Estonia’s real estate market is going strong despite the uncertainties and hardships caused by the COVID-19 pandemic. The number of real estate transactions was 20% higher and the total value of transactions 31% higher in the fourth quarter of 2020 than the same quarter the year before (and up 11% and 31% from the third quarter of 2020). As prices also continue to rise – the composite real estate index rose 10% year-on-year – Estonia remains an attractive place for real estate investments. Recent changes, further digitizing the transactions, are making it easier than ever for foreign investors.
Estonia relies on the principle of the binding effect of the land registry. Based on this principle, entries in the land registry can be relied on by anyone and have binding force. One of the main mechanisms to ensure that land registry entries are indeed correct is the requirement that notaries public be used to authenticate real estate transactions (including both transfers of ownership and the establishment of servitudes).
In addition to performing formal checks, such as confirming the identification of parties and ensuring AML-compliance, before certifying an agreement, the notary is obliged to make sure that the parties fully understand the content and consequences of the agreement.
For these reasons, certification of agreements has traditionally required an in-person meeting of the parties to the agreement and the notary public. As one might guess, conducting such in-person meetings has become more complicated, if not impossible, since last year. Fortunately, in what turned out to be extremely good timing, the Parliament of Estonia adopted amendments to the rules on certifying agreements by notaries public in 2019. One of these amendments, which took force at the beginning of February 2020, introduced the option of remote certification.
Remote certification essentially replaces the in-person meeting in which the notary public explains the content of the agreement to the parties and ensures that it reflects their true will. Now this all can be done online via a video meeting. After the notary has performed the necessary checks and explained the content of the agreement, it can be signed with an electronic signature – a tool which enables users to employ all of Estonia’s e-governance tools and electronic signing of documents (and which is available to non-residents if they apply for Estonia’s e-Residency and obtain the e-Residency kit for digital authentication and signing). In effect, with a bit of preparation, anyone can purchase real estate in Estonia, regardless of their location, without leaving the comfort of their home.
In practice, anyone wishing to use the option of remote certification by a notary public should: (1) contact a notary public office in Estonia to arrange for remote certification (the notary public will specify the requirements on self-identification and AML documentation necessary to carry out the transaction); (2) own an Estonian ID card, digital ID, mobile ID, or e-Resident’s digital ID (SmartID or a European Union member state’s eID card can also be used to log in to the portal, but they cannot be used for signing documents); and (3) have a computer or laptop with web-camera and microphone, log in to the www.notar.ee portal, and follow the instructions (the website is also available in English or Russian).
Many notaries in Estonia are also fluent in English, which means that process of certification can be done in English. Parties have a right to ask for a written translation of the contract but may also waive that right.
The COVID-19 pandemic has shown that, in many areas, digitalization of services is key for a service to survive and thrive. With real estate transactions gradually moving online, the ease of doing business in Estonia is again moving a step ahead. This pandemic-proof solution, which provides practical value in the form of both time- and traveling-cost-savings, has proved to be a success.
By Piret Kergandberg, Managing Partner, Triin Ploomipuu, Senior Associate, and Siim Vahtrus, Associate, Walless Estonia
This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.