One of the major problems with buying in many, especially ‘emerging’ countries, is that of title deeds. Sometimes there can be years between paying for a property and a buyer actually getting the title deeds to that property.
Delays in the issue of title deeds and property registration can happen for various different reasons. Sometimes, this is because there is a delay at the Land Registry. More commonly, it is because not all documents required for the transfer are in place (the type of documents depend from country to country although the most usual is a permit that enables you, the buyer, to use the property).
What can then happen, between the sale and the receipt of title deeds, is that the seller, be that a private owner or developer, can take out loans and mortgages secured against that property. After all, officially, they are still showing as owning the property. If, or when, the developer then closes down or disappears, the lender of the now-defaulted borrowings can come after the property.
Whatever the country, when it comes to developers it is almost always the same. Once the full price for a property has been paid a developer has very little incentive to resolve any outstanding issues (whether these are of a minor nature like snagging or of more major concern such as the transfer of title).
Why this does NOT happen in Croatia
So long as you work with a reputable agent and decent independent lawyer with track record of dealing with real estate sales to foreign clients the chances of the above happening through fraudulent means is none existent. It can only occur if all parties involved, real estate agent, lawyer, seller and members of the land registry are actively working to defraud you. The only way this could happen would be if you didn’t take the absolute basic and necessary due diligence that all property buyers buying in a foreign country should take (see this article Due Dilligence When Buying Property In Croatia) .
They way it works in Croatia is as follows. When you have paid for the property the seller must sign and notarize a document which states the money has been received. This is called a Permission to register the Property Clause (‘clausula intabulandi’). With this document and an original version of the contract the lawyer will go to the land registry immediately and register title. The process of actually being inscribed into the land registry can take a varying amount of time and is often dependent on the time of year and which local land registry you are dealing with. This is not for any other reason than some are busier than others and some are just badly organized.
However, on submission of the request for title by the lawyer an entry is made into the land registry both physically in the books at the land registry office and on the Internet. The entry states that you have purchased the property, fulfilling all your obligations from the real estate purchase contract and are therefore the new owner of the property and are waiting to be inscribed as the new property owner. This entry is therefore visible on the deeds of the property and no one can remove it or surpass it without permission from all the parties involved. It is know as an, ‘active plomb’ in Croatia. Once the land registry finalizes the entry and your name appears on the title deeds the ‘active plomb’ is removed.
The most important thing from Croatia real estate buyer’s perspective is that anybody carrying out a search at the land registry or its equivalent will see that you now own the property. More importantly, it shows that the previous owner no longer owns the property. This avoids the pitfalls that can come with a delay in registration that is often experienced in other emerging property markets.