New Decree on conversion for a fee
On 1 September 2011 the Government of the Republic of Serbia enacted a Decree on the conditions, criteria and the manner of the conversion of a land use right into that of an ownership right for a fee. It also addresses the method of determining the market value of construction land and the amount of the fee that is to be charged for the conversion of such a land use right into that of an ownership right (“Decree”). The Decree is effective as of 21 September 2011.
An important implication of the enactment of the Decree is that there is a 30 day deadline for the submitting of a request for the conversion of a land use right into that of an ownership right over undeveloped land granted for the purpose of construction. This expires on 21 October 2011. The request for conversion needs to be submitted to the local government department where the land is question is located.
Those who have a land use right over undeveloped land, where such a land use right was granted for the purpose of construction, risk losing their use right if their application is submitted after the deadline of 21 October 2011.
Where a request is not submitted by the stipulated deadline, the relevant authority will ex officio annul the land use right and bestow the ownership right to the local government where the subject land is located.
The conversion fee is calculated using the current market value, reduced by the amount paid for the initial obtaining of the land use right if such costs were incurred by 11 September 2009.
Under the Decree there are two ways to determine the market value of the construction land:
- local governments can produce a document determining the market value according to the urban zones and the designated plans; or
- the market value can be determined by a certified court civil engineering expert or a legal practitioner that is registered as a real estate evaluator (this is in the event that local governments do not enact aforesaid rules).
It is expected that the City of Belgrade will adopt an act pursuant to which the market value of construction land will be determined according to urban zones. The deadline for the enactment of this act is 90 days from the date of the enactment of the Decree, i.e. by 20 December 2011.
The payment of conversion fees can be made in a one off payment or by way of instalments. A discount of 30% can be given in the case that the fee is paid up front. Funds generated from the conversion fees are split evenly between the Restitution Fund and the local government budget.
This Decree abolishes the previous decree on the procedure for exercising the right to convert a land use right over construction land into that of an ownership right (“Official Gazette Republic of Serbia” no. 46/2010) It also abolishes the decree on the criteria and the procedure for determining the amount of the conversion fee payable by persons entitled to such a conversion (“Official Gazette of Republic of Serbia” no. 4/10, 24/10 and 46/10). Proceedings initiated by the previous regulations will continue according to the rules and conditions of the previously effective decree. Holders of land use right who have applied for the conversion according to the previous decree, may withdraw their request and submit it again under the new Decree. This also applies to requests for a valuation that has been filed with the Ministry of Finance.
Finally, should you require any additional information regarding the above, if you have any doubts regarding the implementation of the Decree, or if you require any assistance with respect to the same, please do not hesitate to contact us:
jasna.milosavljevic@karanovic-nikolic.com