Acquisition and sale of real estate in Armenia
Are there any limitations for foreigners to acquire property in Armenia?
Generally, foreigners have the right to acquire almost any type of property in Armenia. The only limitation is acquiring certain types of land. For example, foreigners can freely own yards, gardens, and plots of land intended for the construction of residential or commercial objects but cannot directly own agricultural land. Meanwhile, there is no limitation on acquiring a stake in a company that owns agricultural land (this limitation does not extend to foreigners with a "special residency status"). Therefore, instead of directly buying agricultural land, some foreigners basically choose to own a legal entity that owns the land.
How is a real estate transaction concluded?
Each real estate transaction goes through the following stages:
Acquisition of a “clear title” certificate (certificate of limitations) from the State Real Estate Agency,
Notarization of the contract,
State registration of the title.
What is a clear title certificate and how can it be obtained?
The certificate shows the existence of encumbrances, liens, easements on the title. It does not, however, reveal the tax obligations or utility bills that may have accumulated up until that moment.
The state duty for obtaining it varies depending on the type and location of the real estate (up to AMD 10 000). It is given within 3 working days following the application unless an additional payment is made for expedited processing. The certificate is valid for 15 working days following its issuance. If this period expires before the closing, a new certificate can be obtained.
When does a real estate contract need to be notarized?
The contract must be notarized unless it is concluded at the Real Estate Agency on a readily available template. If the parties want to modify the terms in a standard form contract to better suit their needs, the contract must be notarized.
Parties to a contract should either appear in person or through their authorized representatives. The power of attorney issued by an individual for concluding a real estate transaction should be notarized. Although a power of attorney issued by a legal entity does not require notarization, some notaries may demand that.
How is the title registered?
After the contract has been concluded, it must be submitted to the State Real Estate Agency for registration within 30 working days. Failing to do this invalidates the contract unless there is a good cause for missing the deadline. The amount of state duty and service fee to be paid for registration depends on the type and location of the property (typically AMD 45 000 total). Unless the applicant makes an additional payment for expedited processing, the registration will be done within 4 working days following the submission.
Whose consent may be necessary for concluding the contract?
Under the Armenian legislation, the property acquired during the course of a marriage (with the exception of gifts or inherited property) is jointly owned by the spouses. This means that if the property had been acquired during the marriage, both spouses must give their consent unless there is a marriage contract between the spouses. Until 2014, there was no centralized database of registered marriages, which means that in practice it may be difficult to find out about marriages registered before that date. This is why if a seller of a property states that they did not have a registered marriage at the time when the property was acquired, the notary may ask them to sign an official statement in that regard.
If the owner of a property is a company, the approval of the general meeting of shareholders may be required depending on its Articles of Association and the amount of the net assets held by the company. Generally, this is the case when the value of the property exceeds 25% of the value of the company’s net assets.
When selling a share in a property by one of the owners instead of selling the entire property, the other owners have the right of first refusal which can be exercised within 30 days after serving the notice to that effect.
Both cash payment and wire transfers are generally allowed. However, any payment exceeding AMD 50 000 000 should be executed electronically.
Price quotations and payments must be exclusively made in Armenian Drams. There is a hefty fine (equal to the value of the transaction but not less than AMD 2 000 000) for breaching this rule.
The agreement on the payment of earnest money should be notarized. It is common practice in Armenia to prepare an agreement on earnest money on a simple paper without notarization. However, this practice is not in conformity with the provisions of the civil code and is therefore invalid. An invalid agreement can, however, evidence the payment and help to get the deposit back.
As a general rule, real estate transactions between individuals are not taxable.
If the buyer of a property is a business entity, the latter will act as a tax agent and will be required to withhold 10% of the contract price as a revenue tax. In other words, if the property is sold to a company or a sole proprietor, a 10% income tax will be deducted from the payment amount. Tax obligations arise when a property is sold by individual developers (20%).
The revenue received from a real estate transaction is taxable if the object of the transaction is a property that is used for business activities.
Gifts and inheritance are not taxable.
For simplicity, the information on taxation is provided in general terms. Therefore, we recommend that you contact us for more accurate information in your individual situation.
Risks to consider when buying real estate
Unauthorized constructions. Some private houses may illegally occupy adjacent private or communal land.
Overlapping boundaries. The boundaries of some plots of land may overlap with neighboring properties which can create technical problems for registration.
Unauthorized residents. Make sure that the property is vacated at the date specified in the contract.
Category of land. There are certain predefined types of land use. Plots of land which have different intended land use may have different market value and changing the category will require special permission.
Future bankruptcy of the seller. When buying a property at a price significantly lower than the market value, you should know that if the seller goes bankrupt within 3 years following the sale his bankruptcy manager may file a lawsuit and try to claim the difference between the purchase price and the market value. Although there is a decision of the constitutional court of Armenia which can protect the buyer in this situation, it can still create a dispute that you want to avoid.
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