REAL ESTATE LAW
After restoration of independence in 1990, Lithuania has reoriented its economic system to the one based on private initiative and ownership. Current laws enable private persons (either nationals or foreigners) to acquire into ownership, lease or otherwise dispose of any type of real estate, however, with certain restrictions established in respect of the land plots.
When the Constitution of the Republic of Lithuania was enacted on 25 October 1992, the acquisition into ownership of land in Lithuania was allowed only to Lithuanian citizens and the State. On 20 June 1996, however, Article 47 of the Constitution was supplemented with Paragraph 2, allowing municipalities, other national entities and foreign entities engaged in economic activity in Lithuania and complying with certain criteria determined by the law to obtain permission to acquire land for non-agricultural activities.
- The 25 October 1992 Constitution of the Republic of Lithuania;
- The 20 June 1996 Constitutional Law No. I-1392 of the Republic of Lithuania "On Subjects, Procedures, Conditions and Restrictions of Acquisition into Ownership of Land Plots Provided for in Paragraph 2, Article 47 of the Constitution of the Republic of Lithuania" ("the Constitutional Law");
- The 18 July 2000 Civil Code of the Republic of Lithuania;
- The 25 July 1991 Law No. I-1607 of the Republic of Lithuania "On Land Reform";
- The 6 October 1992 Law No. I-2936 of the Republic of Lithuania "On Mortgage";
- The 2 February 1993 Law No. I-61 of the Republic of Lithuania "On the Procedure and Conditions for Sale and Lease of Land to Diplomatic and Consular Missions of Foreign States";
- The 26 April 1994 Law No. I-446 of the Republic of Lithuania "On Land";
- The 22 December 1994 Law No. I-733 of the Republic of Lithuania "On Protection of Immovable Cultural Valuables";
- The 12 December 1995 Law No. I-1120 of the Republic of Lithuania "On Planning of Territories";
- The 19 March 1996 Law No. I-1240 of the Republic of Lithuania "On Construction";
- The 24 September 1996 Law No. I-1539 of the Republic of Lithuania "On Real Estate Register";
- The 1 July 1997 Law No. VIII-359 of the Republic of Lithuania "On Restoration of Citizens' Ownership Rights to Existing Real Estate";
- The 7 July 1999 Law No. VIII-1312 of the Republic of Lithuania "On Investments";
- The 27 September 1995 Resolution No. 1278 of the Government of the Republic of Lithuania "On Approval of Order Regarding Establishment, Registration and Revocation of Land Servitudes";
- The 24 February 1999 Resolution No. 205 of the Government of the Republic of Lithuania "On Evaluation of Land";
- The 9 March 1999 Resolution No. 260 of the Government of the Republic of Lithuania "On Sale and Lease for Non-Agricultural Purposes (Activity) of the State-Owned Land Plots in Use";
- The 2 June 1999 Resolution No. 692 of the Government of the Republic of Lithuania "On Sale and Lease for Non-Agricultural Purposes (Activity) of the New State-Owned Land Plots".
The major institutions authorised to administer issues related to usage, possession and disposal of real estate are the following:
Administrations of County Governors are authorised to issue permission for the acquisition of land plots for non-agricultural purposes, to prepare documents for lease or sale-purchase of the State-owned land plots, adopt decisions to lease or sell the State-owned land plots and to execute agreements on lease or sale of the State-owned land plots (including determination of the price of the land plot), in certain cases to adopt decisions on land servitudes and taking (expropriation) of land etc.
- administrations of County Governors;
- the State Enterprise of Cadastre and Register of Land and Other Real Estate;
- Hypothecary Register Authorities.
Municipalities are entitled to prepare documents for lease of the State-owned land, including drawing of the land plans, to execute agreements on lease of the State-owned land plots in their possession, to establish architectural-urban restrictions and conditions as well as special usage conditions with respect to the leased or sold Sate-owned land plot, to establish the types of permitted activities on the leased State-owned land plots etc.
The State Enterprise of Cadastre and Register of Land and Other Real Estate administers the Land Cadastre and the Register of Real Estate by registering all real estate and rights thereto, keeping records, inventory files and the like.
Hypothecary Register Authorities (the Ministry of Justice, the Central Hypothecary Office and local hypothecary divisions) administer the Hypothecary Register by registering, among other things, mortgages as well as accumulating, storing, processing and supplying with relevant data related to mortgages.
