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Buying property in Croatia: scams and pitfalls

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Everything you need to know is included in our Croatia Property Pack

Croatia is gaining popularity among foreigners looking to buy property, driven by its stunning Adriatic coastline and opportunities for tourism.

Buying property there can be complicated though, especially if you're not a local resident.

Both our customers who purchased properties there and our on-site local experts have reported a significant list of pitfalls. We've listed them all in our Croatia Property Pack.

This article provides a brief overview of potential pitfalls that may arise during the property buying process in this country.

Is it safe or risky to invest in real estate in Croatia?

Generally, Croatia is considered safe for property investments.

However, some cities, notably the tourist hotspot of Dubrovnik, have seen a rise in scams in recent years.

For instance, there have been cases where old property owners, capitalizing on Dubrovnik's surging property demand, presented fake property deeds to potential buyers.

A notable case involved an old stone house overlooking the Old City, where a buyer from the UK was duped into paying a hefty sum, only to find out the property deed was falsified.

While many parts of Croatia are open to foreign investors, the Istria region, with its Italian influences and mixed heritage, has specific land ownership laws dating back to pre-EU times. Non-local buyers here sometimes face challenges in buying vineyards and agricultural lands, as they can be classified under special protective zones.

Croatia, in comparison to its Balkan neighbours, offers a structured property-buying process.

However, occasional slip-ups do occur. A few years ago, the Zadar land registry office had a backlog of cases, leading to significant delays in property title transfers. Such incidents, while not everyday occurrences, underline the importance of due diligence.

The Croatian legal system is fundamentally robust, but its efficiency can sometimes be tested.

A case in point is the Split condominium dispute in 2018, where an apartment complex faced multiple ownership claims due to discrepancies in inheritance laws. The case dragged on for years, highlighting the need for thorough legal groundwork before making a purchase.

A British couple bought an old villa in Pula, intending to renovate it. However, post-purchase, they discovered the villa was listed as a cultural heritage site, placing severe restrictions on renovations.

This story underscores the importance of understanding local regulations, which can sometimes be unique to specific regions or properties.

Opatija, a prime real estate destination, faced skyrocketing property prices in the early 2010s. The Croatian government, recognizing the bubble, implemented regulations to curb speculations. While well-intentioned, it led to a temporary stagnation in property sales.

This event illustrates how governmental interventions, though aimed at stability, can sometimes introduce unpredictability in the market.

An American investor, after purchasing a property in Hvar, faced resistance from local communities when he attempted to introduce modern architectural designs in a traditionally styled neighbourhood.

The situation brings to light the importance of understanding and respecting local sensibilities

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Potential real estate buying mistakes in Croatia

"Pre-emptive rights" or "pravo prvokupa"

When buying residential property in Croatia, a specific pitfall you should be aware of is related to the concept of "pravo prvokupa," which translates to "pre-emptive rights."

This is a legal principle unique to Croatian real estate law.

In Croatia, when a property is being sold, certain parties, often neighbors or agricultural co-owners, may have the right to purchase the property before anyone else. This right is typically not well understood by foreigners. It's particularly prevalent in rural areas or when dealing with agricultural land, but it can apply in other contexts too.

Here's how it might affect you. Imagine you find a property you love, negotiate a price, and even sign a preliminary agreement. However, if someone with pravo prvokupa steps in, they can override your agreement and buy the property at the terms you've negotiated. This can happen even after you've paid a deposit.

While not extremely common in urban real estate transactions, it's frequent enough in rural or agricultural property sales that you should be vigilant.

Always ask your real estate agent or legal representative to check for any pravo prvokupa obligations attached to the property.

This way, you can avoid the disappointment and financial loss of having a seemingly secured property purchase fall through at the last minute.

The issue of "zakup prava građenja"

Another unique and potentially tricky aspect to be aware of when buying property in Croatia is the issue of "zakup prava građenja," which translates to "lease of construction rights."

This is a concept that might not be familiar to you as a foreign buyer and is quite specific to Croatia.

In Croatia, it's possible for land to be owned by one entity (often the government or a municipality) while the buildings or structures on that land are owned by another. When you're buying a property, especially in urban or developing areas, you might actually be buying the building or structure, but only leasing the land it stands on.

