1 Legal framework

1.1 What legislation governs real estate in your jurisdiction?

  • The Law on Proprietary Relations;
  • The Law on Spatial Planning and Construction;
  • The Law on Tourism;
  • The Law on State Surveys and Cadastre; and
  • The Law on Obligations (with accompanying bylaws).

1.2 What special regimes apply to different types of real estate?

The Law on Proprietary Relations sets out different regimes for goods which are in general use or of general interest (eg, natural resources, cultural goods, marine goods, national parks), such as the following:

  • Goods of general interest (eg, construction land; agricultural land; forests and forest land; protected parts of nature; exceptional marine property; flora and fauna; locations of cultural, historical and ecological significance) may be subject to private property and other real rights. The owners and holders of these real rights must exercise their rights in accordance with the manner of use prescribed by a special law;
  • Public goods (natural resources) by their nature should be accessible to everyone, and under the law one can only hold contractual usage rights over these goods (eg, lease, concession); and
  • goods in general use and natural resources (eg, water, wild game, minerals, airports, roads, cultural and historical monuments) serve a public purpose and may not be the subject of private property.

2 Ownership

2.1 What types of ownership rights exist in your jurisdiction?

The Law on Proprietary Relations recognises the following real rights:

  • ownership (freehold), including co-ownership and joint ownership;
  • fiduciary ownership;
  • right of way; and
  • mortgage.

2.2 What ownership structures are commonly used in your jurisdiction?

All legal and natural persons that are classified as such under the applicable laws may be holders of proprietary rights. These include partnerships, joint stock companies and limited liability companies, individuals, non-governmental organisations and so on. Trusts are not recognised under the laws of Montenegro.

2.3 Are there any restrictions on real estate ownership in your jurisdiction?

Yes, under Article 415 of the Law on Proprietary Relations. However, these restrictions can be bypassed by setting up a local company to formally make the purchase.

Article 415 provides as follows:

Restrictions for foreign persons

Article 415

A foreign person may not have the right of ownership to:

  1. natural wealth;
  2. good in general use;
  3. agricultural land;
  4. forests and forest land;
  5. a cultural monument of exceptional and special significance;
  6. immovable property in the land-border area at a depth of one kilometre and islands;
  7. immovable property located in an area which, in order to protect the interests and security of the country, has been declared by law an area in which a foreign person cannot have the right of ownership.

A special law, in terms of paragraph 1, item 7 of this Article, shall be enacted in the manner and according to the procedure prescribed for the enactment of this law.

Exceptionally, a foreign natural person may acquire the right of ownership on agricultural land, forests and forest land of up to 5,000 m2 only if the subject of the contract of alienation (purchase, gift, exchange, etc.) is a residential building located on that land.

A foreign person may have the right to long-term lease, concession, BOT and other private-public partnership arrangements, on immovable property referred to in paragraph 1 item. 1 to 6 of this article as well as a domestic person.

2.4 Is ownership of land and buildings constructed thereon legally separable?

Yes. This is specifically the case with regard to large residential projects (eg, Porto Montenegro, Luštica Bay, Portonovi), which are constructed on land owned by the government of Montenegro. The land is subject to a long-term lease regime and all buildings which are constructed thereon are under the freehold ownership of the developer, which is then passed over to the purchasers of separate units (ie, apartments/villas).

2.5 What security interests can attach to real estate? How are they prioritised?

Mortgages. If multiple mortgages are registered on a single property, the priority is determined on the basis of the date of submission of the mortgage registration request.

3 Registration

3.1 What body administers the land register in your jurisdiction?

The Real Estate Administration of Montenegro, which is part of the Ministry of Finance, with branch offices in each city.

3.2 Is registration of real estate rights, transactions and encumbrances mandatory? What are the consequences of failure to register?

