Buying Property in Macedoina
Initial agreement between the buyer and seller - Preliminary contract
1 - What form can this agreement take? Preliminary contract?
The preliminary contract, or the preliminary agreement for the sale of real estate (pre-contract), (as it is referred to in legal theory in the Republic of Macedonia) is in written form. In accordance with article 37 of the Law on Obligations, if the envisaged form is a criterion for the validity of the same contract, then the pre-contract takes the same form. In accordance with article 443 of the Law on Obligations, the agreement for the sale of real estate must be in written form.
2 - With whom must the parties (buyer/seller) formalise the initial agreement? Is a legal form imposed?
The parties may formalise the initial agreement either with a notary or a lawyer. The pre-contract has to be in written form. Regarding the pre-contract, it is sufficient that the contracting parties verify their signatures before a notary, while the main agreement is drafted as a notarised act before a notary and is formalised (confirmed) before a practising notary chosen by the parties.
3 - What are the legal effects of this preliminary contract? Is a preliminary contract necessary?
The pre-contract is a bilateral agreement. It will be necessary if it involves the fundamental elements of the contract. In accordance with article 37, paragraph 1 of the Law on Obligations (LO), the preliminary contract is an agreement establishing the duty to enter into a further, main contract. In other words, if a preliminary contract is made and one of the contracting parties refuses de conclude the main contract, the other contracting party may ask the court to impose this on the other party within a deadline fixed by the same court. The party requesting the conclusion of the main contract may file this request within 6 (six) months from the expiry of the deadline established for its conclusion, as provided for in the preliminary contract.
4 - Are there amounts to be paid, and to whom? Can these amounts be repaid?
When concluding a preliminary contract, the contracting parties may agree on the payment of some sums. The buyer may therefore pay the seller part of the contract price, the sum of which is calculated based on the full contract price that will be paid later. If the main contract is concluded, then these sums cannot be paid back. On the other hand, if the main contract has not been concluded, the preliminary contract will be terminated and a decision reached on how to pay back the foregoing sum based on which of the parties was in default.
5 - Are there any consumer protection measures (cooling-off period, right of withdrawal)?
Yes, there are. The preliminary contract may provide for the cancellation of the contract within a given deadline, establishing the ensuing consequences. The preliminary contract may include an opt-out criterion according to which in case of cancellation of the preliminary contract by one of the contracting parties without a justified legal reason, the defaulting party will pay the other party the sum fixed in the preliminary contract.
6 - How can I obtain financing? Directly from the banks? Through brokers?
In the Republic of Macedonia, financing can be obtained by applying directly to banks or savings banks, without having to involve brokers.
7 - What form does the financing agreement take?
The financing agreement has to be in written form. In practice, in the case of significant sums, banks conclude credit insurance contracts with the beneficiaries of financing and these contracts are concluded in the form of a notarised act or are formalised before a notary. The contracting parties also sign the loan contracts before a notary.
8 - What do I need to do once I have obtained financing? Who draws up the loan agreement? To whom will the loan be paid?
9 - What are the usual types of guarantee requested to finance a residential real estate purchase?
To obtain financing in order to purchase real estate, the most widely used guarantee is the mortgage on the purchased property or on another property owned either by the beneficiary or another person (a mortgage debtor) who agrees to guarantee the debt (i.e. the loan taken out by the beneficiary with the bank) using his/her property. However, there are also other types of guarantees, such as the pledges on movable property, bills of exchange, pledges on cash held at the bank, etc.
10 -How do I constitute a mortgage/other type of security?
According to the law on contractual liens, the mortgage has to be in written form. The contracting parties may choose whether the mortgage contract will be concluded by a notary in the form of a notarised act or whether the mortgage contract drafted by a lawyer or the bank will be formalised by a notary. For the mortgage to be valid, there has to be a legal basis (iustus titulus), which is the mortgage contract, and a mode of acquisition (modus acquerendi), which is entry in the public registry that registers all rights over immovable property. For other types of guarantees, the contract has to always be drawn up in writing.
11 - What are the consequences of this mortgage for me?
