Purchasing a house in Euros or Kunas?

[Limey]

I talked to a dealer at Moneycorp today about buying Euros to purchase my house in Croatia. They said it is illegal to buy a house in Euros. Apparently, a new law has recently been passed and you can only purchase a house in Kunas. He went so far as to read a letter to me from the Croatian Embassy in London confirming this fact. He said that several banks have recently returned funds to them advising that they cannot accept Euros for house purchases. Has anyone else had this problem?

[johnt]

I'm currently building a house on Krk and all negotiaions and payments are in Euros. I sold some property there too, and paymants to my bank in Croatia was in Euros.

I have not heard that you must purchaes it in Kunas.

[robert]

Limey, you are right. The new law explicitly prohibits purchase of Croatian properties in foreign currency when the seller, or the buyer, is Croatian resident - be it private individual or a company. I read the law carefully and although I'm not a lawyer the above point is made very clear. It is still unclear though what rule applies in situations when BOTH seller and buyer are foreign residents and people in such situations (very small number for now) should seek further explanation.

[Anja]

Limey said:

I talked to a dealer at Moneycorp today about buying Euros to purchase my house in Croatia. They said it is illegal to buy a house in Euros. Apparently, a new law has recently been passed and you can only purchase a house in Kunas. He went so far as to read a letter to me from the Croatian Embassy in London confirming this fact. He said that several banks have recently returned funds to them advising that they cannot accept Euros for house purchases. Has anyone else had this problem?

If you really need to change pounds to kunas then the best deal was always to do it in Croatia, as you get more kunas there than here.

[johnt]

Clarification to Limey and Robert

I am also a Croatian citizen besides US and British.

I sold property to a Craot in Euros and built in euros.

[robert]

I understand. But the fact that you did something doesn't mean that it is legal. Also, the law changed last summer/autumn. Before that there was a way to pay in foreign currency legally. Since the introduction of the new law, the payments can be made legally only in Croatian Kunas.

The contract can, however, stipulate a price in, for example, Euros with a note that the payment is in Kunas with the exchange rate used current on the day of payment. The contract can no longer stipulate payment in foreign currency.

This new measure will not stop people expecting payments in Euros, and in cash (now only way since you can't do it through a bank) and buyers will most likely be forced to go down that route or pay extra to compensate sellers for the exchange rate difference. I suspect that in many cases people who insist on paying in Kunas will be disadvantaged and often ignored by the estate agents.

What is the state trying to achieve by this, forcing exchanges of huge sums of money away from banks and any form of control, is beyond me. It will fuel further the black economy and money laundering. Also, Kuna is much overvalued and since some people will have to change foreign currency into Kunas (paying from abroad for example) the value of Kuna will be forced even higher (supply and demand factor). Which will further damage the economy already suffering from high levels of imports and low, and ever diminishing, exports.

[johnt]

Yes, Robert the transaction happened Spring of last year through Croatian lawyers. It was quoted in Euros and Kunas but as Euros being the base --payment in Kunas. However, I am still paying my builder in Euros.

Hmmmmmm

Take care

John

[tunbridge]

I am in the process of buying a property in Novigrad.

I used Moneycorp who told me that I could not send Euros tp Croatia. I asked them to try - they said if the money was returned I would be charged £50.00

The money went through without any problems

[robert]

We have to distinguish the difference between merely transferring money (foreign currency) to Croatia and paying for property in foreign currency. And if foreign currency transferred to Croatia is somehow used in property purchase transactions this doesn't mean it is legal to do so. Also, money transfer can be just that - a transfer of funds, which is legal. This is, however, different from making payments. Some payments in Croatia in particular circumstances can still be made in foreign currency. The law will not stop property sellers and agents demanding payments in Euros, however, and it will not stop buyers obliging, especially if they have no choice. This is Croatia for you, unfortunately.

[Culchie]

Am I missing something here?

Why is it illegal to pay in Euro ?

[Limey]

I was told it is illegal because Euros are not the official currency of Croatia.

[valiant]

john t.
are you a realestate agent or a builder?
we moved here from australia and tried building houses. we found that it was impoossible. from paperwork getting permits. how do you manage? im fascinated.especially if you are new to croatia.

