Real estate is one of the most reliable forms of investment. The current trend in the real estate market in Belarus is a decrease in the price of both commercial and residential real estate due to excessive supply. This tendency may be interesting for foreign investors, since the yield rate in Belarus is usually at a high level.
Apart from land plots, Belarusian law treats the following as real property objects: a) buildings and constructions (permanent structures); b) isolated premises (parts of buildings registered and regarded as separate real property); c) parking places (structures registered and regarded as separate real property); and d) objects of incomplete construction.
These objects may be for commercial or residential use.
Commercial properties may be acquired by both foreign companies and citizens.
Since March 2013, foreign citizens and companies have been provided with the right to purchase privately owned residential properties based on any type of agreement (i.e., a sale-purchase agreement, a contract of exchange, etc.). Acquisition of state-owned residential property is permitted only when an international treaty specifically allows for the acquisition.
Acquisition of a non-state-owned building involves the transfer of the land plot’s title to the new owner of the building. As the general rule is that ownership of land plots cannot be acquired by foreign citizens or companies, land plots are provided to foreign citizens or foreign companies by lease, and in practice the land user often provides for transfer of the rights to the land plot into the lease rights. The maximum duration of a lease agreement is 99 years.
Execution of an acquisition contract usually involves the following stages:
Legal check of property and the owner’s rights to dispose of and alienate the property. In particular, this involves a determination of: (a) whether the property is included in the list of objects for which the local authorities enjoy the right of first refusal to acquire the property; (b) whether all necessary corporate approvals of the authorized body have been obtained; (c) whether the signer is duly authorized; (d) whether there are any encumbrances over the property that will transfer to the new owner together with the title to the property (e.g., mortgages, arrests); (e) whether any unauthorized improvements or additions to the property were made; and (f) the history of transactions involving the property.
Technical check of property. An examination of the actual state of the object being purchased may discover hidden and often irreparable technical defects. In addition, many unauthorized improvements and/or additions to the property may be found that could not be established during the legal check. Unauthorized improvements and additions may result in administrative liabilities for the new owner and other negative consequences, up to and including the obligation to restore the building to the condition it was reported as being at the time of sale.
Preparation of the sale-purchase agreement. Foreign laws may not govern the sale-purchase agreement. Only Belarusian laws shall apply.
Registering the foreign citizen and/or company that is purchasing the property with the tax authorities.
Notarization of the agreement, if the seller or a buyer of the property is a natural person.
Registration of the transaction and transfer of the titles to the property and the land plot with the Unified State Register of Real Estate, Rights Thereto, and Transactions Therewith (i.e., the Real Estate Register). Registration procedures usually take up to five business days, although urgent procedures (allowing for registration in 1 day) are also possible. Depending on the terms and conditions of the sale-purchase agreement, registration of the agreement and registration of the title to the property may be performed either simultaneously or one after another (for example, after payment for the property). As a general rule, real estate is considered to be mortgaged by the seller if it was transferred to the buyer but has not been fully paid for.
Although letters of intent are not widely used in Belarus due to their unclear nature from the Belarusian law point of view, they are nonetheless binding for the parties where they comply with the requirements for preliminary sale-purchase agreements.
In practice, real estate may also be acquired through share transfer. However, this option is less preferable since the buyer, on completing the transfer of shares, assumes responsibility for the whole company including any matters that occurred before change of ownership.
By Ekaterina Zabello, Partner, and Yuliya Liashenko, Senior Associate,Vlasova Mikhel & Partners
This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.