Real estate purchase agreement in Croatia

Šime Unić
Real estate purchase agreement

It may surprise you if we say that it's possible to purchase a piece of real estate quickly and easily, but this really is the case. The most important part of the whole process is the purchase agreement that will be drafted by your lawyer or your agency, and once you have it, you need to get it notarized by a public notary.

There you can also register your ownership, which can be very handy, especially when it comes to buying real estate. Who wants to waste time on paperwork when they've just purchased a new house or an apartment? Still, it's good to know that your agency can do this for you, as well.

Naturally, the main condition for a quick and simple process is that the real estate's papers are in order and that its owner is clearly defined. In that case, the deal can be closed easily.

Keep in mind that once the agreement is signed, a tax equal to 3% of the real estate's price will need to be paid. This is regulated by the Real Property Transfer Act.

Foreign citizens or Croatian citizens who live abroad will have to report the purchase to the country they live in for which they will need to get the agreement translated by a court interpreter.

What is a real estate purchase agreement?

A real estate purchase agreement is actually a fairly simple document at its core – the seller commits to transfer the ownership rights of the piece of real estate in question to the buyer in exchange for a previously agreed price. Of course, the buyer has to be able to actually transfer those right to themselves and take possession of the real estate.

It needs to be said that this kind of agreement is only valid in written form and has to be signed as such.

All the parties have to have their basic information mentioned in the agreement, and that includes their name, surname, address and their personal identification number. Also, the agreement must contain all information relevant for the real estate.

If you're buying, don't forget that making the payment doesn't make you the owner. The ownership rights have to be transferred to you, and this has to be visible in the land registry. This is why it pays to have experienced agents at your side – they can make the whole transaction much simpler and speed up the whole process.

All this information has to be in the agreement even if the parties are foreign citizens, but they will have to secure some additional documents, too. The Ministry of Justice first has to receive their application, and the foreign citizen has to prove their citizenship, have the certificate from the local government and prove that the seller does indeed own the real estate in question.

what is a real estate purchase agreement?

We should also say that in the case of legal entities buying or selling their real estate, their full name and headquarters have to also be stated. In addition to the agreement, a Permitted Property Registration Clause also has to be present. This document confirms that the seller has received the full amount and that the buyer has fulfilled all of their obligations. Consequently, the transfer of ownership can be initiated. This clause can be a part of the agreement itself or attached to it as a separate document.

Other documents needed for purchasing real estate

A real estate purchase agreement is not the only document you may need during this process. Let's take a look at some other papers you should be mindful of.

An official copy of the land register: the only document that can be used to prove ownership over real estate.

Energy certificate: this certificate testifies about the building's energy features, and the owner is required to acquire it before selling real estate and show it to the buyer. A certificate like this expires after 10 years.

New buildings: for apartments that are being built, the investor has to have a valid building permit and a certificate of occupancy. The aforementioned energy certificate is required to get the certificate of occupancy.

Pre-contract: a pre-contract is often signed when purchasing real estate. It defines the real estate in question, its price and sets the down-payment which usually amounts to 10% of the final price.

Ownership transfer: as mentioned, this process has to be completed in the land registry because it is not automatic after the financial transaction is made.

energy certificate

Real property transfer tax

As stated, Real Property Transfer Act says that the tax rate for these transactions is 3%, but that is if the VAT doesn't have to be taken into account.

Also, some citizens can be exempt from paying this tax if they are, for example, buying the real estate in which they already live, if they are getting real estate that was taken from them back, if they have possessory interest, etc.

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