COMPARATIVE GUIDE
4 October 2022

Real Estate Comparative Guide

Real Estate Comparative Guide for the jurisdiction of Serbia, check out our comparative guides section to compare across multiple countries
Serbia Real Estate and Construction

1 Legal framework

1.1 What legislation governs real estate in your jurisdiction?

  • The Law on Real Estate Transaction;
  • The Law on Agricultural Land;
  • The Forest Law;
  • The Law on the Fundamentals of Property Relations;
  • The Law on Obligations (with accompanying bylaws);
  • The Law on Housing and Maintenance of Buildings;
  • The Law on Planning and Construction;
  • The Law on Mining and Geological Research;
  • The Law on Public Property;
  • The Law on Expropriation;
  • The Mortgage Law; and
  • The Law on the Procedure for Cadastral Registration of Real Estate and Lines.

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

The Law on the Fundamentals of Property Relations stipulates that natural persons and legal entities may have a right of ownership to:

  • residential buildings;
  • apartments;
  • business buildings;
  • business premises;
  • agricultural land; and
  • other real estate, except for natural resources that are state owned.

In addition, natural persons and legal entities may have the right of ownership to:

  • certain goods in general use and on construction land, in accordance with the law; and
  • forests and forest land, within the limits established by law.

The Law on Public Property sets out a different legal regime for publicly owned real estate (construction land, agricultural land, water land, forests and forest land), such as:

  • natural resources;
  • goods of general interest; and
  • goods in general use.

Natural resources: The following natural resources are owned by the Serbian state:

  • waters, watercourses and their sources;
  • mineral resources;
  • groundwater resources;
  • geothermal and other geological resources;
  • reserves of mineral raw materials; and
  • other goods that are determined as natural resources by a special law.

The exploitation and management of natural resources are regulated by special laws. Also, a concession or right of use (ie, exploitation) over natural resources can be acquired in accordance with special laws. The fee for the use of natural resources is paid to the Serbian state, the autonomous province and the unit of local self-government within whose territory the natural resources are located, in accordance with special laws.

Goods of general interest: These are state owned and are defined by law as goods of general interest (eg, agricultural land, forests and forest land, water land, water facilities, protected natural goods, cultural goods), which is why they enjoy special protection.

Goods in general use: These are state owned and represent goods which, due to their nature, are intended for use by all and which are determined as such by law (eg, public roads, public railways, bridges and tunnels on public roads, railways, streets, squares, public parks, border crossings).

The rights provided by special laws (eg, concessions, leases) can be acquired on goods in general use.

2 Ownership

2.1 What types of ownership rights exist in your jurisdiction?

Under Serbian law, the following types of rights on real estate are recognised:

  • ownership right (freehold), co-ownership and joint ownership;
  • servitude right;
  • pledge (mortgage); and
  • possession and usage right.

2.2 What ownership structures are commonly used in your jurisdiction?

Natural persons and legal entities that are classified as such under the applicable laws may have different ownership rights (eg, partnerships, joint stock companies, limited liability companies, non-governmental organisations).

Serbian law does not recognise the instrument of trust.

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

Yes, Articles 82 to 85 of the Law on Fundamentals of Property Relations prescribe certain restrictions, as follows.

Foreign natural and legal persons conducting activities in Serbia may, under the conditions of reciprocity, acquire a right of ownership to real estate in the territory of Serbia that is necessary for them to conduct their activities. The state body in charge of trade issues will issue an opinion on whether the type of real estate acquired by contract is necessary for the foreign natural or legal person to conduct its activities.

A foreign natural person who does not conduct activities in Serbia may, under the conditions of reciprocity, acquire a right of ownership to an apartment or a residential building, just as a citizen of Serbia (eg, by contract or inheritance).

Exceptionally, the law may provide that a foreign natural or legal person may not acquire a right of ownership to real estate located in certain areas.

A court or other competent body before which the issue of reciprocity is raised may request an explanation from the body in charge of justice in the relevant jurisdiction (such an explanation may also be obtained at the request of interested persons).

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

In Serbia, the principle of ‘unity of immovable property' applies, which means that a land parcel and everything that is permanently connected to it constitute a single object of property rights.