In addition to the above mentioned authorities, a number of other State institutions also have discrete functions related to real estate, including: the Ministry of Agriculture; the Ministry of Environment; the Department of Protection of Cultural Valuables under the Ministry of Culture; etc.
Acquisition of Land and Buildings
According to Article 6.393 of the Civil Code, every agreement on sale-purchase of real estate must be certified by a notary. Failure to notarise the agreement on sale-purchase of real estate makes it null and void. Besides, the agreement on sale-purchase of real estate may be invoked against third persons only upon proper registration of such agreement with the Real Estate Register.
The ownership right to the sold real estate passes over as of the transfer of the real estate to the buyer. The transfer of the real estate must be documented by the act of transfer-acceptance signed by the seller and the buyer or by another document provided for in the sale-purchase agreement.
In order to register the acquired real estate and rights to it, an application must be filed with a respective branch of the State Enterprise of Cadastre and Register of Land and Other Real Estate. In addition to the application for registration of the acquired real estate, the applicant must also file the following documents:
According to Law on Protection of Immovable Cultural Valuables, transactions concerning real estate of cultural value are to be certified by a notary and registered within a period of 3 months with the Department for Protection of Cultural Valuables under the Ministry of Culture.
- the original document on the basis whereof the real estate has been acquired into ownership (a sale-purchase agreement, inheritance certificate etc.);
- the passport or other document of identification (if the applicant is a natural person) or the registration certificate of an enterprise and in particular cases its Articles of Association (if the applicant i.e. the acquirer of real estate, is an enterprise);
- the original plan of a land plot (in case of acquisition of a land plot);
- other documents.
Point of Interest
The Civil Code does not provide for compulsory legal registration of the agreement on sale-purchase of real estate. Such agreement is deemed effective with respect to its parties, irrespectively of the legal registration thereof. However, failure by the parties to register the agreement on sale-purchase of real estate precludes the parties from invoking such agreement against third persons.
Acquisition of Land
According to the Constitutional Law, the following subjects are vested with the right to acquire into ownership the land plots in Lithuania:
"The rights of effective control" mean management of an enterprise's capital and holding of the block of shares that ensure the possibility of taking decisions on the disposal of property and / or management of an enterprise.
- National subjects:
- municipalities of the Republic of Lithuania;
- Lithuanian enterprises registered and performing business activity in Lithuania, having the rights of legal persons and owned under effective control rights by (i) the State, (ii) municipalities, (iii) citizens of the Republic of Lithuania or (iv) other Lithuanian enterprises which are owned under the effective control rights respectively by the Lithuanian citizens, the State or municipalities;
- other Lithuanian entities, including public organisations of the Lithuanian citizens, non-profit organisations etc. having the rights of legal persons and engaging in relevant activity.
- Foreign subjects:
- enterprises registered and performing business activity in Lithuania, having the rights of legal persons and owned under effective control rights either by foreign entities or foreign citizens;
- foreign entities having established for business purposes in Lithuania their branches or subdivisions without the status of a legal person;
- foreign citizens engaging in registered business activities in Lithuania.
The above described national and foreign subjects are entitled to acquire land plots in Lithuania provided the following conditions are met:
Entities complying with the above criteria may acquire land plots owned by private persons by way of purchase, exchange and other ways provided by the laws.
- the foreign enterprise is registered in:
- a Member State of the EU, or
- a State that is a party to the European Agreement Establishing Association with the EU and its Member States, or
- a State that at the moment of the adoption of the Constitutional Law was a member of the Organisation for Economic Co-operation and Development (OECD) or a member of the North Atlantic Treaty Organisation (NATO);
- the State of registration of the foreign entity provides for equal rights to the Lithuanian entities (i.e. the rights are applied on a reciprocity basis);
- the foreign enterprise has its main place of business in the state of registration for at least 5 recent years;
- a permission of the Government of the Republic of Lithuania has been received;
- the land plots to be acquired must be of non-agricultural purpose and necessary for:
- operation of the buildings or facilities designated for the direct business activity of the acquirer; or
- construction and operation of the new buildings and facilities necessary for the direct business activity of the acquirer.
