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Legal Overview of Construction of New Buildings and Housing in Kosovo

Legal Overview of Construction of New Buildings and Housing in Kosovo

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Acquisition of property ownership in Kosovo is regulated by the Law on Property and Other Real Rights. The Law on Property, along with the Law on Cadaster, sets out the process of acquisition and registration of property in Kosovo. The Law on Property regulates the creation, content, transfer, protection, and termination of real rights, while the Law on Cadaster regulates the basis for the registration and recognition of the real rights by creating cadastral units for parcels, buildings, part of buildings, and utilities.

Based on the Law on Property and Other Real Rights, there are two conditions that must be met to acquire ownership of immovable property in Kosovo: a) a legal basis (a sale-purchase contract, donation, etc.) and b) registration of the change of ownership in the immovable property rights register. Natural and legal persons who wish to buy property need to ensure first that the property is registered in the cadastral office with the details described in the property certificate in order to enable the transaction between the buyer and seller. If the property is not registered in the cadastral office, the buyer cannot transfer ownership via a contract signed in front of a Notary Public. The sale is not final and the transfer of the property rights from the seller to the buyer has not been completed until the property is registered by the buyer in the cadastral units.

In the last decade, the construction of buildings and housing in Kosovo has grown exponentially, contributing directly to the increase of economic activity in this sector. As the sector has become more competitive, many investors failed to register their constructed buildings and housing with public authorities and register their ownership in the cadaster offices. This failure was caused by two primary factors: the first and most common is the bureaucratic and time-consuming process required to have public authorities technically accept the structures and register them in the cadastral office, and the second is the failure of investors to comply with the terms of the  construction plans permitted by the public authorities. These properties are treated by public authorities and applicable law as unauthorized until they receive technical acceptance and are registered in the cadastral office.

Given that, currently, investors cannot transfer ownership of the structures to the buyers, a mechanism for buyers to have the right to use and exploit the unauthorized structures has been adopted. This mechanism is implemented in two ways: a) by entering into legal obligations through internal contracts (i.e., one not involving the presence of a notary public) between an investor and a buyer; and b) preliminary contracts between an investor and a buyer signed in front of a notary public. However, neither of them fulfills the condition of registering the property in cadaster register. These two forms both aim to regulate or enforce a future binding contract between a buyer and an investor. In addition, this mechanism seeks to assure the buyer that the investor will not enter into other contractual obligations with third parties. Lastly, it ensures that the transfer will take place at the moment when the investor receives the property certificate from the cadastral office.

Both of these mechanisms have, to some extent, regulated the transfer of ownership and the de facto recognition of the buyer’s rights to the property. Courts and public authorities still do not always rely on the same doctrines in upholding these contracts, however, with some relying on the legal doctrine of substantial fulfillment and winning prescription to prove that the contract has been fulfilled.

In light of these crucial problems, Kosovo must undertake act quickly in order to regulate, ease, and quicken the process of registering these immovable properties in cadaster registers, since as the real estate sector is continuously growing, the number of unregistered buildings is growing as well.

All the above obstacles in transferring ownership for newly constructed buildings have a direct impact on access to financing, especially for buildings used for residential purposes, since buyers do not have legal title in their hands and are thus unable to use it as collateral for securing loans.

By Mentor Hajdaraj, Partner, and Blerina Ramaj, Senior Legal Associate, Ramaj, Palushi, Hajdaraj, Salihu Attorneys at Law

This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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