„What should foreigner know about real estate in Estonia“

Eveli Lindell

Buying real estate in Estonia is not complicated for a resident of another country In comparison to other European countries, conclusion of real estate transactions here is considerably easier. However, as everywhere, we also have rules and practices that must be followed and recognized.

You can find real estate in Estonia from Internet portals (e.g. www.kv.ee, www.city24.ee, www.Kinnisvara24.ee) as well as with the help of a real estate agent who can find objects of interest for you and show those to you. Once you have made your choice, however, things will require a bit more effort.

Preparations

Before you start looking for a home or an investment, find out how you will finance it. Depending on the country of origin, movement of money between accounts may be unusually complicated and it may be required to prove its origin.

There are situations where a foreign buyer cannot be present at the notary’s office at the time of transaction. In such an event, the buyer is represented by a notarised authorised person who may be a friend or a real estate agent. Also when you have a Estonian digital signature ( e-residency) you can do the transaction even remotely.

Documents

Depending on the situation, in addition to the regular documents it may be necessary to have various additional certified (apostilled, legalised) documents. Thus, you may be required to produce certification for marital status, a marriage certificate, separate property agreement, etc.

You should certainly find out whether the real estate acquired (e.g. an apartment) has an authorizations for use and whether the construction works carried out there have been legal. Professional real estate agents have already checked that out before the sale and if necessary taken all the steps required to correct the situation.

Financing, fees and agreements

If you purchase real estate for 100% own funds, you have to certify the origin of the money and if required provide various documents about your salary income, the operations of your company and the balance sheet.

If you wish to use a bank loan, you should consider that a prerequisite is valid residence permit and an at least six months to one-year work experience in the same company.

In many cases a reservation agreement is concluded before the sale/purchase contract, which shall ensure that the seller gives the potential buyer time to take care of all the documents and financing required for the purchase. However, an unattested reservation agreement may not include references to any obligation to purchase and the buyer shall have a right to withdraw from the transaction. If a similar agreement is concluded at a notary’s office, it may include references to obligations.

A sales-purchase transaction of real estate, i.e. a real right contract is always concluded by a notary.

In comparison to many other countries, the fees related to a real estate transaction are low and easily understandable in Estonia. There is also no requirement here to pay any real estate tax when buying or selling.

Based on the good practice, notary fees are equally split between the buyer and seller and the state duty (entry of the new owner into the land register) is paid by the buyer. For new developments, however, the notary fees and state duty are always covered by the buyer.

Once the state duty is paid, an assistant judge creates an entry in the Land Register about the transfer of ownership within 30 calendar days. In practice it actually takes 1 to 2 weeks. However, it must be noted that if the state duty is not paid, the entry shall not be made.

When to sell

In the event of sale, the marital status shall always be certified at the notary’s office. Depending on the country of origin, the documents shall also be apostilled or legalized.

It shall also be certified whether the real estate has been purchased as separate property or during marriage. If that has already been certified before during the purchase, it is not required again. In the event of property acquired during marriage, both spouses should be present at the notary’s office or if that is not possible, a notarized authorization to one of the spouses is sufficient.

In the event of sale, the income shall be declared in the month following the transaction.

Tax is calculated from the profit, not from the total sales amount. However, if you sell your home and you have not disposed of other real estate within two years, there is no tax obligation. For some countries there may be a double taxation obligation, unless Estonia has concluded a relevant agreement with the given country to avoid it.

The seller is responsible for hidden defects for three years. Upon acceptance of an apartment, you should register as many different circumstances or defects as possible. Major defects, however, must be registered in the sale/purchase contract, as otherwise the buyer shall have a right to request that the seller eliminates those or compensates for the loss, or in the event of major problems even demand reversal of the transaction. And all that regardless of the fact that at the moment of transaction the buyer was aware of everything and agreed to the situation.

When to lease

Similarly to sales objects, also lease apartments and tenements can be found from real estate portals. Here it is also possible to hire an agent who ensures the most efficient process, as a real estate agent represents and protects their client from potential problems and can also negotiate with the lessor if necessary.

In order to lease, a valid residence permit is required. If you are not a citizen of the European Economic Area, you also need a visa.

It helps if you can submit to the owner a valid employment contract and also a letter of recommendation of a previous lessor.

In Estonia, lease agreements are generally concluded for a fixed term of one year, after which they may be extended. During the lease period the lease amount may not be changed. However, if an indefinite lease agreement is concluded, the leaseholder has a right to change the lease amount, but it needs to ne notified 30 days before.

When an agreement is concluded, the lease amount of one month and the guarantee deposit shall be paid in advance (according to the law, the lessor has a right to request a guarantee deposit which is the lease amount for three months, but generally it is the lease amount for one month). The agency fee in Estonia is always paid by the lessee, unless agreed otherwise. As a rule, it is the lease amount of one month plus VAT.

In addition to the monthly lease amount, the lessee also pays the additional expenses and maintenance and improvement costs, which they shall clarify before the agreement is concluded.

The lessee also has a right to register themselves in the apartment. That can be done in the Internet with the ID card or at the service bureau of the local municipality. Here, it is important to have a signed lease agreement.

As everywhere in the world, also in Estonia you may come across and perceive cultural differences, the most prominent one of which may be that the local lessor does not speak foreign languages. You should definitely also consult your real estate agent and find out which circumstances might turn out to be the greatest challenges from your perspective.

Contact me, Eveli Lindell, with questions or help with any of your real estate transaction.