LATVIA Law and Practice Contributed by: Jānis Kārkliņš, Annija Kārkliņa, Ēriks Krēsliņš and Rihards Strads, BERG
3.2 Typical Security Created by Commercial Investors In commercial real estate financing transactions in Latvia, the most common form of security is a mort - gage 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 addi - tional 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 com - mercial 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 flexibil - ity 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). 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders In Latvia, there are generally no specific restrictions on granting security over real estate in favour of for - eign 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 vari - ous 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. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security 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 corrobora - tion request. In addition, the notary charges a sepa - rate 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 commis - sioning the building. Latvian law also allows claims secured by a mort - gage to be enforced through uncontested compul - sory enforcement proceedings. For an application for uncontested compulsory enforcement where the claim exceeds EUR25,000, the state fee is EUR500. In addi - tion, 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.
423 CHAMBERS.COM
Powered by FlippingBook