Real Estate Laws and Regulations in Montenegro (2025)

1 Real Estate Ownership

1.1 Legal Framework

The right to ownership, along with other property rights, is guaranteed by the Constitution of the Republic of Montenegro. Constitutional protection is highlighted in Article 58, which stipulates that no one can be deprived of or restricted in their right to ownership, except when required by the public interest, with fair compensation. Besides the Constitution, the most important real estate legislation in Montenegro includes:

• Law on Property-Legal Relations (Zakon o svojinsko-pravnim odnosima),
• Law on Contracts and Torts (Zakon o obligacioniom odnosima),
• Law on Spatial Planning and Building Construction (Zakon o planiranju prostora i izgradnji objekata),
• Law on State Survey and Real Estate Cadastre (Zakon o drzavnom premjeru i katastru nepokretnosti), and
• Law on State Property (Zakon o drzavnoj imovini).

Overall, ownership right in Montenegro is recognized as the most extensive form of entitlement to real estate, granting its titleholder the broadest variety of rights (possession, usage, and disposal of the real estate), whilst other property rights, may provide fewer degrees of entitlement (such as easements, right of use and passage).

When it comes to the acquisition of property by foreigners in Montenegro, Montenegrin law makes a difference for movable and immovable property. Therefore, a foreign person or entity can acquire the right of ownership of movable property under the same conditions as a Montenegrin citizen. However, when it comes to acquiring immovables (i.e., real estate), there are certain restrictions for foreign citizens in Montenegro, as foreign persons cannot have ownership rights to:

1. Natural resources;

2. Goods in general use;

3. Agricultural land;

4. Forest and forest land;

5. A cultural monument of exceptional and special importance;

6. Immovable property in the land-border area at a depth of one kilometer as well as islands;

7. Immovable property located in an area which, for the sake of protecting the interests and security of the country, has been declared by law to be an area where a foreign person cannot have ownership rights.

Exceptionally, a foreign natural person can acquire ownership rights on agricultural land, forests, and forest land with an area of up to 5,000 square meters, under the condition that the object of the alienation contract (purchase, sale, gift, exchange, etc.) is a residential building located on that land. A foreign person can also have the right to a long-term lease, concession, BOT, and other private-public partnership arrangements on immovables under the same conditions as a Montenegrin citizen.

It is noteworthy that a foreign natural person can acquire the right of ownership of immovable property in Montenegro via inheritance, no different than a citizen of Montenegro. Additionally, foreign natural and legal persons can transfer the right of ownership to a domestic citizen via legal transaction, as well as to a foreign person who has the right to acquire ownership under Montenegrin law.

Regarding the question of expropriation in Montenegro, it can be labeled as a legal process that occurs in the public interest and involves fair compensation, which can be determined in money or by providing ownership or co-ownership of other appropriate immovable property. A beneficiary of expropriation can be the state itself, a municipality, state funds, and companies that are majority-owned by the state, which, in accordance with the law, performs activities of public interest. The procedure of expropriation of immovables, for which public interest has been determined, is carried out by the competent Real Estate Administration.

Expropriation occurs in the form of full loss of ownership (absolute expropriation) or in the form of retention of ownership rights with the imposition of an easement or lease for a certain period (partial expropriation). According to Article 4a of the Montenegrin Law on Expropriation, the purpose of expropriation is described as building facilities or carrying out works of public interest, communal infrastructure facilities, facilities for the needs of state authorities, authorities of the capital city and the municipality, health, educational, cultural and sports facilities, industrial, energy, water management facilities, traffic facilities with associated infrastructure, electronic communication infrastructure network facilities, as well as research and exploitation of mineral and other natural resources.

1.2 Registration of Ownership

Ownership rights on real estate in Montenegro are registered within the competent regional unit of Real Estate Administration, upon the finalization of the legal transaction or other mode of real estate acquisition. In fact, Montenegrin law prescribes the constitutive effect of registration, therefore it is not only mandatory but the acquirer can only be considered the owner of the real estate upon registration in the cadastre, managed and supervised by the Real Estate Administration, which is decentralized and divided into regional units. Therefore, the handover of real estate based on a purchase and sale contract has no effect on the transfer of ownership rights, since, according to the law, handover is not a way of acquiring ownership rights in real estate, as it is a case with movable property.

