Real Estate Acquisition in Armenia

Sole Ownership

Regardless of your marital status, you have the option to purchase property in Armenia under your sole name. In many countries, marital laws dictate that assets acquired during marriage are jointly owned by both spouses, regardless of the purchaser. Armenia follows a similar approach. In the case of a married couple, civil law treats the property as if it were jointly owned equally (50-50), unless the marriage contract specifies otherwise. Thus, your spouse is considered a co-owner of the property, even if their name is not on the purchase agreement.

Armenian law does not recognize "common-law marriages." If you cohabit without marriage, your partner does not automatically gain permanent occupation or ownership rights. Without a will, your partner also has no inheritance rights.

If a single person in Armenia buys property and subsequently marries, they can enter into a marriage contract to outline how the property is handled within the terms of the contract.

Joint Ownership

Joint ownership arises when property is purchased by two or more individuals, each holding a stake in the property based on their agreed terms. For couples, this typically involves equal shares, but with more purchasers, it can be proportional to their financial contributions, e.g., 70% / 20% / 10%. In common law, this is similar to a 'tenancy in common.'

All property owners have the right to participate in decisions related to the property. The law requires unanimous decisions regarding the property. Any owner or group of owners can request the sale of the property, unless shares can be physically separated or other owners are willing to buy those shares. If no agreement is reached, a court order may be necessary to authorize the property's sale.

Owners can also sell or gift their share of the property. In the case of a sale, they must offer existing owners a right of first refusal, which does not apply to gifts or inheritances. Other owners have one month to exercise their preemption rights.

Company Ownership

Property in Armenia can be purchased through a local or foreign limited company with distinct legal identity from its shareholders. Reasons for this approach include:

• Allowing multiple individuals to purchase the property.
• Ensuring stability and continuity in family property ownership and management.
• Simplifying property transfer and ownership.
• Mitigating constraints of inheritance laws.
• Creating potential tax advantages.
• Protecting the family home from business creditors.

However, it's essential to be aware of potential tax disadvantages, particularly related to withholding taxes and capital gains tax, when using this ownership structure.

1. 100% Foreign Ownership

Armenia welcomes foreign investors with open arms, allowing them to have complete ownership of real estate properties. Whether you want to acquire, hold, lease, sell, bequeath, or otherwise manage your property, you enjoy the same rights as local residents. There's no need for a residence permit or any specific ties to Armenia. Even agricultural land can be owned through a legal entity.

2. High Appreciation Rates

Investors in central Yerevan witnessed a remarkable increase in property values, with a notable 34.5% surge in 2018-2019. This uptrend is attributed to a growing economy and declining mortgage rates, making it a lucrative market for potential appreciation.

3. High Rental Yield

Armenia's flourishing tourism industry is driving strong demand for rental properties. This sector's vitality translates into attractive rental yields for property owners.

4. Fast & Secure Registration

Streamlined processes make buying property in Armenia exceptionally efficient. The country ranks 13th out of 190 nations on the World Bank's "Registering Property" index, signifying both the speed and reliability of its property registration system. Notably, it is even possible to purchase properties remotely without visiting Armenia.

5. No Gift or Inheritance Taxes

Armenia stands out as a tax-friendly destination. It imposes no gift or estate taxes, offering investors more flexibility in managing their assets.

6. No Tax on Capital Gains

Individuals selling real property in Armenia typically enjoy tax exemptions on capital gains, further enhancing the attractiveness of property investments.

7. Low Property Taxes

Property taxes in Armenia are notably reasonable, typically ranging from 0% to 1% of the cadastral value, which tends to be lower than market prices.

8. No Stamp Duties

Unlike many other countries, Armenia imposes no stamp duties on property transactions. Only modest official fees are applicable, unrelated to the property's value.

9. Residency & Citizenship Opportunities

Armenia extends residency options, including temporary and permanent residency, along with special programs designed for foreign businesspeople. Additionally, investors in real estate may qualify for citizenship-by-exception, making Armenia an enticing destination for those seeking immigration benefits.

1. Direct Bank Transfer

Payment via direct bank transfer is akin to cash transactions in terms of risk for both parties. It's generally not recommended unless done after ownership rights are officially registered.

