How to Check if the Property You’re Buying Is Free of Legal Encumbrances

Buying a property is one of the biggest and most stressful decisions in a person’s life. To make the process as easy as possible and reduce stress, it’s important to understand all potential legal encumbrances related to the property you’re purchasing.

What Are Legal Encumbrances and Why You Should Check Them

Legal encumbrances refer to all legal issues or restrictions that may affect a property, the transfer of ownership, and the rights of its owner. Legal encumbrances include mortgage debts and liens, court disputes, easement rights, prohibitions on disposal, and similar issues. 

In other words, they are ownership restrictions that can affect the sale or use of a property. Checking for them is crucial because otherwise, a buyer may assume obligations of the previous owner, which could lead to legal and financial problems.

Where to Find Information About Ownership and Encumbrances

Checking the legal status of a property requires understanding terminology, attention, and patience. However, in this case, it’s highly beneficial to hire a real estate agency that has its own legal department or an experienced and skilled agent.

Most data in Croatia is publicly available and can be verified in the relevant offices or online. The most important sources of information are the cadastre and land registry, and it’s also wise to check building permits and compliance with the urban plan.

Land Registry and Cadastre

The land registry contains legal information about every property and is maintained by municipal courts. The land registry records who the owner is, whether there are encumbrances, and all changes related to ownership (for example, inheritance, gifts, or sales). 

The land registry consists of three parts: the possession list (List A), the ownership list (List B), and the encumbrance list (List C). The possession list contains the plot number, area, and type of land or building. The ownership list includes information about owners and ownership shares, while the encumbrance list shows all existing encumbrances and restrictions.

While the land registry contains information about the legal status, the cadastre provides physical details about the property, such as location, area, and cadastral plot number.

If a property is marked with a “plomba,” it means that a change process (for example, ownership transfer) is currently in progress.

Building Permits and Urban Plan

In addition to verifying ownership, it’s necessary to check whether the building was constructed legally and whether it is in compliance with the spatial plan. It’s important to note that without an occupancy permit, a building is not considered fully legalized. The legality of a building can be verified in the offices for construction and spatial planning or online.

The urban plan, on the other hand, provides insight into planned infrastructure, roads, and similar developments.

What to Pay Special Attention to Before Purchase

Having already explained what legal encumbrances are, let’s now go over how to handle them if they appear, as well as other potential obstacles. If a property has a mortgage, it’s pledged as security for debt repayment, which most commonly refers to a bank loan. If the owner fails to repay the housing loan, the bank has the right to recover the debt from the value of the property. Existing mortgages can be checked in the land registry, specifically in the C list or encumbrance section.

A notation of dispute indicates that the property is subject to a court proceeding or that someone is contesting ownership. It is not recommended to purchase a property with a registered ongoing dispute.

Easement rights refer to restrictions on the use of a property (for example, the right of passage or access road). Easement may mean that you will not be able to use the property freely. This information can also be checked in the C list.

A “plomba,” as mentioned earlier, indicates that some kind of change is in progress in the land registry, such as entering a new owner or removing a mortgage. While a “plomba” is active, it is not advisable to buy the disputed property.

Sometimes, a property has multiple co-owners. In the case of sale, all co-owners must agree to the sale; otherwise, the transaction is invalid.

You should also pay attention to discrepancies between the land registry and the cadastre, as it often happens that the data does not match for various reasons. Such discrepancies can delay or prevent ownership registration and sometimes cause additional costs. 

What to Do if Encumbrances Exist

When an encumbrance is identified, it’s important to act. This phase also requires patience and understanding of the issue.

If there is a mortgage on the property, the seller must be asked to pay off the debt and remove the mortgage. If a dispute is in progress, it’s necessary to wait until it’s resolved or seek legal advice.

In the case of easement rights, one should assess how much they affect the use of the property. If there is any doubt or dispute, it is recommended to consult a lawyer. Legal services are included in the activities of certain real estate agencies.

Conclusion

Purchasing a property requires a careful check of its legal status to avoid financial and legal problems. Since this is an important life decision, the process should be as smooth and stress-free as possible. It’s important to verify ownership, mortgages, court disputes, easement rights, active “plombas,” and the consistency of the land registry with the cadastre, as well as the legality of the building through permits and the urban plan.

If encumbrances exist, timely action is required. A thorough inspection ensures a safe purchase and guarantees that the property is free of burdens.