Recent Croatian regulations declare transactions involving illegally built buildings null and void. Legalising these buildings is imperative in order to validly sell, donate, or otherwise dispose of them in Croatia.

Definition of illegally built buildings

Pursuant to recently passed Croatian regulations1, illegally built buildings are in principle2 buildings built, fully or partially, without an adequate building permit or contrary (eg, in excess) to the building permit and registered on the digital map of the Croatian cadastral office of 21 June 2011.

Why legalise buildings?

Illegally built buildings are at risk of being removed by order with the owner bearing all costs. If business activity is operated within an illegally built building, no business permit can be obtained and there is a high risk of seizure.

However, as of 11 August 2011, disposing of an illegally built building (and/or the land it is built on) is not permitted until the building is removed. The corresponding acquisition contract is null and void and cannot be registered with any Croatian public registry. Furthermore, all buildings for which no annotation of having obtained a valid usage permit (general3 issued for buildings built in accordance with the corresponding valid building permit) has been entered with the land register are deemed to be illegally built. No transfer of ownership can be registered with the land register unless a “positive” annotation is registered with the land register or the appropriate usage permit is submitted to the land register4.

In most cases, the illegality of buildings due to no adequate building permit and the prohibition of ownership transfer can be solved within the newly introduced legalisation procedure, resulting in adequate permit(s).

Legalisation requests to be submitted by 31 December 2012

Not all illegally built buildings may be legalised. Legalisation means that adequate permit(s) may be issued if (i) the legalisation request is submitted by 31 December 2012, (ii) all preconditions are fulfilled, (iii) all required documents are submitted with the request, and (iv) all required fees are paid. It will primarily be the task of the engaged licensed architect, supported by other licensed experts (eg, geometer, constructor), to determine whether all preconditions are fulfilled and a legalisation procedure is permissible, as well as to provide most of the required documentation.

Permits obtained on the basis of the legalisation procedure will be proof that the building is legal, ie, that a permit corresponding to the building and usage permit has been obtained, and that the building may be validly transferred.

Legalisation in practice

The new legalisation mechanism has engendered heated public reactions, both pro and con. So far, these new, sometimes unclear, regulations have brought confusion and near paralysis to the real estate market, especially residential.

Whether and how the real estate market will ultimately benefit from the legalisation mechanisms is yet to be seen. As, according to some estimates, almost 90% of buildings in Croatia do not have a usage permit, architects will see plenty of work coming their way – if owners can afford the costs of legalisation.