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The situation on the Croatian property market was affected by the recent military conflict, at which time around a quarter of the property here was damaged or completely destroyed. Croatia does not have enough money to take care of the restoration of this property. The Croatian legal environment is less stable and foreigners that do not know the local conditions can expect a few surprises on the property market. A large number of Croatian properties do not have building permission, whilst others have been built outwith their building plots and in conflict with the land-use plan. Many owners did not take advantage of the official opportunities for legalisation provided in recent years. The Croatian government recently imposed a strict ban on new residential construction (including holiday homes) within a distance of 70 m from the coast in as yet undeveloped areas. Therefore, this move does not affect parts of existing urban locations. This ban is contained in a decree on the protection of coastal land, which is a belt of land of 1000 m in width from the coast, 300 m into the sea, and all islands. In addition to halting unrestrained building work, this ruling intends to prevent the devastation of the coast. Meanwhile, the Croatian authorities continue to remove and liquidate structures that have been built without permission. 
Selecting estate agents
If you decide to buy a house or apartment in Croatia but are not an expert in Croatian legislation, do not have a good grasp of Croatian language, and do not have a good friend in the country who is genuinely skilled in property issues, it undoubtedly pays to make the purchase through an estate agent. Yet even the selection of an estate agent is crucial and may predetermine the success or failure of the entire transaction. A host of new agents that focus on selling property to foreign clients have been established in Croatia in the past couple of years, either owned by Croats themselves or foreigners. Among them are professionals who have brought their experience from the countries of Western Europe to the Croatian market and who offer a solid range of all-encompassing services. Unfortunately, you will find others whose presentations on the Internet are absolutely professional, but at whose head office you will find only a post box in a block of flats alongside a list of another ten companies. Individual agents differ in terms of the length of time they have actually been on the market, their background and size, the range of property they have on offer, their portfolio of services, and the commission they charge for their services. It is quite common in Croatia that the commission is not included in the price of the property, meaning that the buyer has to pay the estate agent this commission separately. Commission most often ranges from 2 % to 7 % plus VAT. Some agents offer a full range of services for the commission they charge, whilst others only provide selected basic services associated with the purchase of property and it is a good idea to ask about this in advance. It is also quite common that a number of estate agents will offer the same property at different prices. Some agents try to profit from foreigners’ lack of knowledge of the local conditions and prices of property in certain locations. If you are used to a certain standard of services in the Czech Republic, be prepared to come across a different approach in Croatia. It may happen that you cannot see the property you are interested in more than once due to the fact that, for example, the seller has a tenant in the apartment at the same time. Plans of the layouts of a house and its position are sometimes only created specifically for the needs of a certain interested party.
Choosing property
If you are buying property predominantly as an investment, choose a location primarily from the perspective of tourism and in particular according to the available infrastructure (either already in place or planned for the future) - airport, motorway, restaurants, sports facilities, and other services. In terms of the property itself, most important are its condition and distance from the sea. If you are choosing property for your own needs, it pays to spend more time on your choice – you might choose at the first time of asking or it may happen that you want to see the place selected more than once. When choosing it is a good idea to remember that the location might look completely different during season and at other times, for example in autumn or spring. Small villages that live on tourism during the summer are mostly only occupied by a few permanent residents out of season; local shops and restaurants are closed. The houses and gardens that profit from the shade of trees during the hot summer may seem shadowy and gloomy in autumn, especially if they do not face south-west. These are some of the points that you ought to take into consideration if you are planning to visit your property by the sea on a more regular basis and if you plan to spend more than just you summer holiday there.
