Ivan Gazdić Joins Working Group for Amendments to Land Conversion Act
In his capacity of the President of the Foreign Investors Council’s Real Estate Committee, Ivan Gazdić of the CMS Belgrade office has been elected member of a working group for drafting amendments to the Law on Conversion of Right of Use into Ownership Right over Construction Land for Consideration (“Land Conversion Act”).
He is one of the eleven experts who have been invited to assist the Ministry of Construction, Transport and Infrastructure to improve the current legal framework for land conversion in Serbia.
Mrs Zorana Mihajlović, Serbian Deputy Prime Minister and Minister of Construction, Transport and Infrastructure, chairs the working group.
The Land Conversion Act is one of the most crucial pieces of legislation in the real estate sector in Serbia. It provides for investors to obtain a building permit for locations that were subject to privatization.
In principle, without having ownership over construction land or a long-term lease of 99 years, no building permit may be granted to an investor. In other words, companies with only the right of use over the land need to either acquire ownership through the conversion process, or alternatively sign a long-term lease for 99 years.
Investors interested in taking a long-term lease as an alternative to payment of the conversion fee should provide collateral. If they provide a bank guarantee, it must cover all outstanding rents payable for the entire 99-year lease term, which makes the lease option too expensive and not used in practice.
The task of the working group is to consider alternatives and a more realistic collateral mechanism in order to encourage investors to take a long-term lease, especially in cases where the conversion fee is excessive.
Of course, other improvements pertaining to the conversion procedure will also be taken into consideration.