The principle of unity of real estate is indirectly prescribed in the Serbian legal system through:

  • Article 3 of the Law on Real Estate Transaction, which provides that it is not possible to sell a building without a corresponding right to land under the Law on Fundamentals of Property Relations (Articles 24 to 26); and
  • Article 106 of the Law on Planning and Construction, which prescribes the establishment of the unity of real estate once a right of use has been transformed into a right of ownership on construction land.

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

Mortgage and other obligation rights (eg, contractual right of pre-emption, lease).

Where more than one mortgage is registered on a single property, the priority is determined on the basis of the date of submission of the mortgage registration request, in accordance with the principle of priority prescribed by the Law on the Procedure for Cadastral Registration of Real Estate and Lines.

3 Registration

3.1 What body administers the land register in your jurisdiction?

The Republic Geodetic Authority (RGA) is a special organisation that conducts professional and state administration activities related to:

  • state surveys;
  • real estate cadastre;
  • line cadastre;
  • basic geodetic works;
  • the address register;
  • topographic-cartographic activity;
  • real estate valuations;
  • the geodetic-cadastral information system; and
  • the national infrastructure of geospatial data and geodetic works in the engineering and technical fields.

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

It is, bearing in mind that ownership rights become effective only upon registration with the RGA. It is certainly in the interests of every person and legal entity to register their rights before the competent register.

The registration process is initiated in two ways:

  • Ex officio: Courts, notaries, public executors and other bodies and organisations that issue, confirm or certify decisions must submit documentation for registration to the competent service for real estate cadastre.
  • At the request of a party: This occurs if the procedure for the registration of property rights is not initiated ex officio (ie, where the documentation has a date which is prior to the enactment of the law that established the obligation of the above-mentioned bodies and courts to submit decisions ex officio on the change of the right holder to the RGA).

3.3 What are the formal and documentary requirements for registration?

The application for registration of rights must be accompanied by:

  • a document which is the legal basis for registration in the real estate cadastre;
  • other documents prescribed by law;
  • power of attorney, if the request is submitted by an attorney at law; and
  • proof of payment of the fee.

If the document that constitutes the legal basis for registration does not prove the continuity of the change with the entry in the real estate cadastre, documents proving such continuity must be attached to the request.

3.4 What is the process for registration?

Registration initiated ex officio: Upon submission of a registration request and the accompanying documents, the competent cadastre established by the RGA has a formal timeframe of five working days in which to process the request and issue a decision.

Registration initiated by a party: Upon submission of a registration request and the accompanying documents, the competent cadastre established by the RGA has a formal timeframe of 15 days in which to process the request and issue a decision.

3.5 Is registered information publicly accessible?

Yes. All registered data on real estate that is located in the territory of Serbia is publicly available on the website of the RGA at https://katastar.rgz.gov.rs/eKatastarPublic/PublicAccess.aspx.

4 Commercial leases

4.1 What types of commercial leases exist in your jurisdiction?

  • Percentage lease: Base rent + turnover rent (a percentage of business turnover).
  • Fully serviced lease (gross lease): The lessor pays all or most of the costs directly. These costs are often passed on to the lessee as a ‘burden factor'.

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 contracting parties are free to agree on a lease in accordance with the provisions of the Law on Obligations on leases. If a contract has not been concluded, the provisions of the law will apply. The contracting parties should try to agree on the terms of lease in as much detail as possible.

A fixed-term contract may terminate:

  • upon the expiry of the period for which it was concluded; or
  • by agreement.

In practice, the contracting parties may agree on:

  • the circumstances under which unilateral termination is allowed; and
  • the applicable penalties in case of early termination of the contract by either party.

The parties will generally specify the notice period in the event of unilateral termination.

Standard terms include:

  • the details of the contracting parties;
  • the details of the property which is the subject of the lease;
  • the term of the lease;
  • the rent;
  • the security deposit/bank guarantee; and
  • termination provisions.

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

A lease agreement is a bilateral legal transaction inter vivos (for life). By its legal nature, a lease agreement is a bilaterally binding contract: it creates obligations for both parties. The lease agreement is a commutative agreement, because at the moment of its conclusion, it is known which party is the creditor and which is the debtor and what is the value of the performance. The lease agreement is a nominated agreement, because it is regulated by law. A lease is generally an informal contract because the consent of the parties will suffice for its creation; but there are also situations in which it may be a formal contract and the written form is thus required (eg, to rent an apartment). In any case, the lease agreement need not be notarised in order to be valid. In the case of a lease, the contracting parties will fulfil their obligations within a longer or shorter period, through a series of procedures that take place at certain time intervals.

