The main source of real estate law in Croatia is a combination of constitutional provisions, statutory legislation and subordinate legislation. The Constitution of the Republic of Croatia guarantees the right of ownership, provides that ownership entails obligations and establishes that all owners are equal before the law.

The essential statute governing the acquisition, disposition, limitations and protection of ownership and other property rights is the Ownership and Other Proprietary Rights Act, which is complemented by the provisions of the Land Registry Act.

Other statutes frequently applied in this area include:

• the Civil Obligations Act;
• the Physical Planning Act;
• the Construction Act;
• the Apartment Rent Act;
• the Commercial Premises Lease and Sale Act; and
• the Building Management and Maintenance Act.

In addition to these key statutes, numerous secondary regulations and by-laws also apply.

Market Trends

Over the past 12 months, the Croatian real estate market has been influenced by two opposing trends. While the number of transactions has declined, property prices have continued to increase. This trend has been particularly evident in larger cities and coastal areas, where apartment prices have risen by more than 10%, partly due to limited supply and inflationary pressures. Despite the decline in the overall number of real estate transactions, strong demand for luxury real estate remains present, and this segment has not been materially affected by the decrease in transaction volume. Accordingly, the market continues to experience a shortage of luxury accommodation, both in the hotel sector and in the segment of high-end holiday villas.

Most Significant Deals

The most significant transactions in 2025 included investments in the tourism sector (particularly luxury hotels), along with continued strong investment in infrastructure (railways and port capacities) and sustained activity in residential construction.

Inflation Impact

Inflation and rising interest rates have negatively affected purchasing power and the cost of financing, resulting in increased caution among banks, slower lending activity and a growing interest in alternative sources of financing, including investment funds and private lenders.

Adaptation to New Trends

New digital technologies are gradually entering the market but have not yet demonstrated their full potential. The financial sector has proven to be more agile in this regard, thereby creating new opportunities for investors seeking more flexible financing options than traditional bank loans. Although there are no problems with financing for now, banks continue to operate under the close supervision of the Croatian National Bank.

The conversion of former industrial premises into commercial and residential spaces remains marked by tensions with local authorities and differing perceptions of the public interest. Nevertheless, awareness of the need to revitalise such spaces is steadily increasing.

As high real estate prices represent a widespread issue, Croatia included, the Croatian government adopted the Affordable Housing Bill in early 2026 and submitted it to parliamentary procedure. The proposed legislation represents an overarching framework for the implementation of the National Housing Policy Plan until 2030, aimed at increasing the supply of affordable housing both for rent and purchase. Measures include the activation of vacant apartments, the construction of new housing units and the introduction of tax incentives. It is envisaged that by 2030 more than 20,000 apartments and family houses could be constructed or renovated through public and public-private partnership (PPP) mechanisms, with planned funding from state and local budgets and financial institutions amounting to several billion euros.

In 2025, additional legislative initiatives were implemented allowing partial VAT refunds for the purchase of a first residential property for persons under the age of 45, and increasing standard construction prices for state-subsidised housing in order to ensure the sustainability of the programme in light of rising construction costs.

The government of the Republic of Croatia also continues to implement measures aimed at activating state-owned real estate in order to increase budget revenues and reduce rental costs for public authorities. The National Housing Policy Plan until 2035 envisages the activation of a significant portion of state-owned properties through sale, lease and other forms of disposal, which could affect the supply of real estate on the market. However, most of these reforms will require time before their effects on the real estate market become apparent.

The types of property rights that may be acquired over real estate are prescribed by the Ownership and Other Proprietary Rights Act. These are divided into ownership rights and limited property rights. Ownership is the only property right that exists over one’s own property.

Limited property rights are rights exercised over another person’s property and allow the holder to use the property in a certain manner, satisfy a claim from the property, receive a certain periodic benefit from the property owner or construct a building on another person’s land. Limited property rights include easements rights, pledges (mortgages), real burdens and building rights.

The transfer of ownership rights and their registration in the public register (land register) are governed by the Land Registry Act.

All types of real estate are subject to the same regime for the transfer of ownership, although certain special regulations may prescribe additional requirements concerning the disposition with specific types of real estate, most commonly those owned by public authorities.

Ownership of real estate is acquired through registration in the land register on the basis of a valid legal transaction (most commonly a sale and purchase agreement), inheritance, a court decision or by operation of law. In each of these cases, ownership must be registered in the land register maintained by the municipal courts. The land register is a public register containing information on the legal status of real estate relevant for legal transactions, including the description of the property, information on the owner and any encumbrances.

Where ownership is acquired on the basis of a legal transaction, it is deemed to be acquired only upon registration in the land register.

Title insurance is not customary in Croatia, as acquirers of real rights acting in good faith may rely on the accuracy of the information recorded in the land register.

While legal due diligence is standard in most transactions, the scope of technical and environmental due diligence primarily depends on the specific characteristics of the property.

Legal due diligence typically includes:

• verification of land registry data relating to the property;
• verification of the legal basis for the acquisition of ownership;
• review of the historical status recorded in the land register;
• verification of property data in the cadastral records;
• analysis of encumbrances and annotations registered in the land register;
• review of contracts relating to the property (eg, lease, maintenance);
• analysis of contracts, rights and obligations; and
• review of pending judicial and administrative proceedings relating to the property.

Technical and environmental due diligence typically includes:

• verification of compliance with issued permits;
• assessment of the technical condition of the property (structure, installations);
• review of the energy performance status;
• verification of compliance with applicable regulation; and
• environmental protection considerations.

