Obtaining a usage permit

[Victoria]

Hi, I am in the process of buying an apartment in Croatia. We have signed the pre-sales contract but not the final contract, which we are due to sign next Monday.

The vendor is now saying that he cannot guarantee getting a usage permit, although has applied for one. This is because of a balcony that was not on the building permit.

Worst case is that the balcony has to be removed, we are asking that it is written into the contract that the vendor would pay for any alterations required.

We have been told that many buildings in Croatia do not have a usage permit, and it is highly unlikely that the government would insist the balcony is removed. What are the implications of not having a usage permit? Is it illegal? Could this affect buildings insurance? Will it affect whether we can sell the property or rent it?

If the usage permit is not approved on the basis of the balcony, are there any legal routes to take other than destroying the balcony? Could we appeal? What would be the likely legal cost of this?

I have also heard one can obtain temporary usage permits? How would we go about this and what would the cost be?

Our alternative route is to pull out, although this is not our preferred choice. The vendor signed the pre-sales contract saying he would obtain a usage permit, therefore he is in breach of contract. He will pay us back our initial deposit, but to obtain double as per the contract we would have to go to court, which we have been told could take a year or more. Is this true?

I would be most grateful for your advice!

Kind Regards,
Victoria

[Peter Ellis]

Hi Victoria

The problem is, unfortunately, a common one. Builders regularly seem to deviate from their approved project, oblivious to the risks they run in selling on, particularly to foreigners.
If you are a foreign buyer, buying in your own name, you will need to get the aknowledgment of reciprocity statement from the Ministry of Foreign Affairs before being able to register title in the Land Registry. The MFA work in conjunction with the Justice Ministry and between them they need to see various documents before issuing the statement. One of them is definitely a Useage Certificate.

You could duck it by buying via a company setup, which, as it means a Croatian entity is buying, avoids any need for MFA approval, but you would still have the problem on selling, as any private foreign buyer is still going to need a Useage Certificate for their own MFA application. Then again, if you hang on to it long enough, the rules might change after EU accession but I wouldn't bank on it. EU members don't have standard rules on this and there is no reason why Croatia would have to standardize either. However, under current law, you would still need to ensure that you have a Useage Certificate for any residence built after 1968 and there is a deadline of 2007 for everyone obtaining one.

Frequently, builders will complete to spec, get the Useage Certificate, then add the access in to, for instance, an extra bedroom in the attic, afterwards. However, a balcony is a bit different. There is a reasonable chance that you might get a planning approval for it, but it is likely to be time consuming and time is obviously not on your or your vendors' side if a contract is imminent.
I fear that demolishing the balcony is the only practical option if he is to be able to produce that essential Useage Certificate.
Yes, a building that has been built that doesn't conform to the building permit is illegal. Traditionally, lots of people did it, relying on periodical amnesties to get away with it. These now appear to have come to an end and the government is demolishing buildings that do not conform. In extremis, it could mean not just the balcony being demolished but the entire building.
We have no experience of any temporary useage certificates. It could affect your insurance. It probably wouldn't make much difference to renting out.

If your vendor is unable to meet the terms of the pre-contract he has constructively failed to complete and you are entitled to double your deposit and yes, it could take a year or two to get it to court. The court system here is unfortunately very congested and law suits are hampered by this.

The bottom line on all this is that your lawyer should have checked everything before advising you to put a deposit down.