Procedure for Concluding a Real Estate Purchase Agreement
The transfer of real estate (promet nepokretnosti) represents a set of legal actions relating to the transfer of ownership rights from one person to another. It may be carried out through onerous legal transactions (e.g., sale) or gratuitous legal transactions (e.g., gift).
This text focuses on the sale of real estate as the most common form of onerous legal transaction.
The procedure for concluding a real estate purchase agreement can be systematized into four main phases:
1. Preliminary Verification and Negotiation Phase
Legal Verification of the Property
Before formal negotiations begin, it is necessary to conduct a legal due diligence of the property, which includes:
- verification of the chain of title – whether the seller is the lawful owner and whether there are prior legal transactions affecting ownership rights,
- verification of encumbrances – whether the property is subject to a mortgage, servitude, annotation of dispute, or third-party rights,
- verification of the pre-emption right – which may belong, for instance, to a co-owner, tenant, or the state (see more on this topic here),
- verification of special conditions if the buyer is not a citizen of the Republic of Serbia, in accordance with the Law on Property Relations and international treaties.
Role of Real Estate Agencies
In this phase, real estate agencies often participate. It is important to:
- regulate the contractual relationship with the agency (brokerage agreement),
- ensure transparency in negotiations and avoid any abuse of rights.
Submitting the Offer
Once the property’s legal status is confirmed, the buyer submits an offer to the seller.
If the seller accepts the offer, the process proceeds to the next phase.
2. Contract Conclusion Phase
Is a Preliminary Agreement Necessary?
A preliminary agreement (predugovor) is required in the following situations:
- when additional legal or technical preparations are needed (e.g., discharge of mortgage or other encumbrances, legalization of the building, registration of rights, conversion, etc.),
- when the purchase is financed by a bank loan – since commercial banks usually require a preliminary agreement as a condition for concluding a loan agreement.
The preliminary agreement must contain the essential elements of the main contract.
It usually includes a deposit (kapara) provision:
- if the seller withdraws without justification – they must return double the deposit,
- if the buyer withdraws without justification – they forfeit the deposit.
Upon execution of the main agreement, the deposit is typically offset against the purchase price.
Conclusion of the Main Agreement
If no preliminary agreement exists, or after it has been fulfilled, the main purchase agreement is concluded.
Essential Elements of the Agreement
The contract must contain:
- the exact identification of the contracting parties,
- a precise description of the real estate,
- the purchase price, and
- the clausula intabulandi – the seller’s express consent for the buyer to be registered as the owner in the Real Estate Cadastre.
Without this clause, the buyer cannot acquire ownership, as ownership based on a legal transaction arises only upon registration in the public records (Real Estate Cadastre).
Drafting the Agreement
The draft contract is usually prepared by the buyer or the buyer’s attorney, as the buyer typically bears:
- the cost of contract preparation,
- the cost of notarial solemnization,
- the transfer tax (2.5% of the agreed or market value),
- bank fees, and
- the registration fee in the cadastre.
After harmonizing the draft, the contract is submitted to the competent public notary along with all supporting documents (IDs, prior deeds, court decisions, etc.).
3. Solemnization Before a Public Notary
What is Solemnization?
Solemnization is the formal notarization of the contract by a public notary.
Its purpose is to:
- confirm the identity of the contracting parties,
- verify the legality of the legal transaction, and
- ensure that the parties are legally capable of disposing of the subject property.
Obligations of the Public Notary
The notary is obliged to:
- refuse solemnization if the transaction is unlawful,
- verify that the parties are entitled to dispose of the property,
- inform the parties about the legal consequences of the agreement,
- check whether another contract for the same property already exists, and
- deliver the notarized contract to:
- the Real Estate Cadastre (for registration), and
- the Tax Administration (for tax assessment).
Note: The public notary does not protect the interests of the contracting parties.
To ensure adequate legal protection, the parties must engage an attorney or qualified legal advisor.
4. Execution Phase
Obligations of the Buyer and Seller
After solemnization, the parties must fulfill their contractual obligations:
- Buyer: payment of the purchase price (amounts exceeding EUR 10,000 must be paid via bank transfer);
- Seller: delivery of possession and issuance of the clausula intabulandi if not already included in the contract.
Additional Obligations
The parties may also agree to undertake additional actions, such as:
- deregistration of persons residing at the property’s address,
- settlement of outstanding utilities,
- submission of documents to the Tax Administration and Cadastre to finalize the transfer.
Conclusion
The transfer of real estate is a legally complex process that requires thorough preparation, legal verification, and professional assistance from a real estate attorney or other qualified expert.
Errors at any stage — from negotiations to solemnization and execution — may result in serious legal and financial consequences.
Therefore, obtaining professional legal counsel is essential to ensure full protection of the rights and interests of the parties involved in real estate transactions.
The cover image is for illustrative purposes only, generated via https://leonardo.ai/.
