Recently, the National Alliance for Local Economic Development (NALED) published a report stating that 2,200 applications for land conversion have been submitted, with the economy planning investments worth 88 million euros. This report represents a significant step in improving the business environment in Serbia, but to fully understand its significance, it is necessary to examine the regulatory framework that preceded and the current legal regime.
How Was It Before?
A major shift occurred in 2009 with the adoption of the Law on Planning and Construction. This Law introduced the concept of converting usage rights into property rights, allowing owners to legalize their status on the land.
In 2014, amendments to the Law on Planning and Construction led to the abolition of provisions on paid conversion, while free conversion remained regulated by the same law. This law enabled automatic conversion of usage rights into property rights free of charge, providing investors and landowners with greater legal security and a simpler process.
Current Regulatory Framework
Currently, in Serbia, there are two main legal acts regulating the process of land conversion: the Law on Planning and Construction, which regulates free conversion, and the Law on Converting Usage Rights into Property Rights on Construction Land with Compensation, which regulates conversion with compensation.
Free Conversion: According to the Law on Planning and Construction, the usage rights on construction land are automatically converted into property rights without any compensation. This conversion is carried out ex officio by the competent authority, but in practice, it is often necessary for the interested party to submit an application and pay the corresponding fee. Property rights are recorded in favor of the person registered as the owner of the building on that parcel or the holder of usage rights on undeveloped construction land.
Conversion with Compensation: The Law on Conversion with Compensation stipulates that conversion can be carried out on land owned by the state, autonomous provinces, or local self-government. Persons required to pay compensation include, among others, legal entities that have been privatized, holders of usage rights on undeveloped construction land, and other entities defined by law. The compensation for conversion is determined according to the market value of the land at the time of the application, and the amount of compensation can be reduced in certain cases, such as costs of acquiring usage rights or when the land is located in underdeveloped areas.