This principle is consistently applied to the acquisition of other property rights based on a legal transaction and a mortgage, as the registration has a constitutive character. It must be borne in mind that when it comes to other means of acquisition (decision of a court or other state authority, acquisitive prescription, construction), registration in the cadastre is not a legal requirement for the acquisition of rights and therefore has a declarative character.

1.3 Publicity of Real Estate Register

Article 9 of the Montenegrin Law on Survey and Real Estate Cadastre proclaims a principle of publicity, meaning that everyone has the right to inspect the data contained in the cadastre (which can be done online, through the website of the Real Estate Administration), the right to be issued a real estate title deed, or a certificate that a certain real estate or right has been registered in the real estate cadastre. Detailed entries and documentation can be provided, upon request, to the parties directly involved (e.g., owner) and third parties who can prove a legitimate legal interest in accessing the files.

Additionally, certain information may be obtained based on a request for free access to information pursuant to the Law on Free Access to Information.

However, it is not uncommon that certain encumbrances and limitations are not properly registered, or are not updated; hence a thorough due diligence analysis should always be conducted before entering a transaction concerning the real estate.

1.4 Protection of Ownership

Another principle embedded in the Montenegrin Law on Survey and Real Estate Cadastre is the principle of trustworthiness, which stipulates that data registered on real estate and its rights are considered accurate; thus no one can suffer harmful consequences in real estate transactions and other relations in which this data is used. Registration decisions, as well as any decision from the Real Estate Administration, are subject to appeals and other legal remedies before competent authorities pursuant to the Law on Administrative Procedure. In these proceedings, the participation of involved parties is mandatory, and they are authorized to give all statements and use legal remedies to protect their interests.

Additionally, when it comes to the protection of ownership, the Law on Property-Legal Relation prescribes multiple types of litigation proceedings to protect ownership, possession, secure unhindered ownership, etc. Although litigation proceedings may be lengthy, once they become final, judgments and decisions are enforceable through a public enforcement executor (or court in some cases), who has the ability to engage the police and other competent authorities for assistance.

2 Real Estate Acquisition

2.1 Share Deal or Asset Deal?

A decision to opt for a share or asset deal shall be made depending on the facts of each case and by a previously made complex analysis encompassing all aspects, especially the nature of the investment, the intended business activity, and, of course, tax reasons.

Both share and asset deals are present in Montenegro, whereas a prior “spin-off” option, representing the formation of an SPV company, is gaining more and more affirmation through recent commercial practice.

2.2 Share Deal

The essence of share deals revolves around acquiring ownership of the company itself, which is the owner of the target real estate.

The seller and buyer are required to conclude a sale and purchase agreement (i.e., share transfer agreement), the subject of which is the sale and purchase of the company’s shares. This agreement, in practice, is an all-encompassing legal framework covering multiple areas of parties’ interest such as representations and warranties, conditions precedent, pre-closing, closing, guarantees, indemnification clauses, etc. The transfer of shares agreement shall be certified by notaries/courts in order to be eligible for registration in the Central Registry of Commercial Entities (Montenegrin company registry).

It is noteworthy that share deals may be used to avoid the prohibitions and limitations for foreigners to purchase certain types of real estate (See Section 1.1), since in this case, the direct owner of the real estate would be a Montenegrin-based company.

Typical positive sides to share deals include:

• Tax advantages, as they are favorable to the buyer since it is not subject to RETT,
• Continuity, as all licenses, permits, contracts, rights, obligations, and employees remain unchanged.
• Typical negative aspects pertain to:
• Acquiring the target company with its entire history, including its liabilities and claims,
• Depending on the circumstances, the seller may be subject to capital gains tax.

To minimize the risks, usually, if the share deal is chosen as the manner of acquiring real estate, the buyer tends to broaden the scope of the seller’s liabilities by stipulating a variety of guarantees, representations, and warranties. The basis of any good transaction is a due diligence analysis covering legal, corporate, management, financial, IP, and other aspects, which serves both parties in these terms.

As highlighted above, another solution that may efficiently minimize transaction risks of the share deal is through the formation of an SPV company that will be the owner of the target asset. Thus, the transaction would have two steps: a) the first step: forming the SPV by restructuring the company, whereby the target asset shall also be transferred to the SPV, and b) the second step: acquiring the SPV’s shares. Considering the phases, the downside of this option is the lengthy procedure.

