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Home > News & Articles > International Property Alerts - July 2007 - What developers and agents might not reveal to you about Croatia

International Property Alerts - July 2007 - What developers and agents might not reveal to you about Croatia

Posted on Thursday, 20 September 2007 08:48AM
Let me start with a confession. I fell in love with Croatia when I first went there and do find it difficult to keep objective about it. Croatia is a special place as investors are starting to discover…   

1. Know why the International Law Partnership opened an office in Croatia. The country is attracting increasing attention from property investors. EU membership is on the horizon. Croatia is also only a couple of hours flying from the UK. It is also determined to prevent excessive and low value tourism – the country has learnt from some of the mistakes made in other countries in the past. As a firm, we felt confident enough about Croatia to open an office there a couple of years ago - a month before the Government decided to put a stop on all new building licenses. You see - even experts get it wrong sometimes! The coast is amazing – wonderful clear water, hills, green landscape, islands, red-topped houses and so on. And don’t get me started on Dubrovnik old town as I could extol its virtues all day. Despite its small size I personally prefer it to Venice or Paris. But don’t run down the main street in the wet as it is completely marble. If you haven’t been I would thoroughly recommend visiting as it is a stunning place.

2. Discover how to source property. One of the problems in buying in Croatia is finding property. It is often sold by word of mouth directly from the seller. There are estate agents, but they don’t shout about their presence and can be difficult to find. This is a country where a property finding service works best. The property market is very new. It only really started in 2002. In addition to this, because less people have bought in Croatia than they have in, let’s say, Spain, you tend to find that the path towards ownership is more of a rocky road. Then again, isn’t it always in a new market? Many agents have no experience of dealing with foreigners so it is important to make sure that you explain exactly the sort of properties that you are looking for. Often, the commission is split between the buyer and seller – about 3% each. Make sure that any deposit that you pay over is protected – we have seen cases where an agent disappears after having received the deposit; after all, it may equate to about four years pay to him!

3. Familiarise yourself with the legal process of buying in Croatia. It is similar to that in many European countries. Once you have found a property you will be expected to sign a reservation contract and pay something like £2,000 as a deposit. Within a couple of weeks you will be expected to sign a full purchase contract and pay the balance of a 10% deposit. There is no cooling-off period in Croatia.  Your lawyer must check that the property is owned by the seller, is free of charges etc, and should advise you whether it is safe to proceed with signing the contract. You will need to apply to Ministry of Foreign Affairs for permission to buy. This is normally a formality – although it can take several months or even up to a year so it is important to start the process early. You can get around this by buying in the name of a Croatian company (although that has its own set of issues). The title deeds are signed before a Notary Public. There is a land registry – although this had been neglected and is often out-of-date or incomplete. Proving ownership can be a problem for the seller.

4. Uncover the issue of illegal property. There has been a problem with illegal property in Croatia in the past. Even some major developers sell property that is illegally constructed. The government is cracking down on this and there has been a major tightening up of the issuing of new planning permissions - in fact, at one point, they simply stopping issuing them completely! Alterations and changes to existing properties can be difficult. Even something as simple as putting in a swimming pool may not be a straightforward matter and may even be prohibited completely.  The government has made a sensible decision – to prohibit excessive building and to avoid some of the mistakes that other countries have made. Because of this, getting planning permission can be difficult. If you are going to build yourself or make alterations to a property, make sure that this is possible before you pay over any money or make sure that you can get your money back if you can’t get planning permission. Your solicitor should advise you at an early stage.

5. Apply the acid test of the International Law Partnership. I think that one of the real tests from any so-called expert is this - would they invest there themselves? Would I invest in Croatia? Well, we opened an office there (although we closed it when the planning permissions were put on hold) – so I already have. For my own personal use, undoubtedly Croatia would be in my top three places that I would like to buy in. The order of those three changes depending on my mood! I don’t think that it will ever be the most spectacular investment, but I believe that over time more and more people will discover the country for their own use. I strongly believe in places where people want to go to, not just those places which are trendy or fashionable to invest in at the moment. The last word? I’m sure you will excuse a plug for our own services. It can be just as safe buying a property in Croatia as it can in your home country – providing you take proper independent professional advice; and at the earliest opportunity.

The International Law Partnership LLP
Solicitors & International Lawyers
The Vaults
193-197 High Holborn
London
WC1V 7BD

Tel: 020 7061 6700
Fax: 020 7061 6701
Email: info@LawOverseas.com
Internet: www.LawOverseas.com


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