Buying property in Croatia? There are some great deals, but BE careful. The buying process, useful websites, rental law, property management & legal advice.

Buying property in Croatia: an introduction

There is no property buying experience quite like the Croatian property buying experience. It is possible to go from viewing and pre-contract in 55 minutes and final sale the following day (I have).

Or to give a lawyer power of attorney to conclude the purchase of a property he insists has a clean title. And still not be the 100% owner 15 years later. Unfortunately, I also had (and am still having) this experience.

There are tales of fantastic deals, more tales of frustrating paperwork, as well as various scams. One thing if for sure – buying property in Croatia is a lot different from back in the UK.

Surveys are very rare, there is no legal requirement to mention problematic neighbours, and the lack of historical sales and uniformity of properties mean that property trends are much harder to spot.

But it is the paperwork which causes most anguish. Foreign property sales were illegal in former Yugoslavia. Sales were infrequent, and properties were simply handed down (and divided) from father to sons to grandsons.

In order to avoid inheritance tax, none of this was done officially. And go Great Grandfather idea, who passed away in 1923, was still on the title document in 2004 when British buyers with a fistful of euros turned up to buy the ruined goatshed.

And so the story begins…

The 2004 Croatian property gold rush – and aftermath

The good news in 2019 is that the situation is MUCH improved on the crazy days of 2004. The industry is much more regulated and there is a LOT much property for sale which has no ownership issues at all.

But back in 2004…

I have honestly seen nothing like it. Living on Hvar, I saw an opportunity to be a bridge between British buyers and local sellers. And so I set up a website and became a real estate agent. I was not prepared for what came next.

I would literally have five different buyers each morning at the cafe in Jelsa I used as my office. Ruins, land, apartment, villas – it didn’t matter. They just wanted to get on the Croatian bandwagon before the train pulled out of the station.

I couldn’t fail and was concluding 2 sales a week. Prices went nuts, and I sold the same house three times in 6 months – for 43,000 euro, then 85, and then 150. The last buyer purchased the house as an investment.

People would come for a long weekend, choose a property, give a power of attorney to a lawyer for the legals, open a bank account to which I had access, then leave. In several cases, they would never visit Croatia again. At one point I had almost 800,000 euro at my disposal, which I could have withdrawn totally legally. It was insane.

And just as it started, so it ended. Many people think it was the global crisis of 2008 which killed off the property boom. But in Croatia that was not true. Sales dried to a trickle in mid-2005, and it was time for me to find a new business idea.

The crisis did not help, of course, and the market has never fully recovered.

Croatian property paperwork – is it really that bad?

As I said in the introduction, my fastest sale for in less than an hour from viewing to pre-contract. So despite what you might hear to the contrary, Croatian property sales CAN be among the easiest and quickest in the world.

The property in question was an old stone house in Stari Grad. My buyer was desperate to find something. I got a new instruction which looked absolutely perfect. All the paperwork was in order and neatly arranged for me to view. One owner in the title deed, no liens on the property, a document confirming the property was older than 1968 (see below), the same name in the catastar.

I knew my buyer was in town and so I called him. The price was a steal at 55,000 euro. I knew it and so did he. It would not be around long. We went straight to the waiting lawyer who had a power of attorney from the seller.

The pre-contract was signed less than an hour of me getting the instruction, the final contact the following day. My client has lived happily in the house ever since.

Sadly, this is very much the exception to the rule. The majority of Croatian paperwork has some paperwork issue – usually shared ownership (see below) or permit issues.

You will need a good lawyer.

From cowboys to regulation – Croatian real estate agencies

Back in 2004, literally EVERYONE was a real estate agent. If you were a foreigner visiting out of season, the restaurant waiter would come out with 5 property deals when serving your starter.

There was no regulation whatsoever. Anyone who wanted to could become a real estate agent – I had proved that. It was dog eat dog, and it was at this moment that I realised this idyllic island (like everywhere else in the world) had a dark side.

property in croatia lavender dormice and a donkey named mercedes
My Hvar property experiences can be enjoyed in Lavender, Dormice and a Donkey Named Mercedes, which was serialised in the Croatian media. It is available on Amazon.

I had stepped on the toes (and territory) of the local property boys. To say that this added a little spice to my daily routine would be an understatement. If you want to read more about that (and othe ramblings of a foreigner on Hvar for ten years), you can read Lavender, Dormice and a Donkey Named Mercedes: An Expat Decade on Hvar.