4.4 What is the process for concluding a commercial lease?

  • Agreement of the contracting parties on the elements of the lease agreement;
  • Conclusion of the lease agreement; and
  • Handover of the immovable property to the lessee.

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 obligations of the lessor and the lessee, and the consequences of violation of these obligations, are prescribed by the Law on Obligations (eg, termination of the contract; reduction of rent; cancellation of the contract).

The lessor's obligations are as follows:

  • Handover of the leased property: The landlord is obliged to hand over the leased property to the lessee.
  • Maintenance: The lessor is obliged to maintain the leased property in good condition during the lease and therefore to make all repairs to it as necessary. It is obliged to reimburse the tenant for any costs incurred in maintaining the property, which it would itself be obliged to incur. On the other hand, the costs of minor repairs caused by the regular use of things, as well as the costs of the use itself, are borne by the lessee.
  • Obligation to protect: The lessor is obliged to protect the lessee in case of legal and physical defects of the property. When it comes to legal deficiencies – that is, where someone pretends to exercise a right to property and addresses the lessee – the lessee is obliged to inform the lessor or will be liable for damages unless the lessor knew of these deficiencies. If it is determined that a third party has a right that precludes the lessee from using the property, the lease agreement will terminate according to the law and the lessor will be obliged to compensate the lessee for damage suffered due to interference (eviction).

The lessee's obligations are as follows:

  • Obligation to pay rent: The lessee is obliged to pay the rent for the leased property. The rent usually consists of money. The lessee is obliged to pay the rent within the timeframes specified by the contract or by the Law on Obligations; or otherwise those that are usual in the place where the property was handed over to the lessee. Unless otherwise agreed, the rent is paid semi-annually when the property is leased for one or more years; or if it is leased for a shorter time, after that time. If the lessee does not pay the rent within the period stipulated by the contract or the law, the lessor may terminate the contract. However, before doing so, it must seek payment from the lessee for payment; if the lessee does not pay the rent within 15 days of this call for payment, the lessor may terminate the lease.
  • Obligation to use the property in accordance with the contract: The lessee is obliged to use the property with care and in the manner determined by the contract or in accordance with its purpose. If the property is used in a way that is contrary to its contractual or presumed purpose, the lessee will be liable for all damages that arise as a result, regardless of whether this was done by the lessee himself or herself, or by someone else to whom the lessee handed over the property.
  • Obligation to return the leased property: Once the lease contract expires or the contract is terminated, the lessee is obliged to return the property undamaged to the lessor. The lessee is not responsible for wear and tear caused by regular use of the property, or for damage resulting from its deterioration. If the lessee makes any changes to the property during the lease, he or she must return the property to the condition it was in when it was leased to him or her. The lessee may remove the additions that he or she has made to the property if they can be separated without damaging the property; but the lessor may retain them if it reimburses the lessee for their value at the time of return.

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

The lease agreement may stipulate that the rent will vary in certain cases (eg, after the expiry of a certain period; after fulfilling the conditions); or the parties may conclude an annex to the agreement to agree on a new amount of rent. In practice, in the case of a long-term commercial lease, the contracting parties agree on a fixed rent for the first (usually) five years of the lease. After that period, the annual rent increases; the amount can be fixed or tied to some objective data (eg, the Harmonised Index of Consumer Prices). The parties can set a maximum rent, in which case the lessor cannot exceed that amount.

4.7 What taxes are levied on rental income?

The lease tax is paid by the lessee when paying the rent to the lessor if the lessor is a natural person and the lessee is:

  • a legal entity;
  • an entrepreneur;
  • a natural person that is a value added tax payer; or
  • another legal entity.

The lessee pays tax at the rate of 20% on the basis of the gross amount of rent (ie, the net rent multiplied by the coefficient for the recalculation of real estate income tax), reduced by standard costs in the amount of 25%.

The ‘net rent' is the amount received by a natural person after payment of tax. For example, if a net rent of €300 has been agreed, the legal entity must calculate and pay the rent tax of €53 to the tax administration, and pay €300 to the natural person.

