Board member of SIA Vestabalt, Līga Plaude-Stukovenko, participated in a discussion organized by LANĪDA on the topic “Mitigating Fraud Risks and Whether a Good-Faith Acquirer Is Protected in Latvia.” The discussion took place as part of a series organized by LANĪDA aimed at improving transaction literacy.
The recent case involving the deprivation of an apartment from a good-faith acquirer should not be considered a classic fraud transaction, but rather a shortcoming of the Latvian judicial system, as a civil dispute was examined within criminal proceedings, which may have led to an unbalanced court judgment.
As commented by Līga Plaude-Stukovenko:
“The possible error lies in the fact that criminal procedural methods were used to resolve a civil dispute. Such an approach threatens the fundamental nature of civil transactions and creates a risk that, in the future, any failure to fulfill contractual obligations could simply be classified as misappropriation or fraud. This may stem from a lack of knowledge and understanding of civil transactions and the consequences of their non – performance.
If the authorized representative had acted using a forged power of attorney, the situation would be understandable. However, it is unacceptable that non-payment of the purchase price in a transaction carried out on the basis of a valid and effective power of attorney -where the developer knowingly granted authority to act with their property, and where both a sworn notary and the Land Register verified the representative’s rights – is treated as unlawful acquisition of property. This, in turn, leads to the deprivation of property from a good-faith acquirer.
This is a dispute between the principal and the agent regarding payment of the purchase price, which should have been resolved through civil proceedings. It is important to emphasize that the apartment buyers, who acted in good faith relying on the Land Register entry and obtained a bank loan to pay the purchase price, were not even granted the status of victims in the case. Although, following the logic of the case, the sale of a misappropriated apartment means that money was effectively obtained from these individuals through deception. However, neither the police nor the prosecutor’s office recognized the apartment buyers as victims, and the authorized representative was not charged with fraud.”
When considering secure transactions, it must be taken into account that all transactions involving powers of attorney require increased attention. A professional agent must verify whether the terms of the transaction are aligned with the principal, as well as whether powers of attorney issued several years ago are still valid in substance and whether the relationship between the principal and the agent has changed.
Particular attention should be paid to powers of attorney issued abroad, as well as to whether the essential terms of the transaction-price, payment method, and execution deadlines-have indeed been agreed upon with the principal.
Fraudulent transactions clearly highlight how important it is, in real estate transactions, to engage real estate agents registered in the intermediary register of the Ministry of Economics and to inform the public about the existence of such a register. Professional brokerage work, experience, and knowledge in transaction management help to avoid fraudulent transactions.