2. Bank Escrow Agreement

A bank escrow agreement involves three parties: the seller, the buyer, and the escrow agent (a bank). The buyer opens an escrow account and deposits the purchase amount. Once deposited, the funds are locked for a predetermined period, such as 20 days. The seller gains access to the funds only upon presenting proof of the buyer's registered ownership, like an ownership certificate, to the bank. Failure to provide this proof within the specified time allows the buyer to reclaim the funds.

Escrow accounts are commonly used in transactions involving mortgaged property, as mortgage-holding banks often require funds to be deposited in escrow before approving the sale.

3. Safety Deposit Box

In this method, the buyer deposits cash into a safety deposit box, typically under the supervision of a trusted professional, like a lawyer or realtor, who acts as an escrow agent. The seller gains access to the deposit box once the new ownership is officially registered. If registration doesn't occur within the agreed timeframe (e.g., 20 days), the lawyer or realtor returns the funds to the buyer. The added benefit is that the safety deposit box is usually located in a bank, which can assist in counting the money and verifying its authenticity.

Direct payments via bank transfer are generally discouraged unless conducted after ownership rights are legally registered. To minimize risks for both buyers and sellers, opting for an escrow account or a bank safety deposit box is recommended. These methods provide security and ensure that funds are only released when the required ownership documentation is in place, safeguarding the interests of all parties involved in the real estate transaction.

Foreign buyers in Armenia should be cautious to avoid overpaying for real estate. To make informed decisions, consider the following recommendations:

1. Valuation Reports

A valuation report is an invaluable tool for understanding the correct price to pay for a property, especially if it requires renovations. Numerous licensed agencies in Armenia employ qualified staff to conduct property appraisals. While not a substitute for a survey report, an appraisal can still assess wear and tear, potentially offering insights into the property's condition. Appraisals are typically based on:

• Sales Comparison Approach: Evaluating selling prices of similar properties.
• Cost Approach: Estimating the cost of purchasing similar land and constructing a comparable building.
• Income Approach: Assessing expected annual rental income.

2. Building Surveys

Armenian law does not mandate sellers to commission surveys. However, it is advisable for buyers to consider this option. Although there is no specific building surveying profession in Armenia, you can engage a local architect, engineer, or skilled builder (electrician, plumber, etc.) to perform this task. A comprehensive survey can help minimize risks associated with property purchases and serve as a valuable negotiation tool.

3. Property Measurement

It's prudent to measure the property, particularly land, independently. Cadastral documents may not always provide entirely accurate area measurements, and property boundaries may lack clarity. By verifying these details, buyers can ensure they have a precise understanding of the property they intend to purchase, avoiding potential boundary disputes and other complications.

The clean title certificate, known as "միասնական տեղեկանք" in Armenian, is a crucial document issued by the Cadastre. It provides a comprehensive overview of a property's registered ownership and details various rights and encumbrances associated with it, which may include liens, mortgages, tenancies, easements, and more. In many cases, this certificate is the primary document relied upon by buyers during the due diligence process.

Notably, the clean title certificate holds validity for 15 business days. Within this timeframe, any necessary agreements, whether preliminary or final, must be executed. If the 15-day period expires, it becomes necessary to obtain a new certificate. Any party involved in the transaction, be it the seller, buyer, or another interested party, can submit an application for a clean title certificate.

However, it's important to note that certain interests related to the property, such as easements or rights of heirs, may not always be entirely verified by the clean title certificate. There could be individuals with prior acquisition rights or preemption rights concerning the property sale. Additionally, unauthorized alterations or additions to the property may not have been declared to the planning authority, posing potential challenges.

For properties designated for construction, the certificate merely confirms that the land is zoned for such purposes. Obtaining full planning consent, often in the form of a building permit, is a subsequent step required to legally proceed with construction on the land.

In Armenia, it's important to be aware that verbal offers or agreements to buy or sell real property hold no validity and cannot be enforced. Even a written agreement lacks enforceability unless it has been authenticated by a notary or a Cadastre official. Therefore, the standard contract forms typically used by real estate agencies are not legally binding. Consequently, it is not advisable to make any payments, such as a deposit, at this preliminary stage.

However, it can be beneficial to prepare a formal written offer to demonstrate your serious intent and to clarify the terms of the sale. This written offer can outline key details, including the payment structure, the earnest money deposit amount, the seller's responsibilities regarding outstanding utility bills and taxes, transaction costs, contingencies, and other relevant terms. Essentially, this written offer can take the form of a draft preliminary agreement, providing a clear framework for the eventual purchase agreement. While the written offer itself may not be legally binding, it serves as a crucial step in the negotiation process and helps establish mutual understanding between the parties involved in the real estate transaction.