The lease tax is paid by the lessor where both the lessor and the lessee are natural persons (including foreign persons). The amount of lease tax that the lessor will pay and the timeframe within which he or she must pay the tax will depend on whether the natural person leases within the scope of his or her registered activities (in the case of an entrepreneur) or has no registered activities.

If the lessor has no registered activities, he or she must report the received rent within 30 days of the date of realisation of income, regardless of whether he or she collected the rent in cash or through a current account. The lessor must pay tax at a rate of 20% on the basis of gross income, reduced by standard costs of 25%.

If the lessor leases within the scope of his or her registered activities (ie, as an entrepreneur), he or she must keep business books and pay taxes in accordance with the law.

4.8 Can a commercial lease be triple net?

This is not common practice in Serbia, given that both maintenance charges and property taxes are insufficiently high to justify a significant decrease in the rent.

The decision determining the real estate tax that is payable will be issued to the owner of the property, but it is possible that this tax may be paid by someone else, depending on the provisions of the lease agreement.

4.9 How are landlord and tenant disputes typically resolved?

Disputes between the lessor and the lessee are generally settled amicably. If this is not possible, the dissatisfied party may commence appropriate court proceedings (although the court process is very slow and ineffective). However, lengthy and inefficient litigation can still be avoided, as outlined below.

While it is not obligatory to certify the lease agreement before a notary public, the contracting parties may still decide to do so and certify the lease agreement in the form of a solemnised notarial document, which is an enforceable document. In accordance with Article 85 of the Law on Notaries Public and Article 43 of the Law on Enforcement and Security, the contracting parties may agree that if one of them fails to fulfil its obligations under the contract, the other may immediately commence enforcement proceedings before the competent public executor, based on a contract that has the status of an executive document.

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

Cash deposits, bank guarantees, promissory notes and so on.

5 Real estate transactions

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

Agreements for the purchase and sale of real estate must be concluded in the form of a notarised (solemnised) document. The competent notary public is that based in the territory where the real estate is located. The parties to the contract must be present personally or represented by a proxy when signing.

A mortgage agreement and a mortgage statement must be executed in the form of a notarial deed if they contain an explicit statement on the part of the obligated person that, on the basis of the mortgage agreement (ie, pledge statement), enforcement may be carried out directly, either in court or out of court (more common).

The mortgage agreement and the pledge statement may be certified by a notary public in the form of a solemnised document if they do not contain such an explicit statement of the obligated person.

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

At a minimum, a real estate transaction will involve the buyer, the seller and the notary public. The contracting parties may be represented by a proxy, on the basis of a power of attorney made in the form prescribed by law (the law requires only the verification of the signature on the power of attorney before the competent notary public).

If any of the contractors do not speak the local language, the presence of a licensed translator is required when concluding the contract.

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

The buyer will always inspect matters such as:

  • the status of the seller and the property;
  • inscriptions; and
  • encumbrances.

To this end, he or she will usually hire a legal consultant.

The notary public will usually obtain an extract from the Republic Geodetic Authority (RGA) for the property ex officio on the date of contract signing.

The Law on Obligations prescribes the seller's liability for material and legal defects. The seller's warranties will typically involve warranties such as the following:

  • He or she is the registered owner of the right of ownership to the real estate;
  • The real estate is not encumbered by the rights of third parties and is not subject to court or administrative proceedings;
  • There is no prohibition on the disposal or alienation on the real estate; and
  • He or she:
    • has not received a down-payment or other compensation for the real estate;
    • has not leased or gifted the property; and
    • has not entered into an exchange agreement or any other legal transaction which transfers ownership of the real estate to any third party.

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

In the case of real estate that is under construction, the status of the investor (eg, previous business, account blocks) will be checked, as well as the documentation at the buyer's disposal (eg, building permits, deadlines) and the real estate itself (eg, the construction phase).

In the case of real estate that has already been built, it is necessary to check the following, among other things:

  • the situation in the competent real estate cadastre (ownership structure);
  • whether someone else may have certain rights to the real estate; and
  • whether the real estate is encumbered with notes or encumbrances (mortgage).

The buyer will usually check the balance of the property tax. It will usually also check whether there are other costs relating to the real estate (eg, outstanding electricity bills or utility costs).

