While buying property in Armenia is generally safe, prospective buyers are advised to follow these 9 steps to minimize the legal risks.
Know the Seller's Marital Status
If the seller is married or divorced it is likely that the spouse's consent will be required for the sale. Even if the property was not acquired in marriage you still have to be careful because the spouse may claim that he/she contributed to the improvement of the property and thus acquired rights in it. Armenia does not recognize common law marriages. However, relying solely on public records may not be sufficient as the marriage could be contracted in a foreign country.
Learn about the Selle's Family
If the seller inherited the property or received it as a gift you need to find out if there are other family members who are likely to contest the will or the gift. It is possible that an heir will appear after the sale and claim rights in the property.
Note that if there are children involved in the transaction the transaction will need the approval of the guardianship authority (head of the local community). The latter is required by law to ensure that the sale is in the best interests of the child.
Evaluate the Seller's Capacity to Contract
You need to be careful if the seller's behavior looks strange. Under Armenian law people with mental disability may be incapacitated by a court order, while those addicted to drugs, alcohol or even gambling may be limited in their capacity. Agreements with such people can be easily contested and invalidated by their guardians or other interested parties. You may want to check the court records or ask for certificate confirming the seller is not registered with mental institutions.
Understand the Seller's Financial Situation
If it turns out that the seller is in a difficult financial situation and sells the property below market value it is possible that he will be declared bankrupt shortly after the sale and the bankruptcy trustee may challenge the sale in court within a 3-year period of time. Thus, if you buy property at a discounted price make sure that the likelihood of bankruptcy is low.
Verify Encumbrances and Litigation
Prior to signing the sale agreement the government will issue a free title certificate confirming that the property is not mortgaged, arrested or otherwise encumbered with third party rights. However, it is still recommended that you find out if the seller is involved in any litigation that may affect the property.
Investigate the Chain of Preceding Transactions
Even if there are no encumbrances and pending disputes you should carefully check the history of the property to make sure there have been no suspicious activities in the past. For example, a number of transfer over a short period of time can be a sign of potential problems. The statute of limitations in Armenia normally does not exceed 10 years but even older transactions need to be scrutinized. Particular attention must be paid to acquisition of property by donations, inheritance or privatization.
Verify that There Are No Outstanding Tax Liabilities or Unpaid Utility Bills
Under Armenian law property tax liabilities are assumed by the new owner. If the seller did not pay taxes over a long period of time it is possible that substantial penalties have accumulated. Therefore, it is wise to ask for a certificate confirming there are not tax liabilities for the property in question.
By law the new owner does not assume any unpaid utility bills. However, in practice it may be difficult to sign new contracts in your name with the utility companies if the old owner owes them. To save time and nerves it is recommended that you ask for statements confirming the full payment of all utility bills.
Notarize the Sales Agreement
While many sales do not require notarization you should still consider having the contract executed before a notary public. A notary is personally liable for malpractice and has the incentives to do all the necessary checks, such as ensuring all consents are in place, powers of attorney are valid and not revoked, the seller is in sound mind etc. Notarizing the agreement will show your good faith if any dispute arises in the future.
Pay after Your Ownership is Registered
Payments must be made in local currency: the Armenian dram. If you pay in cash you may deposit the money with a safety deposit box in a bank and instruct the bank to give the seller access to it after you get a certificate of ownership (this can be done quickly if you pay for fast-track services). If you opt for bank transfer it is recommended that you open an escrow account with the bank and again instruct the bank to release the money to the seller when your ownership rights are registered. Contrary to the common practice it is not recommended that you pay the full amount while signing the contract at the notary's office because there is a possibility (although not high) that something may go wrong between the notarization and the registration of title.
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