A contract for sale of real property in Bosnia and Herzegovina – engagement of the Law Office
Our law office works on drafting sale contracts for domestic and foreign natural and legal entities in the territory of Bosnia and Herzegovina, as well as on representation of persons without their coming to Bosnia and Herzegovina regarding contracts for sale of real property.
Real property transactions in Bosnia and Herzegovina can be performed on different bases of real property acquisition, and we, as lawyers, most often encounter the following legal bases, namely: concluding a contract for sale of real property, a real property gift contract, a lifetime support contract, inheritance, etc.
A real property contract in Bosnia and Herzegovina:
Contracts whose subject is real property transactions must be concluded in the form of a notarized document. If a sale contract is not concluded in this form, it will not produce legal effect (they are null and void – as if they did not exist). The notary who drew up the contract for sale of real property is obliged to immediately submit a certified copy of that contract to the tax administration. As part of the procedure of notarial processing of the sale contract, the notary must check whether the parties are capable and authorized to undertake and conclude a legal transaction. The notary must examine the true will of the parties, explain the situation, instruct the parties on the legal scope of the work and compose their statements clearly and unambiguously in writing in the form of a notarial original. In doing so, the notary must be careful to exclude confusion and suspicion, as well as that inexperienced, unskillful parties are not harmed. The original of the sale contract must be read to the parties in the presence of the notary. By asking direct questions the notary establishes that the content of the original corresponds to the will of the parties, then the parties must approve and sign the original. The original must, prior to the signature of the parties, state that this was done so.
Attachments must also always be read, unless the parties waive the right and declare that they are familiar with the content of the attachments. This must be written in the original. The compilation of originals can be done only when the attachments are available to the parties when reading the originals.
The sale contract in Bosnia and Herzegovina is defined by the Law on Obligations and is defined as follows: “The seller of an item is obliged by the sale contract to hand over the item to the buyer so that the buyer obtains the right of possession, that is the right of ownership, and the buyer is obliged to pay the price to the seller. The seller of a right is obliged to provide the buyer with the sold right, and when exercising that right demands also possession of the item, to hand over the item to the buyer, too.” The contractors have to agree on the essential elements of the contract, which are the item and price of the real property in question.
If the sale contract is not concluded in a notarized form, it will not produce legal effect in Bosnia and Herzegovina. In relation to the jurisdiction of notaries, the contract for sale of real property may be drafted by any notary from Bosnia and Herzegovina, regardless of where the property is located in Bosnia and Herzegovina. For the real property located in BiH, it is not possible to conclude a contract on another state and implement it in BiH, such a contract would be null and void.
Real rights of foreigners on real property in BiH in relation to the sale contract
Foreigners, i.e. foreign natural or legal persons may acquire the right of ownership over real property in Bosnia and Herzegovina, but under the condition of reciprocity. It is explained in detail on the link above, and it is a complete novelty in the law of the Federation of Bosnia and Herzegovina / RS entity. Never before in the law of the former SFRY, the law of BiH, foreign natural persons and legal entities have been fully in principle subjected to the same real law regime as domestic persons. In the current legal system, there have been primarily restrictions regarding the acquisition of the right of ownership over real property in Bosnia and Herzegovina. The only precondition for the acquisition of ownership over BiH real property by a foreigner that must be met is reciprocity, whose existence is presumed. The Federal Ministry of Justice, with the opinion of the Ministry of Foreign Affairs of BiH, publishes a list of countries with which there is no reciprocity. This is an exceptionally significant improvement over the previous solutions that existed in Bosnia and Herzegovina. In the case of inheritance of real property in BiH, reciprocity is not required. Special rules apply for those foreigners who do not have Bosnia and Herzegovina citizenship, but were born in BiH or are descendants of BiH citizens. Legal provisions for these person aim to avoid unfair solutions for foreigners who still have a close connection with Bosnia and Herzegovina, which is a positive decision, especially in a situation where the aggression resulted in significant emigration of people from Bosnia and Herzegovina.
Content of the right of ownership in BiH
Ownership is a real right which gives the owner the authority to own, use and dispose of an item freely and at his / her own will, and to exclude anyone from this right within the limits determined by law. Everyone is obliged to refrain from violating the right of ownership of another person. The right of ownership is a subjective right from which the highest and widest private legal rule over a certain item derives. The right of ownership is an absolute, unique, uniform, flexible, independent and timeless right. The absoluteness of the right of ownership means that it acts towards everyone, only the owner is authorized to dispose of an item. The owner of an item is authorized to hold and dispose of the thing freely and at his / her own will.
Multiple contracts for alienation of real property
In case several persons have concluded legal transactions with the owner in order to acquire ownership over the same real property, the ownership will be acquired by the person who conscientiously first submitted a request for registration in the land register of the real property in question if other preconditions for acquiring ownership are met. Conscientiousness must exist at the time of submitting the application for registration of the real estate in the land register on the basis of the real property contract, and the previous tax assessment for the real property in question. If one of the several persons who concluded a legal transaction with the owner in order to acquire ownership of the same real property submitted an application for registration in the land register, i.e. obtained registration in his / her favour, and was unscrupulous, the conscientious person has the right within three years of the entry of registration to file a lawsuit requesting the deletion of the incorrect registration and the registration of the right of ownership in his / her favour, as well as to record the dispute in his / her favour. This right cannot be exercised against a third conscientious person who, relying on the land register, has acquired a right.