Under the Law on Proprietary Relations, the transfer of title becomes effective only after the change in ownership has been recorded by the Real Estate Administration. Under Article 118a of the Law on State Surveys and Cadastre, for each change, a registration request must be submitted within 15 days; so in principle, registration is mandatory. However, no penal provisions are imposed on natural persons or legal entities that fail to comply with this obligation.

The actual registration process is managed by notaries public in all instances where the title change results from agreements or probate. When the title change results from litigation, the courts will issue an order to the Real Estate Administration to record the change.

3.3 What are the formal and documentary requirements for registration?

Document(s) which evidence:

  • the legal grounds for the registration of a change (eg, an agreement for the transfer of title, a long-term lease agreement, a probate decision);
  • a request for registration;
  • the personal details of the person submitting the request; and
  • payment of the fees.

3.4 What is the process for registration?

Upon submission of the registration request and the accompanying documents (eg, proofs, contracts, land survey reports), the Real Estate Administration has a formal timeframe of 15 days to process the request and issue a decision.

3.5 Is registered information publicly accessible?

Yes, all data on real estate changes is published in real time on the website of the Real Estate Administration. The data which is recorded includes:

  • the land parcel and title deed number;
  • details of the owner;
  • details of the structures which are built;
  • the owners of separate parts of buildings (eg, of each apartment in an apartment building);
  • encumbrances; and
  • active requests (ie, requests for changes which have been submitted to the Real Estate Administration, but have not yet been processed).

4 Commercial leases

4.1 What types of commercial leases exist in your jurisdiction?

The most common types are percentage leases and gross leases; although the Law on Obligations also allows the parties to agree on other terms, as long as these do not contravene the law. Tourist villages such as Porto Montenegro, Portonovi and Lustica have different fee structures (usually fixed rent + turnover rent for some businesses + operational costs). It is very rare for the property tax costs to be taken over by the lessee; but once again, this is not forbidden by law.

4.2 Are the terms of a commercial lease regulated or freely negotiable? What do they typically cover (eg, duration; security deposit; rent; sub-letting; termination)?

The terms of a commercial lease are freely negotiable. However, the Law on Obligations also sets out certain rules that will apply if the parties do not include specific terms in this regard in the lease (eg, the notice period for indefinite-term leases which do not define such notice period in the contract; the rules on sub-leasing).

Fixed-term contracts can either expire or be mutually terminated, without the explicit right of either party to terminate unilaterally. In practice, however, the parties will usually specify a notice period for unilateral termination and will adhere to this accordingly. In the event of litigation, existing court practice suggests that the unilateral termination of a definitive term lease agreement is not permitted. The sub-lease of a property requires the consent of the lessee.

The standard terms of the lease contract include:

  • details of the property;
  • the lease term;
  • rent;
  • security deposit/bank guarantee; and
  • termination provisions.

4.3 What are the formal and documentary requirements for conclusion of a commercial lease?

A commercial lease on a property must be notarised before a notary public (who certifies the parties' signatures); and the parties must submit documents relating to the property proving that they have the required right of disposal. In certifying the signatures, the notary is not approving the actual text of the contract – just the legal capacity of the contracting parties. The notary does not draft the contract, but the contracting parties must align the text and submit it to the notary's office.

4.4 What is the process for concluding a commercial lease?

Formally, just certification by a notary public. Lease agreements with lease periods that exceed five years can be registered in the ‘G' section of the title deed for the relevant property (which is a section containing encumbrances).

4.5 What are the respective obligations and liabilities of landlord and tenant under a commercial lease, and what are the consequences of any breach?

The obligation of ‘investment maintenance' and the obligation to pay the annual property tax usually remain with the landlord; while the tenant is obliged to regularly maintain the property and pay rent and utilities. If the property is undergoing renovations which are financed by the tenant and which increase the value of the property, the parties will usually agree on rent deductions for a certain number of years or months of the lease term.

