestly:
- Tallin: in 2018, the price for apartments increased slightly, by approximately 4.31% compared to the previous year, one of the slowest growth rates in recent years.
- Tartu: the second largest city in the country recorded a lower increase of 2.82% on a year-on-year basis;
- Parnu: a southwestern city that has recorded a 15.51% increase in property prices;
- The rest of the country: apart from Tallin, apartment process rose on average by 3.92%, a decline from more significant increases recorded in 2017.
According to Statistics Estonia, the total number of households in the country was 6,260,000m an 1.4% increase compared to the previous year. Our of these 76.2% were households with good or very good dwelling conditions and 57.8% were households living in blocks of flats. As far as the problems in a household that concerned its members the national statistical institute reveals the following: overhearing noises, pollution, damp walls, floor or basement or rook leaks.
Our Estonian law firm can advise you when purchasing a real estate property. You can also contact us for any information regarding the registration process with the Estonian Land Register.