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

  • The real estate purchase agreement (usually drawn up by an attorney);
  • The title deed to the real estate;
  • The personal documents of the contracting parties (ie, identity card /passport for natural persons, and an excerpt from the commercial register for legal entities); and
  • The legal basis on which the seller acquired ownership rights to the real estate (the notary public will inspect the original document).

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

The process of concluding the contract primarily involves the negotiation of the price and other elements of the contract of sale between the contracting parties. The agreement will then be drawn up (usually by an attorney at law); and thereafter the contracting parties will engage the notary public to notarise the purchase and sale agreement. Once the buyer has paid the price in full, the seller will certify with a notary public the statement that the price has been paid and give the buyer permission to register with the RGA as the owner (this permit for registration in the RGA can be given within the contract). The notary public will then send such a contract to the competent real estate cadastre, which will issue a decision on registration.

The whole process takes approximately 20 to 60 days in practice, depending on aspects such as:

  • whether the buyer requires a housing loan;
  • the date scheduled for verification of the contract; and
  • the cadastre's action on the application for registration.

The costs include those incurred for the following:

  • drafting the contract (attorney);
  • notarising the contract certifying that the sale price has been paid (notary public); and
  • registering the property rights.

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

The obligations of the contracting parties are set out in the Law on Obligations and are as follows:

  • Seller: Handover of the property, liability for material defects and liability for legal defects. In the event of breach of the seller's contractual obligations, the buyer has the right to demand:
    • fulfilment of the relevant obligation;
    • a price reduction;
    • termination of the contract; and
    • in all cases, compensation.
  • Buyer: Payment of the price and receipt of the property.

5.8 What taxes are payable on a real estate transaction?

Value added tax (VAT): VAT is payable only in specific legally prescribed situations. The law provides that when transferring property rights to real estate, VAT is paid where the taxpayer (seller) is a person who independently conducts trade in goods and services within the scope of performing activities. In practice, this means that when buying an apartment from an investor (ie, a person whose main activity is real estate), VAT will be paid at a rate of 10% for the purchase of new constructions. However, VAT may also be payable on the sale of existing buildings if the seller is professionally engaged in the purchase, renovation and sale of real estate.

Tax on the transfer of absolute rights: The tax on the transfer of absolute rights is payable on the transfer with compensation of the property rights to real estate. The tax is levied at a rate of 2.5%.

The tax liability arises on the day that the contract is concluded for the transfer of ownership of the real estate. If the building is still under construction, the tax liability arises on the day of handover or taking possession of the real estate in question.

The law stipulates that the taxpayer is the seller of the real estate. However, in practice, it is usually agreed that the buyer will pay this tax and the seller will give the buyer a power of attorney so that he or she can submit a tax return to the tax administration instead and pay the tax in full once the tax administration has issued a decision.

The tax on the transfer of absolute rights is calculated on the price that is agreed in the contract for the sale of real estate, if this it is not lower than the market value of the real estate. If the agreed price is lower than the market price, the tax administration may determine the tax base based on the market price.

Tax relief is available under the law, so this tax is not payable on the transfer of ownership of an apartment if this represents the first purchase by a natural person of his or her own apartment with an area of up to 40 square metres for the buyer and up to 15 square metres for each member of his or her household.

VAT and the tax on the transfer of absolute rights are mutually exclusive, so there is no situation in which a person will pay both taxes on the same basis.

Capital gains tax: Capital gains tax is levied where a natural person – including an entrepreneur – sells his or her real estate. The seller makes a capital gain when he or she sells real estate for a price that is higher than the price at which he or she acquired it.

The tax base is the difference between the sale and purchase price of the real estate in question (ie, tax base = sale price - purchase price).

Capital gains tax is levied at a rate of 15%.

Liability for capital gains tax arises on the day of the sale of the real estate. The law obliges a person who has made a capital gain to submit a tax return to the competent branch of the tax administration within 30 days of the date on which the contract is concluded. The tax administration will then issue a decision on the basis of the tax return, which will determine the tax. Capital gains tax is due within 15 days of the date of delivery of this decision to the taxpayer.

A capital loss in the sense of this law is not considered to be the difference caused by the transfer where:

  • the property is acquired by inheritance in the first hereditary order;
  • the transfer is made between spouses or blood relatives in a direct line;
  • the transfer is made between divorced spouses and is directly related to the divorce;
  • the transfer involves the transfer of debt securities issued by Serbia, an autonomous province, a unit of local self-government or the National Bank of Serbia; or
  • the obligor has transferred rights, shares or securities that he or she owned continuously for at least 10 years before the transfer.

