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How to buy property in Bosnia and Herzegovina (referred to as BiH hereafter) ...
The official property market is similar to that in other developing or emerging market countries: high-end construction, investment and sales transactions occur, generally between multinational companies, aid agencies and foreign individuals with access to equity or external financing and established legal procedures. Real estate agents exist only in major cities and towns, handling mostly residential sales and apartment and office rentals in the official market. They are not licensed or regulated, but operate in a reasonably transparent, competitive environment, given the newness of the market. On this site we aim to only list reputable agents who have a track record of selling property with clean title.
Foreign investors have the same owner's rights on real estates as Bosnia and Herzegovina nationals.
Permission is not required
A serious drawback in Croatia is the need to apply for permission to buy from the government. This process can drag on for 2-3 years with resultant problems in utility connection and rentals.
No such requirement exists in BiH.
Property Valuation
Property valuation is not regulated in BiH and there is no local or national body offering the service. Outside consultants-usually moonlighting civil engineers-are sometimes brought in and their findings treated with care.
A similar situation exists in Croatia, where purchasers often complete without a survey. Whilst fraught with potential problems if you are looking at an old stone house that has not fallen down in over a 100 years - chances are it is a solid structure. When looking at new structures then builder's guarantees can be asked for.
Mortgages
No lender currently offers foreigners mortgages secured on BiH property, this is due mostly due to the difficulties a lender would encounter when trying to foreclose due to non payments-mostly the court back log and the poor registration papers of properties.
Currency
Transfer funds from your country of residence to a BiH bank. It takes 3 - 5 days to transfer the funds and 3 days for the funds to clear, so allow minimum of 8 days before funds can be made available to draw on. Click to currency mangement
Clean Title
In a country with two entities and one smaller jurisdiction - The Federation of Bosnia and Herzegovina, the Republika Srpska, and the district of Brcko - a maze of legislation sometimes hinders the development of businesses.
Registering property
Napoleon started registered property to finance his wars, he had all French properties mapped and registered for taxation - "a good cadastre (property map) of the parcels will be the complement of my civil code"
The word "cadaster" stuck and is used in BiH.
Bosnia and Herzegovina court backlogs cause delays for property registration. You will get a provisional title on application, but according to a 2005 survey it can take 331 days to get final title.
Property registers are largely unreliable. According to laws in both entities, property transfers must be registered with municipal authorities. In practice, transactions are often not recorded due to high transfer taxes. This leads to inaccurate and unreliable property records that leave property transfers open to dispute.
The 1984 Law on Land Survey and Real Property Cadaster, which would unify the property books and the cadaster under the supervision of municipal offices, could provide a good starting point for reform but has only begun to be implemented.
Would be purchasers are advised to exercise exhaustive enquiries into title ownership before proceeding. At the purchase stage it may be essential to employ a translator. The professional agents will speak English or have a translator in tow.
Purchasing a freehold property
Stage 1
A preliminary contract is drawn up between the seller and the purchaser, which has to be signed by a representative of the purchaser, who will be resident in BiH for the full process.
The contract must state the agreed price and confirm that both parties are committed to completing the registration process, after which they will be legally bound to conclude a finalised Contract of Sale for the property.
Upon completion of the preliminary contract the purchaser must pay a deposit of 3-5% of the agreed selling price to the seller.
Stage 2
To be valid properties must be registered in the property books maintained by the local court. Properties are also recorded in the local Cadaster, which requires the establishment of a unified property record and cadastral system. This law has only just been implemented and usually the property books and the cadastral will be separate.
Property records are frequently out of date, incomplete or incorrect. Also the property books and the cadastral may be in conflict. An owner may own a property on state owned land and has had long-term occupancy, which are registered in the property books.
Many property books were destroyed in World War 2 and the civil war-possibly as many as 25% property books of the country may be missing.
Property books are divided into 3 sections-the owners name, the property details and any encumbrances such as mortgages.
Registration procedures allow for "subscription", which is temporary registration of property rights, pending authentication.
To make matters worse registration of properties is widely avoided to try to dodge paying the property transfer tax. In 2000 the deputy Minister of Justice of Sarajevo estimated that just 18% of that years sales were registered and as low as 10-15% in Travnik.
