Buying a property in Montenegro can be a simple process if you deal with a registered estate agent and relevant professionals.
Overseas buyers can easily purchase property for their business or for personal use.
Stages of Buying Property in Montenegro:
1. Property selection made from several visits with your estate agent.
2. Negotiate a price acceptable to all parties (estate agency commissions vary between 3-5% usually paid by the seller), request further information on the property &/or agree conditions of the purchase.
3. Registration of the contract of sale of real estate
The initial contract of sale is drawn up by a notary. The notary also certifies other documents necessary for the successful transaction.
You must make an appointment with a licensed notary in advance then submit documents for verification of legality, preferably 3-5 days before the transaction.
In practice, it takes from 3 to 8 days from the moment when all documents related to the transaction are handed over to the notary until the parties sign the agreement and notarize it. A procuration (proxy) can be requested for this contract in your absence.
Rates for types of notary actions and notary services are set by Law.
The cost of notary services is assessed based on the following criteria:
– The value of the transaction
– Elapsed time
– The established rate for notarial action.
When performing a notarial act for foreign citizens, the presence of a certificated translator is required. At the buyer’s request, the contract can be translated into any foreign language in written form.
Payment to the translator is made in accordance with the rates of their services
4. Transfer of Deposit
The deposit amount is determined by agreement, usually between 5% and 10% of the value of the purchased property. It is recommended that you pay your deposit when the contract is signed and certified.
5. After signing and certifying the agreement, as well as making a deposit, the buyer pays the full amount of the purchase and sale within the date agreed by all parties including the notaire. You can make a payment in any convenient way. For example, transferring money from your bank account (via a currency broker, please enquire for details) to the escrow bank account in Montenegro. The transfer of ownership is normally done once the full payment has been received.
6. After fulfilling all the buyer’s obligations under the contract and paying the full amount of the purchase, the seller issues a confirmation named-“clausula intabulandi”. Clausula intabulandi and the contract of sale are the main documents – on the basis of which the property rights are re-registered in the cadastre (government organization for registration real estate ownership) to the new owner, without the seller’s further presence.
The legal term for re-registration of property rights is up to 60 calendar days.
7. The tax on the purchase of real estate
After registering the contract with a notary, a copy of the purchase and sale agreement is sent to the tax inspectorate. Based on the contract and guided by market prices for real estate, an expert of the tax inspectorate gives a tax assessment of real estate.
If the seller sells the property at market value, it is usually kept at the tax assessment or slightly increased. In this sense, it is extremely profitable to acquire and take ownership of properties that require repair or restoration, since their estimated cost at the time of purchase is quite small compared to the renovated value.
After the assessment, the tax inspectorate makes a decision to pay a one-time tax on the purchase of real estate in the amount of 3%. the Tax Inspectorate acts in parallel and independently of the Cadastre. This means that the buyer (except in cases where the seller is a legal entity, or if the contract of sale does not provide otherwise) will receive a decision to pay real estate tax before fulfilling its obligations under the contract. The tax must be paid within the prescribed period (within 15 days from the date of receipt of the decision to pay the tax), otherwise penalties will be charged.
When purchasing primary real estate from a developer that is a VAT payer, the 3% tax is not paid. Please note that sometimes a new property is built by an individual, and in this case 3% tax is paid.
8. Documents of title (deeds)
After completing the procedure for re-registration of ownership rights, the seller and buyer, or a proxy based on a notarized power of attorney, receive a decision to transfer ownership rights to the new owner.
It is important to know that the seller and buyer, or a trusted person, must sign the cadastre, and thus confirm receipt of the decision on re-registration of property rights.
Within 8-10 days (the time that is given for appealing the decision and technical processing of documentation) after receiving the decision, the new owner of the property can receive an extract from the cadastre of property rights, “Certificate of ownership”, where the buyer will already be entered as the new owner.
In fact, the buyer becomes the owner of the property immediately after signing the contract and fulfilling the obligations under it, that is, paying the full price of the purchase and sale of real estate on time. Possession can take place at this point.
The transaction cost on a newly built property is much higher because 19% VAT is levied instead of the transfer tax.
Notarization is mandatory for sale-purchase agreements. Notary fees are around 0.01% of the property value.
According to common practice, lawyers are hired to prepare the sale-purchase agreement. Although negotiable, legal fees range from €100 to €300 per transaction.