12 - What types of information/documents are required for a real estate sale? Concerning the parties? Concerning the property sold?
When selling real estate, it is necessary to determine whether the seller owns the property on sale, how he/she acquired it (legal basis), whether the real estate is mortgaged or under other charge and if there is a ban on the use of the property established by a court or another competent authority. If the real estate is acquired through marriage, the consent of the seller’s spouse has to be assured. The ownership title containing all the information on the property and any charges or other constraints on the registered property in the title serves as evidence of ownership of the property for sale.
13 - Who collects the information/documents?
14 - How long does it take to obtain this information?
This information can be collected in a day.
Signature of the contract
Signature of the act
1 - Is there a compulsory form for the sale agreement (e.g. notarised)?
The real estate sale contract has to be drawn up in writing. The contracting parties may choose to have the contract drafted by a notary in the form of a notarised act or if the parties or their lawyer have/has drafted the contract, then it is formalised (confirmed) before a notary. This type of contract is then forwarded to the Land Registry electronically so that it can be entered in the public registers thus giving rise to ownership rights.
2 - If several forms are possible, are some more secure or more risky than others?
Several forms are not possible. Either the contract is drafted in the form of a notarised act before a notary or it is formalised by a notary. Both forms have the same certainty.
3 - What is involved in the signature of the act?
The contract is signed before a notary in the presence of all the contracting parties. Prior to the signature of the contract, the notary checks the identities of the contracting parties, reads out the contract to them and explains its purpose and consequences to them, warns them of the legal consequences and when he/she is certain that the parties are authorised to conclude the contract and there are no legal hindrances to its conclusion, the contracting parties sign it and the notary places his signature at the end of the contract.
4 -What are the resulting rights and obligations?
The rights and obligations are established in the contract. At the time of the signature, the buyer will have paid the contractual sum to the seller providing a bank receipt of the payment to the notary. The transfer of ownership may occur on the day of the signature of the contract or on another day as agreed by the parties.
Performance of the contract
Implementation of a certain number of public rights applicable to the sale
1 - What rights must generally be implemented for a real estate sale? Right of first refusal? Preferential right? Compulsory administrative document or authorisation? etc.
When selling property, the contracting parties may agree that the seller has the right of first refusal, if the buyer decides to sell the same property. This right of first refusal may last for a maximum of 5 (five) years from the day of the conclusion of the contract. When selling a given property, if other persons also have a right of pre-emptive purchase, the seller is obliged to fulfil the same sale conditions concerning the property (price, form of payment, etc.) and inform them through a notary. The person have a pre-emptive right has to respond to the seller’s offer within a given deadline. If the person accepts the offer, he/she has to pay the sale price into the account of the notary within a given deadline. If the person fails to respond within 30 days from the written acceptance of the offer, the seller may sell the property to any other buyer. If one of the contracting parties is represented by an agent, the power of attorney has to be certified and be in the form of a public document. If one of the contracting parties is a legal entity, the authorised representative of this legal entity has to provide evidence from the Business register that he/she is the person authorised to represent this legal entity and submit a power of attorney, in the form of a public document, attesting that he/she is authorised to conclude the contract on behalf of the legal entity.
Who fulfils the formalities for the implementation of these rights?
These formalities are fulfilled by the contracting parties. The notary can obtain information from the Business Register on registered legal entities.
2 - How and at what point does the buyer become the owner of the property?
The buyer becomes the owner as soon as the property is entered in the public register where property rights are recorded. In the Republic of Macedonia, this register is the Immovable Property Register, which means that if the buyer becomes the owner, in addition to the contract, it will be necessary to fulfil the criterion on the mode of acquisition (modus acquerendi) as a legal basis (iustus titulus). This is the way rights over property are registered.
3 - At what point is the payment made? By the buyer? To the seller?
Payment is generally made at the time of the signature of the contract.
4 - How must I make the payment?
In accordance with the regulations currently in force in the Republic of Macedonia, if the contractual price is 15,000 EUR or more in Macedonian currency, then the buyer can only pay the purchase price through a bank.