2.3 Asset Deal

An asset deal refers to the sale and purchase of specific real estate executed through a classic sale and purchase agreement.

The parties are required to conclude the agreement before the competent notary (depending on the location of the real estate), which is then submitted to the Real Estate Administration for registration purposes.

As in any transaction, a thorough due diligence analysis should be conducted, but it should primarily focus on examining the chronology of real estate changes in the cadastre, as well as the on-site inspection of the real estate, with the expert team. It is not unusual that there may be defects in the method of acquisition of ownership by the seller or their predecessor (void contracts, etc.) or that there is an earlier contract on the transfer of a right or a request for the recording of a burden, which has not yet been registered in the cadastre.

Typically, the pros of asset deals are:

• The possibility of picking the target assets,
• Limitation of liability, since the risks of acquiring the entire company and its potential liabilities are excluded.
• Typical downsides to the asset deals are:
• All licenses, permits, and contracts related to the target real estate must be transferred to the new owner,
• The buyer is subject to the RETT.

2.4 Disposal Process

As explained above, depending on the type of transaction, a different agreement, and its registration procedure will be conveyed before the authorities: i.e., in the case of a share deal, the registration of acquisition of the company’s shares is done by the companies’ register, and in the case of an asset deal, the registration of the sale and purchase agreement is done in the cadastre.

The notary and other fees are not significantly burdensome to potential investors.

It should be noted that these types of transactions may trigger the merger control process with the competent authorities, which should be obtained beforehand.

Additionally, depending on the type of transaction, the location of the real estate, and the ownership, obtaining different approvals may also be needed (e.g., the sale of real estate located in National Parks is conditional upon Government’s pre-emption rights as provided in the Law on National Parks).

2.5 Registration of Change of Ownership

The registration of change of ownership rights based on sale and purchase agreements is done in accordance with the Law on Property-Legal Relations and the Law on State Survey and Real Estate.

The procedure is initiated by the notary, who by authorization of the parties, submits the agreement to the competent Real Estate Administration for the registration of the new owner.

As stated, the fees are not significantly burdensome and are standard pursuant to the Notarial Fee of Montenegro and state fees related to the Real Estate Administration.

The timeframe for concluding the agreement before the notary is quite short, compared to the procedure of actual registration in the cadastre, which may be quite lengthy due to its limited staff capacity. Usually, the Real Estate Administrations responsible for the central and coastal regions are more affected, considering the large influx of requests.

Once again, the sole signing of the sale and purchase agreement does not constitute ownership under Montenegrin law, since such title must be accompanied by registration in the real estate cadastre as the manner of acquisition.

2.6 Risks To Be Considered

As in any transaction, a comprehensive analysis of all the risks should be done. Several typical risks were outlined above, but some additional aspects specific to each jurisdiction should be taken into account, such as possible limitations in the disposal of real estate, namely pre-emption rights, etc.

Noteworthy pre-emptive rights are found in the Companies’ Law of Montenegro, which sets forth that such rights belong to the company’s shareholders (if multiple shareholders) unless otherwise agreed in the company’s founding act/agreement and articles of association. Additionally, co-owners have pre-emptive rights when it comes to the sale of parts of the real estate owned by other co-owners. Pre-emptive rights concerning real estate may also be established by contracts, but in that case, they should be registered in the cadastre.

Furthermore, we highlight once again that the target real estate should be thoroughly examined (both on-site and legally), as it may contain material and legal deficiencies.

Namely, in the case of contracts with compensation, such as sale and purchase agreements of real estate (note: refers only to asset deals), each party is responsible for material deficiencies in its performance. The party is also responsible for legal deficiencies in performance and is obliged to protect the other party from the rights and claims of third parties that would exclude or narrow its rights.

The seller is responsible for the material defects that existed at the time of the transfer of risk to the buyer, regardless of whether they were aware of this, as well as for those material defects that appear after the transfer of risk to the buyer if they are the result of a cause that existed before that. Insignificant material deficiencies are not taken into account.

In any case, the buyer who timely and properly informed the seller about a defect may require the seller to remove the defect, reduce the price, or declare that they are terminating the contract. Regardless of the chosen option, the buyer is also entitled to compensation for damages.