A preliminary agreement in Armenia serves as a significant step in the process of buying or selling real estate. Here are some key points to understand about preliminary agreements:

1. Purpose and Function: A preliminary agreement does not transfer property ownership but outlines a future date or period for the property transfer. It may include conditions (contingencies) that must be met before the final closing of the sale. While signing a preliminary agreement is not mandatory, it can be beneficial in securing a legally binding agreement, especially if you are not ready to close the sale immediately.

2. Importance of Clarity: A preliminary agreement ensures that all parties involved in the transaction agree on the terms of the deal, helping everyone stay "on the same page."

3. Contingencies: A preliminary agreement may become necessary when the final sale depends on certain contingencies, such as securing financing, clearing property liens, conducting appraisals, or obtaining specific permits or documents.

4. Notarization: To be legally enforceable, a preliminary agreement must be notarized.

5. Filing with the Cadastre: While preliminary agreements are generally not formally registered, it is advisable to file a copy with the Cadastre. This can help minimize the risk of the seller breaching the contract by selling the property to a third party.

6. Deposit Payment: Typically, the buyer pays a deposit to the seller at this stage. The specific amount is subject to agreement between the parties.

7. Binding Nature: A preliminary agreement is mutually binding once validly signed. Neither party can walk away from the deal unless one or more of the specified contingencies are not met. Defaulting on the agreement may result in various legal remedies, including forfeiture of the deposit. Sellers may be required to pay a penalty, often double the deposit amount, for default. In some cases, a court may enforce specific performance to compel both parties to complete the property transfer as per the agreement.

In Armenia, the final sale and purchase agreement holds significant legal weight and must be executed in the presence of a notary. Here are important details to consider:

1. Notary's Role: The notary's presence is essential to validate the agreement. Basic agreements may be authenticated directly by a cadastral officer, but a notary becomes necessary for customized agreements or when one of the parties does not speak Armenian.

2. Notary's Obligations: The notary is legally obligated to provide you with information about the nature and implications of the agreement you're signing. They will also need to verify the identity of the parties involved and ensure their legal capacity for the transaction. This often involves checking the passports (and possibly marriage certificates) of all signatories.

3. Guardianship Considerations: If the seller is a minor, elderly, or handicapped and under the protection of a guardian, the approval of the guardian will be required before concluding the sale. If the seller is married, the notary will also seek confirmation that the spouse consents to the sale.

4. Notary Agreement Templates: Each notary may have their own agreement template, and the level of detail can vary. It's crucial to ensure that all important clauses are included in the agreement. Typically, agreements are in the Armenian language, and verbal translation services are provided for a fee.

5. Final and Comprehensive Agreement: The sale and purchase contract should be comprehensive because parties have only 30 days to register it at the Cadastre. If there are conditions that still need to be fulfilled, it's advisable to sign a preliminary agreement. Armenian law does not have "cooling-off" rules, so once signed, the agreement is effective and cannot be withdrawn from.

6. Inventory and Property Inspection: If the purchase includes fixtures or fittings, consider preparing an inventory. If possible, visit the property a day before signing the agreement to ensure everything is as expected, especially if certain fixtures and fittings are part of the sale. Also, check that you will get vacant possession of the property unless the agreement specifies otherwise.

7. Power of Attorney: If you cannot be physically present in Armenia for the agreement signing, you can grant a relative, friend, or lawyer a power of attorney to sign on your behalf.

In Armenia, after the final sale and purchase agreement is executed, the buyer has a critical 30-business-day window to register their ownership rights with the Cadastre. It's essential to adhere to this timeframe, as failing to register within the specified period will invalidate the sale and purchase agreement. Here's what you need to know about the registration process:

1. Documentation Required: To initiate the registration process, the buyer must provide an original copy of the sale and purchase agreement along with a notarized translation of their passport. If the registration is handled through a lawyer or another representative, a notarized power of attorney will also be necessary.
2. Registration Timeframe: The duration of the registration process can vary from a few hours to a few days, depending on whether you opt to pay for fast-track service fees.
3. Ownership Certificate: Once the registration is completed, you will receive an ownership certificate. This certificate contains basic details about the property and the new owner.
4. Utility Services Update: Subsequently, you should present the ownership certificate to public utility services (such as electricity, gas, and phone providers). This step ensures that they update their records to reflect the change in ownership and prepare new service agreements in your name.

