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Purchase a Property in Estonia

Purchase a Property in Estonia

Buying a property in Estonia can be attractive to foreign investors as well as foreign nationals who have relocated to the country and are ready to acquire their own home. Likewise, foreign companies willing to establish their business operations in the country may be interested in acquiring a property such as an office space, rather than renting it.

Regardless of the motives behind the purchase, whether for residential or commercial reasons, buying a property in Estonia is subject to a number of mandatory steps, such as signing the needed agreements, as well as a set of steps that are taken to ensure the viability of the purchase, such as property verifications.

In this article, our real estate lawyers in Estonia answer some of the most important questions related to property purchase. This article is for informational purposes only and we encourage all those who wish to purchase property or land to reach out to a team of experts, such as our real estate attorneys, in order to gain a comprehensive understanding of the legal requirements and implications.

If the buyer is interested in immigration to Estonia, our team can assist.

 Quick Facts  
Foreigners can buy property in Estonia (Yes/No)  Yes 

Types of properties in Estonia 

Apartments, houses, cottages, commercial properties (warehouses, office spaces, etc.). 

 Real estate agent use

Commonly used 

 Real estate agent fees  Can start at 2%
 Land ownership

 Special permits can be required for some types of land; restrictions on land purchase can apply.

Deed registration 

Mandatory  

 The agency with which the property deed is registered 

The Estonian Land Register (and also the e-Land Register). 

 Provisional agreement use

Can be used 

 Use of lawyers

Advisable in order to handle certain aspects of the purchase process. 

 Initial deposit Usually 10% of the property value. 
 Property due diligence

 Always advisable

 Property purchase costs (apart from the asking price)

 State duty and additional fees

 Reasons to buy property in Estonia

 A sound investment, multiple purchase options, real estate options versatility.

 Assistance for individuals

Complete legal assistance for drafting the sale-purchase agreement, document vetting, land register submissions, etc. 

 Assistance for investors/corporations  Assistance for commercial real estate purchases, real estate financing matters, zoning and construction law matters, real estate litigation, etc.

Who can buy real estate properties in Estonia?

Estonia provides good investment opportunities when it comes to real estate properties mainly because foreign citizens or companies have the same possibilities to purchase properties as Estonian citizens do. There are only few restrictions when it comes to foreign entities wanting to purchase a real estate property in Estonia. Foreign investors or citizens residing outside the European Unions are not allowed to buy real estate properties on four Estonian islands (Saaremaa, Hiiumaa, Vormsi and Muhu) and are not allowed to purchase over 10 hectares of forest or agricultural land plots.

Our team of immigration lawyers in Estonia can give you more details about the Restrictions on Acquisition of Immovables Act, the law that stipulates the restrictions to purchase property in the aforementioned sea islands by foreign nationals, for national defense reasons. We can also help you with information about other requirements or conditions imposed by the Estonian Ministry of the Interior.

If you want to buy a property in the country as part of your relocation process, you can rely on our assistance as soon as you decide to apply for a temporary residence permit. We can give you details about the available permit types, the entry requirements, the documentation required for the permit application and the current fees. Please contact us for more details on residency in Estonia

What are the pre-purchase steps?

The most important step when purchasing real estate property in Estonia is to verify the owner and the property to be bought. The buyer is advised to check if the property is registered with the Estonian Land RegisterAccording to the Estonian laws, real estate properties not registered with the Land Register are considered movable properties. The property must also be checked for encumbrances, such as mortgages. The buyer is also advised to verify if the owner has any unpaid bills or debts with the authorities.

Some of the issues that can be checked when purchasing an apartment in Estonia include the following:

  • the true ownership of the property and whether or not the seller is indeed the owner of the apartment;
  • whether or not the apartment is part of the residential building constructed on the land that is duly registered;
  • the energy performance certificate for the house;
  • whether or not the residential building has an apartment association;
  • a verification to make sure that the apartment has no tenants; as the new owner you will be able to make legitimate demands if you find that the apartment has persons that were registered of whom you had no information.

An apartment association is created by the owners of the apartments in the building for the purpose of managing the ownership and representing common interests.

Our Estonian lawyers can help you with a thorough real estate due diligence process before making your purchase.

A seaparate division of our team, our immigration lawyers in Estonia, will give you details about the visas and residence permits.

What does the sale/purchase agreement include?