As for legal deficiencies, the seller is liable if there is a right of a third party on the sold item that excludes, reduces, or limits the buyer’s right, and the buyer was not informed about its existence, nor did they agree to take the item burdened with that right.

If the seller does not comply with the buyer’s request to remove the legal deficiency, in the case of confiscation of the real estate from the buyer, the contract is terminated according to the law itself, and in case of reduction or limitation of the buyer’s right, the buyer may, at his choice, terminate the contract or demand a proportional price reduction. In any case, the buyer has the right to compensation for damages.

3 Real Estate Financing

3.1 Key Sources of Financing

Real estate financing, encompassing its acquisition and development, is most commonly done via bank loans, shareholders’ loans, and from investor’s own funds. The investment is frequently financed on the basis of joint construction agreements, usually executed by the investor with the funding and the owner of the real estate (i.e., land) who contributes to their real estate. The constructed building will then be divided between the parties proportionally to their contributions to the joint project.

The relevant legal framework includes the Law on Credit Institutions with the accompanying bylaws, the Central Bank’s decisions, and the Law on Contracts and Torts.

3.2 Protection of Creditors

Regarding the securement of bank loans, depending on the risk assessment analysis, loan amount, repayment period, etc., the most common security traditionally remains the mortgage over the subject real estate. Furthermore, additional bonds of the borrower and its shareholders or other affiliates are usually requested. Recent trends showcase the bank’s flexibility regarding acceptable collaterals, as they now accept pledges over receivables and shares.

It is not unusual for shareholders to secure their loans via mortgage as well since the mortgage provides the priority order of repayment. Otherwise, their loans would be subject to a general procedure, which would require litigation proceedings, obtaining an enforceable judgment, and then initiating the enforcement proceedings before the public enforcement officer.

4 Real Estate Taxes

4.1 Transfer Taxes

The transfer of real estate in Montenegro is subject to real estate transfer tax (RETT). Domestic and foreign legal and natural persons are treated equally regarding their obligation to pay RETT unless otherwise specified by an international agreement.

The transfer of real estate is considered to be any acquisition of ownership rights over real estate in Montenegro. Acquisition of ownership rights over real estate includes purchase and sale, exchange, inheritance, gift, contribution and withdrawal of real estate from a business entity, acquisition of real estate in the process of liquidation or bankruptcy, acquisition of real estate based on a court decision or a decision of another competent authority, as well as other methods of acquiring real estate.

The tax base for the real estate transfer tax is the market value of the real estate at the time of its acquisition in the case of sales/purchases. If the price stated in the documentation for acquiring real estate is lower than the market value or is not specified in the documentation, the local tax authority determines the market value of the real estate based on market prices at the time of the tax liability.

The RETT rates in Montenegro are progressive and for real estate valued:

a) up to EUR 150,000, the rate is 3%;

b) over EUR 150,000.01, the rate is EUR 4,500.00 + 5% on the amount exceeding EUR 150,000.01;

c) over EUR 500,000.01, the rate is EUR 22,000.00 + 6% on the amount exceeding EUR 500,000.01.

The law provides for various RETT exemptions, such as (the list is not exhaustive):

• State bodies;
• Diplomatic and consular missions of foreign states accredited in Montenegro, under reciprocity conditions, and international organizations exempted from real estate transfer tax by international agreement;
• Individuals acquiring real estate in the process of restitution of confiscated property and in the implementation of agrarian policy measures;
• Montenegrin adult citizens residing in Montenegro who are acquiring a residential building or apartment for the first time to meet housing needs, up to 20 square meters per household member, provided they do not own a residential building or apartment in Montenegro;
• Non-governmental organizations acquiring real estate for the purpose of performing the program activities for which they were established;
• Individuals acquiring real estate in the process of expropriation or other proceedings for the taking of real estate for public interest purposes (construction of residential and commercial buildings, etc.);
• Banks, when ownership rights to real estate are secured by fiduciary or mortgage transfer to the bank as a creditor, and when ownership rights to real estate are acquired in exchange for claims in the process of collecting claims based on approved loans and in the process of debtor bank reorganization in accordance with bankruptcy regulations, provided that the acquired real estate by the banks is sold within three years from the acquisition date;
• Real estate transfer tax is not paid in the case when real estate is contributed to a company as an initial contribution or when increasing the share capital and when real estate is acquired through mergers, acquisitions, and divisions of companies conducted in accordance with the Law on Companies;
• In cases of inheritance, gifts, and other instances of acquiring real estate without compensation.

