HOW THE EASTERN EUROPEAN BUYING
PROCESS DIFFERS FROM THAT OF THE UK

At first glance, the legal system in the UK and Eastern Europe may seem very similar. Although they both follow the same principles, generally speaking, the system employed by Eastern European countries is very different, being based on a different civil and legal code. Consequently it is vital that you secure independent legal advice and look into the taxation, inheritance and other implications of your being a foreign buyer. The most obvious differences are that in the UK there is no need to sign a preliminary contract – you merely see a draft contract and agree to it – and until the exchange of contracts takes place, you are not legally bound to purchase the property.

When buying a property, you should also expect financing for UK nationals to be much more limited than in Western Europe, and in some cases non-existent, meaning that raising finance in the UK will be necessary. Although progress is being made to improve the system in countries such as Romania, the mortgage market is still very immature and there is a long way to go before foreigners will have the choice offered in the UK market. With a limited availability of finance comes the problem of less competitive lending terms. This can be manifested in the form of lower loan to values (LTVs), higher interest rates, lower mortgage terms and higher pre-payment penalties.

One of the first differences you’ll be faced with will be the language problem, and this in turn will translate into cost – the cost of getting documents translated or getting your lawyer/estate agent to deal with issues that you would otherwise have been able to handle had you spoken the language. Secondly, you have the currency differences. Only Slovenia and Montenegro currently use the euro, and so there are issues of currency conversion and oscillating exchange rates to be aware of. However, with EU membership has come increased stability as many Eastern European currencies are now pegged to the euro. Also, while purchase costs for property might be lower, acquisition costs are generally higher than in the UK: these include costs such as taxes, notary and estate agents’ fees, and other costs required to close the sale.

Other factors to consider include ownership. In many instances there are restrictions upon foreign buyers which may require them to purchase as a company. For more details, see p46.