November 25, 2009

New Law on State Survey and Cadastre

The key aspect of the law is that the there will be only one type of record of rights in rem in immovable property, that will be kept by the Republic Geodetic Authority.

On August 31, 2009, the National Assembly of the Republic of Serbia adopted the Law on State Survey and Cadastre, effective as of September 11, 2009.

The key aspect of the law is that the there will be only one type of record of rights in rem in immovable property that will be kept by the Republic Geodetic Authority. Until the present, in some parts of the Republic of Serbia, land registry books kept by the respective local courts used to represent the record of rights to immovable property while in some other areas it was cadastre of immovable property (kept by the Republic Geodetic Authority); a deed, as the third type of the record, practically did not exist. Pursuant to the Law on State Survey and Cadastre the areas of the Republic of Serbia will be covered with the cadastre of immovable property, while other types of records will continue to subsist until the cadastre of immovable property is formed and organized.

Also, the Law on State Survey and Cadastre allows for excerpts to be retrieved from property sheets relating to a specific immovable property, or to a specific person including all immovable property of that person located in the territory of one cadastre municipality.

A novelty introduced by the Law on State Survey and Cadastre is that the final decision on a contested decision, rendered in the second instance regarding recorded rights in rem in immovable property, lies with the court in an administrative proceeding.

Law on Planning and Construction

Also, on August 31, 2009, the National Assembly of the Republic of Serbia adopted the Law on Planning and Construction, effective as of September 11, 2009.

The new Law on Planning and Construction regulates three areas that had been regulated by the former law:

1. Construction land (types of construction land, pertaining rights, obligations and transactions involving the land);
2. Construction of buildings;
3. Spatial and urban planning.

1. Construction land:

Construction land is (i) the land where there are buildings constructed in accordance with the law; (ii) the land that serves for the regular use of the constructed building; and (iii) the land that based on the law or a plan is anticipated for construction and regular use of the building(s).

It is important to note that in the Republic of Serbia, as a relict of the communist era, the land within the city zone is state owned, while physical or legal persons hold the right to permanent use or a 99 year lease.

The Law on Planning and Construction provides that persons who are recorded as holders of the land use right over the developed construction land (construction land with buildings constructed thereon) transforms the land use right over the land to personal property ownership right without the payment of any compensations. The identical solution is provided in the case of a recorded lessor of the developed construction land, whose lease has been concluded for the period exceeding 50 years, and the lease right shall be transformed to the property ownership right without the payment of any compensations.

With respect to undeveloped construction land (the construction land without any constructed buildings thereon), the Law on Planning and Construction does not regulate rights of persons that used to be owners before the communist era and before the nationalization that are now recorded as holders of the land use right, i.e. the Law does not provide for their land use right to be transformed to the property ownership right without any compensation.

With respect to a person who was granted the land use right over the undeveloped construction by the state, the Law on Planning and Construction provides that such land use right could be transformed to the property ownership right if that person pays certain compensation that corresponds to the market price of the land, reduced by the amount that the person paid at the time of such grant. If such a person fails to pay the compensation for the conversion of the land use right over the land to the property ownership right within one year as of the effective date of this Law, the land use right of the person will be forfeited.

The Law on Planning and Construction provides an exception to the above rule regarding the land use right in connection with former state-owned or socially owned companies that were privatized. The Law on Planning and Construction provides that the land use right over the construction land (developed or undeveloped) held by such privatized companies can be converted to the property ownership right with the payment of compensation in the amount equal to its market value reduced by any cost associated with obtaining the land use right over the land. It also provides that these privatized companies, even when they fail to pay the conversion compensation, can construct new or reconstruct the existing buildings on the construction land within 18 months as of the effective date of the Law, but only for operation of their prevailing business activity, i.e. only certain types of buildings/facilities that are used for the prevailing business activity of the company can be constructed or reconstructed.

The Law on Planning and Construction provides for a duty that used to be provided only under the Law on Agricultural Land and not under the law that regulates the construction of buildings, thus many investors had not known of it or had not taken this duty into account when budgeting for the future construction. The Law on Planning and Construction provides that an owner of a cadastre land lot, whose purpose had been changed from agricultural to construction land, is required to pay certain compensation for this change of purpose, which under the Law on Agricultural Land, amount to 50% of the land market price.

2. Building construction:

The Law on Planning and Construction has abandoned the legal requirement that no construction is allowed to commence immediately following an approval of the construction (confirmation of the acknowledgement that the construction work has been set in motion was required). Now the construction permit is considered sufficient for the construction to begin.

The Law on Planning and Construction also provides for the construction permit transferability, which was not possible until the present, however, land rights have to be transferred beforehand to the new investor. This provision enables that a new prospective investor does not need to initiate the entire licensing procedure anew, but on the basis of the transfer of land rights assumes the rights related to the construction of the seller, in the same phase attained by the seller.

3. Spatial and urban planning:

The Law on Planning and Construction has reduced the number of mandatory urban plans, which should speed up the process of rendering the necessary urban plans.

Also this Law grants the City of Belgrade and its municipalities a two year time period as of the effective date of the Law (a three year time period for some remote areas) for rendering the relevant urban plans.

The fact that the prescribed time periods in which the competent agencies have to render urban plans is of great importance, because for many areas the process of obtaining construction permits were taking unusually long period of time because the necessary urban plans had not existed.