The consequences of breach are usually defined in the lease contract. The Law on Proprietary Relations sets out only a few general scenarios, involving either:

  • the right to the refund of moneys paid by the tenant for repairs that should have been undertaken by the landlord; or
  • the right to termination in case of serious breaches, such as unauthorised sub-leasing or unauthorised major alterations to the property.

4.6 How are rent variations typically effected throughout the term of the lease?

For long-term contracts, the parties usually agree on a fixed rent for the first five years and then the average annual increase, which can be fixed or tied to some objective data (eg, the Harmonized Index of Consumer Prices). Alternatively, they can set a cap as the maximum rent that the landlord cannot go above.

4.7 What taxes are levied on rental income?

The tax regime depends on the legal status of both the landlord and tenant.

If the landlord is a natural person, he or she will be charged personal income tax at a rate of 9% on a tax base of 70% (30% permitted deductions), plus a surtax of around 13% which is charged on the personal income tax. This surtax is municipal revenue, so the rate can vary from one municipality to another; but the average is 13%.

For example, if a landlord had a yearly rental income of €1,000, he or she would be charged:

  • Personal income tax: 9% of €700€ = €63€ +
  • Surtax: 13% of €63€ = €8.19.

If a landlord who is a natural person leases a property to another natural person, the landlord must disclose the income, pay the tax accordingly and submit an annual tax return. If a landlord who is a natural person leases a property to a commercial entity, the tenant must submit the tax return with every payment to the landlord and calculate, withhold and pay the related tax liabilities on the landlord's behalf.

If a landlord is a commercial entity, corporate tax of 9% will be payable on its net profits from all business activities, in accordance with the Corporate Tax Law.

For annual rental revenues which exceed €18,000, the landlord must be registered as a value added tax (VAT) payer and charge and pay 21% VAT on rental fees (in limited cases, the VAT rate can be reduced to 7%).

4.8 Can a commercial lease be triple net?

Legally yes, though this is not common practice – mostly because both maintenance charges and property tax are not sufficiently high to justify a significant rent decrease. Real estate taxes will always be issued in the name of the registered property owner, but it is possible that the actual payer may be someone else, in accordance with the contract.

4.9 How are landlord and tenant disputes typically resolved?

Usually amicably; the alternative is a very slow and ineffective court process, during which access to the property is usually blocked – which is in no one's interest.

4.10 What types of guarantees are market practice and required by landlords to secure the tenant's obligations

Cash deposits or bank guarantees (which are renewed yearly). The minimum amount of the bank guarantee/cash deposit is usually two months' non-discounted rent.

5 Real estate transactions

5.1 What form do real estate transactions typically take in your jurisdiction?

Agreements for the purchase of real estate must be concluded in writing and verified before the competent notary in the specific form of a notarial deed. The competent notary will be based at the place where the real estate is located, so the parties to the contract must be present personally or represented by a proxy.

The same applies to mortgage statements and any other agreements for the transfer of real rights. However, lease agreements are excluded, regardless of the subject of the lease, and formally require only the certification of signatures; although the parties may choose the form of notarial deed for added security.

5.2 Which players are typically involved in a real estate transaction in your jurisdiction?

The minimum number of participants in a real estate transaction are the buyer, the seller and the notary public. The buyer and the seller need not be present for the transaction, but can be represented by a proxy via a notarised power of attorney. All signatories who do not speak the local language will require the presence of a licensed translator. In a large number of cases, the sale takes place through the services of real estate agents, so their involvement in the process can be significant.

5.3 Is the seller bound by a duty to disclose? What representations and warranties will it typically make?

The buyer is obliged to independently inspect the status of the property, inscriptions, encumbrances and so on. To this end, either it will hire a legal consultant or the broker will assist.

On the date of contract signing, the notary will usually obtain a fresh extract from the Real Estate Administration and formally state on the contract document that the buyer has inspected the content of the title deed and has no objections. The seller's warranties will typically involve warranties that:

  • it has not already sold or leased the property to a third party;
  • there are no other registered or unregistered rights of third parties on the property, other than those registered with the Real Estate Administration; and
  • there are no outstanding tax liabilities, or if there are, the seller will be given a deadline to make the payment.