Setting up companies
The first condition that the estate agent you select (either Czech or Croatian) ought to point out if you are interested in buying Croatian property is the need to buy such properties through a Croatian company. Given the fact that there is no reciprocity agreement between Croatia and the Czech Republic, Czech citizens cannot own property in Croatia as natural persons, but only through legal entities. There is the theoretical possibility of requesting an exception, but this is a very long-winded process and almost always one that ends in failure. Nonetheless, even for countries that do have reciprocity agreements with Croatia the procedure is still extremely bureaucratic and it is expected that this will become simpler with the accession of Croatia to the EU. A good estate agent will set up a company for you as one of the services provided for the commission you pay. This process takes approximately 1-2 months and you need approximately 4000 Euro to set up a company (including notarial, legal, and court fees), 2700 Euro of which (your investment in the company) you are able to make use of immediately after foundation.
If you have already chosen a property and still haven't set up a company, sign a pre-contract agreement (before a notary or lawyer). Part of the purchase price of the property and a deposit on commission are paid when this is signed. Count on the fact that all payments must be made in kuna in spite of the fact that you can also have a foreign currency account in Croatia. Before you sign the agreement the estate agent ought to take care of all documents regarding the property, from which it should be possible to tell if there is any right of user on the property, whether the property has been built on the exact building plot, in accordance with planning permission, etc. If the buyer withdraws from the pre-contract agreement, he/she usually loses the deposit put down. If, on the other hand, the seller withdraws, he/she is obligated to return to the buyer up to twice the amount which the buyer deposited. A contract of purchase is then signed (again before a notary or lawyer) and the entire purchase price and commission paid once a company has been set up. At this moment the ownership of the property also passes to the buyer. The estate agent ought to ensure that an application is filed without delay for the entry of the new owner in the real estate cadastre. The actual entry in the real estate cadastre generally takes several months. The new owner is obligated to pay property transfer tax within one month. 
What you can expect after you buy
Once you have set up a company it is a good idea to choose an accountant with whom you can discuss your each and every move. The annual costs of accounting services run from 300 to 1300 Euro. Based on the intentions which your company has for its property and activity your accountant will recommend whether it is beneficial for you to register as a VAT payer. He/she will also file your annual tax return on your behalf and will monitor all transactions which ensue for you and the company by law. You do not pay annual property tax in Croatia - you only pay for the services associated with the property, i.e. the consumption of electricity and water, telephone bills, waste disposal, etc. You must register as the new owner of the property with regard to obtaining these basic services. If your estate agent takes care of this for you, it is one thing less to worry about. If not, you have to be patient and take a Croatian speaker to the authorities with you. It is a good idea to hire someone local to take care of the administration and maintenance of your property, especially if it is a family home or apartment intended for lease. Under such circumstances you need to register your property for the purposes of lease and then obtain a so-called “apartment classification”. We also recommend that you take out insurance on the property.
Mediterránea handles all matters required to buy a property and in particular provides the following services:
  • arranging the set-up of a Croatian company; 
  • checking the documents that prove the ownership of the property; 
  • the organisational assurance of a notarial entry in the real estate cadastre; 
  • assistance in opening a bank account; 
  • translations (contracts of purchase, pre-contract agreements, deed of ownership); 
  • the provision of legal services in the place of purchase; 
  • finding an accountant in close proximity to the property; 
  • assistance in registering the new owner for supplies of water, electricity, gas, municipal services, and so on.
The estimated costs associated with buying property in Croatia are as follows:
  • the funds required for setting up a company – approximately 26 000 HRK (20 000 HRK of this sum is investment capital which can be used once the company has been set up); 
  • property transfer tax amounting to 5 %, mostly paid by the buyer; annual property tax is not paid; 
  • fees for a Croatian lawyer (generally 1 % of the purchase price of the property); 
  • commission for the estate agent (up to 7 % + VAT – based on the services provided); 
  • bank charges for transfers.
The costs associated with running property in Croatia are as follows:
  • bookkeeping: from 300 Euro per annum to 50 – 90 Euro per month (the price depends on several factors, e.g. the number of documents involved in accounting, the location, knowledge of English or other languages, etc.); 
  • the costs of services (electricity, water, telephone, gas, etc.); 
  • cleaning; 
  • insurance, etc.