Buying a non-legalized property in Montenegro - what does it mean?

13 Jan 2021
Written By Jonathan Howe

Imagine the situation where you've found your dream property in Montenegro. Everything is perfect: the size, the location, the vibe of surroundings, and the interior. Even the price is below expectations. There is only one problem - the building is illegal. Illegal, unregistered, or buildings with problematic ownership are more complicated to trade on the real estate market. Most buyers, coming from EU countries or countries where planning and building regulations are fully regulated, do not understand how this kind of real estate can exist at all.
This article about non-legalised buildings in Montenegro will help you to understand what it means to own one, to buy one, and most importantly, how to get it legalised!
It is important to note that just because a building was constructed without a permit, does not mean that it cannot be registered with the Katastar (government register of properties) and have a real estate certificate - List Nepokretnosti - which allows it to be used for its purpose as a dwelling.

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It would be easy to assume that every building constructed illegally was simply due to the owner being too cheap, lazy and irresponsible to follow the correct procedures. Of course, that’s bound to be the case in some instances. However, there is much more to the situation that most do not understand.

Every piece of land in Montenegro is given some kind of designation, or use, which determines what it can be used for and how it can be developed, if at all. One of these designations is “Urbanised.” With this designation comes what is known quite simply as and a “Plan” for that area. “The Plan” refers to construction legislation that has been written and approved in order to control building and development - we would know this as “Urban Planning.” The Urban Planning of an area is what determines the planning and building permit requirements and what is and is not legal in that area. This all makes perfect sense and is what most of us are accustomed to in our own countries, in some form or another.

The problems arise when, over the course of decades, huge areas of land owned by private individuals have been left with no official designation and therefore no urban plan. In essence - no legal pathway for the owners of that land to build themselves a family home, or to develop that land in some way. What should these ordinary people do, wait another 20 years in the hope that the government will provide them with the legal route they need to construct a home? They might be waiting a long time if they did!

The resourcefulness of the people who have constructed their homes without permits and urban plans is often quite astounding, with water supplies from natural springs being utilised and self-sufficient sewage systems put in place. Entire road networks connect communities of homes with main transportation routes. You usually wouldn’t have any reason to assume any of these houses are “illegal” in any way at all.

Most owners want their homes to eventually be legalised and passed down to their families, so the standard of construction is generally very good and most employ qualified engineers where necessary. That said, if you are considering buying any building, legal or otherwise, it’s advisable to have it inspected by a certified surveyor or engineer, particularly if it is built on a steep hillside!

Almost every seller, whose interest is to get the money as soon as possible, will try to convince you that the process of legalization is simple and fast. But is that really the complete truth? To make the purchase process easier for you and to help you not to fall into the trap of irresponsible sellers and investors, we present you with some analyses of the act of buying a non-legalized property in Montenegro. However, keep in mind that this is a very complex process, so the outcome depends on the details of the individual case.

Data from cadastral records show that, in Montenegro, there are about 100,000 buildings without a building permit and a lot of them without a use permit. The lack of such documents makes all these facilities illegal for use in general and makes it difficult for the owner to carry out any activities related to the facility. 

A building that was not built by following the regulations and thus did not receive a building permit is considered an illegal property. More precisely, an illegal building in Montenegro is a residential, business, residential-business building, with completed solid construction works and at least one floor, without or not in accordance with the issued building permit. (solid construction includes foundations, structural columns, and beams, walls and slabs, or roof construction). This also applies to parts of the building, such as ancillary buildings. 

There are cases of illegal construction built on state land or on land that was state-owned and then returned to the original previous owners who demanded the demolition of existing buildings.

Possession of an illegally constructed building could bring risks and burdens.

Even if the building is registered and has a real estate certificate (List Nepokretnosti), the document clearly states that the building is under the burden of illegality. This status of the property brings certain risks. Such facilities may be more difficult to insure, and cannot be a guarantee for eventually obtaining a loan. Surely, their market value is significantly lower than the price of buildings of the same quality, which are made in the frame of the law of urban planning. Of course, this does allow for a better deal to be negotiated.

Old houses and buildings, built at a time when there was no obligation to obtain a building permit, and, therefore, which are not registered in the cadastre, are not considered illegal. This is an important point when considering buying historic stone houses that pre-date planning law and building permits.

Montenegro is a relatively young country. Illegal construction is one of the waves of problems it has faced during its development and has therefore taken drastic measures to combat this devastating process.

The recent ortho-photo image of the territory of Montenegro is part of the future geographic information system. It will serve as a basis for planning, design, control of geodetic works, and monitoring needs of urban planning, monitoring of illegal buildings, road planning, environmental monitoring.

Montenegrin ortho-photo image is available at the following link: geo.mrt.gov.me
Illegal buildings and supporting infrastructure that cannot be found in this video were obviously built after the enactment of law regulations, therefore, cannot enter the official process of legalization.

All illegally constructed facilities that do not violate the concept of official Montenegrin planning documentation can be subjected to the process of legalization. Currently, the fees and back taxes payable to the government make it more attractive to allow “illegal” buildings to be legalised, rather than giving drastic demolition orders. Before this can happen, an “urban plan” needs to be put in place for the area in question.

• Request for legalization (on the prescribed form)
• Study of the survey of the condition of the constructed object prepared by an authorized geodetic organization and certified by the cadastre
• Photos of all facades in jpg format with a minimum resolution of 2 megapixels
• Report of the company authorized for audit affairs on the existence of an illegal object on the ortho-photo and its compliance with the basic urban parameters of the valid planning document / the auditor's statement that it was built following the basic urban parameters of the valid planning document
• Proof of recording the existence of the object in the cadastre

After submitting the request, at the invitation of the competent authority, the applicant should submit proof of payment of the fee for urban rehabilitation. If the subject building is located on the coast, special fees must be paid.
By initiating the procedure, the competent authority is obliged to request the following documentation for inspection within a certain period of time:

• proof of resolved ownership relations on the land on which the facility was built
• proof of the regulation of relations in terms of payment of fees for communal equipment of construction land

If the facility was built on state land, after submitting the request for legalization, a request for the purchase of land on which the illegal facility was built has to be submitted to the body responsible for disposing of that land. It can be a state administration body - the Ministry of Finance or a local government body (municipality) in charge of the property.

It should be borne in mind that the political situation in Montenegro is currently quite complicated. With the change of the thirty-year ruling government, consequential changes in the system itself are expected, and replacements in certain laws are possible, especially in the domain of spatial planning.
All previous rules and laws could be subject to changes, although it does not necessarily mean that substantial changes will actually take place. This is also a field in which corruption has played a significant role in the past. With the expansion of illegal construction, certain areas of Montenegro have been permanently damaged. Therefore, building, reselling, and finally buying a non-legalized property in Montenegro is something which needs to be considered carefully.

Overall, the best solution is to consult a lawyer experienced in this domain or an architect who encounters such issues daily in her/his work. As already mentioned, each case of illegal construction carries its own complexity, some are easy to solve and worth the effort. On the other hand, the practice so far has shown that certain facilities cannot be legalized, and their owners are left to wait for the outcome without the possibility to change this unfavorable status.

The following websites were used as a source of information for the above article:

legalizacija.me
investitor.me
www.bankar.me
mrt.gov.me