FAO : SD Dimensions : Institutions : Land tenure

Posted April 1997

Bertinoro I
High-level Technical Seminar:
Private and Public Sector Cooperation
in National Land Tenure Development in Eastern and Central Europe
University Residential Centre
Bertinoro, Italy
1-5 April 1997

Aspects of Land Privatisation in Latvia

by Baiba Ziemele
Senior Expert, Ministry of Agriculture

Introduction

The land privatisation process in Latvia is by nature complex. The speeding up of the privatisation of land (term "land" is used in wider understanding- including all fixtures to land parcel) is essential for successful development of a market economy.

The transition to market economy in the field of landrelated matters is a complex operation that necessitates changes and measures of many kinds. A central aim is to create a functioning land market, in a wide sense of the term.The perspective has to be wide. Steps and changes in different areas have to be reasonably coherent. The development of a land administration system should embrance all main activities that have to be co-ordinated or integrated in order to meet relevant demands on the system. Real property credit should be introduced as one of the tools for land market development. It requires not only legislation on mortgage but also - in order to attract money for long term credit- the existence of credit institutions that are sufficient in real property credit, and effectively functioning real property information system easy accessible for those credit institutions.

Land reform in Latvia

Land Reform started in 1990 following the re-establishment of Latvian Independence, the government introduced laws which established a legal basis for private land ownership, and introduced procedures for enabling Latvian citizens to own land. The general approach to Land Reform is restitution of ownership rights to pre-war owners or their descendants. Were Restitution is not possible or not applied for, other similar land is given, or compensation paid mainly in form of monitory obligations (vouchers). It is also possible to citizens to acquire surplus (free) land by ordinary purchases. Non citizens have restrictions to own land, they have rights to own buildings and have legal rights to use land or to have short or long term lease. The legislation on free land market is under discussion on the Parliament and it is foreseen, it would be approved up to end of 1997.

The legal base for all landrelated matters in Latvia is the Civil Code, which historically is "imported" from Germany. Already before World War I Civil Code was influenced by German law, though at that time Latvia was part of the Russian Empire. A certain Baltic Code of Private Law of 1864, with German legislation partly as a model, served as the basic civil legislation in the part of the Baltic region, including present Latvia. The code was given continued valid in Latvia after independence in 1920. In 1937 it was replaced by Latvian Civil Code. A separate Land Register Law, linked to the Civil Code, was adopted at same time. This legislation was based on similar principles as the German Civil Code and German Land Register Law. This legislation was abolished in 1940.

In 1993 the Civil Code and Land Register Law of 1937, with some very small changes, were revived by Latvian Parliament. Specific problems concerning land-related matters , caused by the radical change from the Soviet system to the new legislation, were dealt with in a separate Law on Introduction on the Land Register Law.

The Land reform is implemented by three main parties:

Local governments (municipalities) are responsible for decision making for land privatisation;
State Land Service is responsible for technical implementation of Land reform;
Land Book offices of Ministry of Justice are responsible for legal registration of ownership rights.

The special authority was created 1992 for technical implementation of Land Reform - State Land Service (SLS). It was formed on the basis of institutions which were working for surveying and mapping related activities in Soviet period and the first years of independence. For reason that Land Reform was the top priority of Government, this organisation was supported in different ways - also financially by allocation quite large State budget funds. In the beginning SLS was subordinated directly to Cabinet of Ministers, but in 1995, as the result of Government reform, it became under supervision of Ministry of Justice, but it still receive funds directly form State budget. SLS is responsible for technical implementation of Land Reform, main areas of responsibilities of SLS are:

Surveying including geodetic surveying and mapping;
Valuation for taxation and compulsory purchase;
Cadastre.

In 1996 Government of Latvia made decision to have no-deficit State budget. Result of such decision is that State organisations have shorter state fund allocations and they should look for other ways to cover their costs.

The Land reform is intended to be carried through within a limited period of time, even this period appears to be longer than was originally expected. November 1, 1997 was deadline for claim submission for restitution of land ownership and purchase of land for users. Formation process of real properties is still continues. Land (real properties) subdivision on January 1, 1997 is:

68% - land assigned for use to natural persons, juridical persons, municipalities and state institutions;
17% - real properties of natural and juridical persons, municipality-owned and state-owned properties;
8% - claimed but unassigned land;
5% - free (unclaimed) land;
2% - leased by natural and juridical persons.

Current situation in land registration

Land registration in the Latvian system is regulated by Land Registration Act, based on the Civil Code. The rules on transfer of land in Land Registration Act also cover amalgamation of properties. The Cadastral part of subdivision and amalgamation procedures is regulated by the regulations on National Property Cadastre.

Property units being the immediate results of restitution and other activities regulated by the land reform legislation are registered as legal units in cadastre and land register (land book). In case such unit contains only one single parcel, it is registered as one single object in both registers. In case the unit contains two or more parcels, it is registered as one single object in the land register but as several objects in the cadastre.