The land plots belonging to the State or municipalities may be acquired into ownership either (i) by way of public sale-purchase (through an auction) or (ii) by way of sale-purchase without holding an auction or tender, provided that the land plot has been leased from the State and buildings owned by the lessee intending to purchase the land plot are located thereon. State-owned land plots of non-agricultural purpose may be transferred into private ownership in accordance with the procedure established by the 9 March 1999 Resolution No. 260 or the 2 June 1999 Resolution No. 692 of the Government of the Republic of Lithuania.
Foreign subjects that do not meet the afore mentioned criteria and conduct economic activities in Lithuania may only lease the land plots required for operation and/or construction of the buildings and facilities designated for their business activities.
On 10 December 1998 the Government of the Republic of Lithuania by Resolution No. 1423 adopted the regulations regarding the submission and examination of applications for the acquisition of land plots of non-agricultural purpose and the issuance of permissions to national and foreign subjects as established by the Constitutional Law. This resolution allows practical implementation of the provisions of the Constitutional Law.
Permissions to acquire land plots of non-agricultural purpose are issued by a respective County Governor, according to the location of the land plot intended to be acquired by the qualifying entities. The County Governor may decide not to issue the permission for acquisition of the land plot if:
The permission to acquire land is valid only for that particular person to which the permission was issued. If the buildings or facilities, for operation whereof their owner has been issued the permission to acquire the land plot, are transferred to another party, the permission is considered invalid in respect of the new owner.
- the applicant or the land plot does not satisfy the criteria provided in the Constitutional Law; or
- the restrictions on the requested activity are established by laws or other legal acts.
Any transaction on acquisition of land, irrespectively of the method of acquisition, must be concluded in writing and notarised. The notary will certify the agreement on purchase of the land plot of non-agricultural purpose only after the permission for acquisition is presented. In addition, pursuant to the Law on Land any transaction on sale-purchase of a land plot must be registered with the Real Estate Register and failure to register will preclude the acquirer of the land plot from disposing of it.
When the private land plots located in national and regional parks are being sold, the State has the priority right to purchase such land plots under the same conditions and at the price agreed between the seller and the buyer. The State also has the priority right to purchase private land plots located in towns, cities and rural settlements, under the same conditions and at the price as agreed by the seller and the buyer, for the needs of the municipal economy, common residential needs or public construction and recreation, if such land plots are designated for such purposes under the territorial planning documents.
In case of sale of the land plot whereon buildings, facilities, seedlings or other objects are located, the sale-purchase agreement should discuss the conditions of transfer of the ownership right to the mentioned objects. If this issue is not discussed in the agreement, it is to be considered that ownership rights to the buildings, facilities, seedlings or other objects located on the land plot are transferred to the buyer together with the land plot. If the seller of the land plot does not sell to the buyer the buildings or other real estate located thereon, the seller shall be reserved the right to use the part of the land plot occupied by and necessary for use of the buildings or other real estate under conditions prescribed in the agreement. If, however, the agreement on sale-purchase of the land plot does not specify such right of the seller and conditions thereof a servitude must be established for the benefit of the seller in respect of the respective part of the land plot.
Point of Interest
Restrictions on the purchase of land plots prescribed by the Constitutional Law also apply to acquisition of a shareholding ensuring effective control of an enterprise which owns a land plot.
Acquisition of Buildings
There are no substantial restrictions related to acquisition into ownership of buildings in Lithuania by Lithuanian or foreign natural and legal persons.
Pursuant to the Civil Code, an agreement on sale-purchase of a building or other real estate must specify the rights of the buyer in respect of the land plot whereon such building or other real estate is located. In case of failure to specify the said rights, the agreement on sale-purchase of a building shall not be certified by the notary and if certified - shall be deemed void.
If the seller of a building or other real estate is the owner of the land plot whereon the building or other real estate is located, the ownership, lease or development right to the land plot must be transferred to the buyer of the building under the agreement on sale-purchase. In case the owner of a building or other real estate does not hold the ownership right to the land plot, such building or other real estate may be sold without the consent of the owner of the land plot only if this does not contradict the conditions of usage of the land plot provided in the laws and/or agreement. Upon sale of such building or other real estate, the buyer thereof acquires the right to use a respective part of the land plot under the same conditions as the seller of the building or other real estate.