Notary & Registration Fees: By convention, the buyer typically covers notary fees and official registration fees, which can range from $200 to $600. These fees are fixed and do not depend on the property's value. Fast-track services are available for an extra cost.

Capital Gains Tax: Transfers of residential property between individuals are usually exempt from capital gains tax, provided both the buyer and seller are individuals (not registered as private entrepreneurs). In such cases, the tax rate on capital gains from residential property sales is 0%. However, if the buyer is a legal entity or a private entrepreneur, a 10% withholding tax may apply to the entire transaction amount.

Sales Tax for Developers: Individual real estate developers are subject to a 20% sales tax, calculated based on the selling price of the properties they develop.

Real Estate (Property) Tax: Property owners must pay an annual real estate tax. Tax rates range from 0% to 1% of the cadastral value, often lower than the market value. Property tax amounts can be checked on the Cadastre's website. Recent regulations require sellers to obtain a certificate confirming the absence of tax liabilities from the local municipality before registering the sale.

Rental Income Tax: Rental income below 60 million Armenian drams (approximately US$140,000) per year is taxed at a rate of 10%. Income exceeding this threshold faces a 20% tax rate.

Stamp Duty, Inheritance & Gifts Taxes: Armenia does not impose stamp duties, gifts, or inheritance taxes.

Communal Charges: Property owners, especially in apartment complexes, are responsible for maintenance and service charges, which vary based on property size, quality, and available amenities, such as lifts, pools, gardens, and other facilities.

The possibility of financing your property purchase with a mortgage in Armenia hinges on several factors: your nationality, your current country of residence, and the source of your income. Some banks exclusively cater to Armenian nationals or residents. Typically, you'll be required to provide a deposit, which can range from 10% to 30% of the property's purchase price, depending on the lender's policies. Mortgage terms can extend up to 30 years, affording flexibility in repayment. Interest rates in Armenia typically average around 10-13% for loans in the local currency and 8-10% for loans in US dollars.

If you need information about opening bank accounts, please click here.

Regarding property insurance, you can anticipate annual costs ranging from 0.1% to 1% of your property's value.

Armenian laws mandate that real property buyers make payments in the local currency, Armenian drams. If the transaction is conducted through a bank, it is the responsibility of the bank to ensure compliance with these regulations.

Currency exchange services are readily available through banks, other credit institutions, and currency exchange offices.

It's important to note that there are no restrictions on transferring foreign currency to or from Armenia.

However, when the transaction amount surpasses 50 million drams (approximately US$105,000), any excess payment must be executed via a bank transfer.

In cases where there is no will, Armenian inheritance laws establish a specific order of inheritance:

1. Spouse, children, and parents: These individuals take precedence in inheriting the estate.

2. Brothers and sisters (and their descendants): If no spouse, children, or parents exist, the next in line for inheritance are siblings and their descendants.

3. Grandparents: In the absence of the above categories, grandparents become eligible inheritors.

4. Uncles and aunts (and their descendants): If none of the preceding categories apply, uncles, aunts, and their descendants are considered for inheritance.

Each order of inheritors excludes those in other orders, and individuals within the same order share the inheritance equally. In cases where the estate owner leaves behind a surviving spouse, two parents, and two children, each would inherit 1/5 of the estate. It is possible to enhance the rights of the surviving spouse or children through inheritance planning.

Spouse: Armenian inheritance law does not offer specific protection to the surviving spouse. However, typically, the surviving spouse retains ownership of at least 50% of jointly held assets. Unregistered marriages may not grant inheritance rights.

Children: Children, regardless of whether they were born within or outside of marriage, have equal inheritance rights. Adopted children enjoy the same rights as natural children but cannot inherit from their biological parents. Grandchildren inherit only if one of the deceased's children is deceased, in which case they step into their parent's place.

Testamentary Freedom: Under Armenian law, you have the freedom to dispose of your estate as you wish through a notarized will or gift. However, certain conditions, such as age restrictions or disabilities, may allow your spouse, children, or parents to claim 50% of the property's value in the absence of a will.