The good news is that there is much more regulation in the industry these days. Only licenced real estate agencies can operate, and all employees need to pass an exam.

Buying land in Croatia – some warnings

Nowhere do you have to be more careful with property in Croatia than buying land. Several fortunes have been made (local) and lost (foreign) over land transactions in Croatia.

Firstly, you cannot buy agricultural land as a foreigner, and you will need to set up a Croatian company in order to facilitate this.

Most foreigners want to buy land to build, however. And buying building land does not always mean you can build on it…

There are two reasons for this. The first is that building zones change every 10 years or so. So while a piece of land is in the building zone when sold, it will not necessarily be the case in a few years. Unscrupulous local sellers are aware of this, foreign buyers are not. Get a good lawyer.

The main building issue is not that, however. Building plots are usually for sale without a permit. Once you buy, you then design what you want to build and apply for the permit.

But building permits are sadly not a foregone conclusion. There are several reasons for this, which would take a separate website to explain here. Or a good lawyer.

The only time a building plot comes with the cast-iron guarantee that you can build with property in Croatia is if you buy it with the permit.

There are three stages of building permit in Croatia. The location permit comes first, where the general concept gets approval. This is similar to outline planning permission back in the UK.

Next comes the building permit, after which construction can begin. Upon completion, inspectors will check that all complies with the building permit. They will then issue a usage permit for the property. Many properties built after 1968 have no usage permit. Why and why is this a problem?

Buying in private name of via a Croatian company

One of the great discussions during the boom among foreign buyers was whether to buy in private name or via a Croatian company.

Back then, before EU entry, British and other buyers could buy in private name, but then have to wait for permission to own after the purchase was completed.

This understandably caused some nervousness. There was another stipulation that resales within three years of ownership (not purchase) came with a 35% profit tax.

As such, many buyers decided to buy via opening a Croatian company. While this had several advantages, such as immediate ownership and less tax (selling the property was done by transferring ownership of the company, rather than a real estate transaction), there are plenty of headaches with running a Croatian company, including recurring monthly costs.

Rather than try and give expert advice on this very tricky subject, I do strongly advise that you find a good laywer.

‘Nema problema’ v ‘Ima problemcic’ – Croatian lawyers

Ah, a good lawyer in Croatia. If I planned to write a book about shocking Croatian law experiences, it would be longer than War and Peace.

Things are MUCH better now with better regulation, but back in the 2004 rush, the stories were quite astonishing. Some of the ones I can publish are in my book above, but most I will take with me to the grave to avoid lawsuits.

It USED to be the case that you could find a lawyer who had a power of attorney for both the buyer and the seller AND was the real estate agent. The same lawyer insisted the papers where clean. And STILL there would be a problem.

If I have one piece of advice for you regarding lawyers, it is this. It a lawyer tells you something is ‘nema problema’ (no problem), run as fast as you can in the opposite direction.

There is even a Croatian word I have only heard ‘nema problema’ laywers use. ‘Ima problemcic’ literally means ‘there is tiny problem’, but it only comes from the mouths of Croatian lawyers who previously insisted there was no problem.

Legal practices have improved considerably in recent years, and the incompetent and corrupt lawyers are less prevalent. Do your research before finding lawyers. Expat forums are a good place to start, as most foreigners living here will have had some lawyer experience.

The contract price v the real price

I don’t think I am divulging any state secrets when I say that the price on the contract does not always equate to the amount paid. As with other countries, a lower contract price (with the difference paid in cash) is a common way to reduce the 3% real estate transfer tax (as of January 1, 2019).

It is clearly illegal, but it is common practice. By law contracts and payments must be in kuna and for the full price. Another consideration for the cash transaction is for resale of the property. If you have a lower contract price, but your later buyer insists on a full contract price, your profit tax will be higher.

Legalisation of property in Croatia – 1968 and all that

Is a property in Croatia legal? Welcome to the minefield!

It is actually not that complicated to check if a property is legal. What breaks the hearts of so many buyers is finding out their dream property is illegal.

The basic things you need to know are that ALL properties built before 1968 are legal. During that year, there was a blanket amnesty of all illegal building. The authorities photographed the country from the air, so if your building existed, there is a document to prove it.