5.4 What due diligence is typically conducted in a real estate transaction?

The extent of the due diligence will usually depend on:

  • whether the subject of the sale is land or a building/apartment;
  • the age of the property; and
  • in some cases, the location (if the specific location has any specific planning regulations or has been subject to changes of plans).

The buyer will typically also check the balance of the property tax and whether there are any outstanding liabilities, because the municipality – which is the recipient of this tax – has the right, in case of non-payment, to register an encumbrance on the property.

5.5 What are the formal and documentary requirements for conclusion of a real estate transaction?

The minimum requirements include:

  • the title deed (obtained by the notary); and
  • the personal documents of the parties (ID/passport copies for natural persons and extracts from the company register for legal entities).

If a party to the contract is represented by a proxy, a notarised power of attorney must be presented in the original, with a translation into the local language if applicable. The notary will usually prepare the contract draft (this service is included in the notary's fee and cannot be excluded); but the parties are free to present their own draft, in which case the notary's fees can be reduced by 20%.

5.6 What is the process for concluding a real estate transaction? How long does this take? What costs are incurred?

Excluding the due diligence and negotiations, which are case specific, the process takes one day for the notary session; if the conditions are met for the title transfer, the Real Estate Administration will register the change within approximately 15 days of the date of submission of the contract and the registration application.

The mandatory costs of the process are as follows:

  • the notary costs, based on the official tariff, which will depend on factors such as the contract value, the number of parties and the presence of a translator; and
  • the cadastral fees for registration (approximately €20).

5.7 What are the respective obligations and liabilities of buyer and seller, and what are the consequences of any breach?

In a standard real estate transaction, the buyer is obliged to pay the price and the seller to transfer the title and complete the handover. The transfer of title – which is the most important obligation in the process – is automated, in that the notary will execute this document (ie, the consent for the transfer), but will not make it public until after the buyer or seller has provided proof that the payment has been completed. This way, the buyer's position is improved, as it does not need to chase the seller for this consent in cases where, for example, the payment plan is extended over a few years. The safety of the transaction can also be enhanced by using the notary account for payments (similar to escrow), in which case the notary will record all payments and can submit the request for cadastral registration after receiving the money from the buyer and before sending it through to the seller (if this is agreed between the parties, of course).

If the purchase price is not being paid immediately, the parties will agree on some retention amount, as a percentage of the purchase price, which the seller will be authorised to retain if the buyer fails to complete the purchase. This amount must represent a fair reimbursement of seller's costs, expenses and damages; otherwise, the buyer may try to reduce it in court. This amount cannot be referred to as a ‘contractual penalty', as contractual penalties can legally be imposed only for non-monetary obligations.

5.8 What taxes are payable on a real estate transaction?

The sale of all real estate is subject to transfer tax of 3% of the property value (which is usually the contract value, although the Tax Office can challenge the contract value if it suspects that this is not realistic and hire a licensed appraiser to conduct an independent evaluation). Payment of the transfer tax is legally an obligation of the buyer.

The only exception from the general transfer tax rule is the sale of newly built properties: the first transfer from the developer to the buyer is subject to value added tax (VAT) at a rate of 21% (provided that the seller is the registered VAT payer, which will be the case for all commercial developers). This VAT represents input VAT on the buyer's side and can be refunded if:

  • the property is purchased for commercial use (office space or rental); and
  • the buyer is also a registered VAT payer.

6 Real estate finance

6.1 Who are the most common providers of real estate finance in your jurisdiction? Do any restrictions apply in this regard?

Real estate financing is usually provided by banks, which legally are the only institutions allowed to provide bank loans and mortgages. No formal restrictions apply, except the bank's own policies, which will require a certain loan amount to property value ratio, local income and so on.