[EMIZZZZAGREB]

I purchased a property in October and the developer insisted that I paid in Euros, not kunas, so in turn we insisted that the buyers of our property paid in Euros.

They took out a loan, which the bank insist is a Euro equivalent, yet they pay in in kunas, and they demand that you pay back the euro equivalent, however when they couple who purchased my last property asked the bank for euros they were told to pay the exchange rate, so their loan for €80,000 would actually €only have given them about €77,000.

This was only a few months ago, and I wanted to pay on kunas so i find it very difficult to believe that it is illegal to pay in euros as my lawyer handled everything.

However I really hope that it does become illegal to buy in anything other than euros as this is ripping of the Croatians. Croatians are being forced to play bankers, any big down turn for the kuna has a very negative effect on most Croats.

Croatia should decide if its currency is the kuna or the euro as they have no choice, they should stop hiding behind the euro and everything should be in kunas.

Roll on the eu.

[Martin]

To buy and to maintain your household bills you will need 2 types of account in Croatia-a foreign currency account and a day to day Kuna debit card account.

Firstly to transfer deposits and final payments from MoneyCorp you will need a foreign currency account-sometimes these only accept euros-sometimes any currency.
Sometimes a kuna account coexists in this account in which case the foreign currencies are "convertible" i.e. when converted into kunas, the exchange rate applied is more favourable than that applying in the UK or on the open exchange market in Croatia

Unlike in the UK, where funds can arrive after the contract is signed, in Croatia it is essential to have the funds cleared and waiting in a Croatian bank. Therefore, it is a good
idea for a buyer to open a foreign currency account as soon as possible, in any leading Croatian bank. Make a note of all their contact information (Swift codes) for potential future transfers from the UK
Starting an account is quite simple, entailing only production of your passport and a few euros.

A Croatian resident (or Croatian registered company) is obliged to sell a property in Croatian currency, whereas a foreigner/non-resident may sell in any currency of his choice. Often the pre-contract stipulated the price in Euros.

Find out from the agent whether you will be completing in Euros or Kuna before you action any currency transfers.
It is essential that a purchaser know well in advance what currency is required
for the final transaction, to avoid paying unnecessary charges. In a bad situation you could convert to Euros for the transfer and then pay for a conversion to Kuna in Croatia.

MoneyCorp can send Kuna, Euro or Sterling (not as mad as it seems as many UK financial organisations have real difficulty getting sterling quickly and cheaply to Croatia)

MoneyCorp can send Kuna, Euro or Sterling (not as mad as it seems as many UK financial organisations have real difficulty getting sterling quickly and cheaply to Croatia)

In the spring of 2004 a law was passed in Croatia banning people from making property purchases in Euros from overseas. Some banks in Croatia translated this into flatly not accepting payments in Euros for property purchase, whereas others have confirmed that they will accept the incoming payment in Euro but will convert it into Kuna on arrival.

This was a misunderstanding -the new law stated that you couldn’t send Euros to a Croatians "Foreign” account.

You will have started a “Foreign account” in Croatia in your name to welcome transfer funds for when you completed. This means that you are sending money to a foreigners "foreign" account (i.e. our own accounts) and we can have euros sent. It is a case of being firm with the banks as they are misapplying the legislation.

Generally speaking funds need to be in the account for 10 days before you can access them in Croatia.

Having ready funds can be very useful from a negotiating point but they could also save you making a second trip. For example on your two week house hunting trip you would have to be very fortunate to be in a position to complete but if you have found a house
with clean title and a solicitor you absolutely trust you could give him power of attorney over your money to complete in your absence.

Finally the second type of bank account you need is a day-to-day Kuna debit card account.
This enables you pay your monthly utility bills and shopping and this is when some kind of electron card is necessary. Some banks seem happy to issue these; other banks ask to see proof of permanent residency.

www.croatia-holidayandhome.co.uk/book.html


Best Wishes

Martin Westby
Website www.Croatia-HolidayandHome.co.uk
The site to visit for buying property or holidaying in Croatia
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