Buying property in Croatia

Before the final price is negotiated, the buyer should establish whether the property can be acquired safely and used for its intended purpose. A property may be properly registered yet unsuitable for the proposed development, reconstruction, letting or business activity.

The property must be identified precisely by reference to the land register and cadastre. For apartments and commercial premises, the review should establish what forms the separately owned unit and whether a parking space, storage room, terrace, garden or another appurtenance belongs to it.

The scope of the verification depends on the type of real estate and the intention of the buyer. The purchase of an apartment, tourist facility, construction land or real estate intended for the development of an investment project requires various legal and technical checks.

Any issue should be identified before a binding obligation is assumed. The parties can then determine whether the seller must resolve it in advance, whether it can be addressed after signing or whether it should be reflected in the price and other contractual terms.

The first step in the legal review is to identify the owner and establish whether the person negotiating the sale is authorised to dispose of the property. The seller's details should be compared with the land-register extract and identification documents.

Where the property is co-owned, each co-owner may independently dispose of their share. As a rule, all co-owners must participate in a sale of the entire property. The review should also identify any relationship that makes disposal subject to the consent of a spouse or another person.

When the seller is a legal entity

• existence and legal status of the seller
• persons authorised for representation and method of representation
• internal restrictions and necessary decisions of the body of the legal entity
• bankruptcy, pre-bankruptcy proceedings (predstečaj), liquidation or other proceedings affecting the disposal of assets

Powers of attorney and an off-register chain of title

If the seller is represented under a power of attorney, it must be valid, in the appropriate form and sufficiently specific. It should expressly authorise the sale of the specified property, agreement of the price, receipt of funds where intended and issuance of the documents required for registration of title.

If the seller is not yet registered as owner, an uninterrupted chain of title from the registered owner to the seller must be proved and documents enabling registration of the buyer obtained before the agreement is entered into.

Additional consents or approvals may be required when the real estate is disposed of by a minor, a person under guardianship, a community of heirs, a bankruptcy estate or a person whose dispositions are governed by special regulations.

Land registers and cadastre keep different information about real estate. The land register primarily shows the legal situation, while the cadastre contains information on the location, shape, area, method of use and registered buildings. Cadastral data by themselves do not, as a rule, prove ownership.

What to compare

Differences between the land register, cadastre and physical condition may complicate registration of title, financing, the establishment of condominium ownership, permitting or a future sale.

For apartments and commercial premises, the review should establish whether the separately owned unit is properly registered and whether its description, floor area and appurtenances correspond to its physical condition. If condominium ownership has not been established (etažiranje), the relations between co-owners and the documents supporting use of the premises require additional review.

• cadastral municipality and plot number
• area, form of land, address and method of use
• data on registered buildings
• land register and cadastral data
• physical condition on site

Encumbrances, pending applications and actual occupants

The existence of encumbrances is sometimes resolved as part of the transaction. For example, the deletion of the mortgage should be coordinated with the creditor in advance and regulated precisely in the contract.

The review also covers persons actually using the property, such as a tenant, commercial lessee or member of the seller's family. The current status should be checked again immediately before signing, making any substantial payment and submitting the land-register application.

• mortgages and other liens
• easements, real burdens and building rights (pravo građenja)
• prohibitions on alienation or encumbrance
• records of enforcement, disputes, temporary measures or expropriation
• rights of first refusal, tenancies or commercial leases
• notations of pending land-register applications (plomba)

Registering a building in the cadastre or land register does not in itself confirm that the building was legally built and suitable for the planned use.

For an existing building, the review should identify the legal act under which it was constructed and authorised for use. Depending on its age and status, the relevant document may be a building permit, a use permit (uporabna dozvola), a decision on the as-built condition or another act recognised by law as having equivalent effect.

For a building built before February 15, 1968, the time of construction and the corresponding status are determined by the use permit provided for such a building, or by a previously issued document which the law recognizes as having the appropriate effect.

Comparison of documentation with the physical condition

For an apartment or commercial premises, the review should establish whether the separately owned unit corresponds to the approved design, the use permit or equivalent authorisation, the floor plan and the land-register description.

Non-conformity may affect use, reconstruction, lending, insurance, establishment of condominium ownership and a future sale. If the documentation is incomplete, the method, timetable and cost of remedying the issue should be established before purchase.

• extension or addition of another storey
• closing the balcony, loggia or terrace
• remodeling of the attic, basement or garage
• merger or division of apartments and commercial premises
• change of purpose
• swimming pool, auxiliary building or encroachment on common parts of the building

Before buying, it should be checked whether the valid spatial plan allows the use of the property in the way the buyer intends. This is important when buying land, but also when planning a reconstruction, extension, change of use or performance of a certain activity in an existing building.

A location within a building area is only the beginning of the analysis. The review should cover the land-use designation, whether the area is developed, any requirement for a detailed local spatial plan, the permitted type and size of building, the conditions for forming a building plot, road access, infrastructure and special protection regimes.

In the case of an existing building, it should be checked whether the current use of the space is permitted and whether the planned change can be carried out. Actual use as an apartment, office space or tourist facility does not in itself confirm the approved purpose.

Location information provides an overview of conditions from valid spatial plans. An additional professional analysis is required for the assessment of a specific project.