5 - How can I guarantee that the mortgages taken on the property against the seller will disappear?
If the purchased real estate is mortgaged, the mortgage remains in place regardless of whether the property has changed owner. However, if the buyer does not want a mortgage and does not want the property to be mortgaged, it is necessary to contact the mortgage creditor to find out how the mortgage can be settled. The buyer may agree with the seller that part of the contract price be paid to the creditor bank on behalf of the seller in order to settle the mortgage, etc.
6 - What taxes are usually payable on a real estate sale? Are the rates available on an official website?
When selling real estate, if the seller is a person, a tax on the transaction is paid, amounting to 3-5% of the market value of the sold property. The rate is fixed by the municipality where the property is situated and the tax is paid to this municipality. Tax rates are calculated by the tax authorities of municipalities. If the seller is a legal entity, besides the tax on the transaction, it also has to pay value added tax (VAT) amounting to 18% of the market value of the sold property. The market value of the sold property is estimated by an authorised individual commission in the municipality, while in other municipalities the market value is estimated by authorised evaluators. The tax on the transaction is paid following the signature of the contract. If the tax on the transaction is not paid, the sale contract cannot be submitted to the Land Registry, as the Land Registry will not enter the buyer’s ownership right in the public registers where ownership rights are recorded, unless the tax has not been paid. The rates can be found on the official website.
7 -How and by whom are the taxes calculated?
The amendments to the law on Taxation that came into force on 01.01.2016 establish a streamlined procedure for tax payment and the prompt transfer of ownership from the seller to the buyer.
In particular, the contracting parties who have concluded a real estate sale contract may choose a special procedure to determine the sum of the real estate transaction tax that will be settled by the notary whose jurisdiction is based on where the property is situated. The taxpayer (or buyer according to the agreement) has to give the notary a report on the property’s estimated market value and the calculation of the tax advance on the sale, both prepared by an authorised evaluator, as well as the duly completed tax registration form. The notary obtains the ownership title in electronic format containing the property data including details on the mortgage and any other charges, a bank statement if the buyer is a person, and organises the conclusion of the sale contract. The form and content of the report, the calculation and statement are requirements established by the Minister of Finance.
8 - When and where is the tax payment due?
In accordance with the tax advance form, the assessment and calculation of the tax advance on the sale, the taxpayer pays the tax on the purchase-sale of the property into the notary’s deposit account for the payment of purchase-sale tax advance. Following payment, the notary transfers the tax sum into the accounts of the local government (the municipality). Later, the notary formalises the purchase-sale contract or drafts it in the form of a notarised act, adding the clause that the real estate transaction tax has been duly paid. The notary electronically submits all the transaction-related documents to the Land Registry of the Republic of Macedonia which, in turn, records the property ownership right in the public registers within one working day and forwards the complete documentation to the competent local government electronically. The procedure of checking the documents, transferring the tax sum, formalising the purchase-sale contract or notarised act and forwarding the documents to the Land Registry of the Republic of Macedonia has to be performed within two working days. Based on the documentation submitted by the notary, the Land Registry, the responsible local government agency (the municipality) checks the sum of the tax to be paid and issues tax decision. If the municipality determines that the property’s market value and the sum of the purchase-sale tax advance have not been calculated correctly by the authorised evaluator, it issues an assessment review request addressed to the Assessment revision committee of the Chamber of Evaluators. The decision of this commission is final and if it establishes that a difference is due, the taxpayer is required to pay it.
9 - At what point can the new owner take possession of the property (handing over of keys)?
In general, at the conclusion of the contract (when it is signed before the notary) or following the conclusion of the contract. This depends on the contracting parties.
10 - What is the procedure for publication of the sale agreement?
The procedure for the publication of the sale agreement is based on the mode of acquisition (modus acquerendi). It consists in entry in a public register where ownership rights are recorded.
11 - Who conducts the formalities of publication of the new ownership?
12 - What are the consequences of this?
Entry in the public register leads to a change in ownership and from that moment onwards the buyer is the owner of the property.