Tax due diligence typically includes:

• analysis of the tax status of the property; and
• identification of potential tax risks.

The Civil Obligations Act governs the general liability of the seller for material and legal defects of the object of sale, so there is no special statutory regime specifically applicable to real estate transactions.

The law defines what constitutes a material defect and distinguishes between visible defects and hidden defects in relation to the buyer’s rights. The buyer is required, under penalty of losing the relevant rights, to inspect the property as soon as reasonably possible in the ordinary course of events, and to notify the seller of any defects.

With respect to defects that could not have been discovered upon taking possession of the property (latent defects), the seller is liable if such defects are discovered within two years from the handover of the property or within six months in commercial contracts, although the parties may contractually extend these deadlines.

The seller is also liable for legal defects – ie, situations where a third party has a right over the sold property that excludes, reduces or restricts the buyer’s right. The time limit for exercising rights in such cases is one year from the moment the buyer becomes aware of the third party’s right. Contractual limitations of liability are most commonly capped at the purchase price.

Contractual provisions regarding the seller’s liability may be expanded or limited, except where the seller was aware of the defect. Contractual penalties are most commonly used as security for the seller’s warranties, while representation and warranty insurance remains rare in practice.

In the event of a breach of the seller’s obligations, the buyer may request the removal of the defect, a reduction of the purchase price or termination of the contract, and in any case claim damages.

When purchasing real estate in Croatia, an investor must primarily take into account the provisions of the statutes referred to in 1.1 Main Sources of Law. In particular, the investor must verify the ownership status of the property, whether the property is encumbered and whether any judicial proceedings are pending in relation to the property.

It is also essential to determine whether the building has all required permits and whether it has been constructed in compliance with applicable regulations, as well as whether the designated use of the land corresponds to the intended investment.

Special attention should be paid to the content of the sale and purchase agreement, in particular to provisions relating to the seller’s liability, contractual deadlines and any limitations on the exercise of the investor’s rights.

The tax aspects of the transaction are also relevant, as the acquisition may be subject either to real estate transfer tax or to value added tax (VAT), which affects the overall cost of the investment. If the buyer is a foreign national, it is also necessary to verify whether there are any restrictions on the acquisition of ownership (particularly for non-EU buyers).

Pursuant to the Environmental Protection Act, the person responsible for environmental pollution is required to bear the costs arising from such pollution. These costs include the costs of assessing the environmental damage, determining the necessary corrective measures and implementing the remediation of environmental damage. In addition, the polluter is responsible not only for the damage caused but also for monitoring, prevention and other financial obligations associated with environmental protection.

However, exceptions may arise. For example, where the perpetrator of illegally disposed waste cannot be identified, the owner of the real estate may become responsible for the removal of such waste. For this reason, careful due diligence should be conducted prior to acquisition, and the sale and purchase agreement should contain contractual representations and warranties whereby the seller guarantees that the land is not contaminated and undertakes to indemnify the buyer should contamination subsequently be discovered.

A buyer can ascertain the permitted uses and the manner of use of a parcel of real estate by reviewing the spatial planning documentation of the relevant local self-government unit (cities, municipalities). Spatial plans regulate the planned use of land, prescribe protection measures and set out the conditions for the issuance of administrative acts required for their implementation. There are several levels of spatial plans, depending on the territory covered and the level of detail; these plans are publicly accessible. In the adoption of spatial planning instruments, the principle of vertical integration applies. Under this principle, the Republic of Croatia, as well as local and regional self-government units and other public law bodies, are required to co-operate and take into account the objectives and interests expressed in spatial planning documents adopted at a higher hierarchical level or covering a broader territorial scope, and to participate in the procedures for the preparation and adoption of spatial plans.

For the purpose of obtaining official information on the intended land use and the planning conditions applicable to a particular development project, a buyer may request a location information certificate (lokacijska informacija), which is an official document summarising the applicable spatial planning documents.

To facilitate and accelerate the implementation of a project, an investor may also enter into arrangements with the local authorities whereby the investor undertakes to construct municipal infrastructure and subsequently transfer it to the relevant local self-government unit.

Expropriation is possible in Croatia. It is a procedure through which ownership of real estate may be taken or restricted in the public interest, for example by establishing a lease or easement, subject to the payment of fair compensation to the owner.

Public interest may exist, for example, for the purpose of carrying out works in the interest of the Republic of Croatia for construction of transport, energy, municipal or other infrastructure, etc.

The procedure for expropriation is governed by the Expropriation Act. Before initiating the expropriation procedure, the existence of public interest must be established by a specific act (a decision of the government of the Republic of Croatia). Subsequently, expropriation proceedings are conducted before the competent administrative authority, which issues the decision on expropriation. Compensation for expropriation is determined at market value of the property. If the issue of compensation is not resolved by agreement between the parties, the amount of compensation is determined within the expropriation proceedings.

The sale of real estate is subject either to real estate transfer tax or to VAT (see 8.1 VAT and Sales Tax).

In an asset deal, the principal tax applicable to the purchase of real estate is real estate transfer tax, which, pursuant to the Real Estate Transfer Tax Act, amounts to 3% of the market value of the real estate at the time of transfer. The taxpayer is the buyer, although the parties may contractually agree that the seller will assume the obligation to pay the tax; however, this is not customary in practice. Real estate transfer tax is payable whenever the transaction is not subject to VAT. The standard VAT rate is 25%.

