The usual steps in a sale and purchase transaction of real estate, in general, are:
- legal due diligence;
- negotiations – settlement of the purchase price and other purchase conditions;
- drafting and agreeing the contract;
- obtaining permits for the purchase (e.g. in case of pre-emption rights);
- notarization of the signatures of the parties to the contract;
- registration of the buyer in the competent land registry.
Buyers usually conduct extensive legal due diligence of all obtainable documentation and evidence concerning the property, as well as surveys of the building and, in appropriate cases, soil and geological investigations, plant and machinery tests, and environmental investigations. It is important to identify potential problems early, so that there can be negotiation on the terms and/or price.
In Serbian law negotiations are not binding and, therefore, each party may terminate negotiations whenever they want. However, the party causing damage to other party by negotiating without the intention to conclude a contract or by terminating the negotiations without any sound reason is responsible for damage caused to the other. For these reasons parties occasionally enter a preliminary contract, which is a contract containing essential elements of the main contract and by its conclusion the parties accept the obligation to later conclude the main contract. The formal requests envisaged for the main contract (a written form and notarization) also apply to the preliminary contract. Unless agreed otherwise each party bears its own costs.
A contract for the sale and purchase of real estate must be in writing. It is important to check for the authorisation for registration of the new owner in the land registry (clausula intabulandi), which may be either included in the contract or attached to it as a separate statement. The legal requirement regarding the form of the contract also applies to all future changes or amendments of the contract; however, future amendments regarding subsidiary matters or amendments which reduce obligations of the parties do not have to be concluded in writing if that is not contrary to the original purpose.
If the contract is conditional on obtaining permits for the purchase, e.g. pre-emption rights, the seller has to obtain these permits prior to concluding a sale and purchase agreement with a third party, e.g. the seller has to make an offer to the holder of the pre-emption right.
Notarization of the contract is a legal requirement. However, if a contract (made in writing) without notarization has been partially or fully performed and if no pre-emption right or compulsory regulation has been violated, the court may acknowledge the legal effect of that contract.
Title to real estate is acquired through its registration in the land registry, i.e. title to real estate is not acquired by the real estate conveyance instrument, but rather by the registration of ownership in the competent land registry.
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