Explore the legal process of buying property in Montenegro as a foreigner.
Introduction
Buying real estate in Montenegro has become increasingly attractive for foreign buyers, whether for personal use, investment purposes, or as part of a long-term relocation plan. A liberal ownership regime for foreigners and a dynamic real estate market position Montenegro as an appealing destination for property investment. However, despite the apparent simplicity of the process, real estate transactions in Montenegro are governed by specific legal and tax rules that require careful professional handling in order to avoid legal and financial risks.
This guide provides an overview of the key legal, tax and procedural aspects of buying property in Montenegro, with particular emphasis on legal due diligence and the role of a lawyer in protecting the buyer’s interests throughout the entire transaction.
Who Can Buy Property in Montenegro
Foreign individuals and foreign legal entities are generally entitled to acquire ownership over apartments, residential houses, commercial premises and construction land under the same conditions applicable to Montenegrin citizens. Certain restrictions may apply in relation to agricultural land; however, such limitations can be overcome in accordance with the applicable legal framework and through appropriate legal structuring.
It is important to note that ownership rights are not acquired by merely signing the sale and purchase agreement, but only upon registration of ownership in the Real Estate Cadastre. For this reason, legal accuracy, proper documentation and strict procedural compliance are essential from the very beginning of the transaction.
Real Estate Transfer Tax – Progressive Tax System
One of the key financial aspects of purchasing property in Montenegro is the real estate transfer tax. Under the current legal framework, this tax is progressive and is calculated based on the market value of the property as determined by the Tax Administration, rather than solely on the contractual purchase price.
Applicable tax rates:
· Up to EUR 150,000 – 3%
· From EUR 150,000.01 to EUR 500,000 – EUR 4,500 + 5% on the amount exceeding EUR 150,000
· Above EUR 500,000 – EUR 22,000 + 6% on the amount exceeding EUR 500,000
Purchase from an Investor – Exemption from Transfer Tax
When a property is purchased directly from an investor or developer and the transaction represents the first transfer of ownership, real estate transfer tax is not payable. In such cases, VAT is already included in the purchase price for residential new-build properties, and no separate transfer tax applies.
This distinction has significant legal and financial implications and must be clearly confirmed during the legal due diligence phase.
Property Value and Residence – Related Procedures
In situations where a foreign buyer intends to rely on property ownership for residence-related procedures, the market value of the property must be at least EUR 150,000. It is important to emphasise that the relevant value is not determined exclusively by the contractual purchase price. Instead, the Tax Administration establishes the market value through a dedicated assessment procedure. For this reason, early legal planning and professional guidance are of particular importance.
Why Legal Due Diligence Is Essential
Legal due diligence represents the cornerstone of a secure and legally sound real estate transaction. It is not a procedural formality, but a comprehensive legal assessment aimed at identifying risks that could affect ownership rights, future use of the property or the overall security of the investment.
Through the due diligence process, a lawyer verifies the legal basis and continuity of ownership, reviews cadastral records and determines whether the property is subject to mortgages, encumbrances, registered disputes or ongoing court or administrative proceedings. Particular attention is given to verifying the legality of construction, compliance with planning regulations, the status of any legalization procedures, and the consistency between cadastral records and the actual condition of the property.
Failure to conduct proper legal due diligence may expose the buyer to serious consequences, including difficulties in registering ownership, long-term legal disputes, unexpected tax liabilities and, in certain cases, a significant loss of investment value.
The Role of the Lawyer in the Property Purchase Process
The role of a lawyer in the property purchase process in Montenegro goes far beyond a mere review of documentation. A lawyer acts as the central legal safeguard for the buyer, ensuring that the buyer’s interests are protected from initial negotiations through to the final registration of ownership.
This includes conducting legal due diligence, communicating with the seller, real estate agents and notaries, as well as drafting or thoroughly reviewing the sale and purchase agreement. As the key legal instrument governing the transaction, the agreement must be carefully structured to protect the buyer’s rights, clearly regulate payment terms and deadlines, and provide effective legal safeguards in accordance with Montenegrin law.
Throughout the entire process, the lawyer represents the buyer before the competent authorities and closely monitors the cadastral registration of ownership, ensuring that the transfer of rights is properly completed and legally secure.
Additional Costs and Legal Planning
In addition to the purchase price and applicable taxes, buyers should also plan for additional costs such as notary fees, legal fees and cadastral registration costs. In certain situations, valuation expenses may arise, particularly for tax or administrative purposes. Proper planning of these costs, with professional legal assistance, forms an integral part of a well-structured and secure transaction.
Conclusion
Buying property in Montenegro offers significant opportunities; however, legal certainty can only be achieved through thorough legal due diligence and continuous professional legal representation. A transaction based on accurate legal analysis, properly structured contractual protection and ongoing legal oversight provides the safest foundation for a secure, enforceable and long-term sustainable real estate investment.
“Adžić & Knežević” Law Firm
