Eight checks to make before signing a contract
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You’ve found the perfect apartment or office – do you know what documents you need to check before handing over the money?
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Did you know that a seller can sell the same property to multiple buyers at the same time – and how can you protect yourself?
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What are three red flags that indicate you are dealing with a scam?
An entrepreneur found office space at an attractive price. The seller rushed him to sign the contract, claiming “there are other buyers.” A deposit was made without verifying documents. A week later, it was discovered that the seller was not the owner, but was acting under a forged power of attorney. The money was never returned.
Eight mandatory checks
First check: land register (zemesgramata.lv). Check who the registered owner is. The land register is the only official source of property ownership in Latvia. Make sure the seller is indeed the owner.
Second check: check for encumbrances in the land registry. Check for mortgages, restraining orders, easements, leases, or other encumbrances. If there is a mortgage, the buyer risks acquiring the property along with the bank debt.
Check three: the seller’s authority. If the seller is not the owner but their representative, check the power of attorney. It must be notarized, valid, and expressly authorize the seller to sell the specific property.
Check number four: outstanding utility bills. Ask for certificates from the management company, heat supply company, and water utility. Utility bills may be transferred along with the property.
Check number five: registered persons. If third parties are registered in the apartment, they have the right to reside there even after the owner changes, until the registration period expires or the lease agreement is terminated.
Check number six: construction and redevelopment permits. If the premises have been redeveloped, check to see if there is a permit for it. Unauthorized redevelopment places the new owner under obligation to legalize or remove it.
Check seven: seller’s tax debts. Significant tax debt on the seller’s part is a sign that the transaction may be challenged by the tax authorities as asset stripping. Check the VID list of tax debtors.
Check number eight: the business register if the seller is a legal entity. Who has the authority to sign the transaction? Is the signature of several board members required? A board of participants? Without proper approval, the transaction may be declared invalid.
Three red flags
First: the seller rushes the buyer and demands a decision “today.” A legitimate transaction requires no rush. Pressuring the buyer is a typical scam.
Second: the price is significantly below market value with no obvious explanation. A “hot sale” at a price 30-40% below market value is always cause for questioning.
Third, the seller avoids notarization or offers alternative transfer schemes. The only legal way to transfer property ownership in Latvia is through the land register with a notarized transaction.
Defense mechanism: preliminary agreement with registration
If you’ve agreed to purchase the property but aren’t ready to sign the main contract right away, sign a preliminary purchase and sale agreement with a notary and register it in the land register. This will prevent the seller from selling the property to someone else while your transaction is ongoing.
The land register is your protection. But it only protects those who check it themselves.
This article is for informational purposes only and does not constitute legal advice.