Real estate transfer tax is not payable in certain cases, including transfers of ownership between family members and the contribution of real estate to a company (eg, contributions to share capital, mergers and acquisitions).

In addition to taxes, there are also notarial certification costs for the sale and purchase agreement, and court fees for the registration of ownership in the land register; however, these amounts are generally negligible.

In a share deal, tax liability may arise on the part of the seller, depending on whether the seller is an individual or a legal entity and on the holding period of the shares.

In Croatia, legal restrictions exist regarding the acquisition of ownership of real estate by foreign investors. Under the Ownership and Other Proprietary Rights Act, foreign natural persons and legal entities from outside the EU/EEA may acquire ownership of real estate only with the prior consent of the Ministry of Justice and Public Administration and subject to the condition of reciprocity. Without such consent, the transaction does not produce legal effects.

Citizens and legal entities from EU/EEA member states may acquire real estate under the same conditions as Croatian nationals.

A stricter regime applies to agricultural land, where foreign persons may acquire ownership only where this is permitted by an international treaty and a specific statute. Citizens and legal entities from EU/European Economic Area (EEA) member states are exempt from this restriction.

Additionally, last year Croatia adopted the Foreign Direct Investment Screening Act, which may apply in cases where real estate is acquired through a share deal. The screening mechanism applies to foreign investors from outside the EU acquiring a controlling shareholding of 10% or more in a company in the Republic of Croatia and requires prior approval from the competent state authority.

Acquisitions of commercial real estate in Croatia (eg, office buildings, hotels or logistics centres) are most commonly financed through bank loans. As security, banks typically require the purchased real estate to be mortgaged. Banks usually do not finance the entire purchase price but only a portion of the property value (generally 70–80%), with the remaining portion to be provided by the buyer.

For larger acquisitions or development projects, project financing or structured financing may be used. Financing can also be raised through investment funds or other investment structures supervised by the Croatian Financial Services Supervisory Agency (Hrvatska agencija za nadzor financijskih usluga – HANFA).

In Croatia, a commercial loan for the acquisition or development of real estate is most commonly secured by a mortgage over the real estate itself. A mortgage constitutes a property right enabling the creditor to satisfy its claim from the value of the property if the debtor fails to fulfil its obligations. A mortgage is created by registration in the land register and gives the creditor priority in enforcement.

Other security instruments used in financing may include pledges over receivables, bank accounts or shares/participations in companies.

As a general rule, there are no specific restrictions on granting security over real estate in favour of foreign lenders. Likewise, there are no restrictions regarding the repayment of loans to foreign lenders under a security document or loan agreement.

When creating and enforcing security over real estate, certain fees may apply.

• Notarial fees: The security arrangements (eg, a mortgage agreement) must generally be notarised, and the amount of the notarial fee depends on the amount of the secured claim.
• Registration in the land register: The registration of security in the land register generally does not attract additional court fees if the agreement is executed in the form of a notarial deed. Otherwise, there is a small registration fee.
• Administrative fees: A court fee must be paid when initiating enforcement proceedings, and additional costs may arise during judicial proceedings.

No taxes are payable upon the creation of security over real estate. However, if ownership of the property is acquired through the enforcement of the security, the relevant taxes may apply (see 2.10 Taxes Applicable to a Transaction).

Before an entity may validly grant security (eg, a mortgage) over its real estate, certain legal requirements must be complied with, depending on the type of entity involved.

• Joint-stock company (dioničko društvo – d.d.): Such companies are prohibited from providing financial assistance for the acquisition of their own shares or from returning contributions to shareholders. Such transactions are null and void. Accordingly, a joint-stock company may not grant guarantees or security for the acquisition of its own shares. Although other types of security are not explicitly prohibited, the “corporate benefit” principle applies, meaning that the management board must demonstrate that the transaction benefits the company and is economically justified.
• Limited liability company (društvo s ograničenom odgovornošću – d.o.o.): There is no explicit prohibition on financial assistance comparable to that applicable to joint-stock companies. However, capital maintenance rules, solvency requirements and the corporate benefit principle still apply.
• Other entities (eg, sole proprietors, co-operatives): Such entities may generally grant security if permitted by applicable regulations and their internal rules.

In the event of a borrower’s default, the lender may enforce its security over the real estate if it holds an enforceable instrument (eg, a notarised mortgage agreement containing an enforcement clause). If the lender does not possess such an enforceable instrument, it must first obtain a binding and enforceable court judgment.

In any event, the first procedural step is obtaining a certificate of enforceability on the enforcement instrument, after which enforcement proceedings may be initiated directly before the competent municipal court in accordance with the Enforcement Act.

The sale of the real estate is carried out by the Financial Agency (Financijska agencija – FINA) through an electronic public auction following the determination of the property’s market value.

The priority of security rights/pledges is determined according to the order of registration in the land register in accordance with the principle of priority. In enforcement proceedings, only creditors whose rights are registered in the land register are entitled to satisfaction.

In practice, enforcement against real estate typically takes between two and three years for commercial real estate, and generally longer when enforcement is carried out against property owned by individuals. In recent years, a decrease in the number of enforcement proceedings has been observed as a result of the overall reduction in non-performing loan (NPL) portfolios. Consequently, the market for NPLs has also declined and largely relies on portfolios originating from earlier periods.

Special pandemic-related restrictions on lenders’ ability to foreclose or realise collateral are no longer in force.