Lease of Land and Buildings
Lease of Land
According to the Civil Code, both Lithuanian and foreign natural and legal persons are permitted to lease either private or State-owned land in Lithuania. If the land plot belongs to several owners under the joint ownership right, such land plot may be leased only upon the written consent of all co-owners. Agreements on lease of the State-owned land plot are executed by the following institutions acting as the lessors of the State-owned land plot:
All land lease agreements must be concluded in writing. Besides, land lease agreements may be invoked against third persons only upon proper registration of such agreement with the Real Estate Register. A plan of the land plot or a scheme thereof (in case the land plot is leased for a term not exceeding 3 years) must be attached to the land lease agreement.
- a respective County Governor or a representative of the administration of the County Governor authorised by the County Governor;
- the Council of a relevant municipality (it leases only those land plots that have been transferred into possession of the municipality under the trust right);
- other institution performing functions of the possessor of the State-owned land plots.
The lease term of both private and State-owned land plots is determined by the agreement of the lessor and the lessee. However, the lease term of the State-owned land plot may not exceed 99 years.
The State-owned land plot may be leased with or without holding an auction for land lease. The auctions for lease of the State-owned land plot must be held in all cases, except for the lease of the State-owned land plot which is built over with constructions or facilities owned or leased by private persons. In case of an auction for lease of the Sate-owned land plot, lease is granted to a person who proposes the highest rent.
Auctions for lease of State-owned land plots are organised and held in accordance with the regulations approved by the 2 June 1999 Resolution No. 692 of the Government of the Republic of Lithuania.
The lessee of either private or State-owned land plot may sub-lease such land plot to third persons only upon written consent of the lessor (the owner). Besides, the sub-lease of the land plot must also comply with the requirements provided in the agreement on lease of such land plot.
The Civil Code provides for a number of issues which must necessarily be discussed in a land lease agreement (e.g. the object of the lease and data from the Land Cadastre and the Real Estate Register describing the land plot; the term of the land lease; the main special purpose of land utilisation; conditions of use of structures and facilities located on the leased land plot and owned by the owner of the leased land plot or third persons; special conditions of land utilisation; land servitudes and other rights in rem; etc.)
The terms and conditions of land utilisation prescribed in the lease agreement may not contradict the environmental and public interests or the interests of owners or users of the neighbouring land plots.
Upon expiry of the land lease term, or upon termination of the land lease agreement prior to its term, the owner of the land plot must compensate the lessee for the buildings, structures and facilities constructed on the land plot if such construction was stipulated in the land lease agreement. In case the former lessee remains the owner of such buildings, structures or facilities constructed on the land plot, it has the right for establishment of the land servitude if this was provided for in the land lease agreement or in a supplementary written agreement. However, in case the constructions were performed on the land plot without permission or the land lease agreement has not provided for such construction, the lessee will be obliged to demolish them and clean the land plot. Upon failure by the lessee to do so, the buildings, structures or facilities may be demolished by the lessor at the lessee's expenses, or such buildings, structures or facilities will be passed over into ownership of the lessor.
Point of Interest
If, upon expiry of the land lease term, persons other than the former lessee apply for the lease of the land plot under the identical conditions, the former lessee has a priority right to enter into the new land lease agreement, provided it has duly fulfilled the obligations under the previous land lease agreement.
Lease of Buildings
There are no substantial restrictions on the lease of buildings, structures or facilities in Lithuania by Lithuanian or foreign persons.
According to the Civil Code, any agreement on lease of buildings, structures or facilities must be concluded in written form. Such lease agreement may be invoked in respect of third persons only after it has been registered with the Real Estate Register.
The transfer of the leased building (structure or facility) must be documented by the act of transfer-acceptance to be signed by the lessor and the lessee. In case either party to the lease agreement refuses to sign the act of transfer-acceptance, it shall be considered that the lessor refuses to fulfil its obligation to transfer the object and the lessee refuses to accept it.
The Civil Code provides that, according to the agreement on lease of the building (structure or facility), the rights to use the land plot that is required for operation of the leased building pursuant to its purpose must be transferred to the lessee.