Ensuring the clean title of your proposed purchase is the key element when purchasing in BiH.
On this site we aim to ensure that any properties have clean title. They may because the owner is a foreigner reselling after purchase and has satisfactory paperwork, or through an agent with a track record for researching properties prior to listing.
Purchasing using a BiH Company As with Croatia it is easier to complete the purchase transaction if you use the Company route. This will cost you around 1000 E in fees and an initial start up capital of 2000 E. Owning a Company then has a regular commitment of maintaining your accounts to present to the tax authorities. The incorporation process is quite speedy in BiH and should be completed in 3 weeks. Lawyers You can expect to pay 3-5% for a lawyer, this cost should include the Company incorporation costs In every case engage a trustworthy lawyer.
The Office of the High Representative (OHR), a civilian peace implementation body headed until 2006 by Lord Paddy Ashdown, has modified existing laws concerning the judicial system to make them compatible with EU legislation. As a result, large law firms are no longer prohibited in BiH, although most firms prefer a traditional structure, with one attorney-at-law assisted by a junior lawyer.
New legislation regarding the attorney's profession stipulates that foreign lawyers must be registered with one of the two bar associations in Bosnia-Herzegovina. Unregistered foreign lawyers are not allowed to advise upon Bosnian law.
The complex and rapidly changing legal environment dictates the need for a local attorney. Bosnian attorneys' experience base is still limited with respect to legal questions and issues that arise in a market-oriented economy. However, local lawyers are quickly learning as they gain experience in working with international organizations and companies that are operating in BiH
The transfer of the property has to be registered by the appropriate local authority. Once the registration is complete the seller must abide by the conditions agreed in Contract of Sale and pay the balance owing.
On completion of the sale the purchaser is required to pay Property Tax-Real Estate Tax to the authority. These rates used to vary from authority to authority from as high as 15% down to 5%.These different tax rates inevitably lead to "canton shopping" where people looked for properties only in cheap tax areas.
The system has been recently updated so that there is a 6% rate across all the cantons.This is 5% property tax and another 1% that the canton charges to value your property, this is to stop people undervaluing their properties to reduce the 5% tax payable.
The liability for the payment of this tax can be transferred to the seller, but only if stipulated and agreed under the Contract of sale.
Planning Permission in BiH
A development that would have an "enduring impact" on the country, need to have licenses from the State Government of BiH. Less strategic development s are dealt with at the Entity level, where licensing comes from the district level. The municipal authorities in each administrative area of BiH license smaller, local developments.
This licensing covers all building activities including repair and renovation.
The Law on physical planning has been changed dramatically to speed up the permission process.
Property Insurance
Foreigners can insure their properties-the leading company in BiH, is Sarajevo Osiguranje.
http://www.sarajevoosiguranje.ba/index.php
There are no contact email addresses - apparently (!) - there are English speakers at the head office:
71000 Sarajevo, Čobanija 14
Bosna i Hercegovina
Centrala: (+387 33) 203-270 / 665-510 / 665-511
Fax: (033) 664-142
Local office addresses are at:
http://www.sarajevoosiguranje.ba/main.php?id=11&blok=1
Capital Gains tax At the moment there is no CGT payable in BiH for foreigners buying and selling property.
You can guarantee that this position will be tightened up in the near future! Rental Law The other good news is that a foreigner can rent out their BiH property without any requirement to obtain a rental license from the authorities. People who have been involved in renting in Croatia will know that is a very big concession as you can waste a lot of time and patience in this particular paper chase. Your guests would just need to pay a local tourist tax of around 2KM a day to the local tourist office.
Cost of Living The cost of electricity and water supply, both of which are metered in Bosnia and Herzegovina, for individual apartments, will depend on the amount of water and electricity used. With normal usage, during yearly changing weather conditions, it should not exceed more than approximately €40 per month. This can be more or less dependant on the usage of electricity for heating and air conditioning and the amount of water used. Generally, the cost of living in BiH is considerably less then in the rest of the Economic Community. It is planned that sometime in the future that Bosnia Herzegovina will become part of the Economic Community at which time it is estimated that the apartments will be worth considerably more then their current cost.
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How to buy? 
(32) FOR SALE
