 The good news is that a foreign national does not
need to ask for permission to purchase a property in Bosnia and
Herzegovina.
The emerging property market in Bosnia Herzegovina is similar to other
developing countries with high end construction, and investment
opportunities.
Your estate agent operates in a reasonably transparent and competitive
market, given the newness of the market; most agents only operate in the
major town, handling mostly residential sales along with apartment
rentals.
Property valuation is not regulated in Bosnia Herzegovina, there is
no national body offering this service, so you're Agent's local
knowledge of properties and prices will prove invaluable.
At this moment we are unaware of any
mortgage lenders in Bosnia and Herzegovina that will offer foreign
nationals finance to assist with real estate purchase.
It is easier to complete a real estate purchase if you use the company
route, this will cost you around €1000 in fees and an initial start up
capital of €2000.
Owning a company then has a regular obligation of maintaining your
accounts to present to the tax authorities making life that little bit
easier.
Purchasing a
freehold property
Stage 1
A preliminary contract is drawn up between the seller and the purchaser,
which has to be signed by a representative of the purchaser, who will be
resident in BiH for the full process.
The contract must state the agreed price and confirm that both parties
are committed to completing the registration process, after which they
will be legally bound to conclude a finalised Contract of Sale for the
property.
Upon completion of the preliminary contract the purchaser must pay a
deposit of 3-5% of the agreed selling price to the seller.
Stage 2
To be valid properties must be registered in the property books
maintained by the local court. Properties are also recorded in the local
Cadaster, which requires the establishment of a unified property record
and cadastral system. This law has only just been implemented and
usually the property books and the cadastral will be separate.
Property records are frequently out of date, incomplete or incorrect.
Also the property books and the cadastral may be in conflict. An owner
may own a property on state owned land and has had long-term occupancy,
which are registered in the property books.
Many property books were destroyed in World War 2 and the civil war-possibly
as many as 25% property books of the country may be missing.
Property books are divided into 3 sections-the owners name, the property
details and any encumbrances such as mortgages.
Registration procedures allow for "subscription", which is temporary
registration of property rights, pending authentication.
To make matters worse registration of properties is widely avoided to
try to dodge paying the property transfer tax. In 2000 the deputy
Minister of Justice of Sarajevo estimated that just 18% of that years
sales were registered and as low as 10-15% in Travnik.
Ensuring the clean title of your proposed purchase is the key
element when purchasing in BiH.
On this site we aim to ensure that any properties have clean title. They
may because the owner is a foreigner reselling after purchase and has
satisfactory paperwork, or through an agent with a track record for
researching properties prior to listing.
Purchasing using
a BiH Company
It is easier to complete the purchase transaction if you use the Company
route. This will cost you around 1000 Euro in fees and an initial start
up capital of 2000 E. Owning a Company then has a regular commitment of
maintaining your accounts to present to the tax authorities.
The incorporation process is quite
speedy in BiH and should be completed in 3 weeks.
Lawyers
You can expect to
pay 3-5% for a lawyer, this cost should include the Company
incorporation costs
In every case engage a trustworthy
lawyer.
The Office of the High Representative (OHR), a civilian peace
implementation body headed until 2006 by Lord Paddy Ashdown, has
modified existing laws concerning the judicial system to make them
compatible with EU legislation. As a result, large law firms are no
longer prohibited in BiH, although most firms prefer a traditional
structure, with one attorney-at-law assisted by a junior lawyer.
New legislation regarding the attorney's profession stipulates that
foreign lawyers must be registered with one of the two bar associations
in Bosnia-Herzegovina. Unregistered foreign lawyers are not allowed to
advise upon Bosnian law.
The complex and rapidly changing legal environment dictates the need for
a local attorney. Bosnian attorneys' experience base is still limited
with respect to legal questions and issues that arise in a market-oriented
economy. However, local lawyers are quickly learning as they gain
experience in working with international organizations and companies
that are operating in BiH
The transfer of the property has to be registered by the appropriate
local authority. Once the registration is complete the seller must abide
by the conditions agreed in Contract of Sale and pay the balance owing.
On completion of the sale the purchaser is required to pay Property
Tax-Real Estate Tax to the authority. These rates used to vary from
authority to authority from as high as 15% down to 5%.These different
tax rates inevitably lead to "canton shopping" where people looked for
properties only in cheap tax areas.
The system has been recently updated so that there is a 6% rate across
all the cantons.This is 5% property tax and another 1% that the canton
charges to value your property, this is to stop people undervaluing
their properties to reduce the 5% tax payable.
The liability for the payment of this tax can be transferred to the
seller, but only if stipulated and agreed under the Contract of sale.
Planning Permission in BiH
A development that would have an "enduring impact" on the country, need
to have licenses from the State Government of BiH. Less strategic
development s are dealt with at the Entity level, where licensing comes
from the district level. The municipal authorities in each
administrative area of BiH license smaller, local developments.
This licensing covers all building activities including repair and
renovation. The Law on physical planning has been changed dramatically
to speed up the permission process.
Property Insurance
Foreigners can insure their properties-the leading company in BiH, is
Sarajevo Osiguranje.
http://www.sarajevoosiguranje.ba/index.php
There are no contact email addresses - apparently (!) - there are
English speakers at the head office:
71000 Sarajevo, Čobanija 14
Bosna i Hercegovina
Centrala: (+387 33) 203-270 / 665-510 / 665-511
Fax: (033) 664-142
Local office addresses are at:
http://www.sarajevoosiguranje.ba/main.php?id=11&blok=1
Capital Gains tax
At the moment there is no CGT payable
in BiH for foreigners buying and selling property.
You can guarantee that this position will be tightened up in the near
future!
Rental Law
The other good news is
that a foreigner can rent out their BiH property without any requirement
to obtain a rental license from the authorities.
People who have been
involved in renting in Croatia will know that is a very big concession
as you can waste a lot of time and patience in this particular paper
chase.
Your guests would
just need to pay a local tourist tax of around 2KM a day to the local
tourist office.
Cost of Living
The cost of electricity and water supply, both of which are metered in
Bosnia and Herzegovina, for individual apartments, will depend on the
amount of water and electricity used. With normal usage, during yearly
changing weather conditions, it should not exceed more than
approximately €40 per month. This can be more or less dependant on the
usage of electricity for heating and air conditioning and the amount of
water used.
Generally, the cost
of living in BiH is considerably less then in the rest of the Economic
Community. It is planned that sometime in the future that Bosnia
Herzegovina will become part of the Economic Community at which time it
is estimated that the apartments will be worth considerably more then
their current cost.
Guy Klima
Prague, 2010
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604 568 553 |
