Estonia 108 - Owning Property and Taking Security

  • This time, we will talk about owning real property and taking security in Estonia. Stay tuned and as always, any questions and comments are welcome!

    Real Property

    All immovables and related real rights are entered in the Land Register. The Land Register is public and it is very easy to check the owner and third party rights related to an immovable.

    For the transfer of ownership or encumbrance of an immovable, a notarised agreement and a corresponding entry in the Land Register are required. As a rule, real rights encumbering the immovable, such as easements, mortgages or building title, are not terminated when the immovable is transferred.

    The main costs of transferring or encumbering an immovable include notary fees and a state duty. Both depend on the transaction value. For instance, when a piece of land is sold for EUR 100,000, the notary fee and costs related to notarization are approx. EUR 320 + VAT of 20% and the registration duty for entry in the land register is approx. EUR 110.

    Limitations on Ownership

    Very few restrictions apply to acquiring an immovable. Pieces of agricultural or forest land larger than 10 ha, may be acquired by an Estonian company or an Estonian branch of a company established in the EU which has been engaged in agricultural or forestry activity for at least the last three financial years or by a permit issued by the county governor. A person who is not a citizen of Estonia or the EU nor a legal person of Estonia or the EU is prohibited from acquiring immovables in certain border areas.

    Taking Security on Real Property

    Establishing a mortgage requires conclusion of a notarised agreement and registration in the Land Register. The costs are similar to those incurred in transfer of ownership (see “Real Property”). To satisfy a claim secured by mortgage, the immovable will be sold in execution proceedings.

    Other Security Interests

    Other more common security interests include commercial pledges (or a floating charge), share pledges and assignments of trade receivables and other claims.

    Commercial pledges extend to all movable property of a company, but not to money or securities. Establishing a commercial pledge requires conclusion of a notarised agreement and an entry in the Commercial Pledge Register.

    Shares may be pledged unless the articles of association prescribe otherwise. The pledgor continues to exercise all shareholder rights. Unless registered in the ECRS, the pledge agreement must be notarised. Shares registered in the ECRS are pledged by making an entry in the register. Registration is applied for by the pledgor and the pledgee does not need a securities account with the ECRS (see also “Acquisition and Sale of Business - Completion of Share Transaction”)‏.

    Key statutes:
    Law of Property Act 1993
    Law of Obligations Act 2002
    Commercial Pledges Act 1997
    Restrictions on Acquisition of Immovable Property Act 2003

    Information posted above is intended as a general guide and does not constitute legal advice.

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