Croatia Property Buying for Dummies

Finding and buying a property in Croatia, for anyone who does not speak the language fluently, and without the services of an estate agent, would be almost impossible. These days, Croatian agents are perfectly accustomed to being called on their mobiles, so if they are not in, its more than likely that they will have left a message with the number on their office or shop door.

As in all property transactions, the purchaser must use the services of a lawyer who acts solely for him. It is also essential that the lawyer should speak both Croat and English fluently.

It is important for the lawyer to check that the propertys title is clean. Because Croatian families used always to hand properties down from father to son for several generations, in some cases the paperwork is either incorrect or non-existent.

Getting a survey done is somewhat unusual in Croatia, but it can be arranged through surveyors located in the bigger towns.

In the case of a foreign national buying as a private individual, permission to purchase must be sought from the Ministry of Foreign Affairs. If a foreign national has registered a company in Croatia and is buying through that company, permission is not necessary.

The stages of the purchase include:

1.)The reservation contract
2.)The preliminary contract. This will include the payment of a deposit, usually of between 5 and 10 per cent of the purchase price. It is usual for the contract to include a clause stating that should the vendor withdraw the property from sale, he must pay an equivalent sum to the purchaser
3.)The certifying of the contract by a notary
4.)The submission of the documents to the Land Registry for the recording of the legal title
5.)The payment of Real Estate Purchase Tax and/or VAT (known as PDV in Croatia)

Costs
Estate agents charge between 2.5 and 3 per cent of the propertys sale price.Lawyers will charge around 1.5 per cent. This will usually include the Land Registry search and the preparation of the purchase contract. Permission from the Ministry of Foreign Affairs for a foreign national to acquire property costs around 70 kuna (approximately 6.50 pounds).The notarys fee and that of the translator (officially required) total approximately 500 kuna (around 50 pounds).The fee charged by the Land Registrar is about 400 kuna (approximately 38 pounds). Check with your lawyer whether this has been included in his or her fee. Property transfer tax is currently set at 5 per cent. This is paid by the buyer. Once the transaction has been completed, the change of ownership should be registered within 30 days. The tax can be paid by money transfer, and is then changed into kuna.

VAT (PDV in Croatia) is currently 22 per cent and payable only on the value of a newly constructed building or a resale for which the VAT was already paid, if disposed of by a business VAT payer. It is also charged on the services provided by both estate agents and legal advisers.

Mortgages
At present, the situation relating to mortgages on Croatian property is changing, with some UK-based companies now able to offer them. The main criterion appears to be that the potential purchaser must set up a company that is registered in Croatia.

Of course, for UK buyers who already have a mortgage, it is perfectly possible to add to it. This will be linked to UK rates, which differ from overseas ones.

Overseas mortgages generally attract higher set-up costs, typically around 3 per cent. Following this route will not add an additional burden to an existing UK mortgage. It is essential to note, however, that there is an exchange risk attached to basing repayments on a foreign mortgage from UK income. It is also essential to ensure that the overseas mortgage documentation complies with both local and UK law. Above all, it is important, as in all overseas property transactions, to take professional advice.

Euro mortgages
Many lenders have been inundated with enquiries from people seeking a mortgage to buy property in Croatia, and some are now offering mortgages averaging 60 per cent based in euros. Generally, these are linked to terms of 15 years and provide for completion at a maximum age of 65. Agricultural land is not eligible for a mortgage.

Its worth noting that the mortgage will most likely be only for the purchase of the property. Any additional costs or overheads, such as notarys fees, agents commission or completion fees, will have to be met by the buyer separately.