Pledge that is securing a claim may be subordinated to newly created debt by means of an agreement on ceding of the priority ranking. By such an agreement, a secured creditor consents to its security right having a lower priority ranking than a newly created or another existing security right. Such agreement must be executed in a form suitable for registration in the land register and produces legal effects vis-à-vis third parties only upon registration of the change of priority in the land register.

A creditor holding or enforcing security over real estate is generally not liable under the Environmental Protection Act, as the fundamental principle of environmental liability is that the polluter is responsible for the damage (see 2.7 Soil Pollution or Environmental Contamination).

Security interests created by a borrower in favour of a lender (eg, a mortgage or pledge) do not become void solely because the borrower becomes insolvent or because bankruptcy proceedings have been opened against the borrower. A validly created and registered security interest remains in force, and the creditor has the status of a secured creditor with a right of separate satisfaction, enabling him or her in principle to satisfy their claim from the value of the encumbered property.

However, certain legal acts undertaken prior to the opening of bankruptcy proceedings may be challenged by means of avoidance actions if such acts disrupt the principle of equal treatment of creditors or place certain creditors in a more favourable position. In such cases, the legal act may be declared ineffective with respect to the bankruptcy estate. Upon the opening of bankruptcy proceedings, individual enforcement proceedings are stayed, and secured creditors exercise their rights within the framework of the bankruptcy proceedings.

In Croatia, there is no specific tax applicable to loans secured by real estate, nor to mezzanine loans related to real estate transactions. At present, there are no existing, pending or proposed legislative measures that would introduce additional taxes on such financial instruments.

Land use, development, design and construction are governed by several statutes and secondary regulations, the most important of which are spatial planning documents adopted at the national, regional and local levels.

The principal statute is the Physical Planning Act, which regulates the spatial planning system, the types and content of spatial plans and the authorities responsible for their implementation. In addition, the Construction Act governs the design, construction, maintenance and use of buildings.

The Environmental Protection Act establishes obligations relating to environmental impact assessments, while the Cultural Heritage Protection and Preservation Act applies to construction works and similar interventions affecting protected cultural heritage. In addition to these principal statutes, numerous by-laws also apply.

The fundamental strategic document governing spatial development is the Spatial Development Strategy of the Republic of Croatia. Spatial planning is implemented through spatial plans of different levels, which determine land use and prescribe measures for its protection. These plans determine the purpose of land use (public, residential, commercial, etc), construction conditions and various other urban planning parameters.

The principal spatial planning documents include:

• the State Spatial Development Plan;
• the County Spatial Plan;
• the City or Municipal Spatial Plan;
• the General Urban Plan; and
• the Urban Development Plan.

For most development activities affecting real estate, it is necessary to obtain a location permit and a building permit, both of which are issued in administrative proceedings.

The authorities responsible for issuing location permits and other planning acts, as well as building and use permits, are the Ministry of Physical Planning, Construction and State Assets and the competent administrative departments of the counties.

Larger and more complex development projects require the issuance of a location permit, while in most cases the construction itself requires a building permit.

In the procedure for issuing a location permit, the applicant must demonstrate compliance with specific conditions prescribed by various regulations, such as environmental protection requirements, fire safety regulations, water supply conditions, traffic access and connection to electricity supply.

Persons holding rights over the property concerned, as well as owners of neighbouring properties, are parties to the proceedings for the issuance of location and building permits. Their consent is not required; however, they may lodge appeals in order to protect their rights. In addition, any person may submit comments or proposals during the public consultation process conducted in the course of the preparation and adoption of spatial planning documents.

Planning and zoning restrictions are enforced primarily by refusing to issue permits where a proposed development is not in accordance with applicable spatial planning documentation, as well as through construction inspections. Competent authorities may suspend unlawful construction, impose fines or order the removal of illegally constructed buildings. Furthermore, a building may not be lawfully used without a previously issued use permit.

Pursuant to the Ownership and Other Proprietary Rights Act, both natural persons and legal entities may hold ownership rights over real estate.

The limited liability company (d.o.o.) is the most commonly used and market-preferred vehicle for the acquisition and holding of real estate. Its advantages include relatively simple corporate governance, flexibility in financing and tax predictability.

The joint-stock company (d.d.) is used less frequently, and typically for larger projects or portfolios where a larger number of investors or more complex financing structures are required, as it is subject to stricter regulation and higher administrative costs.

Investment funds (particularly alternative investment funds – AIFs) are primarily used for institutional investments and are subject to specific regulatory requirements and supervision.

Foreign natural and legal persons may acquire real estate directly (particularly entities from the EU) under the conditions described in 2.11 Legal Restrictions on Foreign Investors; however, in practice a Croatian limited liability company is most often established in order to achieve greater legal and tax certainty.

Limited Liability Company (d.o.o.)

This is established with a minimum share capital of EUR2,500 and has a relatively flexible corporate governance structure.

Joint-Stock Company (d.d.)

This requires a higher minimum share capital of EUR25,000 and has a more complex governance structure, including a management board and a supervisory board.

Investment Funds

These are subject to specific regulatory frameworks and supervisory requirements.

General

All companies are subject to corporate income tax at a rate of 10% if their annual revenue does not exceed EUR1 million, or 18% if this threshold is exceeded. They are also subject to VAT if their annual turnover exceeds EUR60,000.

Investment funds are generally exempt from corporate income tax.