6.2 What forms of real estate finance are available in your jurisdiction?

Only mortgage loans.

6.3 What formal, documentary and other requirements do lenders typically require of borrowers?

  • Property details;
  • Proof of the borrower's income over a certain period (eg, the past one to two years; the borrower's monthly income can be burdened by a mortgage payment of up to 50% and this will usually define the loan entitlement); and
  • Credit history (if available).

In most cases, the borrower will be required to close other loans with any other bank for any purpose.

Some banks will ask borrowers to manage and pay for the property appraisal, while others will assume this cost themselves.

6.4 What type of security interests are typically required by lenders?

Registration of a mortgage on the property which is subject of the purchase or any other suitable property. A bill of exchange (blank) can also be accepted.

6.5 What is the process for obtaining real estate finance? What costs are payable?

  • Loan application, with the specification of the property and delivery of all supporting documents;
  • Application review and approval by the bank;
  • Property appraisal; and
  • Signing of the sale and purchase agreement which is the basis for release of the loan from the bank with simultaneous issuance of the mortgage registration consent of the buyer (as borrower).

The bank will usually agree to fund up to 90% of the property value, so the any difference in price must be managed by the borrower directly with the seller.

6.6 How is security enforced in case of any breach?

In the event of a breach, the bank can initiate enforcement proceedings before a public enforcement officer. This procedure involves:

  • registration of the enforcement procedure with the Real Estate Administration;
  • property evaluation;
  • sale of the property; and
  • settlement of the claim.

One of the biggest challenges is removing the borrower from the property upon finalisation of the enforcement process, in terms of the time this can take and the delays which the borrower can cause.

7 Real estate investment

7.1 Who are the most common investors in real estate in your jurisdiction? Do any restrictions apply in this regard?

The most common investors in real estate are foreigners, who choose to purchase properties either:

  • as investment opportunities (some luxury property developers offer guaranteed yields over a certain period);
  • with the aim of refunding the value added tax paid at purchase; or
  • as a way to obtain temporary (and later permanent) residency and take advantage of Montenegro's low tax rates.

Montenegro's geographical location, climate, favourable tax rates, wonderful nature and clean environment have made the country very attractive to foreign investors in the past 20 years.

The only applicable restrictions are those discussed in question 2.3. Any foreign national can enter Montenegro under the terms set out by the Montenegrin authorities; these can be more or less strict, but no general or permanent bans exist.

7.2 What investment vehicles are typically used in your jurisdiction? What are the benefits and drawbacks of each?

Direct investment: The Montenegrin real estate market remains relatively underdeveloped, as very few of the standard investment vehicles that are common in Western Europe are utilised in Montenegro (eg, no limited partnerships, no trusts). Most recently, the Montenegrin Citizenship By Investment Programme generated considerable investment in real estate, with the minimum threshold (including application fees) being €350,000. The programme offers the benefits of a passport alongside property ownership, which in most cases is part of a condominium business model (mandatory or voluntary rental of property through a hotel operator), and thus includes a return on investment.

Property rentals: Real estate purchasers often invest in rental properties in various residential developments where professional property management services are available. This includes the condominium business model, whereby established hotel operators (eg, Regent Hotels, The Chedi, One&Onl) manage and rent the properties through their rental pool in exchange for a share in the revenue. Investors that are established as local legal entities can enjoy further benefits by availing of the value added tax refund option for first-hand purchases from developers, along with the favourable tax rate applicable to future revenues.

General benefits:

  • One of the most competitive tax systems in Europe a (tax rate of 9% for corporate tax, personal income tax, capital gains tax);
  • A qualified and low-cost workforce; and
  • Great tourism potential.

Drawbacks:

  • The small size of the domestic market;
  • A poor business environment;
  • Low return on investment outside of luxury property developments or exclusive coastal locations;
  • The high cost of borrowing; and
  • The general inaccessibility of mortgage loans to foreigners.