It is important to mention that the sale of newly constructed properties (but only the transfer to the first buyer) is subject to Value Added Tax (VAT) at a standard rate of 21%, whereas the RETT is not applicable.

Additionally, provisions of relevant double taxation treaties may also be applied.

4.2 Specific Real Estate Taxes

Annual property tax is levied on real estate located within the territory of Montenegro, and the taxpayer is the owner of the real estate registered in the real estate cadastre or other property records (such as business books, registers, notarial records, etc.) as of January 1st of the year for which the tax is determined.

The tax base for property tax is the market value of the real estate, and the criteria for determining the market value of real estate are more precisely defined by the Law on Property Tax. The market value of the property is considered to be its value as of January 1st of the year for which the tax is assessed.

The property tax rate is proportional and ranges from 0.25% to 1.00% of the market value of the property. However, there are exceptions to this rule: (i) for secondary residential properties or apartments, the rate ranges from 0.30% to 1.50%; (ii) for unauthorized structures used to address housing needs, the rate ranges from 0.30% to 1.50%, and for those not used to address housing needs, the rate ranges from 0.30% to 2%; (iii) for undeveloped building land, the rate ranges from 0.30% to 5%.

Tax reliefs applicable in this specific case pertain to property tax on residential buildings or apartments that serve as the taxpayer’s residence or permanent place of stay. The relief includes a reduction of 20% for the taxpayer and an additional 10% for each member of the household, up to a maximum of 50% of the property tax liability.

The law also recognizes numerous tax exemptions, which include, for example, real estate owned by the state, real estate owned by the Central Bank of Montenegro, real estate owned by accredited consular and diplomatic missions, and others.

The determination, collection, and control of property tax are under the jurisdiction of municipalities in whose territories the properties are located. Consequently, the tax rate is defined by each municipality, with each municipality adopting its own Decision on Property Tax. In doing so, it uses parameters prescribed by the Law on Property Tax and the Law on Tax Administration.

Generally speaking, understanding the tax implications of real estate transactions in Montenegro is crucial for anyone involved in the real estate market, which is why both buyers and sellers must remain vigilant in this matter.

5 Condominiums

5.1 Legal Framework for Condominiums

Condominium, or Condominium property, is defined in Montenegrin law as the right of ownership of separate parts of a residential or commercial building, which is indisputably connected with certain rights on the common parts of such building, as well as on the land on which that building was built. The law also makes a distinction between what is considered a separate or individual part (e.g., apartments, business premises, separate basements, separate attics, separate garages) of the building and the common or mutual part (e.g., foundations, vertical and horizontal construction, roof, hallways, staircases, elevators).

A natural or legal person can have exclusive ownership, co-ownership, or joint ownership of separate parts of a residential building, while on the common parts of the residential building, which serve the building, all owners have common indivisible ownership. However, on the common parts of the residential building, which serve only some owners but not all, only the owners of those separate parts have common indivisible ownership.

An interesting investment opportunity is reserved for mixed-use and condo hotels, which, as a form of exception, are a certain form of sui generis condominium property, pursuant to provisions of the Law on Tourism and Hospitality. Ownership rights can be obtained only over accommodation units with associated parking spaces (excluding rights over common rooms and complementary facilities of the hotel).

5.2 Rights and Duties of Co-Owners

Regarding the rights and duties of condominium owners in respect of their own individual units, the co-owners are free to use their individual part of the residential building, as well as to perform works on their individual part, in such a manner that they do not affect the individual part of another co-owner or the parts that serve the building as a whole.

Regarding the rights and duties of condominium owners when it comes to the common parts and the residential building as a whole, they are obliged to use the common parts in accordance with their purpose and to the extent that corresponds to the rights of other co-owners. Co-owners can decide on all works in the common areas that aim to improve or facilitate use or increase income. Works that may cause damage to the stability or safety of the residential building, that change its architectural appearance, or that cause certain common parts of the building to be unusable by even one co-owner are prohibited.

