LATVIA Law and Practice Contributed by: Jānis Kārkliņš, Annija Kārkliņa, Ēriks Krēsliņš and Rihards Strads, BERG
while the landlord is responsible for major repairs and capital improvements; and • rent is typically paid monthly in advance for the fol - lowing month. 6.5 Rent Variation 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. 6.6 Determination of New Rent 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. 6.7 Payment of VAT 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 ser - vices such as hotels, guesthouses and similar estab - lishments). 6.8 Costs Payable by a Tenant at the Start of a Lease 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. 6.9 Payment of Maintenance and Repair 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 charg - es, usually on a pro rata basis if the lease so provides. 6.10 Payment of Utilities and Telecommunications 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. 6.11 Payment of Property Taxes The Civil Law provides that the obligation to pay immovable property tax, as well as other charges encumbering the property, rests with the owner rath - er than the tenant. In practice, however, it is often observed that the parties agree otherwise. 6.12 Insurance Issues Real estate is, as a general rule, insured by the party possessing an insurable interest in preventing or miti - gating 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 insur - ance policy. As regards the scope of coverage, real estate insurance policies typically extend to a range of insured events, including (inter alia) fire, natural dis - asters, 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 inter - ruption insurance policies due to COVID-19-related office closures. 6.13 Restrictions on the Use of Real Estate 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. 6.14 Tenant’s Ability to Alter and Improve Real Estate As a general rule, the tenant may carry out altera - tions or improvements to the real estate only with the prior consent of the landlord. An exception may apply
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