After checking the property to be bought, a reservation contract will usually be concluded between the seller and the buyer. The reservation agreement does not compel any of the parts to sell, respectively to buy the property but it offers the buyer priority if other persons are interested in purchasing the same property. A pre-purchase contract can be concluded in front of a public notary in case the final agreement cannot be concluded right away. This way the buyer makes sure the Estonian property will enter in his or her possession after concluding the final purchase contract. The pre-purchase agreement will usually contain the terms of the sale, the price of the property and if any deposit has been made. When signing a pre-purchase contract a sum ranging between 10-20% of the total price of the property must be paid. The final step for buying the Estonian property is to sign the purchase contract. The contract must be signed in front of a public notary.

Some of the relevant documents when concluding such an agreement include the following:

  • the identification documents for both parties;
  • the marriage certificate of the seller (if the property that is being sold was purchased during the marriage);
  • the marriage certificate of the buyer (if the property is purchased with the help of a bank loan).

It is clear from the documents presented above that when the purchase/sale take place, the role of both spouses is important. Both of them participate in the agreement and both of them need to approve the sale of the property.

When the buyer or the seller is a legal person (or they both are) the following documents are relevant:

  • the identification documents for at least one of the Board members (in general, one member will suffice);
  • the shareholder’s decision to sell the property, a document that will include important information about the transaction that will take place such as the location of the property, the price and details about the seller.

How can you register the property with the Estonian Land Register?

Once the new owner has purchased the property, he or she must pay the registration fee and then register the property with the Estonian Land Register. The application form to be submitted with the Land Register must be notarized. According to the Estonian laws, a real estate property tax will be levied depending on the value of the land plot the property is built on and it ranges between 0.1 and 2.5%.

Residency by investment program

There is no direct real estate investment program that leads to residency in Estonia. Therefore, you cannot buy a property in Estonia and receive residency.

However, residency options in Estonia are available for business investment, and if you establish a business in the country with a substantial investment, you may qualify for a residency permit. Owning or buying a property in Estonia can be part of your overall business strategy, but it is not a standalone route to residency.

If you want to know more about the pathways to Estonian citizenship or residency, our specialized immigration lawyers can help.

Bank loans when buying a property in Estonia

Foreigners can obtain loans to buy a property in Estonia, but the eligibility criteria and requirements can vary depending on the lender and the terms of the loan.

To obtain a property loan as a foreigner, you typically need to meet certain requirements, including:

  • Having a valid residence permit;
  • Demonstrating a stable income;
  • Maintaining a good credit history;
  • Being prepared to make a down payment, which may be a certain percentage of the property’s value.

Of course, you need to have or open a bank account to apply for a loan. Our Estonian lawyers can assist you in this process.

Mortgage rates in Estonia for a 20-year term can range from 0% to 4%, which is considered highly favorable. 

Taxes related to properties in Estonia

The taxes when purchasing a property in Estonia are either paid by the buyer or seller, depending on the type of tax and the nature of the transaction. Additionally, there are taxes related to renting or selling properties as well. Our attorneys in Estonia will explain them to you. 

The VAT is applied on the sale of newly constructed buildings and is 20% of the sale price of the property. The buyer of the property is responsible for paying this tax.

Land tax is an annual tax levied on the ownership of land, including real estate properties. The tax rate varies between 0.1% and 2.5% of the property value, depending on the municipality where the property is located. If you purchase this property in Estonia and become the land owner, you are responsible for paying the tax. 

For rental income, you pay 20% of the total rental income earned from the property if you are the owner. We recommend hiring an accountant in Estonia if you receive constant rental income.

If you sell the property, you pay the capital gains tax, which is 20% of the net capital gain, calculated as the difference between the sale price and the acquisition cost of the property.

There are also some costs related to buying a property in Estonia. First, there is the registration fee for registering the property transfer, paid by the buyer once, evaluated at 0.25% of the property value. There are also the state fees, paid to the state for various administrative procedures related to the property transfer. They range between 0.3% to 0.5% of the property sale price. Lastly, there are the real estate agent commissions and notary fees, which might vary. Both the seller and the buyer may share the responsibility for paying the notary fee, but the real estate agent commission is usually paid by the buyer. 

If you need more assistance regarding taxes, our law firm in Estonia can recommend our accounting partners. 

Real estate in Estonia

For more details regarding property purchasing in Estonia and the real estate market, we have gathered some statistics:

  • There were 739,000 total dwellings in 2021, according to Statistics Estonia;
  • In 2022, the homeownership rate in Estonia increased to 82%;
  • In June of 2023, residential property prices in Estonia increased by 4.99 percent compared to the same month in the previous year. 

Our Estonian law firm can advise you when purchasing a real estate property. You can also contact us for any information regarding the registration process with the Estonian Land Register.

We also offer services related to immigration to Estonia.