Condominium owners are also required to contribute to the expenses associated with maintaining the common parts of the building and the land for regular building use, as well as the costs related to building management. The Assembly of Condominium Owners determines the method of organizing the maintenance of the residential building, whereas the obligation to pay the maintenance is prescribed by law.

5.3 Liability of Co-Owners

Co-owners are liable for any damages, irrespective of fault, that result from failure to comply with regulatory requirements of maintaining their individual parts of the building. The performance of any works, along with its individual and common parts, must be kept in such a manner that ensures its functionality and prevents any potential damage. Therefore, The Assembly of Condominium Owners may also be held accountable for any damages resulting from non-compliance with regulations of maintaining the common parts of the building.

5.4 Rights and Duties of Condominium Associations

Condominium Associations in Montenegro take form in the Assembly of Condominium Owners. Assembly represents one of two governing bodies of residential buildings (along with the Manager) and is formed by owners of individual parts of the building or Condominium Owners. As mentioned before, Assembly is responsible for the maintenance of the common parts of the building, therefore it adopts a building maintenance program and ensures its execution, decides on improving living conditions in the building, ensures the dedicated use of the common parts of the residential building and decides on the manner of use of the land designated for the regular use of the building. On the other hand, the Assembly bears responsibility for damages resulting from neglecting or inadequately carrying out tasks within its jurisdiction.

6 Commercial Leases

6.1 Form and Contents of a Lease Agreement

Generally speaking, the essential elements of any lease agreement under Montenegrin law are (i) the subject of the lease; (ii) the rent; (iii) the duration of the lease; as well as other important elements which include the obligations of the lessor, the obligations of the lessee, termination of the lease agreement, etc.

It is important to emphasize that the Law on Contracts and Torts relies upon the principles of dispositive implementation of law provisions, which means that only in the absence of specific contractual provisions will the provisions of the law apply. However, the parties are not free to deviate from the imperative provisions of the law.

Speaking about the category of commercial leases, Montenegrin law recognizes lease agreements for commercial premises. In this case, a written form as mandatory for this contract is prescribed, i.e., the contract must be certified by the competent authority (notary); otherwise, it is considered null and void (note: example of an imperative law provision).

In practice, commercial leases typically include, but are not limited to, provisions regulating issues such as (i) repairs to the commercial premises; (ii) the amount of rent during repairs; (iii) special rights of the tenant during repairs; (iv) significant alterations to the commercial premises and the necessity of the lessor’s consent for such alterations; (v) compensation for the costs of common facilities; (vi) maintenance costs; (vii) the possibility of subletting the commercial premises and the conditions for subletting; (viii) installed equipment; (ix) notice period and notification of termination.

Recent trends in Montenegro’s commercial lease market include a growing emphasis on automatic renewal clauses, where leases may be extended unless a party provides notice to terminate. Additionally, there is an increasing focus on compliance with formal registration requirements, ensuring leases are properly notarized and recorded to secure legal standing and enforceability.

6.2 Regulation of Leases

The Law on Contracts and Torts distinguishes between different types of lease agreements, by prescribing basic provisions for lease agreements and consequently regulating specific lease agreements such as residential and commercial lease agreements.

It is noteworthy to mention that specific regulations may apply to real estate owned by the state of Montenegro. In such cases, additional formalities and conditions may be required (e.g., organizing public tenders).

Although the parties have the autonomy of will, as previously mentioned, there are rules that cannot be circumvented. It is important to note that every contract, including this one, must be made in accordance with mandatory legal provisions and the fundamental principle of conscientiousness and fairness.

6.3 Registration of Leases

Although it is not mandatory to register the commercial lease, it certainly is a good option to record it before the competent Real Estate Administration to ensure the necessary visibility and security.

The registration of the lease agreement is recorded in the real estate cadastre in the “G” section, which relates to encumbrances and restrictions. There is also the possibility of registering a pre-entry of the lease right if it is proven by a document and if the right and the will of the parties to register this right are indisputable.

The current legislation does not provide for any register or database of concluded lease agreements, but there are public requests calling for the organizing of such a register.

