Skip to main content

Eversheds Global Estate Management

Croatia

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - (in Croatian: ‘vlasništvo’) has been regulated by the Ownership Act (Official Gazette No. 91/96, 68/98, 137/99, 22/00, 73/00, 114/01, 79/06, 141/06, 146/08, 38/09, 153/09, 90/10, 143/12) as the most extensive right on the property that enables the holder to use the property and dispose of it without limitations, except those determined by law.

Leasehold - in Croatia is in general regulated by the Obligations Act (Official Gazette No. 35/05, 41/08, 125/11). Special rules apply for certain types of real estate (eg agricultural land and business premises).

Common hold/Usufruct - right of usufruct is easement in gross based on which an entitled person is able to use a thing that is in another person’s ownership in any way that is in accordance with the purpose of the thing and in a way that preserves its substance. Right of usufruct can exist on non-consumable things, movable or immovable. On consumable things can exist only quasi usufruct (quasiususfructus).

Condominium ownership - ownership of certain specific part of the real estate (condominium ownership) is inseparably linked with co-owned part of real estate (ideal part) on which is established. Ownership of certain specific part of the real estate authorizes the co-owner on whose co-owned part is established, to exercise all powers and duties of ownership as if the specific part of the real estate is solely his ownership.

Utilisation right - is easement in gross based on which an entitled person is able to use a thing that is in another person’s ownership only in the extent of their needs and in a way that is in accordance with the purpose of the thing and in a way that preserves its substance. Utilisation right can exist on non-consumable things, movable or immovable. On consumable things not even quasi utilisation is possible.

Joint/Co-ownership

  • (i) co-ownership is one of two forms of participation of more people in ownership of one same thing. Co-ownership is participation of more people in ownership of one same thing in the way that to each individual co-owner belongs a part of ownership, computationally determined in proportion to full ownership.
  • (ii) joint-ownership - the other form, beside co-ownership, of participation of more people in ownership of one same thing. However, co-ownership is considered a regular form and joint-ownership exists only under certain conditions determined by law. Joint-ownership is participation of more people in ownership of one same thing in the way that a thing belongs to each person equally but the ownership part is not determined though is determinable.

Registration - the holder must register at the Land Registry as the owner in order to acquire a property. The Land Registry contains data on the legal status of the property as well as important details on the owner. The Cadastral Register is the Property Register which lists real estate classification, area, possessors and other important facts.

 

Restrictions on foreign ownership

Restrictions on foreign ownership

Restrictions determined by law apply to foreign natural and legal persons and only to real estate in Republic of Croatia.

Foreign persons can, with assumption of reciprocity, acquire property through inheritance.

Foreign persons can acquire property, with assumption of reciprocity and with the prior approval of the Ministry of Justice. These limitations do not apply to citizens and legal persons from EU member states, they can acquire property in Republic of Croatia under the assumptions that apply to Croatian citizens and legal persons with registered seat in the Republic of Croatia.

Special regulations prescribe cases in which land cannot be owned by foreign persons: Agricultural Lands Act (Official Gazette 39/13), Nature Protection Act (Official Gazette 80/13) and Forests Act (Official Gazette 140/05, 82/06, 129/08, 80/10, 124/10, 25/12, 68/12, 148/13). These limitations do apply to citizens and legal persons from EU member states. These limitations do not apply when a foreign person owns a Croatian company.

 

Title to real estate

Title to real estate

Investigation of title - When purchasing real estate the buyer will investigate the title. In real estate transactions the notary usually only verifies the parties' signatures. In exceptional cases the notary will verify the contents of the documents and confirm all the relevant facts.

Transfer of title - Conditions for transfer of title regarding real estate are value legal transactions (titulus) and registration of property acquisition at the Land Registry (modus).

Registration - the holder must register at the Land Registry as the owner in order to acquire a property. The Land Registry contains data on the legal status of the property as well as important details on the owner. The Cadastral Register is the Property Register which lists real estate classification, area, possessors and other important facts.

Information on the register - the register is available to the public. More and more records are available on the internet.

Commercial leases - not applicable

 

Structure of a real estate transaction

Structure of a real estate transaction

Negotiation of terms/Agreement - parties usually engage in negotiation through professional representatives (real estate agents and lawyers), especially where the value of the property is high or the legal status is unclear. A real estate acquisition can be completed on the basis of a Special Power of Attorney.

Heads of terms - prior to transaction the parties can decide to sign the Heads of terms. In Heads of terms the parties may agree if the Heads of terms are binding or not and which clauses are binding.

Investigation of title - When purchasing real estate the buyer will investigate the title. In real estate transactions the notary usually only verifies the parties' signatures. In exceptional cases the notary will verify the contents of the documents and confirm all the relevant facts,

Purchase deed - not applicable

Contracts - a contract can be drafted either by the parties themselves or by the lawyers. Purchase and lease agreements are regulated by the Obligation Act which allows the parties to freely define various terms and conditions. Purchase and lease agreements regarding real estate have to be in written form.

Completion/closing - completion occurs on the execution (signing) of the purchase/lease agreement.

Post completion - once the purchase agreement has been executed, it must be submitted to the Land Registry in order to acquire ownership and to register the changes. Purchase/lease agreements must be submitted to the tax authority.

Leases - Please see “Usual commercial lease terms”

Transfer of ownership of leased property (alienation) - In case of alienation of the thing after its delivery for lease, the acquirer of the thing shall take the place of the landlord and assume his rights and obligations arising from the lease towards the tenant. Due to alienation of the leased thing, the rights and obligations of the landlord are transferred to the acquirer, the tenant may cancel the contract, in accordance with the legally prescribed period of notice.

