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when natural persons and private companies lack title to the
property that can be subject to restitution. Even though the
Law on Property Restitution prescribes the priority of natural
restitution, (i.e. restitution of unjustly expropriated property),
there are numerous exceptions. Therefore, it is likely that compensation
will be the most commonly implemented form of
restitution. Property restitution is the obligation of the Republic
of Serbia, local government, public enterprises established
by the Republic of Serbia, socially owned companies
and cooperatives, while the disbursement of the compensation
is the exclusive obligation of the Republic of Serbia.
real Estate Leasing
Amendments to the Law on Financial Leasing from May
2011 introduced the option of financial leasing of property.
However, the new legislative framework has not been
fully developed, and it remains to be seen whether financial
leasing of property will be viable in practice. The main issues
related to the application of the Law on Financial Leasing
arise from the interpretation of the service of financial
leasing of property by the tax authorities.
mortgage
Following the first 6 years of application, the shortcomings
of the Law on Mortgage have become apparent in practice.
For example, provisions of Article 49 prescribing that in the
event of out-of-court sale of mortgaged property, rights of
later creditors remain reserved, thus implicating the sale of
mortgaged property along with mortgages of a lower tier.
Other examples include the unclear status of property built
on land under mortgage (i.e. when mortgage automatically
extends to built property), issues involving project financing
and similar.
Strict bank regulations and restrictive interpretation of
provisions of the Law on Mortgage by public property registries
disable comprehensive application of the Law and
thus limit the option of project financing of construction.
PoSitiVE dEVELoPmEntS
The main positive development is the adoption of a new set
of laws in September 2009 (Law on Planning and Construction,
Law on Cadastre and State Survey, Law on Social Housing),
and amendments to the Law on Construction from April
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2011. Even though it is too early to analyse the future impact,
which depends on the implementation and application in
practice, the new set of laws could be a major breakthrough
in the real estate market. This area is very sensitive, especially
as regards restitution, and bringing its comprehensive regulations
in line with the current international legislation and
practices is essential to create a favourable and attractive investment
and business environment. Enacting of the Law on
Property Restitution and Compensation is a big step, but it is
uncertain how it will be implemented.
Land oWnErSHiP and rEaL EStatE
By-laws regulating in more detail the conversion of the right
of use to right of ownership of buildable land were originally
adopted during 2010. They initially provided a clearer interpretation
of the conversion process. However, from May 2011
the already slow process was blocked. The new by-law was
adopted on 1 September 2011. This by-law is of crucial importance
since it ought to chart the future of the construction
and real estate sectors in the upcoming period. The by-law
contains technical shortcomings and legal inconsistencies,
and would require additional interpretations or even changes
to make it functional. Furthermore, the chosen model is
very difficult to implement and there is a possibility that in a
number of cases conversion is not going to be possible.
The Law on Mortgage, adopted 4 years ago, introduced the
possibility of re-issuing construction permits following the
foreclosure of a mortgage over a semi-finished structure to the
subsequent purchaser. However, such a possibility diverged
from the previous Construction Law, which insisted on having
the same investor throughout the construction venture. The
new Law has changed this now, allowing the possibility of a
transfer. The new Law on Cadastre and State Survey has been
adopted, with a very important clause that all property registered
in the cadastre should also be appraised. This opens the
possibility for the state to regulate and organise this process
through the adoption of rules and procedures, with the methodology
of mass and individual evaluations.
Instead of the currently preferred type of land rights – lease
of buildable land, the new Construction Law introduces
the possibility for investors to acquire ownership under the
terms prescribed by the Law.
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