New Regulation on the establishment of a building right and a right of easement over real estates owned by the Republic of Croatia

On 4 February 2014, the new Regulation on the establishment of a building right and a right of easement over real estates owned by the Republic of Croatia (the “Regulation”) came into force, whereupon the corresponding regulation from the year 2011 ceased to be valid.

Among others, the Regulation prescribes conditions, manner and fee under which it is possible to establish a building right and a right of easement over real estates owned by the state, which are managed by the State Administrative Office for State Property Management (before: State Property Management Agency). It is prescribed that the building right is established by way of public tender (exceptionally through direct sale), for the period which may not be longer than 99 years. The content of a public tender, documentation which has to be additionally delivered by the bidder (the novelty is that a certificate of tax debt and a solvency confirmation, as well as a bank guarantee of the bank having a certain status according to the Standard & Poor's Bank Rating Guide have to be delivered), amounts and payment of fees, criteria for evaluation of bids (ecological standards are now included), a possibility of transfer to another person, conditions for termination of the contract on establishment of a building right (the bankruptcy or any other proceeding initiated with the purpose of cessation of a holder’s legal standing are now included, as well as the enforcement procedure under scope of which the building right represents the object of the enforcement), as well as the conditions for repeating the public tender, are prescribed. The establishment of a right of easement is conducted by the means of the direct negotiations.

The novelty is that the Regulation defines the way and conditions for establishment of a building right and a right of easement for the purpose of building of plants for renewable energy sources and cogenerations (“RESC”), as well as of realisation of tourist projects. For the purpose of building of RESC plants, a building right may be established for a period of up to 30 years, by the manner of direct sale with the investor who is registered with the special registry. It is interesting that investors have the obligation to pay, besides prescribed fees, the amount of up to 1.5% of total annual revenue generated by the sale of electricity to the Republic Croatia (respective contract is to be executed as an enforceable deed). A building right for the purpose of realisation of tourist projects is conducted exclusively upon the recommendation of the relevant ministry and the lowest fee amount is determined in relation to the total revenue of the tourist facility.