THE BUYING PROCESS

Given that the Austrians and Germans have been buying in Croatia in their droves since the late 1990s, the buying process here is well established. However, that doesn’t make it easy and the bureaucracy can be slow and clunky to say the least–it has been known to take a year between commencing a property purchase to being named as the owner. Nevertheless, if you secure the right impartial advice and do your research, the process–while not lacking in frustration–should at least be hassle free.

Stage one: Restrictions on foreign buyers

Most EU buyers are free to purchase property and land in Croatia, with the only restrictions in place on agricultural or forestry land. However, before purchasing, you will need to seek the permission of the government to do so and this can take anything up to a year to secure. This is a mere formality on the part of the government, but it can still lead to significant hold-ups, unless you purchase as a Croatian registered company.

Stage two: Financing your purchase

Foreigners are unable to secure a mortgage in Croatia. British banks are also reluctant to lend money to fund a Croatian home purchase, and so most investors resort to releasing equity from their UK home. Some of the bigger banks in both Croatia and the UK are starting to look at the possibilities of lending and the situation is beginning to change, although most UK lenders are generally only dealing with those who have set up a company.

Stage 3: Surveys and background checks

Surveys are not as common in Croatia as they are in the UK and there are fewer building surveyors around. Although there is a formal qualification for a land surveyor, known locally as a geodet, there is no specific qualification for a building surveyor, unlike the UK; most building surveyors are qualified as architects.

It is not uncommon for Croatian agents to complain that getting a survey carried out will hold up the sale. Nevertheless, it is recommended that you do have one, especially if you are going to be buying an older, resale property. For a newly-built home, it is not as necessary to have a survey, especially if the property is protected by a guarantee for a couple of years.

As with many Eastern European countries, the transition from communism to capitalism has left behind many question marks over land ownership, with some instances of displaced Serbs returning to reclaim their land. While these incidents are few and far between, it is essential that you check the land registry status of the property before buying. Ensure that the cadastral (which records the provenance of the property) and the land registry (which states the owner’s name) match. If they don’t, walk away. Also check that the property was not built contrary to planning permission and that there are no debts registered against it. As the Croatian land registry is available to search online, get your agent to print you off a copy of the Certificate of Title (Vlasnicki List) on any property in which you are interested.

If you are buying an apartment, always check that it possesses a Division Document (etager). Without this, all that you are buying is a share of the building. For example, if there are eight apartments for sale, without an etager you will only own an eighth of your apartment and a eighth of everyone else’s. Also, should you wish to modernise or change your apartment in any way, you will need the permission of all the residents in the development.

Stage 4: Deciding on your ownership

If you are reluctant to wait for the Croatian government to grant you approval to buy, you can bypass this by setting up a Croatian company. This is the fastest and most common way to purchase, but you need to be aware that setting up as a company will result in you incurring additional costs, such as paying an accountant to produce company accounts, and the payment of corporation tax on any profits made, such as rental income. You also need to decide on whether or not to register for PDV (VAT). This decision rests on the purpose of your company. If you are simply buying to let, it will probably not be a worthwhile exercise. It is best to discuss this in detail with your lawyer.

Setting up a company is a simple process that requires you to open a bank account which contains at least Kn20,000 (£1,827), and visit a notary, who will need to take your personal details – such as a passport number, address, full name and so on – and the list of activities in which the company will be participating. The process generally takes between two to three weeks and is inexpensive.

Ownership choice	Pros	Cons
Individual	Limited paperwork following transaction	Takes longer
Company	Quick and easy Can claim back PDV	Regular paperwork to be submitted Incurs costs

Stage 5: The contract

The first stage is to arrange for a reservation contract to take the property off the market. Generally speaking, this will cost you €200 and gives you a bit of breathing space until you can organise to have the deposit in place for the signing of the preliminary contract – this is generally between 5% and 10% of the total cost of the property. Make sure that you get your lawyer to have a look through the details of the preliminary contract as it will generally be written by the estate agent who is acting on behalf of the seller. It is normal to get it written into the contract that if the vendor withdraws from the sale you will have your deposit returned.

Once all the paperwork is completed and signed, the final stage is to get the contract notarised. You will need to have the remaining fee ready to pay on the signing of the final contract. Once it’s signed, if buying as an individual, you will need to apply to the government for approval before you can get your name entered in the land registry. Generally, this is a standard procedure and you are unlikely to be turned down. The major problem is the time-consuming nature of the process. Once your lawyer has the confirmation certificate from the ministry, it can be passed on to the land registry office and you are recognised as the official owner of the property. If you are buying as a business you do not need to seek the permission in order to purchase a property.

Stage 6: Additional costs

When working out your budget, make sure you take all additional costs into consideration, as well as the price of the property. Agents in Croatia charge buyers a commission ranging from 2% to 3%, while legal fees will cost around 1% of the purchase price, with an additional 0.5% to be entered in the land registry. You’ll also have to pay property transfer tax of 5% once the property is registered. If you buy newly-built property, this 5% will be levied only on the cost of the land, as opposed to it being levied on the entire property for a resale.

There may be PDV (VAT) on a newly-built property of 22% to allow for. Sometimes this is included in the overall price of the property, but ensure you check. A survey will cost between £300 and £400, while notary fees and translation costs are roughly £50.