In case the lessor of the building (structure or facility) is the owner of the land plot under the leased building, the lessee must be granted the lease right or any other right stipulated in the building lease agreement to use the land plot. However, if the agreement on lease of the building does not discuss a particular right of the lessee in respect of the land plot, it shall be considered that the lessee has been granted the right to use free of charge such part of the land plot which is necessary for operation of the leased building pursuant to its purpose. In case the lessor of the building does not own the land plot thereunder, such building may be leased without the consent of the owner of the land plot only if this does not contradict the laws or agreement between the lessor of the building and the owner of the land plot.
According to the Civil Code, the object of mortgage may be a separate real estate registered with the Real Estate Register which is not withdrawn from the civil turn-over and may be presented for sale in auction. Besides, with exception of land, the mortgaged property must be insured.
The Civil Code provides for two types of mortgage: compulsory and contractual. The compulsory mortgage is created on the basis of law or court decision. Meantime, the contractual mortgage is created by execution of an agreement between the creditor and the owner of the mortgaged property, or by a unilateral application of the owner of the mortgaged property.
Any mortgage must be executed as a mortgage bond in a standard form approved by the Ministry of Justice. In case of contractual mortgage, the mortgage bond is to be certified by the notary. Upon execution of the mortgage bond, the mortgage must be registered with the Hypothecary Register. The mortgage is valid only after registration thereof with the Hypothecary Register.
Upon the conveyance of the mortgaged property to some other person, the mortgage follows the property. The mortgagee shall have the right to transfer the mortgage claim or a part thereof, unless the agreement on mortgage provides otherwise. Further, the mortgagee is also entitled to pledge the mortgage claim for securing the loan received (or to be received), however, provided the term of repayment of such loan does not exceed the term of repayment of the debts stipulated in the mortgage bond.
The mortgagee has the right to fully satisfy its claim prior to other creditors from the proceeds from the sale of the mortgaged property by way of auction. In the event of multiple mortgages of the property, claims of the mortgagees are satisfied according to the time of their application for registration of the mortgage.
Upon failure to sell the mortgaged property by way of auction, such property may be either transferred to the mortgagee or sold without auction under procedure prescribed by the laws.
Point of Interest
Upon mortgage of a building, the land plot under the building or the lease (gratuitous lease) right of such land plot is to be mortgaged as well. The mortgage of land extends to the building located thereon unless the mortgage agreement provides otherwise. If, upon mortgage of land, the building located thereon is not mortgaged, after the sale of the mortgaged land by way of auction, the owner of the building becomes entitled for establishment of a land servitude.
Current Lithuanian laws cover only land servitudes (i.e. obligations of the landowner or the user of State-owned land to grant other persons the right to use a part of a land plot).
The Law on Land provides that land servitudes may be established by:
Land servitudes, with the exception of those established by the laws, must be registered with the Real Estate Register.
- the laws; or
- the decision of the Government of the Republic of Lithuania or the County Governor on the grounds of public needs; or
- by mutual written agreements between the owners of the private land plot and natural or legal persons. Agreements that establish the obligation of a private landowner to allow other persons to use a part of the land plot must be certified by a notary.
Land owners and other users may be compensated by the interested persons or through the State funds for losses incurred by reason of the established servitude (with the exception of compensation for private land owners because of servitudes established under a mutual written agreement between landowners and natural or legal persons) in the manner established by the Government of the Republic of Lithuania. For losses incurred because of servitudes established by the mutual agreement between landowners and natural or legal persons, the owners of private land may be compensated upon mutual agreement of the parties.
Land servitudes established by laws or decisions of the Government of the Republic of Lithuania or the County Governor pass over to other persons together with the title to the land plot in respect of which such land servitude has been established.
Land servitudes may be revoked in the following manner:
Point of Interest
- by the law, if the land servitude has been established by the law;
- by the decision of the Government of the Republic of Lithuania or the County Governor, if the servitude has been established by the decision of the said institutions; or
- by an agreement between the parties or by a court decision, if the servitude has been established by a mutual agreement between landowners and natural or legal persons.
As of 1 July 2003 the provisions of the Civil Code allowing establishment of servitudes in respect of property other than land (e.g. roads, structures, underground and surface communications etc.) will come into effect. Besides, the provisions of the Civil Code regarding the possession, as a separate right in rem, usufruct, right of development (superficies) as well as long term-lease (emphyteusis), as a separate right in rem, will come into force from 1 July 2003 as well.