If the taxpayer invests the funds obtained from the sale of real estate in resolving his or her housing issue and that of his or her family members within 90 days of the date of sale, he or she will be exempt from profit tax. If the funds are invested in resolving the housing issue within 12 months of the date of sale, a refund of the tax that was previously duly paid can be made.

If the taxpayer invests only part of the funds in resolving his or her housing issue and that of his or her family members, his or her tax liability will be reduced proportionally.

Property tax: Property tax is levied on a natural or legal person, whether resident or non-resident in Serbia (a ‘resident' is a person residing in Serbia), who has the right to own real estate located in the territory of Serbia

The Law on Property Taxes also envisages special tax relief which reduces the determined property tax for the real estate in which the taxpayer lives by 50%; however, this reduction cannot be higher than RSD 20,000. Therefore, in order for a person to avail of this tax relief, after the purchase of the real estate, the residence should be changed to the address of the purchased real estate and then a request should be submitted to the tax administration to determine the property tax. The notary public must submit a request to determine the property tax for the purchased real estate on behalf of the buyer within 24 hours of verification of the purchase agreement. As the buyer can change the residence to the address of the purchased real estate only after verification of the contract, the buyer will make the change after verification of the contract and subsequently submit proof to the competent tax administration (to complete the documentation) to obtain this tax relief.

Property tax for the period before the conclusion of the contract for the sale of real estate is paid by the seller. It is recommended that before its conclusion, the buyer submit a certificate of payment of property tax for the tax liability incurred before the conclusion of the contract.

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?

The most common providers of real estate financing in Serbia are commercial banks.

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

Housing loans and financial leasing are the main forms of real estate financing available in Serbia.

The main difference between the purchase of an apartment on lease and a commercial bank housing loan concerns the ownership of the apartment during the period of the loan repayment – that is, during payment of the leasing instalments. In the case of a commercial bank housing loan, the ownership of the apartment belongs to the borrower; whereas if an apartment is bought on lease, the ownership of the apartment belongs to the leasing company until the last leasing instalment has been repaid.

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

In deciding whether to approve a housing loan, banks will frequently request the following:

  • property details;
  • credit history;
  • confirmation of citizenship of Serbia and residence in Serbia,
  • confirmation of either employment for an indefinite period of at least six months with the borrower's latest employer or pensioner status;
  • proof of the borrower's income for a certain period (usually one year);
  • proof of the borrower's age – the age limit for submitting a request for a housing loan is 20 years on the date of submission of the request or 70 years when the last annuity is due; and
  • the credit rating (satisfactory).

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

The bank will establish a mortgage on the real estate of the debtor (ie, the buyer of real estate), mainly as collateral for a new claim arising from a loan agreement,

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

  • An interview with the bank's adviser;
  • Submission of the loan application, accompanied by details of the property and supporting documents;
  • A preliminary agreement on the purchase and sale of real estate;
  • Appraisal of the property;
  • Approval of the loan by the bank;
  • Issue of a pledge statement for the purpose of registering a mortgage on real estate before a competent notary public;
  • Conclusion and certification of the contract on the sale of real estate; and
  • Payment of money to the seller's account (in practice, the buyer and the seller will go to the bank immediately after the notarisation of the contract to transfer the money).

The buyer usually makes a down-payment on the purchase price – usually 10% – based on a pre-agreement for the purchase and sale of real estate, and will then enter into negotiations with a bank to obtain a mortgage for the remainder.

6.6 How is security enforced in case of any breach?

If the debtor fails to pay the debt due, the mortgagee may settle its claim from the value of the mortgaged property, regardless of whose property it is at that time.

Settlement is effected in accordance with the Mortgage Law and the Law on Enforcement and Security, as well as the law on the forced collection of tax claims on real estate.

Where the mortgage agreement is executed in the form of an executive document referred to in Article 15 of the Mortgage Law, the rules on out-of-court settlement set out in the Mortgage Law will apply.

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 domestic legal entities and natural persons.