7.3 How are these vehicles established and administered in your jurisdiction?

The investment options and structures are usually established and administered by property developers looking to raise capital during construction.

8 Planning and zoning

8.1 How is land use regulated in your jurisdiction?

Land use is regulated through a number of plans which are organised in the following hierarchy:

  • the Spatial Plan of Montenegro (developed for a 20-year period); and
  • the General Regulation Plan (developed for a 10-year period), which is adopted separately for the coastal, central and northern regions. The coastal region also includes separate regulation of the coastal area, which represents a common good and is managed by the state company (the state is considered to be the owner of almost all of the area up to 6 metres from the sea line, although exceptions apply).

The state and local authorities can also develop special plans for special areas, or define the usage of a certain area in more detail.

8.2 What is the process for obtaining planning permission? How long does this take? What costs are incurred?

This process is usually initiated through a request for urban-technical conditions, which costs €50 and is usually issued within one to three months, depending on what is being constructed. The urban-technical conditions will be issued by the local municipality for most buildings; and by the competent ministry for large tourist villages, five-star hotels and so on.

The urban-technical conditions will outline all details on matters such as:

  • the plan regulations;
  • the permitted footprint of the building;
  • the permitted usage of the land/buildings;
  • how the communal services must be organised; and
  • landscaping rules and requirements.

Based on this document, the investor will prepare the schematic design and submit it to the main state or municipal architect for approval. Following approval, the investor will usually start developing the main design, which must be revised by a licensed company.

The investor can commence construction works following the submission of a construction application together with the following:

  • the certified main design;
  • a report on the positive revision of the main design;
  • proof of the liability insurance of the designer (ie, the reviser);
  • the contract for the hiring of contractors;
  • the contract for the engagement of professional construction supervision; and
  • proof of the right of ownership on the land (ie, the right to build on the land).

Significant costs include the communal fees, which are calculated based on factors such as the location of the property and the square footage and usage of the building, and are adopted separately for each municipality.

8.3 Can a planning decision be appealed?

The process of urban plan preparation includes a public debate. During this public debate, any citizen with a legal interest can submit an objection to the draft of the urban plan. The plan maker must respond to each objection (of course, it is not obliged to accept it). Upon adoption of the urban plan, it is possible to amend the plan, but appeals in the strict sense are not possible – only amendments, which must follow the same procedure as for adoption.

8.4 What are the consequences of failure to obtain planning permission or to comply with a planning condition?

The commencement of construction without the fulfilment of all legal preconditions and the submission of a construction application can result in a ban on construction following an inspection visit and the criminal liability of the investor. If a building is built outside of the parameters and rules set out in the urban-technical conditions, the technical supervisor will not issue a final positive report, which will prevent the investor from registering the building with the Real Estate Administration and legally using it.

8.5 Is expropriation of land possible in your jurisdiction?

Yes – under the Law on Expropriation, as full or partial expropriation, when the public interest (which is determined in accordance with the law) so requires.

Expropriation is most commonly used for capital investments, such as the construction of energy infrastructure projects and roads.

8.6 Is confiscation of land possible in your jurisdiction?

Only the confiscation of assets which are presumed to have been acquired through criminal activities (where the owner cannot prove otherwise), in accordance with a specific law.

9 Environmental

9.1 What main environmental legal provisions apply to the development, use and occupation of real estate?

All relevant terms applicable to environmental protection in relation to the construction of real estate will be outlined first in the applicable planning document and then in the urban-technical conditions, which are mandatory and precede the building design process.

Depending on the location and planned use of the real estate, these environmental protection conditions may vary; and in some cases, the investor may be required to prepare a report to assess the impact of the planned construction on the environment. The investor's compliance with these terms is monitored at several stages:

  • when the schematic design is approved;
  • during revision of the main design; and
  • before the building is registered in with the Real Estate Administration.