Inheritance Planning: To exert control over your estate upon your death, consider inheritance planning methods, including increasing an heir's share through a will, making lifetime gifts, purchasing property through a limited company, or obtaining a life insurance policy.

Taxes: Armenia does not impose taxes on inheritance or gifts. However, property disposition may be subject to taxation in the heir's tax residence country unless a double tax treaty exists between Armenia and that country.

Accepting the Inheritance: Heirs have a 6-month window following the death to accept the inheritance through a notarized declaration. The notary oversees beneficiary lists, verifies the existence of a will, divides the estate, and issues inheritance certificates to the inheritors.

Executor: You can appoint an executor, such as a lawyer, to manage the estate. The executor's responsibilities include maintaining and managing the estate, debt collection, legal representation, ensuring compliance with the will, and liaising with the notary, among other tasks.

Apartments in the central district of Yerevan (average price for one sq.m.). Source: official website of the Cadastre Committee. AMD/USD conversion according to the rates published by the Central Bank.

Armenian real estate market grew exponentially between 2002 and 2008 with prices going up by 570%. In 2009 the country’s economy was hit by the global financial crisis and real estate prices went gradually down over the next few years. They remained flat during 2014-2016, and started growing in 2017. Prices in central Yerevan went up by 18.8% in 2018 and by 15.7% in 2019. In 2020, prices went down, mostly because of the devaluation of the local currency by more than 8%. In 2021, the local currency regained its value and hence the prices went up again.

Key factors for recent price increases:

1. Growing Economy: Armenia's GDP grew by 6.1% in 2021.

2. Lower Mortgage Rates: Interest rates dropped from 18% to around 10.5% and are expected to decrease further.

3. Rising Rental Demand: Tourism and urbanization drove higher demand for rental properties.

4. Shift from Bank Deposits: Real estate became a more attractive investment due to declining deposit interest rates.

5. Limited New Construction: Central Yerevan experienced limited new dwelling construction.

Listings

Property listings in Armenia can be easily found on websites like estate.am, myrealty.am, bnakaran.com, and list.am. These platforms offer valuable insights into available properties and their prices, allowing you to get a preliminary understanding before embarking on your search.

Before diving into the property hunt, it's beneficial to have a clear idea of what you're looking for, whether it's a primary residence, a vacation home, a rental property, or an investment opportunity, as well as the preferred location, be it in a city or the countryside.

Agents/Brokers

In Armenia, it's customary for agents to charge a commission fee of 2% to both the seller and the buyer, totaling 4% of the transaction's value. The buyer typically covers their portion of the commission separately, in addition to the property's purchase price.

List of Real Estate Agents

1. Akcern

2. Alex-R

3. Bars

4. Elate

5. Golden House

6. Kentron

7. My Street

8. Revan

9. Safe House

10. Viva Realty

11. Yerkir

Tips on Selecting Rental Property in Yerevan

Location: When searching for rental properties, your focus in Yerevan should center on central areas, particularly within the vicinity formed by Moskovyan, Khanjyan, Khorenatsi, and Saryan streets. This area consistently sees demand, especially during the high tourist season from April to October. Many property owners prefer short-term rentals to tourists during this period and long-term rentals for the rest of the year (November to March). However, some experts advise avoiding the "Glendale Hills" neighborhood on Argishti Street despite its proximity to Republic Square.

Building: Most apartments in Yerevan are found in low-cost, concrete-paneled high-rise buildings or lower-quality stone buildings known as "Khrushchyovkas," built between the 1960s and 1980s. These are generally not recommended for investors. Instead, you have two options: "Stalinkas," built between the 1930s and 1950s, and newer buildings constructed after Armenia's economic recovery in the 2000s. "Stalinkas" are typically more affordable but may lack elevators and proper maintenance of common areas due to their age, making them less attractive to buyers. Newer buildings vary widely in quality, with some developers being more reputable than others. Prices can significantly differ between neighboring buildings.

Apartment: Ground floor and top-floor apartments are usually sold at a discount. Ground floor units are often avoided due to security concerns, lack of privacy, noise, and potential humidity from the basement. Top-floor apartments, especially in older buildings, may be less popular due to the risk of roof leaks, excessive summer heat, and difficulties in access without an elevator. Many older buildings have additional superstructure floors, which are best avoided. North-facing apartments may lack natural light, while those with large south-facing windows can present the opposite problem.