Property is registered in Cadastre Register after survey or demarcation of property boundaries is done. The Cadastral registration is the main task of SLS Regional Cadastre Departments. The Cadastre contains information about each property and land parcel, including ownership (or use rights), land use, buildings and value. The cadastre register is computerised.

Land Book Register is Legal Register of property ownership, it defines who owns the property, it also records changes to property ownership. It contains information about rights on property - owner, encumbrances, servitude's, mortgages, sale and purchase, parcel boundaries. Legal Register is not compulsory, registration is done by client claim. Registration of properties is task of regional Land Book offices, they are run by judges. The Land Book is basically paper based system, alsough word processing is used to reduce the amount of writing in record of information. Register on regional level will be computerised during implementation of EU PHARE programme funded project "TA to land privatisation and registration.

Number of properties registered in Cadastre and Land Books is rapidly growing. 17,9 thousand properties were registered in Cadastre and 12,2 thousand in Land Book on January 1, 1995; 58,0 thousand in Cadastre and 37,7 thousand in Land Book on January 1, 1996, 140,0 thousand in Cadastre and 87,0 thousand in Land Book on March 1, 1997.

Total number of claims on November 1, 1996 ( deadline for submission of claims for land privatisation) is 410,0 thousand. It means up to March 1, 1997 34% of claims are processed by Local governments and registered in Cadastre, 16% are registered in Land books.

Investigations shows, the most registration in Land Book place in cases if property is going for transaction or mortgage.

Main reasons for slow registration process are:

High cost of property formation

The survey of property boundaries is the largest single element of the total cost of the land registration process, also valuation of properties (including woodland valuation, where it is required) is on high cost. Average cost for property formation in rural area is about 300-400 Ls - 1Ls=0,57 USD- (average salary in Latvia is 115 Ls per month). Property formation is also very complex and time consuming process, it takes about 3-6 month to go through all procedure.

Long waiting times for state funded surveys

According existing legislation, property formation costs for the first order inheritances are covered by State budget, because of lack of money in the State budget there are long waiting lists for such surveys.

To the international society and to organisations financing support activities in countries in transition, it is essential to support efforts that can reduce the time required for the remaining part of land reform work and by that also contribute to a rapid transition to market economy. Therefore there are given significant support for speeding up land registration process in Latvia by different international donors.

Co-operation of public and private sector

Surveying

Main activities for implementation of Land Reform in Latvia is carried out by state authorities, mainly by State Land Service. This organisation is also responsible for quality control and co-ordination of surveying activities, in same time it also provide surveying services itself. Surveying work within the SLS is organized on regional basis by surveying offices which are working on self-financing basis. Equipment for those offices is provided by SLS. State employed surveyors are more advanced in comperation with private sector, because of opportunity to use state owned equipment and to get better training also as a part of international projects. Some of surveying work is done also by private surveying companies (there are 40 private surveying companies) and licensed surveyors (there are about 150 licensed surveyors in Latvia).

It is recommended to set ap independent quality control service to avoid no-fair competition between pubic and private surveyors. The responsible body for such service could be non-governmental organisation like Association of Chartered Surveyors.

State Land Service is fully responsible for all cadastral activities, including of issuing cadastral number for each parcel, which is one of the key elements for national LIS. There is no involvement of private sector in this area, and it is not foreseen in the nearest future because of responsibility of State for updating of cadastral information.

Valuation

Valuation for taxation needs and for compulsory purchases and also for land registration is business of State Land Service Valuation Centre. It is organized in different way, some of work is done of central level, but all activities for land registration are organized on local level and carried out by Real Estate Valuation offices within SLS regional departments. Those offices is working in similar way like surveying offices - on the basis of self-financing. SLS is dealing mainly with cadastral valuation and mass appraisal for real property taxation.

Private sector is dealing with land market oriented activities, they are servicing banks, real estate agents and private and juridical persons. There is established Association of Licensed Valuators. Private sector in valuation is working using market valuation approach.

Real property management and brokerage

Real estate management includes transitions with tenants, neighbours, service personal, contractors and others. Real estate brokers act as intermediates between those who want to sell or let and those who want to by or rent property. All these activities are carried out by private sector. Also notary's activities are completely privatised, all notary work is done by licensed notaries.

Service and maintenance of registration systems

Servicing and maintenance of different Registration systems and possibly national LIS in future are areas were partnerships between Public and Private Sectors could be established. These activities could be outsource to private sector. There already is experience in using such approach in Latvia. The Enterprise (Business) register was developed by private company and it is still maintain and serviced by same private company.

It is necessary to develop legislation to facilitate this approach. Non-government organisations such as Association of surveyors have an important role to play in brokering such partnerships- the Association itself already encompasses both private and public sector members.

Conclusions

Land restitution within the implementation process of Land Reform will soon cease and further progress in land privatisation will be governed by legal and economic constraints. Land consolidation will be important issue in the nearest future. The initial recording of land occupancy and use will have been completed by 2000.

The land market will grow slowly, except in Riga and the central part of Latvia. In future the banks will play crucial role in the growth of land ownership through the increased use of mortgage facilities by introducing real property credit system.