The following laws govern environmental protection in Montenegro:

  • the Law on Spatial Planning and Construction;
  • the Law on Environmental Impact Assessments;
  • the Law on the Protection of Nature;
  • the Law on Waste Management; and
  • the Law on Protection from Noise in the Environment.

9.2 Who can be held liable for environmental contamination and how are clean-ups effected?

The ‘polluter pays' principle generally applies; but there are exceptions in cases where the contamination is the result of actions of third parties and the person that is assumed to be responsible (ie, the ‘operator') has taken all necessary measures to prevent the contamination. Some business activities require mandatory insurance coverage for eventual damages from contamination.

The choice between different types of clean-ups is at the discretion of the Environmental Protection Agency and will be made based on the best available technics method, which will include a review of factors such as:

  • assessment of remediation measures;
  • assessment of costs;
  • the likelihood of success of measures;
  • the future impact; and
  • time elements.

Clean-ups are managed either by the operator or by the competent governmental body, at the operator's cost.

9.3 What environmental provisions and considerations should be factored into real estate transactions?

Environmental provisions are not usually included in contracts for sale of real estate, unless the sale concerns specific industrial facilities which must be managed and maintained in a pre-defined way. For residential and retail property, the general legal provisions apply, but are not specifically addressed.

9.4 What initiatives are in place to promote green buildings and energy efficiency in your jurisdiction?

  • MEEP – the Montenegrin Energy Efficiency Project;
  • EEPPB – the Energy Efficiency Programme in Public Buildings;
  • MONTESOL – an interest-free credit line for the installation of solar-thermal systems for households;
  • ENERGY WOOD – an interest-free credit line for the installation of modern biomass fuel (eg, pellets, briquettes) heating systems for households;
  • SOLARNI KATUNI – a project relating to the installation of photovoltaic solar systems in summer pasture lands;
  • GIZ-ASE – the Project of Energy Efficiency Improvement in Montenegro; and
  • TA-EnCT – a project that provides technical assistance for the implementation of the Energy Community Treaty.

9.5 What types of environmental certifications apply in your jurisdiction?

ISO 14001.

10 Trends and predictions

10.1 How would you describe the current real estate market and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The Montenegrin real estate market experienced turbulence during the COVID-19 pandemic – demand among foreign investors dropped by about 40% in the first three quarters of 2020. The overall economy was also hit hard, given that tourism is a major contributor to gross domestic product. However, the projections of international supervisory bodies such as the International Monetary Fund for the recovery of the economy are optimistic; and an increase in new constructions (approximately 10% in 2020) reflects the resilience of the market.

Over the past 10 years, Montenegro has established itself as a great choice for a second home, with pristine beaches in the summer and modest but fulfilling (and still developing) skiing destinations in the winter, and being just a few hours' flight away from London, Moscow and Istanbul. The advantages of the Montenegrin real estate market include:

  • healthy capital growth;
  • low tax rates (which foreigners can access through via temporary residence following a property purchase);
  • low transaction costs; and
  • competitive prices.

The only change in legal regulations envisaged which will have an effect on the market is the cessation of the Citizenship by Investment Programme, which was introduced for the initial term of 2019 to 2021; the current government has announced that it will not be extending it due to the small number of applicants, among other things.

11 Tips and traps

11.1 What are your top tips for the smooth conclusion of a real estate transaction and what potential sticking points would you highlight?

Unless the property is being purchased from an established developer – usually a foreign investor with a good reputation – we would recommend that the buyer engage a legal adviser to conduct due diligence of the property, including a review of the following, among other things:

  • a review of the title deed;
  • any registered procedures, claims and encumbrances;
  • the tax liabilities which are triggered by the purchase; and
  • the financial obligations following completion of the purchase.

Any foreign buyer who intends to stay in Montenegro beyond the maximum period permitted without a visa must have a temporary residence permit; so prospective buyers should also acquaint themselves with the terms and conditions for obtaining such a permit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.