6.4 Termination of Leases and Renewals

A commercial lease can be concluded for a fixed term or for an indefinite period. The more common practice is to conclude a lease for a fixed term, with the parties agreeing that the lease will be automatically renewed unless either party notifies the other of their intention not to renew the lease.

A commercial lease agreement concluded for an indefinite term cannot terminate based on a unilateral notice before the expiration of six months from the conclusion unless the contract stipulates otherwise (i.e., the autonomy of the parties applies here). A commercial lease agreement concluded for an indefinite term terminates on the expiration of the notice period specified in the contract, which is typically three months unless otherwise agreed. Additionally, unless the contract specifies otherwise, the notice can only be given on the first or fifteenth day of the month.

The law provides the possibility of terminating the lease at any time by the lessor, regardless of contractual or legal provisions regarding the duration of the lease, in the following cases: (i) the tenant, even after written notice from the lessor, continues to use the commercial premise contrary to the lease or causes significant damage by using it without due care; (ii) the tenant fails to pay the overdue rent within fifteen days of receiving written notice from the lessor; (iii) the lessor, due to reasons beyond his responsibility, cannot use the commercial premise where they were conducting their business and intends to use the premise leased to the tenant. The tenant has the same right in the following cases: (i) if the lessor does not provide the commercial premises to the condition they are obligated to deliver or maintain within a reasonable period allowed by the lessee.

In this context, we can also discuss the tacit renewal of the lease, which occurs when a lease agreement is concluded for a fixed term, and upon its expiration, the lessee continues to use the commercial premises. For tacit renewal to take place, it is necessary that the lessor does not oppose the continuation of the tenant’s use of the space. In such cases, it is considered that a new lease agreement has been concluded for an indefinite term under the same conditions as the previous one.

6.5 Rent Regulations and Rent Reviews

The Montenegrin legal system does not regulate or restrict the amounts of rent, which means that the rents rely on market principles. However, general principles of contracting as stipulated in the Law on Contracts and Torts shall nevertheless be adhered to, e.g., the equivalency of mutual obligations, conscientiousness and honesty, good businessman standards, etc.

There are certain cases where restrictions apply, namely the Law on Social Housing prescribes that the rent amount depends on the income of the tenant’s family household, the size of the residential building, and the amount of maintenance costs of the residential building and common parts of the residential building.

6.6 Services To Be Provided Together With the Lease

The relevant provisions of the Law on Contracts and Torts prescribe that the lessor is obliged to hand over the leased premises to the tenant in good condition. If the leased premise is in a condition described in the contract, it is considered to be in good condition, and in the absence of a contract, a good condition is the one where the leased premise can be used for the purpose for which the contract was concluded.

The lessor is obliged to keep the leased premises in good condition for the duration of the lease and, for that purpose, to perform the necessary repairs. Anyhow, the lessor is obliged to compensate the tenant for the costs incurred by the tenant for maintenance which the lessor would have been obliged to do. However, the costs of minor repairs caused by regular use, as well as the costs of use itself, are borne by the tenant.

6.7 Fit-Out Works and Their Regulation

It is quite common in commercial practice that the leased premises are premises needing fit-out works, whereas, for the leasing of housing premises, it is less common.

The relevant provisions of the Law on Contracts and Torts prescribe that if the tenant made any changes to the property during the lease, he is obliged to return it to the condition it was in when it was leased to him.

The tenant can take away the additions he made to the property if the additions can be separated without damaging them, but the lessor can keep them if he compensates the tenant for their value at the time of return.

However, it is important to note that the parties are free to deviate from the law provisions in contractual relations (apart from the imperative provisions), which they usually do in these cases, e.g., the rent amount includes the costs of fit-out works, or they specifically agree on the handover protocol dividing what belongs to whom upon the expiration/termination of the lease.

6.8 Transfer of Leases and Leased Assets

A lease agreement may be transferred by an assignment agreement concluded between the parties who are the parties to the lease agreement and the party receiving the rights and obligations from it. In the case of assignment, either party may assign its rights and obligations under the lease agreement, but it is conditional on the acceptance of the other party. The rights and obligations remain unchanged unless agreed otherwise.

When the leased property is transferred to another person, the transferee takes the place of the lessor and assumes his obligations towards the tenant if he knew of the existence of the lease agreement at the time of concluding the agreement for such transfer.