Croatian law, as part of the continental civil law legal tradition, does not recognise the concept of a trust; therefore, it is not used within the Croatian legal system.

As a potential alternative, closed-end AIFs with a public offering for investment in real estate may be established; however, these have not yet become widely used in the domestic market.

See 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity.

Limited Liability Company

A limited liability company is managed by a management board consisting of one or more members. A supervisory board is generally not required, the shareholders adopt resolutions at the general meeting and the company must maintain statutory corporate documentation and prepare annual financial statements. Shareholders are not liable for the obligations of the company.

Joint-Stock Company

For a joint-stock company, the governance structure is more formal and consists of a management board, a supervisory board and the general meeting of shareholders. Stricter rules apply regarding reporting obligations, disclosure of financial statements and corporate decision-making

Limited Partnership

A limited partnership (komanditno društvo – k.d.) is managed by the general partner, while limited partners do not have management rights. The general partner bears unlimited liability, meaning that they assume personal risk, whereas the liability of a limited partner is limited to the amount of their capital contribution.

Investment Funds

For AIFs and undertakings for collective investment in transferable securities (UCITS), governance and operations are subject to strict regulatory supervision by the Croatian Financial Services Supervisory Agency (HANFA), including the appointment of a fund manager and compliance with regulatory reporting obligations

Foreign Branch Offices

Branch offices do not possess separate legal personality; rights and obligations are assumed by the founding entity. The branch must maintain accounting records in accordance with Croatian accounting regulations.

The annual entity maintenance and accounting compliance cost primarily depends on the size of the company, the number of employees and the scope of its business activities.

Indicative annual cost ranges for certain types of entities are as follows:

• limited liability company (d.o.o.)/limited partnership (k.d.) – approximately EUR150 to EUR 1,000; and
• joint-stock company (d.d.) – approximately EUR1,000 (or more).

In addition, these costs should be supplemented by expenses related to the registered office of the entity (leasing business premises), which depend on the size and location of the premises or, alternatively, on the costs of maintaining a virtual office.

In Croatia, the use of real estate without acquiring ownership may be established through contractual (obligational) arrangements as well as through the establishment of certain property rights.

The most common contracts are rental and lease agreements, under which real estate is granted for use or occupation for a definite or indefinite period, for a consideration. Real estate leasing arrangements are also used, although to a limited extent.

Regarding property rights, the Ownership and Other Proprietary Rights Act provides for personal easements, although these are used almost exclusively between natural persons. In practice, proprietary arrangements allow significantly less flexibility than contractual arrangements and therefore are less frequently utilised in commercial transactions.

The main legislation governing the lease of commercial premises is the Commercial Premises Lease and Sale Act, with the Civil Obligations Act applying subsidiarily as the general substantive law governing contractual relationships.

The primary distinction between lease agreements is between those concluded for a fixed term and those concluded for an indefinite term. A fixed-term lease terminates upon the expiry of the agreed period, whereas an indefinite-term lease may be terminated by notice, subject to the statutory or contractually agreed notice period.

Although the Commercial Premises Lease and Sale Act regulates the main rights and obligations of the contracting parties, the parties remain free, within the limits of the law, to regulate their contractual relationship in accordance with their mutual agreement.

Where the lessor is the Republic of Croatia or a local self-government unit, the lease agreement is generally concluded through a public tender procedure, subject to strict compliance with statutory requirements.

As a general rule, the amount of rent and the duration of a commercial lease are freely negotiable between the parties, subject to certain elements of the lease relationships regulated by law. Furthermore, business premises owned by the Republic of Croatia or by local or regional self-government units are leased through a public tender procedure, which limits the possibility of entirely unrestricted contractual negotiation of lease terms.

Residential rent agreements are, however, subject to stricter regulation under the Apartment Rent Act. This legislation prescribes the mandatory content of residential rent agreements and regulates the rights and obligations of the contracting parties, who may only agree upon contractual terms that are not already regulated by statute.

The Apartment Rent Act distinguishes between rent agreements with freely agreed rent and those with protected rent amounts provided for specific categories of tenants.

The lease term is most commonly agreed for a fixed period, for example five or ten years, particularly in the context of long-term commercial investments, whereas leases concluded for an indefinite period are less common in commercial practice.

With regard to maintenance and repairs, the lessor is obliged to deliver the premises in a condition suitable for the agreed use and to maintain such condition throughout the duration of the lease, while the lessee bears the costs of regular maintenance and minor repairs resulting from ordinary use, unless otherwise agreed.

Rent is typically paid on a monthly basis, either in advance or by a specified date during the month, although the parties may agree on different payment terms.

Adjustment of rent during the term of the lease depends primarily on the contractual provisions agreed between the parties.

The parties may agree on a fixed rent that remains unchanged until the expiry of the lease term; however, in practice it is common for lease agreements to include a rent adjustment clause, for example linking rent to the rate of inflation or to the consumer price index.

It is also possible to agree on a gradual increase in rent during the term of the lease or on a variable rent linked to the lessee’s turnover.

If the lease agreement does not contain a provision governing the modification of rent, it generally cannot be unilaterally altered. Exceptionally, in the event of fundamentally changed circumstances, amendment or termination of the contract may be sought through court proceedings in accordance with the general principles of the law of obligations.

The method of modifying or increasing rent primarily depends on the contractual provisions or on a previously agreed adjustment mechanism. Most commonly, indexation is applied based on the official consumer price index published by the Croatian Bureau of Statistics, whereby the rent is automatically adjusted once per year.