Language requirement – In order to be possible to register the transfer of ownership in the Land Registry (the ownership of the real estate is acquired after the acquisition is registered in the Land Registry) the documents must be in Croatian. They can also be drafted as bilingual. Further, Croatian language is also necessary because the share and purchase agreement must be submitted to the Tax Authority.

Governance of lease signature/administration – Lease agreements can be executed by the parties directly or via special Power of Attorney. The Landlord’s signature on the Lease Agreement must be verified by the notary public. After the Lease Agreement is signed it must be delivered to the Tax Authority.

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - lease is in general regulated by the Obligations Act. However there are special acts that regulate certain types of lease such as: Lease and Sale of Business Premises Act (Official Gazette No125/11); Apartment Lease Act (Official Gazette No. 91/96, 48/98, 66/98, 22/06); Agricultural Lands Act (Official Gazette No 39/13). Provisions of Obligations Act shall not apply on certain type of leases regulated by special acts, except secondarily.

Alterations/modifications - the landlord may not make any alterations in the leased property during the term of the lease without the tenant’s approval if the alterations would interfere with the tenant’s use of the property. The rent should be reduced proportionally to any diminished right of enjoying the leased property. If the tenant has made any alterations in the thing during the term of the lease, he shall restore the thing to its condition at the moment of its delivery for lease, unless otherwise stipulated. However, tenant may remove any accessories added to the thing, where these can be separated from the thing without causing any damage thereto, but the landlord may keep them provided he reimburses the tenant for their value at the moment of surrender.

Assignment and sub/under letting - the tenant can sublet the leased property provided it is not detrimental to the landlord. The tenant shall guarantee to the landlord that the subtenant will act in accordance with the lease contract. The landlord may cancel the lease contract if the leased property has been sublet without permission where that is required by law or contract.

Destruction/reinstatement - the tenant must restore the property to the same condition as at the beginning of the lease, unless otherwise stipulated.

Duration of lease - length is determined by the parties in the lease agreement.

Forfeiture/irritancy - not applicable

Insurance - it is not regulated by the Act and the parties are free to agree on insurance.

Rent deposit/bank guarantee - parties may agree on a bank guarantee when the value of the contract is high.

Service charges – If not agreed otherwise, the expenses such as cleaning, painting, minor repairs, common areas expenses, etc. are paid by the tenant.

Rent review - not applicable

Repair/decoration/furnishing - landlord is responsible for property maintenance and repairs during the term of the lease. The landlord must compensate the tenant for all maintenance costs the tenant incurs and for which the landlord is liable. Small repair costs are borne by the tenant. The tenant must notify the landlord of any repairs needed.

Tenant’s duties - main tenant’s duties are: to enjoy the thing in a way that is in accordance with the contract or in accordance with the purpose of the thing; to pay the rent within the time limits stipulated in the contract or regulated by law, or in the absence of a contract and law, in accordance with the customs in the place of delivery of the thing to the tenant and to the surrender leased thing undamaged after the term of the lease.

Termination/break clauses - the lease contract may be cancelled due to non-payment. The parties may agree on further reasons for termination of the contract.

Transfer of ownership of leased property - in case of alienation of the thing after its delivery for lease, the acquirer of the thing shall take the place of the landlord and assume his rights and obligations arising from the lease towards the tenant. Due to alienation of the leased thing, the rights and obligations of the landlord are transferred to the acquirer, the tenant may cancel the contract, in accordance with the legally prescribed period of notice.

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - parties are free to agree on rent deposit.

Surety - not applicable

Warranty - not applicable

Rent deposit/bank guarantee - see "lease deposit" above.

 

Security of tenure

Security of tenure

When the tenant continues to enjoy the property after the expiry of the lease term without opposition from the landlord, it is deemed that a new lease contract has been entered into for an indefinite term, under the same conditions as per the previous contract.

 

Taxes

Taxes

On sale/acquisition of real estate - tax on acquisition of real estate. According to the Taxation of Real Estate Transfer Act (Official Gazette No. 69/97, 153/02. 22/11) tax in rates of 5% must be paid by resident and non-resident legal and natural persons that have acquired ownership of the real estate. With respect to tax rate are in process and from 1 January 2015 the sale/acquisition of real estate (buildings) as well as land (construction land) should be regulated with Value Added Tax Act pursuant to which, in general, the tax rate should be 25%.

Immovable property tax - not applicable

Income tax - according to the Taxation of Income Tax Act (Official Gazette No. 177/04, 73/08, 80/10, 114/2011, 22/2012, 144/2012, 43/2013, 120/2013, 125/2013, 148/2013) tax in rates of 12, 25 and 40% must be paid by resident and non-resident natural persons that realize income.

Land tax - not applicable

Lease tax - not applicable

Local tax - according to the Financing of Regional and Local Authorities Units Act (Official Gazette No. 117/93, 67/97, 33/00, 73/00, 127/00, 59/01, 107/01, 117/01, 150/02, 147/03, 132/06, 26/07, 73/08, 25/12) City or Municipality may prescribe Local Income Tax for Income Tax obligees. According to Financing of Regional and Local Authorities Units Act (Official Gazette No. 117/93, 67/97, 33/00, 73/00, 127/00, 59/01, 107/01, 117/01, 150/02, 147/03, 132/06, 26/07, 73/08, 25/12) legal and natural persons owners of vacancy houses are obliged to pay Vacancy House Tax under conditions prescribed by City or Municipality.

Mortgage - not applicable

Other taxes - not applicable

Property lease tax - not applicable

Value added tax - according to the Value Added Tax Act (Official Gazette No. 73/2013, 99/2013, 148/2013, 153/2013) tax in rate of 25% is paid for delivery of newly built buildings.

Information provided by Savoric & Partners