How to buy property in Montenegro
Advice for British nationals buying property in Montenegro, including information on legal advice, fraud, taxation and more.
The Law on Proprietary and Ownership Rights of Montenegro which regulates proprietary rights in Montenegro since 2009 prescribes as general principle that foreigners may acquire immovable properties in Montenegro as Montenegrin citizens. However, the Law also prescribes the following exemptions in respect to acquiring ownership rights by foreigners:
- Natural resources;
- Goods in general use;
- Agricultural land;
- Forest and forest land;
- A cultural monument of great and special importance;
- Immovable property in a land-border area to a depth of one kilometre and islands;
- Immovable property which is located in an area which is to protect the interests and security of the country, legally declared an area in which a foreign person cannot have a property right.
Note: Exceptionally, a foreign person may acquire the right of ownership of agricultural land, forests and forest land with area of 5.000 m2 only if the contract on alienation (purchase and sale, gift, exchange, etc.), residential building located on that land.
A foreign individual may be entitled to long-term lease, concession, BOT and other arrangements of private - public partnership (the above mentioned immovable property in points 1 to 6) as well as domestic citizens.
Buying property abroad is a major decision, and one that must be researched thoroughly. Do as much fact finding as possible, including visiting your chosen location at different times of year. Investing in property is not without risk, particularly in an emerging market. It is essential to obtain professional advice and guidance specific to your circumstances, especially in areas like property purchase, potential rental returns, taxation and mortgages. Never sign any document until you are satisfied that you fully understand what you are committing yourself to.
This guide is intended as practical advice which you should consider when purchasing property in Montenegro.
Research property in Montenegro
It is important to research thoroughly the area you are considering to purchasing in, as well as companies you might use (developers, estate agents and lawyers). You should look at a range of properties with different agents to compare prices and ensure that you do not end up paying too much.
Exercise extreme caution if an estate agent, promoter or lawyer urges you to cut corners to save money or time. The Montenegrin property conveyance system is different to the one in the UK and you should ensure that those involved in the transaction are qualified professionals with expert knowledge of how the system works.
If you choose to work with a British estate agent, promoter or lawyer, check that they are qualified, reliable and have experience operating in Montenegro. It is also worth looking at online forums dedicated to Montenegrin property to learn from others’ experience and ask questions.
Seek independent legal advice
Appoint a lawyer who is experienced in property conveyance and fully independent of anyone else involved in the transaction, e.g. the estate agent, vendor or developer.
If your lawyer is based in Montenegro, check that he/she is registered and practicing with the Montenegrin Bar Association by asking for their registration number and verifying this through the Bar Association’s website. If you appoint a UK firm, check that they are registered with the Law Society in the UK and specialised in International Transactions. Check that your UK lawyer has professional indemnity insurance. There is no indemnity insurance in Montenegro.
Do not sign any papers or hand over any money until you have taken independent legal advice. Although the British Embassy cannot recommend a lawyer, we do have a list of local English-speaking lawyers. Please note the disclaimers.
Use an independent translator
If you do not have a good understanding of Montenegrin, make sure that you get all contracts and relevant documentation translated by an independent translator. Please note that only the Montenegrin version of the contract is valid in a Montenegrin courts.
The UK has a double taxation treaty with Montenegro; tax is paid in one country or the other, not both. Unlike the UK’s, Montenegro’s tax year corresponds with the calendar year. According to Law on Personal Income Tax, income generated from property by residents and non-residents is taxed at the rate of 9%. Also, please note that there are no Capital Gains or Inheritance Tax in Montenegro, but only in the case of the first lines of descendants or Gift contracts.
Foreign nationals living temporarily in Montenegro are considered non-residents and taxed only on Montenegrin-sourced income, including rental income (at 9%), interest payments and dividends. Foreign nationals who have a permanent residence in Montenegro, or who spend more than 183 days there per calendar year, are classified as residents and taxed on their worldwide income. The 183 days need not be consecutive. Residents are liable for tax at 9% on rental income earned in Montenegro.
An annual property tax can range from 0.10% to 1.00 % of the market value of real estate %, calculated on the market value of the property as at 1 January of the year in question.
The real estate tax is determined by decision of the competent local authority by May 31st of the current year. The real estate tax is paid in two equal instalments, the first of which is due on 30th June, and the second on 30th November of the year the tax is determined.
