The Hasty Transition – Quite a Few Problems

February 28, 2019

The Hasty Transition – Quite a Few Problems

February 28, 2019

Miloš Velimirović

Miloš Velimirović

Partner

Milan Novakov

Milan Novakov

Senior Associate

The transition of Serbia`s property rights system from social ownership to private ownership created quite a few issues. Although there are many issues that may be deemed significant in general, there are also some that represented major impediments for a few.

One of those impediments for a few is related to the long-term lease of the construction land in public ownership.

In accordance with article 60 of the Constitution of the Republic of Serbia which was in force from 28th September 1990 until 8th November 2006, construction land could only be in the state and social ownership. In accordance with the laws on construction land which were in force from 1974 until 1994 and from 1995 until 2001, and in accordance with the Law on Planning and Construction which was in force from 2003 until 2009 (“2003 Law”), the right to manage and to use the construction land was given to the municipalities on which territory the construction land was located, and to the City of Belgrade.

In accordance with article 80 of the 2003 Law the municipalities, among other authorizations, had the right to lease the construction land to private entities for the purpose of construction. The lease of the construction land would give lessee the right to construct the designated object, on which it acquires ownership, and to afterward use the object and the construction land, as it is stipulated in article 61 of the Decision on Construction Land which was in force from 24th June 2003 until 21st February 2009.

On 8th November 2006, the new Constitution of the Republic of Serbia was adopted, ceasing all connections with the social ownership and stipulating that the construction land can be in all forms of ownership. In accordance with such reforms, the new Law on Planning and Construction was adopted on 11th of September 2009 (“2009 Law”).

Until the adoption of the 2009 Law, the long-term lease of the construction land system was somewhat complex but applicable. The problem with the long-term leases occurred with the article 100 of the 2009 Law (ref. to “Official Gazette” 72/2009) which introduced the right on conversion of the right of use into the ownership right.

In its essence, the article 100 of the 2009 Law (ref. to “Official Gazette” 72/2009) stipulated that the right of use of the construction land of the municipality is transformed into ownership right conditioned that the right of use of the municipality is registered in the relevant cadaster registry. In almost all other instances the construction land becomes state-owned.

Before 2009 in accordance with the relevant laws, the municipalities were the only administrative bodies that had the right to use and manage the construction land in social and state ownership. Before the adoption of the 2009 Law, there was no reason for the municipalities to register their right of use of the construction land with the land registry.

Therefore, the amendments introduced by article 100 of the 2009 Law (ref. to “Official Gazette” 72/2009) caused ownership issues in certain instances between the municipalities and the state. The ownership issues were (and in some cases still are) reflected in the cadaster, with the subsequent request for the registration of the ownership submitted by a municipality and the state (municipalities proving that they had the right of use and the state claiming otherwise).

This legal uncertainty of the ownership before the cadaster raised a practical issue of the landlord to the long-term lease agreements. The issue was mainly reflected in situations in which the lessee needed to conclude an annex to the lease agreement due to the change of the owner of the object located on the leased construction land or if the lessee wished to convert the long-term lease of the construction land into the ownership right.

It was, and still is an uncertainty, to who does the lessee turn to – to the state agencies managing the construction land in state ownership or to the agencies of the municipalities?

The response of the competent authority is to wait until the cadaster decides which entity has the more grounded claim to the construction land – therefore, creating the major impediment for a few. It seems that regardless of the interests and rights of the lessee the legal voids created by the transition of the property system in Serbia are still left for the interpretation of the cadaster, which in itself is just a land registry, therefore forcing the conclusion of legal uncertainty and the validity of actions of the relevant authorities.

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.

Contact:

Miloš Velimirović, Partner
milos.velimirovic@sog.rs

Milan Novakov, Senior Associate
milan.novakov@sog.rs

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