Last week, Saeima adopted the amendments to the Law on Residential Properties, as the legislation proposal passed the third reading in the Parliament. FICIL welcomes these amendments after having been involved in highlighting the gaps of the previous regulation that has been in force since 2017, as well as urging the Parliament to review the amendment proposal which was submitted already in the end of 2018 but had not attracted significant attention from the legislator since then.
FICIL’s main concern in the existing regulation was the wording in Section 4 of the Law, which prohibited the division of a residential house into residential properties if it shared the same land parcel with other residential houses. Even though the legislator had included an exception for projects that had already obtained a construction permit before 2017, FICIL highlighted that this violates the principle of legal certainty, as construction is a lengthy and complicated process that consists of multiple significant phases and investments even before receiving the construction permit, such as real estate acquisition, preparation of documentation, analysis of project development and other. In case of large projects, development of infrastructure also comes before beginning the construction of buildings.
FICIL argued that the regulation from 2017 is disproportionate to the interests of the society, as individuals and investors had concluded contracts and made investments relying on the rules that were in place previously. Furthermore, the investors were now facing an unfair hit to the value of their investments, since apartments that are a part of a joint property are less attractive to potential buyers.
To voice its opinion, FICIL held discussions with representatives from the Ministry of Justice and the Ministry of Economics, as well as informed Saeima’s Public Administration and Local Government Committee about its concerns. Legal certainty and investment protection are key in establishing Latvia as an attractive place for foreign investment, therefore, FICIL is glad to see that this particular provision has now been changed back to the pre-2017 wording and that investors were able to protect their legitimate interests.