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The most major risks and solutions for real estate purchase and rent with option to buy

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUTo acquire housing in one’s property, often residents use rent with an option to buy. Sworn attorney Zanda Zaluma of Eversheds Sutherland Bitāns shares advice resident should keep in mind when signing real estate contracts.

Contents of the contract

She notes that because contractual relations between the seller and buyer continue for several years, it is highly important to establish rights and duties of both sides in writing.

At the same time, she adds that referencing verbal promises will not help should a conflict arise.

Transition of ownership rights

«One of the most important matters to put down clearly in contracts is the moment of transition of ownership rights. Is ownership registered on the buyer’s name at the very beginning or the end? Is mortgage registered to ensure the seller’s rights? Which of the sides has the right to submit documents to the land book for registration of ownership? The farther away from the moment of signing the contract the transition period is, the more important it is for the buyer to establish the conditions for the transition of ownership rights,» Zaluma explains.

The rights of both sides for the use of property

The expert also explains how to properly use property if rights of both sides are clearly defined: ‘If ownership rights are retained by the seller, the buyer’s rights of using real estate property may be rather limited – owner’s permission will be necessary for most activities, especially construction and repairs. In this case, it is necessary to detail rights and terms.’

The attorney also says that it is also recommended to limit he seller’s rights to perform different actions with property until ownership rights have been re-registered. This is possible to detail in the contract or register in the land book to protect the buyer from unfortunate surprises and complications.

Risk transition

One particular risk associated with transition of ownership rights is the transition of risks. Even if ownership rights are retained by the seller but the property is already handed to the buyer for use, it is possible the seller may insist that the buyer answers for all risks associated with real estate property. Insurance of real estate risks would come in handy there, Zaluma explains.

Delayed payments – risk of losing real estate property

It should be noted that both sides have to understand the consequences in situations when buyers come late with payments. ‘For example, the Civil Law states that if the buyer is late with at least two payments, the seller can request termination of the contract and compensation,’ says the attorney.

Ref: 225.109.109.4213


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