Buying costs are very low, but risks are high
October 26, 2016
How high are realtors’ and lawyers’ fees in Albania? What about other property purchase costs?
|Notary fees||0.23% - 0.35%||buyer|
|Lawyer´s fee||0.10% - 0.50%
|Real Estate Agent Fee||1%
|Transfer Tax||0.50% - 3%||seller|
|Costs paid by buyer||1.33% - 1.85%|
|Costs paid by seller||2.50% - 5%|
|ROUNDTRIP TRANSACTION COSTS||5.83% - 6.85%|
| See Footnotes
Source: Global Property Guide
How difficult is the property purchase process in Albania?
There are no restrictions on the foreign ownership of real estate in Albania, except for agricultural land.
The buying process typically involves signing several contracts - a reservation agreement, an undertaking contract, a preliminary contract and the actual sale-purchase contract.
After the reservation agreement has been signed, the property is reserved for about 4 weeks by the buyer. During this period, the buyer (through his lawyer) undertakes due diligence checks on the property.
While the services of lawyers are not mandatory for a property purchase in Albania, a lawyer is highly recommended. Buyers should be especially careful if the property was confiscated during the Communist period. Since the end of communism in the early 1990s, around 85% of properties have been returned to their previous owners. The remaining 15%, located mainly in Tirana and coastal areas are still waiting for a resolution. The buyer’s lawyer must ensure that the property in question is free from liens and is under the name of the actual seller.
Another problem is the quality of construction. Some developers take shortcuts in obtaining building permits. Some apartments are smaller than stated in the contract.
After all the necessary documents have been obtained, the ‘main undertaking contract’ is signed by both parties. This signifies their promise to buy and to sell the property respectively. It contains details of timescales, payment terms, prices and the terms and conditions of the purchase. The undertaking contract is signed in front of a Notary Public, a public official appointed by the government.
A 10% down payment for second-hand properties is usually paid upon signing of the preliminary contract. For new properties or off-plan developments, the down payment is typically 30%.
The final sale-purchase contract is signed in front of a Notary once the property has been fully paid for. The final contract is registered at the Office of the Immovable Property Registration (ZRPP) for the transfer of the title deed to the new owner.
Buyers should also be careful when dealing with real estate agents in Albania. There are only a handful of established real estate agencies in Albania. However, there are about a hundred unscrupulous part-time agents. The industry is unregulated. Anyone can claim to be an agent. In certain cases, some agents sell properties even without the knowledge of the legal owners.
Completed in about 21 to 23 days, there are sixprocedures in registering the property, according to the World Bank’s Doing Business.
Footnotes to Transaction Costs Table
The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.
Notarization is mandatory for sale-purchase agreements. The fee is set by the Ministry of Justice and the Chamber of Notaries. Notary Fees are estimated proportionally based on transaction value. The minimum notary fee is ALL3,500 (€25) for a property worth ALL100,000 (€709). The maximum fee is ALLL150,000 (€1,064) for properties worth ALL100 million (€709,220) or more.
|PROPERTY VALUE ,ALL(€)||RATE|
|Up to 100,000 (€714)||ALL3,500 (€25)|
|100,00 – 6 million (€42,857)||0.35%|
|6 million – 15 million (€107,143)||0.30%|
|15 million – 50 million (€357,143)||0.28%|
|50 million – 100 million (€714,286)||0.35%|
|Over 100 million (€714,286)||0.23%|
The role of lawyers in the property purchase process is not mandatory but is highly recommended because of the complex nature of ownership in the country. Legal fees are negotiable; it can be a fixed amount ranging from €500 to €1,000 per transaction or percentage of property value.
Transfer tax on sales or real property varies, depending on the property classification and its location. The transfer tax for buildings range from ALL100 (€0.71) to ALL2,000 (€14). Transfer tax for other properties range from 0.50% to 3%.