Houses built after 1968 require a usage permit to be fully legal. This comes after construction is completed. In practice, many houses from the 1970s and 1980s do not have this permit and so are not fully legal.

The main reason for this is simple. Owners then had no plans to sell, and there was certainly not a foreign market of buyers. The houses were for personal and family use, and so once the building permit came, there the relationship with officials ended.

And so a house with a permit for 100m2 became 130m2. As such, the property would not qualify for a usage permit, because it was not built according to the building permit. This was never really a problem until one day the foreign real estate market arrived.

Paperwork required in a Croatian property sale

Vlasnicki List (Ownership document)

The main document for property in Croatia is the ‘Vlasknicki List’ (ownership list). Anyone can order the latest original ownership document the court. This gives the latest information on the ownership status of the property. It comes in three sections:

A. Description of the real estate and the plot number. The description is something like ‘house’, ‘goat shed’, ‘meadow’. Each property has its unique plot number within the cadastral district (KO).

Build plot numbers come with ‘ces. zgr.’ (Zgrada is ‘building’) and land with ‘ces. zem.’ (Zemlja is ‘land’).

B. The list of owners and the fraction of ownership each has. If you are lucky, there will only be one owner, whose name will be followed by the magical 1/1. ‘Jedan kroz jedan’ means one through one, or 100% ownership.

If you are REALLY lucky, the 1/1 owner is still alive and not Great Grandpa Ante who died in 1923. Because then you have to start a paper trail to find out who (and how many) owns the property today.

C. Information about any mortgages or liens on the property. The magical words here are ‘Tereta Nema’ (no liens). If you have a document with one living owner and Tereta Nema, you have a clean property. If not…

Often there will be 3-4 owners. But if all of them sign, then the property is clean. If one of them is not there to sign, or ‘will come next week’, do not sign. Wait until all are together, or a Power of Attorney covers the absentee.

If there are any entries in Section C, get your lawyer to advise. If the person on the ownership document is not the person selling, get your lawyer to advise.

The Cataster Map

The Vlasnicki List may tell you what you are buying, but it does not tell you where it is. The cataster map does that. These are delightfully complex maps of land parcels, and it is often quite hard to find an individual plot unless you look at the huge original maps at the catastar.

The catastart also keeps records of who is the registered possessor of the real estate (this is different to owner). If you are in luck, the name will be the same as the seller. In not, consult your laywer. You should also know that if someone has used a piece of land for 20 years or more (farming etc.), then they have possession rights.

Document proving property was built pre-1968

As mentioned above, there was a general amnesty of illegal buildings in 1968. So if you are buying a property before this date, you will have no legality issues (unless something has been illegally added, of course). Your lawyer will need to obtain a document stating this fact.

Building and usage permits

If you are buying a property built after 1968, for it to be a totally legal sale, you seller should also provide a usage permit to show that the construction is according to the law. In practice, as menionted above, many houses were built larger than the building permit. They are therefore not totally legal. If you find yourself in this position, consult your lawyer for the best advice.

Etaziranje (apartment sub-division)

Just as people building houses in former Yugoslavia did not think they would ever sell, so too with apartments. As such, many apartments in Croatia are not legally sub-divided.

Everyone knows that Stipe lives on the ground floor, Marija on the middle, and Antun on the top. When Antun came to sell his apartment, however…

The ownership document (assuming these were the only owners) would reflect the building as one property with Stipe, Marija and Antun owning 1/3 each. Some lawyers got round this by selling Antun’s 1/3 and describing the fact that the sale was for the top floor in the contract.

The best legal way to protect the seller is to legally sub-divide the property into three separate units. This is called ‘etaziranje.’

Looking to apply for a bank loan?

How to check a property’s papers online

You can check the legal status of a property in Croatia online. For non-Croatian speakers, here is a TCN step-by-step guide, including translation of the key terminology.

property-in-croatia-arkod

If you would like to find out where a plot is on the map, the ARKOD online service takes you where you need to go. Again, here is the step-by-step TCN guide.

Ownership 1/1 and the great-grandson from Uruguay

Foreign buyers are often incredulous about the ownership issues in Croatia. Most come from a culture where things are much simpler. There are three main problems historically with ownership in Croatia.

Firstly, a lot of land was confiscated by the State and reallocated in the 20th Century. The descendents of the original owners are now in legal battles for property restitution.