Real estate owners are obliged, within 30 days from the date of acquisition of immovable property, to submit the tax declaration to the competent tax authority of local authority.
There are two conditions necessary to complete the purchase of a property and confirm ownership. These conditions are: “justus titulus” (legal entitlement to the property), and “modus aquirendi” (the registration of the property with the Area of Land Registry).
Once a property has been chosen, a purchase contract is drawn and signed by both parties, or by their authorised representatives. A purchase contract must be concluded in the form of public notary deed prepared by the public notary who has jurisdiction for the municipality in which the subject property is located. When legal ownership is confirmed, a department within the Local Council Offices determines the value of the property. The buyer then is supposed to pay the property transfer tax of 3% of the agreed valuation. Once this tax is paid, the purchase contract is confirmed by an official stamp. Upon final and non-appealable registration of title with the competent Land Registry the purchase is complete.
Before you complete your property purchase you should make sure you have seen:
- The Land Registry extract (“katastarska skica”) which provides all the information on the land’s use, regulation (building restrictions) and structure.
- For the properties which are not included into the Land Registry (not available for all areas) a Municipality Sketch is issued.
- Planning permit (“dozvola za projektovanje”): you must ensure that when buying off-plan from a developer, the development has been approved from the local municipality (town hall). It is also worth having a look at the Urban Plan which will state whether or not the plot you wish to buy has any building restrictions, is in a green zone or includes a public pathway or similar.
- The paid-up receipt for the previous owner’s annual property tax. It is also wise to make sure that there are no unpaid fees and taxes from previous years.
- The Cadastral certificate giving the exact boundaries and square metres of your land
- The Use Permit which is issued by the town hall for new buildings or restructured ones and certifies that the property is habitable. You will need this document to connect to electricity and water companies.
- It is wise to require from the seller of the property to provide evidence for absence of any liabilities concerning the property (taxes and other statutory costs and fees) or its use (consumable expenses). Ask the property agent for information regarding any costs the owner has not paid. You should be aware that if you later find that there are any outstanding debts, as the new owner, you assume the debts for the current and previous year. For this reason it is strongly advisable to ensure that you have a copy of an affirmation stating that the previous owner has no debts.
- A property survey: this is not obligatory but it is wise to get a chartered surveyor to check the property before you complete.
- If you are buying an off-plan property, confirm that there is an architectural plan for the property approved by local municipality. Ensure that the developer/constructor has the necessary insurance to cover build defects.
- The preliminary contract – this contract is not obligatory but is usually signed between the buyer and the seller before the public deed is granted. You should make sure that you fully understand the contract before you sign it - if you are not fluent in Montenegrin the public notary shall require presence of official interpreter to ensure that you fully understand the terms of the contract.
- The title deed – it is important to check that there is an accurate description of the property in the deeds.
Other sources of advice
Montenegrin Ministry of Finance, Real Estate Administration
Licensed private geodetic organisations
Department of Public Revenues
Protector of Human Rights and Freedoms of Montenegro - Ombudsman is an independent and autonomous institution entrusted with protecting and promoting human rights and freedoms when these have been violated by means of an enactment, act or failure to act on the part of the state authorities, local self-government authorities, public services and other holders of public powers. If you have a complaint about any public authority, you can submit a complaint to national ombudsman.
You should report the fraud by registering a complaint with the Montenegrin police or by pressing charges through the courts in Montenegro. Please, consult official web page of the national administration authority competent for property affairs.
Usually, in Montenegro, property frauds fall under civil law and therefore are settled as private disputes held by a mediator or in court. If serious fiscal frauds have occurred (such as payments taken without receipts), the controversy is likely to fall under penal law. The Montenegrin police should deal with all fraud allegations once they are brought to their attention.
We have published advice on which UK authorities to contact if you think you have been a victim of property fraud.
While we hope that this information is useful, please be aware that it is not intended to be the only guidance for prospective buyers to follow when considering making a purchase. In addition, we make no representation as to the quality or accuracy of the information which is available at the web addresses listed in this guide, nor can we accept any responsibility for the content that is hosted on them. We strongly recommend that prospective buyers of property in Montenegro seek independent legal and financial advice at all stages of their purchase.