General country information

Formerly part of Yugoslavia, Croatia declared its independence in 1991, sparking a war with Serbia that lasted for over four years. Following elections in 2000 which brought defeat of the former right wing nationalist government, the country has undergone democratic reform. It currently has EU candidate status and is next in line to join after Romania and Bulgaria. Membership could come as early as 2009, but EU officials have indicated that reform of the EU’s own constitution make full membership unlikely by then, with 2012 suggested as a more realistic date.

Bordering the Adriatic Sea and having borders with Slovenia, Hungary, Bosnia and Herzegovina, Serbia and Montenegro, Croatia is one of the richest countries in the region. Recently it has experienced annual growth rates in the order of 4 per cent, although unemployment is as high as 13 per cent.

Comprising both mainland and a multitude of islands (1,185 in total), Croatia has a spectacular coastline extending some 5,835 km (the mainland coastline is 1,777 km long). Although boasting a Mediterranean type climate with hot dry summers and mild winters along on the coast, Croatia is also subject to earthquakes (mostly in the Dubrovnik area).

Since 2000 the Government has strived to encourage tourism and investment, and although the Croatian property market is still relatively immature, local agents say prices have been moving up sharply in coastal areas with annual gains of between 20 per cent and 30 per cent.

Direct ownership by foreigners of Croatian property is regulated by the Croatian Property Law (amended in July 2006) which generally requires approval from the Ministry of Justice before a purchase can be made (MFA). The ultimate proof of ownership is entry of the owner's name against the property in the local Land Registry and Katastar maps. Local courts will not allow the names of foreign citizens to be entered in the Land Registry without MFA approval. However, common practice is for foreigners to set up a Croatian company, a procedure which does not require permission and which can be used to buy the property.

Foreign nationals are not permitted directly to own their property if they wish to let it out to tourists. This activity is strictly regulated and requires a rental licence which can only be obtained for properties owned by Croatian companies, and not foreign citizens.

Despite the seeming simplicity of the system title can sometimes be in doubt, especially as the aftermath of the war has left a backlog of civil cases involving land tenure.

The potential problem most affects property seized from Serbs during the war. Any overseas investor buying such a property should take care and generally have their lawyer verify the validity of title.

Properties can sometimes be unsaleable because they are jointly owned by members of large families – there are sometimes as many as 60 joint owners, some of whom may have died since the property was registered without leaving a will. And as Croatians have frequently emigrated, there are now significant numbers of people living in other countries who each own tiny shares in Croatian houses. This means buyers must have their lawyer or estate agent check ownership papers against court records to ensure they tally.

The Croatian Government has taken steps to preserve the country’s unspoilt coastline, which means planning regulations are tight. In the past illegal building has been common, although generally authorities turned a blind eye. More recently they have started to issue knock down orders on illegal buildings or extensions. So again care needs to be taken to verify that necessary permissions have been issued.

According to the US Department of State, while foreign investors enjoy equality under the law with domestic investors, in practice foreign investors often face difficulties arising from institutional weaknesses in government bodies, and in some cases because of corruption which remains a problem. Red tape also presents difficulties.

Even so, it concludes that ‘Croatia offers a number of attractions for investors. It is an official EU candidate, and as such will be continually improving its legislation and administrative capacity over the next several years’.

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