Taking of Property (Expropriation)
Grounds for Taking of Property
The Constitution of the Republic of Lithuania establishes that property may be taken from the owner (expropriated) only: (i) for the needs of society; (ii) according to the procedure established by the laws; and (iii) upon adequate compensation.
Currently, the law allows only the following grounds for taking of property: (i) taking of land for public needs; (ii) taking of improperly kept cultural valuables; or (iii) the confiscation of property as a sanction for infringement of law.
Taking of Land for Public Needs
The Law on Land provides that land may be taken or the agreement on lease of the State-owned land plot may be terminated prior to its term only in exceptional cases, upon the decision of the Government of the Republic of Lithuania or the County Governor adopted at the request of a municipal institution, ministry or other governmental institution when such land is needed for:
Land plots may be taken for public needs by way of purchase of the land plot at its real price or by providing the owners with another land plot of equal value in the same locality. Other losses incurred due to taking of the land plot are compensated in accordance with the procedures established by the laws and resolutions of the Government of the Republic of Lithuania.
- national defence;
- State airports, ports and their facilities;
- construction of the State railways, State roads, pipelines and high voltage electricity transmission lines;
- constructions of national significance, development of urban and rural infrastructure, common needs of the population, public construction and recreation;
- exploitation of mineral resources, reconnoitred at the State expenses;
- fixing of geological and astronomical nets belonging to the State;
- protection of natural, archaeological and historic complexes and objects;
- needs of local authorities and common (public) use, if it is provided for in the detailed plans or land planning projects of cities, towns and settlements;
- implementation of the economic projects of national importance recognised by the decision of the Seimas or Government of the Republic of Lithuania.
The decision of the appropriate institution to take land for public needs must be published in the local press twice with a 15-day interval. If the owner of land does not agree with the decision, it may be challenged in court within one month from the date of the second publication.
Taking of Improperly Kept Cultural Valuables
As provided in the Civil Code, in case that property having significant historical, artistic or other value is kept improperly, the State institution responsible for protection of such property must request the owner to keep the property in due order. Upon failure by the owner to comply with the said requirement, the court may take the property on the basis of the application of the relevant institution. Then the ownership of the taken property is transferred to the State and the owner is compensated for the value of the taken property which is to be fixed either by the mutual agreement with the institution or, in case of dispute, by the court.
Point of Interest
The Law on Investments provides for additional guarantees for both foreign and national investors (see chapter Foreign Investment above)
Following the Law on Construction, all the Lithuanian and foreign natural and legal persons have the right to act as a constructor in Lithuania provided the below conditions are met:
The above mentioned requirements are not be applicable when a building is repaired if: (i) the structural elements of the building are not replaced or strengthened; (ii) the facade is not changed; (iii) the purpose of the building or premises is not changed; and (iv) new technological or other improvements are not replaced or constructed and the common utility systems of the building are not modified.
- a land plot is acquired under the right of ownership or used on other legal basis prescribed by the laws of the Republic of Lithuania;
- a construction plan is prepared and coordinated in accordance with established procedures; and
- a permission for construction is obtained.
The permission for construction is issued by one of the below institutions:
In case the permission for construction is required, the constructor is entitled to use the newly constructed building only after it has been recognised as suitable for usage under the prescribed procedure. A building may be recognised as suitable for usage by a respective commission (to be formed for each particular case) only after the following requirements have been met:
- the State Inspection of Territorial Planning and Construction - for construction of the following structures: (a) structures covering territories of several municipalities; (b) structures that are being constructed by the municipality (its institution, enterprise controlled by the municipality or other subjects of municipality's administration); (c) structures designated for national defence; (d) structures of nuclear energy;
- the Mayor of municipality (or a person authorised by the Mayor) - for construction of any other structures;
- the territorial division of the Department of Protection of Cultural Valuables under the Ministry of Culture - for carrying out of works related to arrangement of the cultural values as well as for construction and demolition of the structures located on the territories of the cultural values.
The act on recognition of suitability of the building for usage is to be registered with the Real Estate Register.
- the construction works established in the building plan have been carried out;
- technical and special conditions for planning of the building have been executed;
- constructed engineering networks and communications have been tested and relevant geodesic photographs have been made.