Article 135, paragraph 1 of the Law on Planning and Construction stipulates that a construction permit will be issued to an investor that:

  • submits a request for the issue of a construction permit, together with details of the project for which the construction permit is sought, prepared in accordance with the provisions on the content of technical documentation;
  • has the appropriate rights to the land or facility; and
  • submits evidence of the payment of appropriate fees and charges and other evidence, as specified in the provisions on the unified procedure.

Article 135, paragraph 2 prescribes that the following will be considered as the appropriate rights to the land:

  • the right of ownership;
  • the right of lease to construction land in public ownership; and
  • other rights prescribed by the law.

It follows from these provisions that an investor which submits a request for the issuance of a construction permit must have an appropriate right to the land, which implies the right of ownership (or some other right prescribed by the law).

Article 2, item 43 of the Law on Planning and Construction relates to the lender. Based on a certified contract concluded with the investor, the lender will co-finance construction, extension, reconstruction, adaptation, rehabilitation or other construction or investment works as provided by the law; and acquires certain rights and obligations as prescribed by the law in accordance with the contract, except for the acquisition of ownership rights to the subject of the construction works.

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

The investment vehicles that are typically used include direct investments and property rentals.

The benefits are as follows:

  • Real estate is highly liquid;
  • By renting real estate, one can make good money on the Serbian market (both for tourists and for the local population);
  • A wide range of investment options is available; and
  • Serbia is home to a well-qualified, low-cost workforce.

The drawbacks include the following:

  • The price of real estate is quite high;
  • In small towns, demand for property is quite low; and
  • Significant additional costs may be incurred (eg, utilities, repairs, taxes).

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

Investment vehicles are established and managed by investors that wish to raise capital during construction.

8 Planning and zoning

8.1 How is land use regulated in your jurisdiction?

The use of land in Serbia is regulated by law which, for example, restricts the use of agricultural land to agricultural purposes only.

Construction land is used according to the purpose specified in the planning document, in a way that ensures its rational use in accordance with the law.

Once a planning document which changes the purpose of the land to construction land has entered into force, the owners of the land acquire the rights and obligations prescribed by law, regardless of whether the body responsible for the registration of real estate and rights thereto has revised the public records of real estate and rights.

Construction land whose purpose has been changed as above may be used for other purposes until the land is finally adapted to the planned purpose.

A fee is payable for changing the purpose of the land to construction land, where this is provided for by a special law.

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

In the case of locations for which there is a confirmed urban project, the location conditions will be issued based on the urban project and the planning document.

An urban project can be executed at the request of the investor, which will also finance its production.

Pursuant to the Law on Planning and Construction, planning documents may be prepared by a public company established by Serbia, an autonomous province or local self-government unit to conduct spatial and urban planning activities, as well as other legal entities established in accordance with the law which:

  • employ licensed spatial planners and licensed urban planners (ie, licensed urban architects registered in the register of licensed engineers, architects and spatial planners in accordance with the Law on Planning and Construction and regulations adopted thereunder); and
  • are entered in the register of legal entities and entrepreneurs for the performance of spatial and urban planning which is maintained by the ministry responsible for planning and construction, in accordance with the law.

The relevant holder of the development of planning documents is the competent authority for spatial and urban planning in Serbia, an autonomous province, a municipality, a city or the city of Belgrade.

The relevant body may assign the preparation of spatial and urban planning documents to another legal entity that, in accordance with the Law on Planning and Construction, meets the prescribed conditions for the preparation of planning documents. This assignment must take place in accordance with the law governing public procurement.

8.3 Can a planning decision be appealed?

The state authority will adopt a draft general regulation plan for a certain area through a process which involves a public debate. During the public debate, any interested party can submit an objection to the draft urban plan. The state authority must respond to each objection.

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

In order to obtain a construction permit, the planning documents must accord with all legal requirements applicable under Serbian law. Failure to obtain a planning permit and construction in contravention of the planning permit can have various consequences, which may arise from an inspection in accordance with the law. Construction without a construction permit will also entail the criminal liability of the investor/contractor, given that this is a criminal offence under the Criminal Code.

8.5 Is expropriation of land possible in your jurisdiction?

The expropriation of real estate is possible, in accordance with the Law on Expropriation.

