In the complex administrative apparatus and historical diversity of Bosnia and Herzegovina, a complex system of Real Estate Registries was developed. What does a buyer need to know in order to protect themselves from the risks that can arise in the purchase of real estate?
The first step is to answer whether the buyer can become a real estate owner. Aliens may acquire ownership of real estate if there is reciprocity between the countries. If the citizen of BiH may acquire ownership of real estate in the foreign country, the foreigner may acquire ownership of real estate in BiH. In legal practice, lawyers often face a problem when the interested foreign buyer comes from a country that does not have reciprocity with BiH. That is often handled by the foreigner establishing a company in BiH, which can then buy real estate without limitations.
The second step is to check the real estate’s status. The historical past of BiH resulted in the existence of two Real Estate Registries – Land and Cadaster. The Land Registry contains data on the ownership and the encumbrances on real estate, whereas cadaster data represents the ownership status and technical data on the real estate (shape, area). The problem starts with the inconsistencies between land and cadaster data, the reality being that much data was destroyed irreversibly during the war and because of the divisions in the country. For the buyer to acquire real estate without risk, the relevant land and cadaster data should be equal. That is not often the case, so asking a lawyer for help is recommended.
Because of the huge impact of those inconsistencies between land and cadaster data – for example, inconsistencies between owner and landlord, or the area and plot numbers not being the same – the Entities have initiated the procedure of public display of real estate. It means commissions are formed, whose task is to harmonize the land and cadaster status. Republika Srpska intends to abolish the dual records entirely and, instead of Land Registry Certificates and Property Deeds, to issue only Extracts from the Real Estate Registry, which shall contain the harmonized records. Instead of the Land and Cadaster Registries, a unique institution was established – the Administration for Geodetic and Property-Legal Affairs – which shall assume responsibility over real estate. On the other hand, The Federation implemented the procedure of public display in order to harmonize the data between the two institutions, whereas the Land and Cadaster Registries would keep their purpose in the future. In practice, this is a complex problem and the harmonization procedure will be slow, as the Cadaster might not accept the data harmonization solution offered by the Land Registry, which would often lead to long-term court proceedings.
At this stage, it is necessary to hire a topographer, for more than one reason. Firstly, it is crucial to determine the boundaries of plots on the ground; but it is of the utmost importance to determine if there are any encumbrances that were not entered into the registry records for that plot. Although, in theory, all the land encumbrances (water irrigation rights, cable setting rights) must be entered as such in the registry, that is not the case in practice. It often happens that a client intends to buy a plot where the landline or cables were not entered into the registry, with its practical construction possibilities limited as a result. That risk makes a thorough check a necessary step in the process of purchasing any real estate.
Finally, a real estate purchase cannot happen without a notary public. The notary public is considered to be the final instance that makes the agreement between the parties formal and concludes the Notarial Purchase Contract. The Real Estate Purchase Contract can only be processed by a notary public, and this specific form is required for the transaction’s validity.
Therefore, the purchase of real estate is a procedure implemented in three steps which demands the common participation of a lawyer, a topographer, and a notary public. Skipping any of the steps can significantly complicate matters. Therefore, preventive action is the key to risk avoidance and the most efficient solution, making the system of real estate in BiH fundamentally simple.
By Tijana Krivokapic, Business Development Partner, Ibrahimovic & Co