MONTENEGRO Law and Practice Contributed by: Milan Keker, Aleksandra Bujkovic, Ivan Pejovic and Iva Rolovic, Keker, Bujkovic & Pejovic
Legal advisers typically manage the entire purchase process – negotiating contract terms, payment condi - tions, deadlines and warranties; drafting and review - ing the sale and purchase agreement and related documents; and assisting with financing, including bank loans if needed. They also assist in obtaining necessary permits for construction when applicable. Finally, legal representatives prepare all documenta - tion for title transfer and oversee notarisation and reg - istration in the real estate cadastre to ensure full legal compliance. 2.5 Typical Representations and Warranties Although representations and warranties may differ by transaction, they typically include: • the parties’ authority to execute the agreement; • the seller’s confirmation that the property is free from rights of first refusal, unregistered liens or encumbrances, leases or transfers to others; • the seller’s confirmation that it holds valid building permits and complies with urban planning regula - tions; • that there are no ongoing legal or administrative disputes; and • that there are no known hidden defects. The seller is liable for any material defects existing at the time of risk transfer to the buyer, regardless of whether the seller was aware of them. This liability also extends to defects that emerge after the transfer if they result from causes that existed beforehand. If a hidden defect – one not reasonably detectable during standard inspection – is discovered, the buyer must notify the seller within eight days (or without delay in commercial transactions), or risk forfeiting the right to claim. The seller’s liability typically lasts six months after handover unless extended by contract. If timely notified, the buyer may request repair, a price reduc - tion or contract termination, and may also seek com - pensation for resulting damages. The seller is also legally liable for legal defects – that is, third-party rights that limit or restrict the buyer’s ownership – provided the buyer was unaware of and did not accept the encumbrance. If a third party asserts such a right, the buyer must promptly notify the seller and allow a reasonable period to resolve
the issue. Should the third-party claim result in the buyer losing possession, the agreement is automati - cally terminated. If the buyer’s rights are only partially affected, they may either terminate the contract or seek a proportionate price reduction, with the right to claim damages in either case. Although liability for legal defects may be contractually limited or excluded, such exclusion is invalid if the seller knew or should have known of the defect and failed to disclose it. The buyer’s rights related to legal defects expire one year from the date they became aware of the third-party right. However, if a lawsuit is filed by the third party within that period and the buyer notifies the seller to join the proceedings, the buyer’s claim remains valid until six months after the court’s final decision. The enforcement of remedies for breaches of repre - sentations and warranties in real estate transactions relies primarily on contractual mechanisms. Notarised sale and purchase agreements could include a clause of direct enforceability, allowing the buyer to initiate enforcement without a full court proceeding if the seller fails to fulfil their obligations. Although escrow arrangements, bank guarantees or security deposits are not standard practice, they may be negotiated in larger or more complex transactions, especially those involving foreign investors. Representation and war - ranty insurance is currently not a common practice in Montenegro. While it may be considered in high-value or cross-border deals, its use is still rare and not well- developed in local practice. 2.6 Important Areas of Law for Investors Investors should consider the primary sources of real estate law outlined in 1.1 Main Sources of Law . In addition, foreign investors should be aware of spe - cific restrictions applicable to certain categories of land, such as agricultural and forest land, which may not be freely available for direct acquisition by for - eign nationals. These limitations are regulated in more detail in 2.11 Legal Restrictions on Foreign Inves- tors . Depending on the structure of the transaction, finance, corporate and tax laws may also be relevant for consideration.
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