Taking counsel

  • 2005-09-28
  • By Kristine Gaigule [ LOZE, GRUNTE & CERS ]
Completion of Privatization

In order to develop private entrepreneurship in Latvia, along with restituting ownership rights, the mass privatization of state and municipal property was initiated in the 1990's. The final stage of the privatization process was launched with the set of legal provisions that came into force as of Sept. 1, 2005, introducing further changes in the privatization of state and municipal property objects and land plots.

The Law On Completion of Privatization provides that 1) the allocation and cancelling of privatization vouchers and compensation vouchers be completed; 2) the privatization of state and municipal objects and the land plots belonging to the state and municipalities be completed; 3) settlement in compensation vouchers during the process of disposal of developed land plots be terminated, and 4) the process of buying out rural land also be completed.

The first step in completing the privatization process was to set a definite term 's Aug. 31, 2006 's for submitting proposals for the state and municipal property object and land plot privatization. Privatization or compensation vouchers can also be used as provided by law to pay for property and land plots, the privatization or disposal proposals on which have been submitted prior to the aforementioned date.

After the aforementioned date it will be possible to acquire state and municipal property only by means of a disposal procedure for the market price, with all payments in lats.

The aforementioned deadline also refers to the permanent users of rural land who would like to buy the land they are using. In practice, there are situations when the land has been allocated only for usage and not in ownership. If the land has been allocated only for usage, the request to buy it has to be submitted by Aug. 31, 2006.

The law prescribes that a registry of publicly available privatization and land buy-out proposals be developed, where proposals or requests submitted after Sept. 1, 2005 and the proposals submitted before the aforementioned date, if no purchase agreement for the particular land plots has been signed, will be registered.

The Law On Completion of Privatization contains a completely new regulation in respect to further activities with non-developed state or municipal land plots. Such land plots can be leased out with building rights; however, the term of such a lease agreement should not exceed 12 years. This effective legal provision should be taken into account while considering previously signed land lease agreements that contain provisions favorable for the lessee and the novation option.

It is possible to initiate the privatization of a nondeveloped land plot prior to Aug. 31, 2006. If the land plot is privatized through a sale, it will be sold in an auction at the initial price equal to its usual value established by a certified appraiser.

The owner of a building that has been erected on the leased state or municipal land plot will not be entitled to request transfer of the respective land plot for privatization or disposal. For the latter, the law provides a transition period limitation until Aug. 31, 2006; however, during this period the lessee of the state or municipal land (lease agreement signed prior to the date of passing the Law, 16 June 2005) may submit the proposal for privatization or disposal of the land plot provided that:

-the lease term is at least 10 years;

-the lease agreement has been registered in the Land Registry;

-the lease agreement provides for the lessee's rights to erect buildings as independent property objects on the leased land plot.

A leased state or municipal land plot will be privatized or disposed of only if the lessee's ownership of the buildings (constructions) located on the land plot is registered in the Land Registry no later than Sept. 1, 2007.

The law limits the activities of the state in relation to companies of national economic importance 's Latvenergo, Latvia Post, Riga International Airport, Latvian Railway, Latvian Air Traffic and Latvian Forests 's by prohibiting the privatization or disposal of their shares.