Property buying in Croatia used to be a relatively straightforward affair. A single lawyer might represent both seller and buyer in preparing the sales contract, and subsequently securing the buyer's ownership on the Land Registry. The same lawyer might also act as estatte agent, matching potential buyers with local vendors. By and large, the system worked well, with honesty, integrity and transparency on all sides.
In the early days of Croatian independence after 1990, foreigners were not allowed to buy residential properties or land plots in the Republic. As always in Croatia, there were ways around the restriction. Foreigners determined to buy could make long-term 'leasing' agreements, usually over 99 years, with a clause stipulating that the agreement would become a sales contract at such time as foreigners were allowed to own property in the country. Another possibility was to buy in the name of a trusted Croatian friend. At the beginning of the noughties, the situation changed, and foreigners were allowed to own property under certain conditions. Firstly, there had to be reciprocal agreement between Croatia and the buyer's home country: if Croatians were not allowed to buy property there, conversely citizens of that country could not buy in Croatia. Eligible individuals had to seek Ministry permission, a process which could take many months during a phase when two Ministries were involved. To avoid this, or if potential buyers were not eligible for the permission for some reason (for instance a criminal record in their home country), they could form a Croatian company and buy their property in the company name. This process had some drawbacks, not least the need to file detailed accounts annually, and the risk that the property would be lost if the bureaucratic procedures were not totally fulfilled year on year. Apart from that, closing down a company is a protracted and expensive business in Croatia.
In 2019 it is still the case that property ownership by foreigners depends on reciprocity agreements. For American citizens, some states do have reciprocity with Croatia, others don't. You can find a list of countries and American states which have agreements on the official website, which gives information (in Croatian) on how foreigners can apply to own property in Croatia. The website was updated in October 2018. In the right-hand panel under 'Dokumenti' is a Word document with the current list, which you click on to download. It too is in Croatian. The categories are 'uzajamnost postoji' - 'reciprocity exists'; 'bez ograničenja' - 'unlimited'; 'uzajamnost postoji uz uvjet stalnog boravka u Republici Hrvatskoj' - 'reciprocity exists on condition that the applicant has permanent residence in Croatia'; 'uzajamnost ne postoji' - 'no reciprocity'; 'utvrđivanje u tijeku' - 'confirmation in process'; and various other conditions and restrictions are detailed. The American states which have reciprocity are listed under 'SAD' (Sjedinjenje Američke Države'). For eight states at the end of the list, ownership is conditional on permanent residence.
There were all sorts of pitfalls for the unwary or naive foreign buyer, and 'caveat emptor' still applies. Unscrupulous sellers and a few lawyers spotted the chance to make money selling properties which did not have clean title, among other unsavoury tricks. They were helped by the fact that property ownership was often not kept up to date in the Land Registry records. Sometimes properties were inherited among family members who simply did not bother to register the changes formally, as everyone knew what belonged to whom. Some cases involved outright fraud, with people selling properties to which they had no claim whatsoever. A suspicious buyer would be reassured by promises that the papers would be cleaned up 'quickly'. The smooth promise of "No problem / nema problema" should be a warning to any buyer that there could be years (or an infinity) of legal struggle ahead, with no guarantee of the right outcome. And then there were cases of people selling properties which had been built illegally, or selling non-residential structures as residential. Although sales contracts were (and are) supposed to be translated for foreign buyers, it is surprising how many did not insist on this, often falling victim to crafty changes between their precontract and the final sales contract. Estate agents were not regulated in the early days, so one could not always rely on them to provide correct information for safeguarding the buyer. To name but a few of the hazards.
What the buyer needs to know
All properties have a plot number, which may be a land plot (čestica zemljišta) or a plot with a building on it (čestica zgrade). Properties should have clear title, and any necessary permits or certificates, such as a Usage Permit (Uporabna dozvola) and Energy Certificate (Energetski certifikat). The requirements change from time to time.
The Land Registry (Zemljišna knjiga) holds the records of current and past owners of all Croatian properties. Proof of ownership is an up-to-date officially stamped Ownership Document (Vlasnički list), which also gives details of any charges on a property, or shared facilities such as access through rights of way. The Ownership Document also shows if there are any Court proceedings in hand relating to the property, for instance Probate procedures for inheritance, or any disputes which might affect the ownership.
The Cadastar (Katastar) in each region of Croatia holds the maps showing all properties, with details of where specific plots are situated, their boundaries, and how big each plot is. The Cadastar issues a Possession Document (Posjedovni list) showing who is using the plot. This should tally with the Ownership Document, but sometimes does not.
Nowadays, as a first step, one can check whether a property has clear title online on the Land Registry and Cadastar websites (detailed instructions in English are given in these linked articles). This will reveal straight away if there are potential problems concerning the property being offered for sale. However, it is not foolproof, and does not provide a definitive proof of ownership, as the internet entries are not always completely up to date. Internet print-offs (like unverified photocopies) are anyway not valid for Court purposes.
A potential buyer should check whether he/she has the right to own property in Croatia. Croatia's entry into the European Union in 2013 simplified the issues for most EU citizens, but there are still many countries in the world whose citizens do not have the automatic right to individual property ownership. Ownership of agricultural land is srill restricted for foreigners, but that is set to change for EU citizens in the next few years.
When a sale is agreed, there is normally a Precontract (Predugovor), on the basis of which a deposit is paid. The buyer can nominate a lawyer to sign the contract on his/her behalf through a Power of Attorney (Punomoć). It is wise not to pay any monies at all, unless it is certain that the sale can proceed without delay to the final contract (Kupoprodajni ugovor). When the final contract is signed, the seller's signature has to be verified by the Notary Public (Javni bilježnik). The buyer can sign the Contract in advance. Once both parties have signed, the final part of the purchase price is paid to the seller, either directly or through a bank.
The lawyer acting for the buyer then presents the Contract to the Tax Office (Porezna uprava), which will bill the buyer for 5% of the purchase price. If the tax authorities consider the purchase price on the Contract to be too low, they will estimate the property value according to their own tariff. Once the tax demand has been issued, it has to be paid promptly. If the Tax is paid late, interest will accrue, which can mount up alarmingly if left unchecked. The Tax Office does not notify late-payers of the continuing liability until it gets to the stage of issuing Court orders for payment. By that time the interest will have been augmented by costs. Therefore, once the Purchase Tax has been paid, it is wise to check with the Tax Office that the debt has been fully cleared.
The buyer's lawyer also simultaneously presents the sales Contract and supporting documents to the Land Registry for entry into the books. Payment of the Purchase Tax does not guarantee that the application will be accepted. However, if due care has been taken over the purchase, registration is simply a matter of time. Once the buyer has been registered as official owner of the property, the last step is to register Possession in the Cadastar. This is straightforward, but if the buyer has no-one to help with the language, it is best to engage the lawyer to carry out this task too - it doesn't happen automatically.
© Vivian Grisogono MA(Oxon) 2016, updated 2017, 2019.
Property ownership