TIME SCALES

[RICH N]

I am thinking of buying a property in Croatia and would like to know what the process is and roughly how long it takes from start to finish. Thank you in anticipation

[Peter Ellis]

Hi Rich

Once you have found somewhere you like, you need to agree arrangements with the vendor. A while ago, many would take a deposit, with the balance payable when the Ministry of Foreign Affairs approval came through. However, as properties are selling quickly, vendors are disinclined to wait for their money so want paying everything at the beginning.
It is therefore important to ensure that your contract is carefully worded to protect you fully.

1. If you pay more then just the deposit to insure yourself in the Pre-Contract, to be able to conclude the Contract and at the and to register Title.

2. The Pre-Contract ( along with other documentation) must be submitted to the MFA with a request for confirmation of reciprocity. Since there is reciprocity with the UK and with Ireland, if you are a citizen of the UK or Ireland, this is just a time consuming formality.

3. Once you receive confirmation from the MFA, you and the vendor can execute the actual Contract for purchase of the property before a NotaryPublic in Croatia.

4. After the execution of the Contract, as purchaser you must apply to the Land Registry to register the title.

All this takes around 6 months if you are buying in Istria, but can be significantly longer down South, where they still rely more on manual systems. It is also worth pointing out that if any documentation is not in order, or missing, then applications get returned and this can add considerably to the time frame. It is therefore important to get good legal advice.
Don't necessarily assume that the lawyer offered by the vendor's agent is looking out for you. Some lawyers may be more conscientious than others. If the property has a defect in something, like for instance the planning permission, the vendor's lawyer may well focus on just the contract that he has been asked to execute and ignore peripheral issues. That could leave you stuck for an essential document. The contract might be good, but it wouldn't help you with the MFA if some other document, inessential to the actual contract, but required by them, is missing and unobtainable.
HTH

[Peter Ellis]

Something else I should have mentioned is that if you come from a country that doesn't offer reciprocity you can still buy, but using the company method. It can also be worthwhile for larger properties or if you are wanting to invest in several properties, or run them as a business..
If you set up a Croatian company, this is regarded as a Croatian entity and is not, therefore, subject to MFA approval. Foreigners can own 100% of a Croatian company. Using this route you can register the property immediately in the Land Registry.
Setting up companies for this purpose is done by our legal department. Depending on where you want it registered, this can take between a week and a month as the court backlog varies. I hear it is actually as little as a day in Slavonski Brod, but that is not a lot of use if your activities are down on the coast., as you need to register locally.

[Rich N]

Thanks for that info Peter it will be a great help. If I was to go down the business route what would be the pros and cons. I do intend to rent it out and buy more properties.

[Peter Ellis]

Hi Rich

Initially, the main advantage is that you would be setting up a Croatian entity. Therefore although it can be 100% foreign owned, it is not regarded as a foreign buyer and does not require Ministry of Foreign Affairs approval for purchasing property. This has various benefits. The most obvious are that you don't have to wait 6mths for an approval and that if you are a national of a country that does not offer reciprocal arrangements with Croatia, the possibility of refusal is removed. The other side of that coin is that you need to check carefully that you have all the right paperwork for the property, over and above the contract. Ministry approval has the effect of adding extra checks that are in their own way, useful.

Once established, you can join the VAT regime, which also has pros and cons. You will be able to recover VAT on relevant materials and services but will also have to charge it. You will be able to deduct expenses from tax for your operations.

After you have successfully traded for a couple of years, loans from local banks become possible and thus gearing. The sooner you do it, the sooner you are in a position to approach them. Currently, the only methods of financing are out of savings or by using the equity in a property at home. Company loans, where the bank has the shares as collateral, are the only other way.
Having said that, we have heard of Austrians getting mortgages through Austria recently but have no details.

Setting up a company is more expensive than in the UK although you can recycle the mandatory working capital into your first deal.