Under a preliminary agreement (pre-contract), the parties undertake to enter into the principal agreement later, so signing it may have serious legal and financial consequences.

The preliminary agreement should identify the property, price, deadline for entering into the principal agreement and other essential purchase terms. If the legal review remains incomplete, the buyer's obligation should be subject to clearly defined conditions precedent.

• orderly ownership of the seller and removal of the contracted encumbrances
• delivery of construction and use documentation
• confirmation of the possibility of planned use
• credit approval or consent required by a foreign buyer

Advance payment, earnest money and reservation fee

An advance payment is part of the price paid in advance. Earnest money (kapara) evidences that the contract has been concluded and secures performance. A right to withdraw by forfeiting the earnest money, or by returning twice that amount, exists only where the earnest money is also agreed as a cancellation payment.

In the case of a reservation contract, its content is decisive: whether it creates an obligation to purchase, to whom the reservation amount is paid, whether it is included in the price and under what conditions it is returned.

Earnest money or a reservation amount should be paid only after a basic review of title, encumbrances and the seller’s identity. If the full review is still pending, the right to repayment should be linked to clearly defined outcomes of that review.

Particular attention should be paid to the sequence of payment, discharge of encumbrances and registration of title. The registration consent (tabularna izjava) may be included in the agreement or issued separately after payment, and the agreement should specify when the buyer may use it.

• the parties' identities and authority and a precise description of the property and its appurtenances
• purchase price, terms and method of payment
• removal of mortgages and other encumbrances
• the condition of the property, the moment of handover and the documentation submitted by the seller
• requirements for registration of title and use of a registration consent (tabularna izjava)
• consequences of delay, non-performance and liability for title and material defects

Purchase of real estate under construction

If the buyer pays a significant part of the price before the completion and registration of the property, the contract should contain protection commensurate with this risk, including the fate of payments if the project is not completed or the investor does not provide the agreed registration.

• the developer's title or right to build, building permit and design documentation
• way of determining the future apartment or space
• existing mortgages and project financing
• deadline for completing the works and obtaining the use permit
• technical description, floor area, equipment and finishing standard
• installment payment and consequences of delay or non-completion
• guarantees, handover, establishment of condominium ownership and future registration of title

When the acquisition is not subject to VAT, the buyer is generally liable for real estate transfer tax at a rate of 3% of the market value. For certain deliveries of new buildings and construction land, VAT is calculated, so you should check whether it is included in the stated price.

Transaction costs

• legal verification, contract drafting and notarial actions
• land-register proceedings and estate agency fees
• translations and certifications of foreign documents
• geodetic, architectural and other expert checks
• bank valuation, loan costs, insurance and mortgage registration

Loan and existing mortgage

Financing conditions should be checked before an irrevocable commitment is made. Bank approval may depend on the appraised value, the state of the documentation and the ability to register a mortgage. The bank's review protects the bank and differs in scope from an independent legal review of the buyer's interests.

If the real estate is encumbered with a mortgage from the seller's bank, the method of closing the existing loan, issuing a cancellation statement and registering a new mortgage should be coordinated in advance.

Certain Croatian citizens under the age of 45 may qualify for a refund of real estate transfer tax or part of the VAT paid when acquiring their first suitable residential property. Eligibility depends on the statutory conditions and a timely application.

By handing over, the seller hands over the property to the buyer. The handover time should be linked to the payment of the price and the performance of other contractual obligations.

Before taking possession, the buyer should verify that the property is delivered in the agreed condition, vacant, free of the seller's belongings and without new damage.

Handover report

With a new or reconstructed property, it is useful to have a professional inspection. If there are significant unfinished works, it can be foreseen to retain part of the price until they are completed.

• date and time of delivery and description of the condition of the property
• list of deficiencies and deadlines for their elimination
• meter readings, keys and access devices
• list of furniture, equipment and submitted documentation
• status of utilities and other charges

The right of ownership based on the contract is acquired by registration in the land register. For registration, a document is required that correctly identifies the parties and the property and contains the consent of the seller for the registration of the buyer. The seller's signature on the document eligible for registration must be certified in the prescribed manner.

The proposal for registration is submitted to the land register court electronically, through a notary public or a lawyer. The priority order is determined at the moment of receipt, which can be decisive if several proposals have been submitted for the same property.

Once the application is submitted, a notation of the pending application (plomba) is entered. The buyer should monitor the proceedings until the decision is implemented and then obtain a new land-register extract.

If the document does not yet meet all the requirements for final registration, in certain cases pre-registration can preserve the priority order with subsequent justification.

The purchase is completed when the buyer is properly registered, the agreed encumbrances are deleted, and the land register balance corresponds to the result stipulated in the contract.

Final checklist

1. check the property, owner, land register, cadastre, pending applications and basic building documents before paying earnest money
2. before the contract, complete the legal and necessary technical verification, determine taxes, costs and financing
3. agree on discharge of encumbrances, payment, handover, registration consent (tabularna izjava) and registration of title
4. after signing, submit the land-register application without delay and monitor the pending-entry notation
5. make the agreed payments, discharge encumbrances and complete a documented handover
6. after registration, obtain a new land register extract