Until now it has been common in Serbia for persons to hold usage rights on construction land owned by the State, an autonomous province or local government. These rights fell short of full ownership. On 16 July 2015, the Serbian parliament adopted a new law on the conversion, for a fee, of usage rights on construction land into ownership rights (the “Law on Conversion”). The new law takes effect from 28 July 2015.
The aim of the Law on Conversion is to complete the process of converting a registered usage right on construction land owned by the Republic of Serbia, an autonomous province, or a local self-government into a private ownership right.
Limited categories of holders of usage rights
The Law on Conversion complements the Law on Planning and Construction, which sets out the general rules for conversion without a fee. The Law on Conversion pertains to only certain categories of holders of usage rights including, inter alia:
- legal persons which acquired usage rights through privatisation, enforcement or bankruptcy procedures, as well as their legal successors;
- holders of usage rights on non-constructed construction land (neizgrađeno građevinsko zemljište) which acquired these rights pursuant to decisions of public authorities or according to regulations in force before 13 May 2003;
- sports clubs;
- socially-owned enterprises.
It is important to note that for these categories of holders of usage rights, conversion was a precondition for obtaining the right to build on such land plots.
According to the Law on Conversion, the above-mentioned holders of usage rights that have registered their rights with the respective real estate cadastre have the right of conversion for a fee. The fee is equal to the respective land plot’s market value, to be determined by the local authorities in each particular case, on the basis of the relevant by-laws. The Law on Conversion allows for a deduction from the fee in certain cases, including:
- if the construction land is located in an insufficiently developed municipality, the Government may determine the percentage of deduction in accordance with the relevant by-law;
- if a holder of usage rights submits a court decision proving that he had costs for the acquisition of usage rights to a respective land plot;
- if a holder of usage rights submits a request for the conversion of construction land on which a completed construction exists, in which case the fee is to be determined as the market price of the respective land plot decreased by the market price of the portion of the respective land plot that is required for normal use of the constructed object (zemljište za redovnu upotrebu).
Conversion for a fee is carried out in proceedings prescribed by the Law on Conversion, which specifies the required documents and the timeframe for the performance of certain activities. It appears that these proceedings last approximately 40 days. Once they are finalised, the competent authority issues a ruling on conversion, by which it determines the right to conversion on a respective land plot. This resolution, once it becomes final, is legal ground for the registration of the ownership title to a respective land plot in the real estate cadastre.
Lease of construction land
The Law on Conversion provides holders of usage rights on undeveloped construction land who acquired these rights pursuant to decisions of public authorities or on the basis of legislation in force before 13 May 2003 with the possibility to lease the respective land from its owner (the Republic of Serbia, an autonomous province, or local self-government) for a period of 99 years. In such cases, the annual amount of rent is calculated as the market price of the land divided by 99 years. It is envisaged that such a lease will be considered as proof of land rights and is among the documents required to obtain a construction permit.