For a very long time, Serbia’s real estate market has been burdened with the issue of widespread illegal construction.  For almost three decades, the government struggled to prepare legislation which is suitable to tackle this issue, i.e. struggled to “legalize” and introduce into Serbia’s legal system buildings that were subject to illegal construction; consequently, the legal status of illegally constructed buildings during this period remained largely uncertain.  On several occasions, the government tried to set up a zero point from which point onwards performing construction works without permits would not be tolerated.  It could be well argued that none of these attempts came to fruition.

Before Amendments: Soft Sticks and Flavourless Carrots

The most recent attempt to improve and finalize legalization of illegally constructed buildings was when the Serbian Parliament enacted 2015 Legalization Act (“Official Gazette of RoS no. 96/2015”, hereinafter the “Act”).  Despite introducing efficient features such as statutory initiation of legalization proceedings (ex officio) as well as possibility for all buildings subject to legalization proceedings to be visible on 2015 satellite image of the Republic of Serbia, the Act did not achieve any notable results.  It failed to provide strong incentives for the owners of illegal buildings to pursue legalization thereof.  Also, the pace of resolving legalization remained on same level it was before the Act.

Amendments: Most Recent Attempts to Resolve an Age-Old Issue

The most recent amendments to the Act (published in the Official Gazette of RoS no. 83/2018, hereinafter the “Amendments”) introduced several turning points, intended to speed up and finalize the process of legalization.  Some of the key provisions of the Amendments are:

• illegally constructed buildings cannot be disposed of until they are successfully legalized. In this respect, the cadastre is under an obligation to register annotation on prohibition of disposal of these buildings within 6 months as of the date the Amendments come into force;
• cities which are composed of several inner-city municipalities (e.g. Belgrade) can assign resolution of legalization proceedings to these inner-city municipalities;
• in case legalization process results in denial or rejection of legalization claim in the first-instance and second-instance, construction inspection is entitled to order immediate demolition of the building, without waiting for the decision on denial or rejection of the legalization claim to be decided in court-administrative procedure (which was previously a standard third-instance legal remedy).
• in case a building which is subject of legalization proceedings is constructed in vicinity of a public building, the owner of illegal building must provide a statement whereby it waives all claims regarding environmental effects of public buildings to the building which is subject to legalization proceedings.
• in case a decision on legalization of the building is not enacted within 5 years as of the date when the Amendments became applicable, the competent authority will render decision on denial of legalization claim.

Will It Work?

Most likely – no.  The above-mentioned provisions seem more like a half step forward, but four and a half steps backwards.

Inability to dispose of the buildings which are in legalization proceedings may be taken as a good step towards quicker resolution of this never-ending problem. However, the actual question is whether this step is reasonable or not since it permanently bans transfer of a significant amount of real estate (res extra commercium) which was previously subject to disposal.

On the other hand, time limits for legalization of all illegally constructed buildings, under the threat of denying the legalization claim, seems somewhat exaggerated, given that legalization proceedings are time consuming (in practice, inactivity of public administration is a major factor in prolongation of these proceedings).  Moreover, transferring this matter back to inner-city municipalities will further impede the legalization process for an unknown period.  Therefore, we anticipate that these provisions will have to be subject to revision at some point of time.

The legislator also applied unusual legislative technique with respect to legalization requirement for the owner of illegal buildings adjacent to a public building, i.e. by stipulating that these owners must waive their claims arising from adverse environmental impact of an adjacent public building.  This could have been simply resolved by stating that owners of illegally constructed buildings in vicinity of public buildings cannot claim any damages arising from environmental issues.

Finally, the Amendments will create serious issue with respect to the principle of legal security.  Specifically, it could happen that owner of illegally constructed building had his request for legalization denied in both first and second instance proceedings and that construction inspection demolished the building as a result thereof. However, if the owner is successful in “third-instance” court-administrative proceedings and manages to reverse decision on denial/rejection of legalization claim, the damage for the owner would be irreparable.

The above-mentioned deficiencies indicate that a number of these provisions are not in conformity with the Serbian Constitution, so we can expect that at least some of the provisions of these Amendments may be set aside by the Constitutional Court.

Having in mind that this issue affects a significant number of natural persons and legal entities, it remains to be seen how the changes to the legalization process will be implemented in practice.  Solely judging on our previous experience regarding this matter, it does not seem likely that the Amendments will provide the intended effects – to the contrary, it seems that the Amendments will further impede the already burdensome legalization process.

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Radovan Grbović, Partner
radovan.grbovic@sog.rs

Ivan Nikolić, Senior Associate
ivan.nikolic@sog.rs