If no adjustment mechanism has been agreed, the rent cannot be unilaterally increased. In such circumstances, modification is possible only by mutual agreement of the parties or, exceptionally, by court decision due to fundamentally changed circumstances.

Under the Value Added Tax Act, the renting of real estate for residential purposes is exempt from VAT. Conversely, the lease of commercial premises or real estate used for business activities, as well as rental for tourism purposes, is considered a taxable supply subject to VAT.

In such cases, if the service provider is a VAT-registered taxpayer, VAT is charged at the standard rate of 25%, or at the reduced rate of 13% for tourist accommodation services.

With regard to lessee-related costs, the statutory framework does not prescribe specific fees other than the payment of the agreed rent and the costs of regular maintenance. However, in practice it is typically agreed that the lessee bears the costs of utilities and communal services (electricity, water, gas, waste disposal, etc), insurance costs as well as a security deposit, the amount of which is contractually determined and serves to cover potential damages or outstanding claims upon termination of the lease.

The lease agreement may also stipulate the obligation to pay brokerage fees or the costs of notarisation of signatures.

The Commercial Premises Lease and Sale Act provides that the lessee is obliged to pay compensation for the costs associated with the use of common installations and the provision of shared services in the building in which the business premises are located. In practice, lease agreements typically reflect this statutory principle, whereby the lessor transfers such costs to the lessees.

In practice, the obligation to pay utilities and telecommunications services is most often transferred to the lessee, who pays the service provider directly. Where this is not technically feasible, such costs are paid by the lessor and subsequently allocated proportionally among the lessees.

Property tax, as a new annual local tax, was introduced on 1 January 2025. The subject matter of taxation comprises real estate intended for residential use. Real estate that is leased for permanent residential purposes (for a minimum period of ten months) is exempt from this tax, whereas real estate used for short-term rentals is not exempt.

The taxpayers are domestic and foreign legal entities and natural persons who are the owners of such real estate. Nevertheless, the parties may contractually agree that the economic burden of this tax will be transferred to the tenant.

In addition to the aforementioned tax, most real estate is also subject to a communal utility fee, which is intended for the maintenance of municipal infrastructure and constitutes revenue of local self-government units. This fee is paid by the property owner; however, the law allows, and it is common practice, for the obligation to pay this charge to be contractually transferred to the lessee.

Insurance of the real estate itself is most commonly arranged by the lessor. The risks typically covered include fire, earthquake and natural disasters. The cost of such insurance may be contractually passed on to the lessee, either directly or through maintenance and operating costs.

Lessees, on the other hand, usually procure insurance policies covering equipment and inventory located within the leased premises, as well as liability insurance covering damage caused to third parties in the course of carrying out their business activities.

With regard to claims against insurers for reimbursement of rent payments and other costs incurred by lessees during the COVID-19 pandemic, Croatian court practice has not recorded a significant number of such disputes. During the main financial impact of the pandemic, lessees generally addressed requests directly to lessors seeking rent reductions or temporary suspension of rent payments. In that context, courts primarily examined the legal doctrines of force majeure and changed circumstances.

In lease agreements, the contracting parties may agree on restrictions regarding the manner in which the real estate may be used. In practice, such restrictions most commonly relate to the prohibition of structural alterations to the property and the requirement that the premises be used in accordance with their designated purpose.

Co-owners of residential and mixed-use buildings may regulate the manner of use of the property through house rules, which are binding upon all co-owners and occupants.

In addition, statutory regulations provide that in multi-apartment and mixed residential-commercial buildings only quiet and non-disruptive business activities may be carried out, while other types of activities may be conducted only subject to special permits and approvals.

The law prescribes that a tenant/lessee may use the property in accordance with its agreed contractual purpose and may not undertake alterations, adaptations or improvements without the consent of the landlord/lessor.

As a general rule, any construction intervention requires the prior written consent of the landlord/lessor. The rent or lease agreement may also stipulate the lessee’s obligation to submit project documentation, obtain the necessary permits for works and restore the premises to their original condition upon termination of the rent agreement/lease.

Irrespective of the contractual provisions, such works remain subject to public law restrictions under the Construction Act, including the obligation to obtain the appropriate permits or documentation where required by law.

The statutory framework distinguishes between two principal categories of real estate based on their purpose: residential and commercial.

Residential rent agreements are regulated by the Apartment Rent Act, while leases of commercial premises (including offices, retail premises and industrial facilities) are governed by the Commercial Premises Lease and Sale Act, both in conjunction with the Civil Obligations Act as the overarching legal framework governing contractual relations.

Special legislation most commonly applies to real estate owned by the state, such as forests, agricultural land or formerly socially owned property.

Additional regulation has recently been introduced in relation to short-term accommodation rentals, requiring the consent of two-thirds of the co-owners of the building as well as the consent of immediate neighbours for an apartment to be used for such purposes.

During the COVID-19 pandemic in Croatia, a moratorium on enforcement proceedings was introduced; however, lease and rent agreements themselves were not directly subject to legislative intervention.

In the event of the lessee’s insolvency, the legal consequences are governed primarily by the Bankruptcy Act, in conjunction with the general principles of the law of obligations.

The opening of bankruptcy proceedings against the lessee does not automatically result in the termination of the lease agreement. Following the commencement of bankruptcy proceedings, the bankruptcy administrator has the right to decide whether to continue the lease agreement or to terminate it subject to the statutory notice period.