This lease of construction rights is often for a long-term period, like 99 years, but it's crucial to understand that you may not be buying the underlying land outright.

Here's how it can impact your purchase. If you're not aware of this, you might think you're buying both the property and the land outright, when in fact, your ownership is more limited.

This can have implications for future resale value, redevelopment potential, and even property taxes.

To safeguard yourself, you should thoroughly review the property documentation with your legal advisor. Specifically, ask about the status of the land the property is on. If it's a lease of construction rights, understand the terms, duration, and any conditions or restrictions.

This will ensure you have a clear picture of what you're actually buying and can plan accordingly.

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Risk of unfinished construction or "nedovršena gradnja"

Another unique aspect you should be mindful of when buying property in Croatia is the potential issue of "nedovršena gradnja," which means "unfinished construction."

This is particularly relevant if you're looking at newer properties or developments.

In Croatia, it's not uncommon to find properties listed for sale that are still under construction or have been partially completed but then abandoned. While buying such a property can seem like a good deal, especially if you're looking to invest in something you can finish to your own specifications, there are several risks and complexities involved.

The key challenge with nedovršena gradnja is dealing with the legal and administrative hurdles to complete the construction.

You need to ensure that all the necessary permits were obtained for the initial construction and that these can be transferred to you.

Additionally, you'll have to navigate the process of getting new permits for any additional work you plan to undertake. This can be daunting, especially if you're not familiar with the local bureaucratic process.

Furthermore, there's a risk that the original construction did not adhere to building codes or regulations, which you would be responsible for rectifying.

This can add unexpected costs and delays to your project.

"Usucaption" or "pravo na stjecanje vlasništva uslijed dugotrajnog posjeda"

A unique and often overlooked aspect when purchasing property in Croatia, particularly for foreigners, is the issue of "usucaption" or "pravo na stjecanje vlasništva uslijed dugotrajnog posjeda," which translates to "the right to acquire ownership through long-term possession."

This legal principle can significantly impact property transactions in Croatia.

Usucaption in Croatian law refers to a situation where someone who is not the legal owner of a property, but who has been in possession of it for a considerable period (typically 10 to 20 years), can claim ownership of that property.

This is particularly relevant in cases where properties have been informally handed down through generations without formal property transfers, which is not uncommon in rural areas of Croatia.

For you as a buyer, this means that even if you're purchasing a property from someone who is listed as the legal owner, there could be other individuals who have a legitimate claim to the property through usucaption.

These claims can suddenly arise after you've completed the purchase, potentially leading to legal disputes and challenges to your ownership.

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The concept of "Zadruga"

When buying property in Croatia, another unique consideration you should be aware of is the concept of "zadruga," a type of cooperative ownership that is quite specific to this region.

Zadruge are traditional community-based cooperatives, which are often involved in agriculture, but can also hold real estate.

In the context of property purchase, if the land or property you are interested in is part of a zadruga, it means that while you might be buying from an individual, the property could be under the cooperative's management or influence.

This can introduce complexities in ownership rights and usage.

The challenge here lies in the shared rights and responsibilities among members of the zadruga, which might affect your autonomy over the property.

For example, there could be restrictions on what you can do with the property, or you might find yourself involved in the cooperative's decisions and obligations.

Therefore, it's crucial to thoroughly investigate whether the property is part of a zadruga. If it is, you need to understand the specific terms and conditions associated with this type of ownership. Engaging a local lawyer who has experience with zadruge and cooperative ownership laws in Croatia is essential.

They can guide you through the potential implications for your property rights and ensure that you are fully informed before proceeding with the purchase.

"Katastarska čestica" or "cadastral parcel"

When buying property in Croatia, an aspect that might be less known to foreigners, but is quite specific and important, is the concept of "katastarska čestica" or "cadastral parcel."

This term refers to the official land registry record that details the specifics of a land plot, including its boundaries, size, and usage classification.

The challenge for you as a foreign buyer comes from the fact that the boundaries and details recorded in the cadastral registry may not always align with the physical reality or local understanding of the property.

In Croatia, it's not uncommon for the actual use of land or the perceived boundaries between neighbors to differ from what is recorded in the cadastral registry.

This discrepancy can lead to disputes over land boundaries and ownership after you've purchased the property.