The transferee who did not know about the existence of the lease agreement at the time of concluding the agreement for transfer is not obliged to hand over the leased property to the tenant. In that case, the tenant may only claim damages from the lessor. The transferor (the original lessor) is anyhow responsible for the transferee’s obligations from the lease agreement as a joint guarantor to the tenant.

Additionally, in the case of transferring the leased property to another person, the tenant has the legal right to unilaterally terminate the lease agreement.

Considering these cases, for security reasons, it may be advisable to register the lease agreement in the real estate cadastre, since Montenegrin law provides for this option. In this case, it is considered that the transferee knew about the existence of the lease agreement, due to the publicly available information on the existence of the agreement.

7 Zoning and Planning

7.1 How Are Use, Planning, and Zoning Restrictions on Real Estate Regulated?

The Law on Spatial Planning and Construction of Buildings is an umbrella act regulating the planning and zoning of real estate in Montenegro. It prescribes that there will be only two spatial planning documents for the territory of Montenegro: the Spatial Plan of Montenegro and the General Regulation Plan based on which all other planning documents will be adopted.

The currently applied Spatial Plan of Montenegro was adopted in 2008 and it was meant to be valid until 2020 but considering that the new Spatial Plan has not yet been adopted (note: currently, its adoption is expected in the upcoming period), it remains in force. The new Spatial Plan should be valid for 20 years after its adoption.

The General Regulation Plan of Montenegro, specifying the goals and measures of the spatial and urban development of Montenegro in more detail, once adopted, will be valid for 10 years upon its adoption.

Until the adoption of the General Regulation Plan of Montenegro, a large number of previously adopted and currently applicable planning documents (both on a local and state level) will remain in force. All planning documents are available on an online public register held by the relevant Ministry.

When it comes to investing, it is advisable to assemble a coherent technical and legal team with a good understanding of the particularities of Montenegrin planning regulations. Adding to that calculation the specifics of the coastal area regime, UNESCO protection of certain areas, five National Parks in Montenegro, the requirements for preservation of nature, sustainable development, and assessment of impact to the environment, the more argument to do so.

As for the construction process itself, under currently applicable provisions of Law on Spatial Planning and Building Construction it is not required to obtain a construction permit but rather to submit the construction report. However, the Parliament of Montenegro is expected to adopt new legislation in this matter by the end of February 2025, i.e. Law on the construction of buildings and Law on spatial planning.

The proposed new laws are re-introducing construction permit to be issued either by local authorities or the relevant Ministry, depending on their division of competence.

The vast majority of the procedure remains the same. Namely, in order to construct, the investor is required to prepare a concept design (“idejno rjesenje”) based on Urban and Technical Conditions extracted from the applicable planning document. The second step is obtaining the approval of the Main State or City Architect (their competence is divided depending on the type of building and its area) for the concept design. The next phase is preparing the main project (“glavni projekat”), which is a detailed elaboration of the concept design, encompassing at least an architectural project, construction project, electrotechnical project, and mechanical project. The main project is subject to certification and revision, which includes checking the compliance of the main project with urban and technical conditions, the law, special regulations, and rules of the profession, etc.

Upon finishing the construction, under current laws, no usage permit is issued (note: except for complex engineering buildings); however, according to proposed law changes, it is also re-introduced into Montenegrin legal system.

It remains to be seen what the final text of the enacted laws in this particular area will be, and more importantly, what impact the new legal provisions will have in practice.

7.2 Can a Planning/Zoning Decision Be Appealed?

The planning documents cannot be appealed, considering they are a public document adopted in an official law procedure and their validity is erga omnes. However, they may be the subject of constitutional reviews.

As for the previously mentioned procedures referring to obtaining the necessary documents in order to construct buildings, they are governed by the Administrative Law and the Law on Administrative Dispute. The applicant has the right to appeal all the decisions to the second-instance bodies, and even to file a lawsuit against the decision made by the second-instance bodies.

The Administrative Court of Montenegro has the jurisdiction to hear these cases, but it is worth noting that the big downside is the lengthiness of these proceedings (e.g., around two years). Additionally, extraordinary legal remedies are also available against the judgment, as well as the constitutional appeal.

Please note that this article is intended for informational purposes and provides only a general overview. Specific details of each potential case should be individually assessed and considered.