Furthermore, once a petition for the opening of bankruptcy proceedings has been filed, the lessor may not terminate the lease agreement solely on the grounds of delayed payment that occurred prior to the commencement of the bankruptcy proceedings.

If the lease agreement continues to remain in force, the lessor’s claims incurred after the commencement of the bankruptcy proceedings (eg, ongoing lease payments) are treated as costs of the bankruptcy estate and are satisfied with priority. Claims that became due prior to the opening of the proceedings must be filed as bankruptcy claims.

In pre-bankruptcy restructuring proceedings, special rules apply restricting enforcement and compulsory collection measures, and the right to terminate certain contracts may be temporarily limited in order to preserve the debtor’s business operations.

Upon expiry of the lease, the lessee is obliged to return the business premises to the lessor without delay, and in the condition in which they were originally received. The same principle applies to rental agreements, except for changes resulting from ordinary use of the apartment.

To ensure that the lessee vacates the premises on the agreed termination date, it is advisable in practice that:

• the lease agreement clearly specifies the termination date and the obligation to return possession of the premises;
• the lessor sends a written reminder to the lessee prior to the expiry of the lease term requesting that the premises be vacated; and
• the agreement includes mechanisms enabling judicial enforcement, most notably through notarisation of the lease agreement.

Notarisation allows the lessor, in the event that the lessee fails to vacate the premises, to initiate enforcement proceedings for the delivery of possession without first having to conduct lengthy civil litigation in order to obtain a judgment.

A lessee of commercial premises may not assign the lease agreement to a third party nor sublease the premises without the lessor’s consent, unless such possibility is expressly provided for in the lease agreement. In practice, the lessor’s prior written consent is almost always required.

Typical conditions imposed by the lessor include:

• verification of the financial capacity of the new lessee or sublessee;
• preservation of the same designated purpose of the premises; and
• prohibition of competing business activities.

Partial subleasing (eg, of a portion of the premises) is likewise permitted only with the lessor’s approval. If the lessee assigns its rights without the required consent, such conduct may constitute a material breach of the lease agreement, entitling the lessor to terminate the lease.

The right to terminate a lease agreement arises both from statutory provisions and from the contractual terms agreed by the parties.

Under statutory law, the lessor may terminate the lease if:

• the lessee fails to pay lease payments within the agreed deadlines;
• the lessee uses the premises contrary to the lease agreement or their designated purpose;
• the lessee fails to perform contractual obligations (eg, subleasing without consent);
• the lessee causes substantial damage to the premises; or
• the lessor requires the premises for the purpose of conducting its own business activities because, due to reasons beyond its control, it can no longer carry out such activities in the premises previously used

In cases of material breach, extraordinary termination without a notice period may be possible.

The lessee may terminate the lease if the use of the premises is prevented (eg, due to legal or physical defects), if the lessor fails to maintain the premises in a condition suitable for use or if the lessee’s peaceful possession is disturbed.

The parties may contractually expand the grounds for termination depending on the specific characteristics of the lease.

In the case of leases concluded for an indefinite term, both parties have the right to terminate the lease by giving ordinary notice subject to the statutory or contractually agreed notice period.

A lease agreement for commercial premises must be concluded in written form and is frequently notarised (although such notarisation is not mandatory) in order to constitute an enforceable instrument for the collection of claims and recovery of possession.

Lease agreements are not required to be registered; however, they may be recorded in the land register. In such cases, the lessor’s signature must be notarised before a public notary. Such registration provides the lessee with stronger legal protection vis-à-vis third parties, for example in the event of a sale of the property or enforcement proceedings.

In practice, long-term leases, particularly those concerning commercial premises, are often recorded in the land register, whereas short-term agreements are usually not recorded. Registration is subject to a court fee in accordance with the regulations governing court fees, although this cost is relatively minor.

In the event of termination of a lease agreement for any reason, the lessee is obliged to return possession of the premises to the lessor. If the lessee fails to do so, eviction may be enforced through court proceedings. For this reason, lease agreements are often notarised, as such agreements allow enforcement proceedings to be initiated immediately. To proceed, the notarised lease must be endorsed by the public notary with a certificate of enforceability, which is typically supported by proof of delivery of the notice of termination.

If the lease agreement has not been notarised, the landlord must first initiate civil litigation in order to obtain a judgment on the basis of which enforcement proceedings may subsequently be initiated. Such litigation may last several years, which is why it is generally recommended to avoid this scenario by ensuring that the lease agreement is notarised. The lessee remains liable for damages arising from the unauthorised use of the property throughout such a period.

Enforcement proceedings themselves generally last between one and two years, depending on the court and the conduct of the lessee, who may also exercise legal remedies within the enforcement procedure.

At present, there is no special legislative moratorium on evictions in Croatia related to the earlier COVID-19 pandemic that would prevent the forced eviction of lessee of commercial premises, and such proceedings are conducted in accordance with the general legal rules.

A lease agreement may be terminated only by the contracting parties. However, a third party, such as the state or a local self-government unit, may indirectly affect the continuation of a lease, for example through expropriation or administrative measures such as prohibiting the use of a building for safety or urban planning reasons.

In the event of a breach of the lease agreement by the lessee and subsequent termination of the lease, the lessor may claim payment of outstanding rent, compensation for damages suffered and restitution of possession of the property. Damages include compensation for both actual loss and loss of profit that the lessee could reasonably have foreseen as a possible consequence of the breach in light of the facts known, or which ought to have been known, to the lessee.