The breakup of former Yugoslavia has also had a significant impact on property in Croatia. All those abandoned hotels you see on the Croatian coast are the most visible examples. Many were owned by Belgrade or Yugoslav companies which do not now exist. Many were nationalised by the Republic of Croatia on independence. The deadlock continues.

For more, however, the ownership issues revolve around the simple purchase. In many cases nobody knows how many owners there are.

This is because Great Grandpa Ante, who might still be on the papers to save on inheritance tax, died in 1923, leaving three children behind. One emigrated to Australia, another to Uruguay, the third to South Africa.

They had kids. Contact died a little and families lost touch. So much so that those who stayed in the family village really had no idea how many relatives there now were abroad. Or how many owners had inherited a slice of the property the foreigner now wanted to buy.

The most number of REGISTERED owners I have found on an ownership document was 255. But I bet there are properties with many more owners than that. If you are anything more than one owner on your ownership document, get the best lawyer you can.

Buy to rent in Croatia – some thoughts

A lot of foreigners came to Croatia in 2004 with the idea of buying to rent. A strong tourist season, they argued, coupled with rising prices and the chance to enjoy the home themselves for a fortnight a year seemed a winning combination.

It SOUNDS ideal, doesn’t it? The realities (and this is just a personal view) are somewhat different. The lack of available credit is a huge negative to this plan.

So too is the reality of a relatively short season. 12 weeks a year of rental is considered good for many in Croatia. The costs of cleaning, meet and greet, booking agencies and company running costs all add up. My personal opinion is you can get much better rental value elsewhere than in Croatia.

The Croatian AirBnB gold rush of 2018

And yet more and more locals are going down the buy to rent route, or converting existing homes into tourist accommodation.

The result has been a huge increase in rentals on the market. So much so that Zagreb now has more rooms than London for short-term tourist rent, for example. Over-supply is about to become a huge issue, and people who have overcommitted could well be in trouble.

For the best example of this, check out the story of rental availability in peak season for Ultra Europe in Split in 2013 and 2018 in the Total Croatia accommodation guide.

Property management in Croatia

If you have taken the plunge and bought a property, you will almost certainly need a little help looking after it from a distance.

This is actually a lot harder than it seems (and more expensive) and reliable property management companies are few and far between. From making sure bills are paid, to airing your property in winter, to keeping the garden in check, there are a number of things to consider even if you have no plans to rent. And if you do plan to rent then you’ll need a professional who is familiar with rental law and has friendly and efficient staff to look after your guests.

The best in the business, and with a solution for everything, is Dalmatian Property Management. Started in 2004 by Alison Keefe after her own experience in buying property on Brač and Čiovo, she established offices in Supetar (Brač) and Trogir and she and her staff now cover the mainland region from Rogoznica to Brela and islands Brač, Čiovo and Hvar. DPM have years of experience and are up with the latest in rental law and taxation & book keeping procedures for private persons (non EU and EU) and companies.

It is definitely recommended that you consult a Property / Rental manager like Dalmatian Property Management before you buy if you are not an EU citizen as they will advise the best method of buying in order to facilitate renting. Visit the Dalmatian Property Management website for more.

The dream stone ruin on a romantic Adriatic island

Buying property in Croatia. A stone ruin on an Adriatic island, the ultimate retirement plan.

I lost count of the number of people I met buying property in Croatia who had the most bizarre plans that they would never coutenance back home. It was as though the sun had got them, and that buying a property in Croatia was a simple transation which would deliver that dream holiday home.

Once the purchase of that lovely ruin is complete, then the fun begins. Electricity and water connections, the construction of a septic tank. Building permits, finding a builder, getting quotes, finding materials.

Property in Croatia is not cheap to renovated, especially those gorgeous old ruins. Once the reality dawned on those impulsive buyers, the romantic Adriatic dream faded, and those ruins were soon back on the market.

If you have truly fallen in love and want to buy property in Croatia, especially one which needs work, do your research and think the whole process through.

Finding a reliable Croatian builder

Finding a reliable builder is obviously key if you are looking to build your dream property in Croatia. The good news is that reliable builders are out there, but the bad news is that they are in relatively short supply. They are also very busy.

As with many other professions, Croatian builders have realised that they can make much more in other parts of the EU, and many young skilled carpenters, electrictrics and other handymen are now working in countries such as Germany.

We do, however, know a few great builders, so please contact us if you need help.