To avoid such issues, you should ensure a detailed survey of the property is conducted. This survey should be compared with the official cadastral records to identify any discrepancies. Engaging with neighbors and local community members is also crucial to understand their perception of the property boundaries.

Sometimes, long-standing local understanding can be as influential as official records.

Furthermore, it’s advisable to work with a local lawyer or real estate expert who can navigate the complexities of the Croatian land registry system.

They can help you understand the significance of the cadastral records and how they might impact your property rights.

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"Prostorni plan" or spatial planning documents

In Croatia, understanding "prostorni plan" or spatial planning documents is crucial when buying property, especially for a foreign buyer like yourself.

These documents outline zoning regulations and future development plans, which can significantly impact the property you're interested in.

The challenge with "prostorni plan" is that it dictates what can be built in various areas, including the types of structures allowed, building heights, and land usage (residential, commercial, agricultural, etc.). This is particularly important if you're planning renovations, constructions, or significant alterations to the property.

For instance, if you intend to build or modify the property significantly, you might find yourself restricted by these plans or in need of additional permits.

Moreover, future developments in the area, as indicated in these documents, could affect both your property's value and your living environment. Imagine buying a quiet residential property, only to discover later that a large commercial development is planned nearby.

To effectively navigate this, you should obtain and review the local spatial planning documents, which are typically available through the local municipality office or urban planning department.

Consulting with a local architect or urban planning expert is also a wise move.

They can interpret these documents and advise how they might affect your property and future plans.

It's essential to consider any potential developments or zoning changes outlined in the "prostorni plan" in your decision-making process, as they can have long-term implications for your property investment in Croatia.

"Suživot" or co-ownership arrangements

Another specific aspect to consider when buying property in Croatia, especially as a foreigner, is the prevalence of "suživot" or co-ownership arrangements.

This term refers to situations where a property, particularly older family homes or estates, is owned jointly by multiple parties, often members of an extended family.

In Croatia, it's not unusual for a property to have several co-owners due to inheritance laws and family traditions. This can complicate the buying process significantly. For example, you might negotiate a purchase with one co-owner, unaware that other co-owners also have a say in the sale.

Each co-owner has legal rights and must agree to the sale for it to proceed legally.

This can lead to situations where you believe you have a deal, only to find out later that other co-owners either don't agree to the sale or have different conditions.

Furthermore, tracking down all co-owners, some of whom may not even be aware they have ownership rights or might be living abroad, can be a challenging task.

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"Legalizacija bespravne gradnje" or the legalization of illegally constructed buildings

When buying property in Croatia, especially as a foreigner, it's crucial to be aware of the issue of "legalizacija bespravne gradnje," which refers to the legalization of illegally constructed buildings.

This is a common issue in Croatia, where buildings or extensions are often built without the necessary permits, leading to a need for legalization later.

As a buyer, you need to ensure that all structures on the property you intend to purchase are legally built and have all the required permits. If you end up buying a property with illegally constructed buildings, you could face legal consequences, including a costly and time-consuming legalization process.

It's essential in your property buying process to conduct a thorough check of all structures on the property to confirm their legal status.

Also, seeking the assistance of a local real estate lawyer specialized in Croatian property laws can be invaluable.

They can help ensure that all legal aspects of your property are in order, avoiding potential legal issues in the future.

By being diligent about the legal status of buildings in Croatia, you can safeguard your investment and ensure a smooth property purchase.

The concept of "energetski certifikat"

In Croatia, a specific issue you should be aware of as a foreign property buyer is related to "energetski certifikat," which is the energy performance certificate.

This certificate is an essential document that provides information about the energy efficiency of a building.

The energy performance certificate is not only a legal requirement for the sale of properties in Croatia, but it also gives you crucial insights into the potential energy costs associated with the property. A property with a poor energy rating might require significant investment to improve its efficiency, which can impact your budget considerably.

Sometimes, sellers might not have this certificate readily available, or they might present outdated certificates.

As a buyer, it's important to insist on seeing the current energetski certifikat before finalizing the purchase.

This certificate should give you a clear understanding of the property's energy efficiency, which is vital for assessing both environmental impact and future utility expenses.

Moreover, the energy efficiency rating can also impact the property's value.

Properties with higher energy efficiency typically have higher market values and are more attractive to future buyers.

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