CROATIA Law and Practice Contributed by: Marko Paulinović and Dino Vukoša, Buterin & Partneri
• review of contracts relating to the property (eg, lease, maintenance); • analysis of contracts, rights and obligations; and • review of pending judicial and administrative pro - ceedings relating to the property. Technical and environmental due diligence typically includes: • verification of compliance with issued permits; • assessment of the technical condition of the prop - erty (structure, installations); • review of the energy performance status; • verification of compliance with applicable regula - tion; and • environmental protection considerations. Tax due diligence typically includes: • analysis of the tax status of the property; and • identification of potential tax risks. 2.5 Typical Representations and Warranties The Civil Obligations Act governs the general liability of the seller for material and legal defects of the object of sale, so there is no special statutory regime specifi - cally applicable to real estate transactions. The law defines what constitutes a material defect and distinguishes between visible defects and hidden defects in relation to the buyer’s rights. The buyer is required, under penalty of losing the relevant rights, to inspect the property as soon as reasonably possible in the ordinary course of events, and to notify the seller of any defects. With respect to defects that could not have been discovered upon taking possession of the property (latent defects), the seller is liable if such defects are discovered within two years from the handover of the property or within six months in commercial contracts, although the parties may contractually extend these deadlines. The seller is also liable for legal defects – ie, situations where a third party has a right over the sold property that excludes, reduces or restricts the buyer’s right. The time limit for exercising rights in such cases is one
year from the moment the buyer becomes aware of the third party’s right. Contractual limitations of liability are most commonly capped at the purchase price. Contractual provisions regarding the seller’s liability may be expanded or limited, except where the seller was aware of the defect. Contractual penalties are most commonly used as security for the seller’s war - ranties, while representation and warranty insurance remains rare in practice. In the event of a breach of the seller’s obligations, the buyer may request the removal of the defect, a reduction of the purchase price or termination of the contract, and in any case claim damages. 2.6 Important Areas of Law for Investors When purchasing real estate in Croatia, an investor must primarily take into account the provisions of the statutes referred to in 1.1 Main Sources of Law . In particular, the investor must verify the ownership sta - tus of the property, whether the property is encum - bered and whether any judicial proceedings are pend - ing in relation to the property. It is also essential to determine whether the building has all required permits and whether it has been con - structed in compliance with applicable regulations, as well as whether the designated use of the land cor - responds to the intended investment. Special attention should be paid to the content of the sale and purchase agreement, in particular to provisions relating to the seller’s liability, contractual deadlines and any limitations on the exercise of the investor’s rights. The tax aspects of the transaction are also relevant, as the acquisition may be subject either to real estate transfer tax or to value added tax (VAT), which affects the overall cost of the investment. If the buyer is a foreign national, it is also necessary to verify whether there are any restrictions on the acquisition of owner - ship (particularly for non-EU buyers).
167 CHAMBERS.COM
Powered by FlippingBook