Real Estate Without Construction Permits. How Did it Happen?
January 04, 2021
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Amazing situation is happening in Montenegro. Tens of thousands of properties do not have building permits. And at the same time, all these buildings are subject to turnover on the market. They are sold, bought, inherited and used for decades. Why did this happen? What risks does "disenfranchised" housing hide? And is it possible to buy a house in the certificate of ownership of which there is a mark "Without a construction permit"?
Illegal Background
The topic is complex and ambiguous. The processes that led to the emergence of self-construction lasted for decades. But we will try to explain the key points.
Yugoslavia started to fall apart in 1991. Over the next 15 years, seven independent countries (including the partially recognized Kosovo) emerged in this territory. Montenegro gained sovereignty only in 2006.
During the Yugoslav period, Montenegrin cities developed slowly. The region was not considered as an international resort, which means that the coast was not built up.
The situation has changed dramatically since independence. Foreigners bought up local land plots, and the Montenegrins themselves had to solve the housing issue. An unexpected construction boom began. In a matter of months, they mastered all the plots in the urban plans that were in effect at that time.
Local authorities did not have time make new projects for the development of territories. In addition, the budget for communications was severely limited. In some regions, dupas (detailed urban plans) have not been developed for 20-30 years. This means that the owners had no option to get an official construction permit.
After building a house, the owner registered it with the cadastral and tax offices. The state accepted and issued a certificate of ownership (a sheet of non-secrecy) with the mark " Нема граджевинске дозволе". After that, the property was included in the turnover in the real estate market. The owner could do anything from that moment, except that banks were not very willing to issue loans secured in the form of a building erected without a construction permit.
The exact figure is still unknown. According to various estimates, from 40,000 to 100,000 properties were built during the period when the state did not issue construction permits.
Not only private owners who built small houses for personal residence, but also developers fell into this legal collapse. As a result, thousands of apartments in high-rise buildings without permits entered the market. The list of "disenfranchised" also includes reconstructed objects: for example, it is possible that the first floor of a house is built legally, and the second is not.
Kotor, Montenegro
Legalization of the Market
A situation in which no one can legally build a house could not last forever. Seven or eight years ago, the Montenegrin authorities finally got involved into cadastral issues and urban planning.
They had to decide what to do with those who had already built housing without obtaining permits. Demolishing was not an option. There are too many properties like that. Most of them meet modern standards. And most importantly, it’s not owners’ fault that during the transition period state institutions were not ready to accompany the construction.
The government has decided to launch the process of mass legalization of this property. And at the same time replenish the budget. On July 30, 2016, the Parliament of Montenegro adopted the law "On the regulation of informal objects" (Zakon o regularizaciji neformalnih objekta), which allowed the entire squatter development to be brought out of the shadows.
Market participants and property owners in Montenegro met the law with enthusiasm. The terms were declared loyal. For legalization, you need to submit an application, collect a small package of documents and pay a tax for connecting to the city communications (komunalije).
The tax rates were equated to the current ones, providing discounts and installments. On average, in the Primorsky region, the state fee is €70-150 per sq.m real estate. For example, for a house in Budva with an area of about 200 sq.m runs up about €20,000. With a one-time payment, the amount is reduced by 20%, and you can also apply for installments for any period up to 20 years.
The deadline was set for July 15, 2018. By this date, all owners of informal objects had to declare themselves. But I couldn't meet the deadline. In October 2019, the authorities reported that they received 51,000 requests, of which about 30,000 were processed.
They planned to push back the deadline, and recently announced that the legalization will become indefinite, but only for properties that appeared before 2018 and marked on orthophotos, which were made during this transition period. Thus, it will be impossible to legalize houses built illegally after the deadline.
Legalization is moving slowly. It is likely that another five to ten years will be needed to register illegally built real estate from 2006 to 2018. But this process is inevitable, all owners, whether they want it or not, will have to go through it.
real estate without building permits is still the norm in the Montenegrin market, there are still a lot of such housing. But in the future, the remaining "without permission" objects will turn into an illiquid, which will be extremely difficult to sell even at a discount. In addition, it is possible that the authorities will toughen the penalties for the owners who remain in the shadows.
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Despite the fact that the formal deadline for the legalization of real estate has already passed, most owners have not received a response from the regional authorities. Applications have not been processed, detailed plans have not yet been drawn up for each region. This means that there are still tens of thousands of properties on the market that do not have a construction permit. Obviously, the process of coming out of the shadows will continue.
With such a scale of the problem it would be strange to say that "disenfranchised" real estate cannot be bought. Such transactions are regularly made, there is nothing illegal in them. But buying a house is usually a long-term investment, many people want to transfer this property to heirs. So, you should think about the prospects: even if the property does not have "permissions" now, it is important to understand whether it is possible to get this permission in principle. And mentally prepare for the payment of taxes to the state.
Each specific property must be checked, preferably with the help of an experienced lawyer or realtor.
View the certificate of ownership whether it is indicated there " Нема граджевинске дозволе ", and also compare the cadastral plan with the actual state of the real estate property. If there are no encumbrances and uncoordinated extensions, then you will not have to pass legalization.
If there is an encumbrance, it is necessary to find out from the owner whether he has submitted an application for legalization before 2018. Most have already done so. In this case, the process will continue with the new owner, when the authorities process the application, they will pay the tax and remove the encumbrance.
If the application was not submitted, it is necessary to find out whether it is possible in principle to legalize the property. The main thing is to study the urban planning plan of the territory, whether the state is going to build an overpass on this land. The plot should be allocated for housing construction. The law prescribes several circumstances that prevent legalization. For example, it is impossible to legalize properties located in national parks, in a protective lane of roads, in a landslide zone, at a distance of less than 400 meters from military facilities.
Analysis of the stability and security of the facility
Step 4
The decision to legalize
The package of documents for legalizing a house with an area of up to 500 sq.m:
Application. It can be submitted by the owner or a representative.
Certificate of ownership – the so-called list of non-secrecy, an extract from the state register.
A survey of the condition of the object (elaborat), certified by a licensed geodetic organization (three copies), a copy of the cadastral plan or an excerpt from the cadastral plan.
Seismic safety certificate. Also prepared by a licensed specialist, such as an architect.
Architectural design (three copies) made by a licensed company. In addition to the basic characteristics of the object, it contains drawings of the foundation, cross-sections and facades, a description of engineering solutions and communications. You do not need to submit an architectural design for objects that are used as the main place of living.