Form of the contract for sale of real property in Bosnia and Herzegovina
The contract for sale of real property that social legal entities put into legal transactions within their regular business, must be concluded in writing with a notary.
Risk in sale contracts
Until the delivery of the item to the buyer, the risk of accidental loss or damage of the item is borne by the seller, and with the delivery of the item, the risk passes to the buyer. The risk does not pass to the buyer if, due to a defect in the delivered item, the buyer terminated the sale contract or requested the replacement of the item.
Risk transfer in case of the buyer’s delay
If the delivery of an item is not made due to the buyer’s delay, the risk passes to the buyer at the time of the delay. When the subject of the contract are items determined by type, the risk passes to the buyer in delay if the seller singled out the items obviously intended for handing over and sent the notification thereon to the buyer. But, when the items determined by type are of such nature that the seller cannot separate one part of them, it is enough that the seller has performed all the actions necessary for the buyer to be able to take over the items and send the notification thereon to the buyer.
Intabulandi clause in the contract for sale of real property in Bosnia and Herzegovina is a provision (clause) of the sale contract that disposes of real property. With this provision / clause, the seller explicitly allows the acquirer, as a rule the buyer, to enter, that is register the acquired rights in the land register. Although the intabulandi clause will usually allow the registration of the right of ownership in the land register, it may also allow the registration of other rights in those books, depending on the rights transferred by that contract, e.g. a contract for establishing a lien on real property will contain such an intabulandi clause that will allow the registration of the real encumbrance, namely the mortgage, and not the registration of ownership.
Price of contracts for sale of real property
The buyer owes the seller a price that must be fixed or determinable, serious and fair. A civil contract of sale must have a certain price in KM currency.
Judicial practice of BiH in relation to the contract for sale of real property in Bosnia and Herzegovina:
Exclusion of liability for legal deficiencies in the contract for sale of real property
Article 515 Law on Obligations
“When the provision “Transfer of ownership of real property will be made by the buyer” is included in the sale contract, it results that the plaintiff as a buyer by signing the sale contract with such a clause accepted exclusion from liability for legal defects of the defendant as the seller of the real property in question, in relation to the real property that did not have a transfer of ownership rights to the seller at the time of sale.”
Decision of the Supreme Court of the Federation of Bosnia and Herzegovina number: 17 0 P 050 894 21 Rev of September 7, 2021.
Converting a pre-contract for sale of real property into a main contract
When a pre-contract for sale contains all the essential elements of the main contract and the statement that the contractors undertake to fulfil the obligation to pay the price and hand over the possession, then it can be considered the main contract regardless of what the contractors called the pre-contract. This is due to the fact that for determining the legal nature of the concluded contract, it is not the name that is important but the content of the agreed rights and obligations.
Judgment of the Supreme Court of the Federation of Bosnia and Herzegovina No. 25 0 P 047 927 19 Rev of August 28, 2020.
A sale contract concluded with a mentally ill person at the time of conclusion:
A sale contract is not valid if one of the parties at the time of concluding the contract was unable to understand its significance due to mental illness. At the same time, the circumstance that the business capacity of that party was taken away only after the conclusion of the contract has no influence on the decision-making.
(Cantonal Court in Sarajevo, BiH – Bulletin spKsS 1/2002, p. 18)
The annulment of a contract concluded by a person who has been partially deprived of legal capacity may be requested within the deadlines referred to in Art. 117 of the Law on Obligations.
From the explanation:
“The right to demand the annulment of a rebuttal contract in accordance with the provisions of Article 117, paragraph 1 of the Law on Obligations shall cease upon the expiration of one year from the knowledge of the reason for rebuttal, i.e. cessation of coercion. That right in any way ceases with elapse of the deadline of three years from the day of concluding the contract (paragraph 2, Article 117 of the Law on Obligations).
Contracts concluded by a person who has been partially deprived of business capacity, without the approval of a legal representative when necessary, are rebuttable and not absolutely null and void, and their annulment may be requested also within the deadlines foreseen by provision of Article 117 of the Law on Obligations which have here, as has been said, expired.”
(Supreme Court of the Republic of Croatia, Rev. 1162/91, 3 October 1991 - Selection of decisions 1994 - 53/115)
A purchase contract concluded by a person incapable of reasoning is null and void, regardless of the fact that at the time of concluding that contract he / she was not deprived of legal capacity by a court decision.
(Vs H, Rev. 767/87, 21 August 1986 - Psp 33 - 78)
You can view the case law of Bosnia and Herzegovina from sale contracts at the following links:
A sale contract in Bosnia and Herzegovina and a contract for sale of real property in the practice of Bosnia and Herzegovina.
An example of a sale contract drafted by our law office which also represented the party in the same case without their presence in BiH on the occasion of the sale of the real property in question.