What should one consider when concluding a lease agreement in Latvia?
The real estate market is one of the fastest changing and growing markets in Latvia and throughout the Baltics. Apart from the purchase and development of real estate, we cannot undervalue the importance of the lease agreement for both residential and business premises. By concluding such agreements we ensure our ongoing plans with respect to living or doing business in a particular territory. That is why a lease agreement must be drafted so as to protect one's interests within a longer period of time. Latvian laws differentiate between lease of premises for residential and business purposes. The main laws regulating the lease of residential premises are the Civil Law and the Law On Lease of Residential Premises, while the lease of business premises is regulated by the Civil Law.
Lease agreement. Although the law generally does not demand a conclusion of a lease agreement in writing, practice still shows that parties prefer to have a written agreement. At the same time one should remember that a written form agreement is a requirement for the lease of residential premises or registration of the lease agreement of business premises in the Land Book. If the lease agreement is registered with the Land Book, the new real estate owner will be bound by the existing lease agreement.
Term and termination. A lease term also is one of the most important elements of the agreement. Its extension and termination must be simple and easy to accomplish. Normally, the lease agreement can be terminated by giving prior notice to the other party within a certain time-period agreed upon in the lease agreement. A unilateral termination of the lease agreement should be envisaged if the other party significantly breaches the lease agreement.
Lease payments and expenses. The prepayment of some lease payments (in a form of deposit) or a guarantee is usually required by the leaser, but the laws do not contain any provisions regarding security. Therefore, parties are free to agree on other kinds of security. Accessory expenses (water, gas, electricity) are usually paid in addition to the lease payments. We strongly advise to specify all the expenses in the agreement.
Maintenance of premises. When leasing premises, the surrounding environment is also crucial. The tidiness and cleanliness of the building and territory can serve as a very substantial obstacle when choosing premises. Maintenance services can be provided either by the landlord himself or by the service providers working in the respective area. Building maintenance means not only cleaning of the territory and waste collection but also the maintenance of the building from the technical aspect - for instance, repairs, maintenance of heating, water supply and sewerage systems, etc. Nevertheless, it is advisable to include all the services that shall be delivered to the lessee and all the costs in the agreement.
Conclusion. As Latvian laws and practice do not include a clear scope of the lessee's and leaser's responsibilities and liabilities, we always suggest to conclude a lease agreement in a written form and to agree on all the important issues for both parties. The concluded agreement will serve as a form of security and evidence of the actual agreement for both parties through many years. o
Gints Vilgerts is a partner at Sorainen Law Offices in Riga
