THE BUYING PROCESS

As domestic and foreign buyers are treated equally when it comes to property purchase, this can be a good country for foreigners to buy in. The main problem you will encounter surrounds the property title and ensuring you are buying from someone who is entitled to sell.

Stage 1: Restrictions on foreign buyers

There are no restrictions on the purchase of property by a UK resident in Montenegro as there is a reciprocal agreement in place with the UK. Residents of other countries should check with the Montenegrin authorities. However, you cannot purchase land which is deemed of ecological or historical significance. This has created a problem as it is not always clear which areas these are, given that there are some unscrupulous characters who will try to sell property in these areas. Also, in order to register land in the land registry, you will have to set up a limited company in the country. Property purchases of a house or ruin which comes with up to 500 square metres of land are usually allowed to be registered by foreigners without the need to form a company.

Always ensure you get the proper legal support and carry out full checks, especially as it is not compulsory to register a property with the land registry, which can make it difficult to check its history.

Stage 2: Financing your purchase

While mortgages are beginning to become available in Montenegro, from 50% to 70% loan to value, the best option is still cash. Most buyers find the easiest path is to re-mortgage their UK home and then purchase in Montenegro with cash, particularly as many UK lenders are nervous of loaning money to fund a purchase in such an immature market.

Given that Montenegro uses the euro, this does simplify money transfers and issues of money exchange. You’ll also find that if you do secure a euro mortgage, rates are currently lower than sterling and offer the best value.

Stage 3: Background checks and surveys

The actual process of purchasing a property in Montenegro is much the same as any other European country, and just as straightforward. As has been stressed earlier, the main problem is the land registry system and the ownership of land. While the registry system is computerised and very good, because it is not obligatory to register your property many have no record or history, making it difficult to establish whether you are purchasing from the actual owner, or if they are allowed to be selling the property. This is further complicated by the fact that many Montenegrin families are arguing among themselves about ownership, and that under Tito’s government, much private land was confiscated. Consequently, many families are currently negotiating with the government to reclaim their lands. You need to avoid buying from a third party where there are currently claims from the actual owners on your land and property, and so you must ensure you secure the best legal advice and get detailed checks carried out.

Surveys are not carried out in Montenegro and there is not a culture of surveying in the country. However, you should get a survey carried out, especially as the majority of the properties for sale are old, traditional stone-built houses.

Stage 4: The contract

Once you have arranged funding and done all the meticulous background checks, the next step is to sign the contract. If you want to arrange for the property to be taken off the market while you carry out all the necessary checks, try to arrange for a reservation contract to be signed, rather than a preliminary contract, as this ties you to the sale.

The first stage of the sale is to sign the preliminary contract. At this stage a 10% deposit will be required and this is non-refundable. However, should the seller pull out, then they will be required to pay you 20% of the price of the property. Once the preliminary contract has been signed and you are happy that the property is safe to purchase, you move on to the signing of the final contract in the presence of a notary. The title deeds are then registered with the land registry to transfer the property legally over to you. As the land registry is an efficient body this should not take long to process.

Stage 5: Additional costs

Generally speaking, additional costs can be quite high in Montenegro, as you may find you will need more legal advice to buy here than you would in some other Eastern European countries, given the complications over land titles. These costs can be as high as an additional 10% of the property price.

Once the sale is completed, you will be required to pay a property tax of 2% for a resale house and 17% for a new build. The amount will be based on the valuation of the price of the property by the Montenegrin Inland Revenue, rather than what you actually paid for it.

Other costs include the payment of notary and legal fees, which are both usually 4% and 3 – 5% for the estate agents. You’ll also have to pay council tax, although this is a minimal amount, and also a capital gains tax on profits made from a resale – 9% for a company and up to 23% on a scaled structure for individuals. You are also likely to have a bill for translation fees, which will be around €50.