8.6 Is confiscation of land possible in your jurisdiction?

Confiscation of property is not possible. Moreover, legislation on the return of confiscated property and compensation regulates the conditions, manner and procedure for returning confiscated property and compensation for confiscated property in the Serbian territory. It includes regulations on agrarian reform, nationalisation, sequestration and so on, based on acts of nationalisation conducted after 9 March 1945 under which property was taken away from natural and certain legal entities and transferred to public, state, social or cooperative property.

The property of natural and legal persons may be confiscated if it originated from a criminal offence, in accordance with the law on confiscation of property derived from criminal offences.

9 Environmental

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

The Law on Environmental Protection aims to protect the environment in order to safeguard the human right to life and development in a healthy environment, and to ensure a balanced relationship between economic development and the environment in Serbia.

The planning document will prescribe all relevant environmental protection conditions relating to the construction works. These conditions are mandatory for the investor and precede the building design process.

The following laws govern environmental protection in Serbia:

  • the Law on Planning and Construction;
  • the Law on Environmental Protection;
  • the Law on Environmental Noise Protection;
  • the Law on Waste Management; and
  • the Law on Strategic Environmental Assessment.

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

Pursuant to the principle of liability of the pollutant and its legal successor, a natural or legal person which, through illegal or incorrect activities, leads to environmental pollution will be liable in accordance with the law.

The polluter or its legal successor is obliged to eliminate the cause of pollution and the consequences of direct or indirect environmental pollution.

The polluter must pay a fee for environmental pollution where its activities result or may result in a burden on the environment – for example, if it produces, uses or places on the market raw materials, semi-finished products or final products that contain substances which are harmful to the environment.

The polluter, in accordance with the Law on Environmental Protection, bears all costs of measures for the prevention and reduction of pollution, including the costs of addressing risks to the environment and eliminating the damage caused to the environment.

A natural or legal person that degrades the environment must carry out rehabilitation and remediation activities in accordance with the relevant rehabilitation and remediation project.

The Ministry of Environmental Protection is responsible for approving rehabilitation and remediation projects, except those relating to mining facilities.

If the party that degrades the environment does not rehabilitate and remediate the degraded area, the ministry will conduct the necessary rehabilitation and remediation works at the expense of that party.

If liquidation or bankruptcy proceedings are commenced against a party that has degraded the environment, the costs of rehabilitation and remediation will be covered from the liquidation or bankruptcy estate.

The request for approval and the remediation and remediation project must be submitted in written and/or electronic form.

The minister will prescribe in detail:

  • the content of the rehabilitation and remediation project;
  • the procedure and conditions for consenting to the project; and
  • the necessary documentation that must be submitted with the request for consent.

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

Primarily, those set out in:

  • the law governing environmental protection;
  • the law governing land protection; and
  • all regulations relating to monitoring and quality of land, the limit values of pollutants and so on.

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

The ultimate goal of investing in energy efficiency is to reduce energy consumption to a minimum, while not compromising on levels of comfort and maintaining or even increasing living standards.

Increased efficiency can yield significant and long-term savings in financial terms, and can have a positive impact on the environment.

In order to encourage and improve energy efficiency in the region, the European Bank for Reconstruction and Development has developed a programme to finance the green economy of the Western Balkans. It applies to investments in the housing sector and the financing takes place through local partner banks.

Lending is provided to residents who want to invest in energy efficiency and/or energy production from small renewable sources. Loan beneficiaries can include:

  • individuals;
  • groups of individuals;
  • housing cooperatives;
  • homeowners' associations;
  • service providers (eg, housing maintenance companies or energy suppliers); and
  • manufacturers or sellers of acceptable technologies.

9.5 What types of environmental certifications apply in your jurisdiction?

Standards for management and certification of environmental management systems are applied under the Law on Environmental Protection.

Legal entities, entrepreneurs and organisations can certify their environmental management systems in accordance with the SRPS ISO 14001 standard.

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?

In recent years, the turnover of real estate in Serbia has increased, while the activities of the cadastre at the request of bodies that submit registration documents ex officio (eg, courts, notaries) have accelerated. However, the real estate cadastre is not so up to date with the procedure for registration of property rights where requests for the registration of property rights are submitted by the parties.

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?

It would be helpful if the procedure for registration in the real estate cadastre at the request of the parties were expedited in the near future. The actions of the second-instance body which hears appeals of first-instance decisions on enrolment should also be expedited, given that they can take several years at present.

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.

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