The sale of unpermitted properties

In Republic Serbia, a great deal of properties has been built without the construction permit. Given that unpermitted objects are a huge problem, the government decided to work on the legalization of those properties. Since the deadlines for the completion of legalization are already significantly overdue, the state had to find a way to speed up this process. As a part of that strategy, the state tried to ban the sale of illegally built properties to motivate the property owners to submit all necessary documentation so that they could complete the legal process.

The sale of properties built without the construction and usage permit, until recently, ran smoothly. The seller needed to submit the certificate issued by the authority responsible for the legalization so he would have a proof that he started the procedure of legalization which is yet to be completed. According to the concluded contract of sale of the immovable property, the buyer was now authorized as the new property owner in the legalization procedure.

However, by the entry into force of the Law on Amendments to the Law on the Legalization of Facilities ("Official Gazette of the Republic of Serbia" No. 83/2018) public notaries began to refuse the authentication of the contracts for the sale of immovable property that are in the process of legalization. The basis for such actions is found in Article 28. of The Law on Amendments to the Law on the Legalization of Facilities. This Article stipulates that the competent legal entity shall, within six months from the date of entry into force of this Law, for all facilities that are in the procedure of legalization ex officio, submit the certificate that the property is in the procedure of legalization, to the competent authority and the Cadastre, in order to registrate prohibition of alienation for those properties.

This provision is directly contrary to the provision of Article 4a of the Real Estate Brokerage Act ("Official Gazette of the Republic of Serbia," No. 93/2014, 121/2014 and 6/2015). Namely, this provision stipulates that the notary public is obliged if they find that the object of the agreement of the sale of the immovable property is a building or a particular part of a building for which the use permit has not been issued or is in the process of legalization, they need to warn the contractors and to issue a warning in accordance with the rules governing the public notary business, and to refuse to take the requested action only if the included parties oppose the issue of a warning. Thus, this Act stipulates that the notary public is authorized to refuse the authorization of the agreement of the sale of the immovable property only if the parties object to the introduction of a warning in the contract. If the contracting parties agree to enter such a warning, the notary may not refuse to verify the contract.

Due to the circumstances in which notaries public refused to obey contracts for the sale of unpermitted properties, the Public Procurement Chamber issued a warning to the public notaries of 04 September 2018 that they must strictly adhere to all laws and regulations regulating their activities, also the Real Estate Brokerage Act, according to which public notaries are obliged to warn citizens if they find that the object of the Real Estate Brokerage Act is an unpermitted immovable property or a property in the process of legalization and that they are obliged to authorize both real estate transactions without use permits or in the process of legalization, if the parties do not oppose it.

This right of ownership is erga omnes entitlement, within the limits of the law, the right to hold, use and dispose of it. The right of ownership also includes the right of disposal, which implies every factual and legal disposal. Therefore, the owner of the property is free to dispose of his property, and it is impossible to prevent him if he wants to destroy or dispose of his property.

The freedom of disposal and the willingness of the buyer to buy an unpermitted property, regardless of the risk, can not be limited by the desire of the state to take legal proceedings at any cost as soon as possible. The state for allowed unpermitted construction for decades, so now there is a pressure to solve this problem. That’s why the state is trying to find a way to speed up the process of legalization, whereby the attempt to ban the disposal of such facilities is a relatively "slippery ground" limiting one of the fundamental property rights.

However, considering the provisions of the Law on the legalization of facilities, as well as the fact that notaries public generally refuse to certify contracts for the sale of immovable property that are in the process of legalization, although there are different opinions and actions of certain notaries, City Expert decided not to intervene in the sale of such properties.