In practice, a security deposit is the standard means of securing the lessor’s claims. It is most commonly provided in cash in an amount corresponding to one to three months’ rent, although alternatives such as bank guarantees or promissory notes may also be used.

In Croatia, two principal pricing structures are used for construction contracts. One model is the unit price contract, under which the final contract price is determined on the basis of the actual quantities of works performed and the agreed unit rates set out in the bill of quantities.

The second model is a lump-sum (fixed price) contract, where the total contract price is agreed in advance. In such contracts, a turnkey clause is frequently included, pursuant to which the contractor assumes the risk of unforeseen works and quantity overruns, except where the scope of works is modified due to circumstances attributable to the employer.

The most common model in construction contracts in Croatia is one in which the employer retains responsibility for the design, typically by engaging the designer under a separate agreement and providing the contractor with the project documentation. In this structure, the designer is liable for the accuracy and completeness of the design, while the contractor is responsible for the proper and timely execution of the works in accordance with the design documentation.

An alternative model is the design-build arrangement, in which the contractor assumes integrated responsibility for both the design and the construction of the project, including the functional performance of the completed structure. This model is often combined with a turnkey clause.

Construction risk in Croatia is primarily managed through contractual risk-allocation mechanisms. The most commonly used instruments include:

• contractual penalties for delay;
• performance security and defects liability security, typically provided in the form of bank guarantees, deposits or, in smaller contracts, promissory notes;
• defects liability periods and quality warranties;
• limitations of liability (liability caps); and
• exclusions of certain categories of damages (eg, loss of profit).

Such contractual provisions are subject to statutory limitations. In particular, liability for wilful misconduct or gross negligence cannot be excluded or limited in advance. Contractual penalties must be proportionate, and the court may reduce them if they are manifestly excessive. Furthermore, liability for material defects of a structure cannot be validly excluded by contract.

Schedule-related risk is primarily managed through contractual scheduling mechanisms. The detailed construction schedule (programme) typically includes intermediate milestones and imposes obligations on the contractor to provide regular progress reports.

Failure to meet contractual deadlines is commonly sanctioned through contractual penalties for delay, usually calculated on a per-day basis. Construction contracts often provide that once the accumulated contractual penalties reach a specified threshold, the employer is entitled to terminate the contract.

In addition to contractual penalties, the employer may also claim compensation for actual damages exceeding the agreed penalty, up to the full amount of the loss suffered.

In Croatian construction practice, it is common for employers to require performance security and defects liability security, most frequently in the form of a bank guarantee amounting to approximately 5–10% of the contract value. Employers also commonly retain retention sums, typically 5–10% of each interim payment certificate, as security for the contractor’s obligation to remedy defects.

Other forms of security, such as parent company guarantees and documentary letters of credit, are used far less frequently but may be agreed in the context of large or financially complex projects.

Contractors and designers do not have a statutory lien over the real property on which the works are carried out. However, in the event of non-payment they could seek to secure their claim through the registration of a judicial security interest (compulsory mortgage) over the property on the basis of a court order.

A building may only be used once a use permit has been issued. The use permit is granted following a technical inspection procedure, which confirms that the building has been constructed in accordance with the building permit and that it satisfies the essential requirements applicable to buildings. The land register records whether a use permit has been issued for the building.

Transfer of real estate ownership is subject either to VAT or to real estate transfer tax (see. 2.10 Taxes Applicable to a Transaction). VAT applies to the supply of new buildings (within two years from the date of first use or occupancy) and construction plots, provided that the seller is VAT-registered.

Conversely, real estate transfer tax applies in all cases where the transaction is not subject to VAT. The taxpayer is the purchaser. Where both parties are VAT-registered persons, it is possible to opt for VAT taxation with the reverse-charge mechanism.

Acquisitions of large real estate portfolios are commonly structured as share deals rather than asset deals. The acquisition of shares or equity interests in a company, as well as certain corporate status changes (eg, mergers, acquisitions), is exempt from real estate transfer tax, which often results in a more tax-efficient transaction structure.

As noted in 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time, commercial real estate is not subject to a municipal real estate tax. However, property owners must pay a communal utility fee, which constitutes a charge for the use of municipal infrastructure (roads, public garages, green areas, etc). The amount of this fee depends on local regulations.

Local authorities may prescribe conditions for partial or full exemptions from the payment of the communal utility fee.

Croatia applies withholding tax on certain payments to foreign investors (non-residents), typically 10% on dividends and profit distributions, and 15% on interest and royalties. A maximum 25% rate applies to all types of fees and services listed in the Corporate Income Tax Act when payments are made to entities in noncooperative jurisdictions. All rates may be reduced or eliminated under EU directives or double tax treaties.

Rental income for natural persons, derived from real estate located in Croatia, is subject to personal income tax at a rate of 12%, calculated on a tax base reduced by lump-sum deductible expenses of 30%. The rental of houses, apartments and rooms for tourist purposes is subject to lump-sum taxation.

Capital gains from the sale of real estate are also taxable in Croatia, as income from property, at a rate of 24% where the property is disposed of within two years of acquisition or where more than three properties of the same type are sold within a five-year period. For legal entities, gains from the disposal of real estate form part of the corporate income tax base.

Croatian tax rules provide some benefits for real estate ownership, including depreciation of buildings for companies (up to 10% annually) and potential VAT recovery on new properties.