Category: Montenegro

The Ministry of Economic Development and Tourism adopted the Draft Law on Real Estate Brokerage. The adoption of this law is motivated primarily by the need to suppress the grey economy that is flourishing in the field of real estate brokerage. The second, equally important motive is the protection of participants and the prevention of abuses and fraud in real estate sales.

The key novelty that this Law brings is the introduction and licensing of the institutes of Real Estate Brokers and Agents in the sales and lease of real estate.

A Real Estate Broker (“Broker”) is a legal entity or entrepreneur that is registered in the public Register of Real Estate Brokers. One of the basic conditions for registration in the Register of Real Estate Brokers is that there is at least one employee with the Broker who works full-time and has passed the professional exam for performing intermediation in the sales and lease of real estate – Agent. The professional exam is conducted by the Chamber of Commerce and is taken before the Commission consisting of at least one member from the Association of Real Estate Brokers and two from the competent Ministry. The condition for taking the professional exam is that the candidate has a domicile or residence in the territory of Montenegro and at least the 4^th level of qualifications of the national qualification level, and the exam is taken in the Montenegrin language. Performing the tasks without registration in the Register of Real Estate Brokers is an offence for which a fine of up to EUR 40,000.00 is threatened, while in the event that brokering activities at the Real Estate Broker’s office are performed by a person who has not passed the professional exam, a maximum fine of EUR 10,000.00 is issued.  

The Broker is obliged to have concluded a contract for professional liability insurance worth at least EUR 20,000.00 per adverse event, i.e., min. EUR 60,000.00 for all adverse events in one year.

The law introduces a prohibition on performing equivalent tasks, which means that the Agent cannot, without the consent of the Broker for whom he works, perform intermediary activities or other activities identical or similar to intermediation, nor provide services related to the work that is the subject of intermediation for himself or for another Broker. In the event that he/she violates the prohibition, the Agent is obliged to compensate the Broker for the damage or to transfer the earnings from such a transaction.

Additional obligations of the Broker defined by the Draft Law include the obligation of the Broker to carry out the control of documents relating to the property that is the subject of intermediation and warn the principal of any possible deficiencies regarding them, to perform actions for presentation on the real estate market, to try to enable the inspection of real estate and to mediate in negotiations, and the principal may, by a special and express power of attorney, authorise the Broker to conclude a legal work on his behalf,  as well as to receive whole or part of the purchase price or rent. The Broker may also, for the purpose of receiving, storing, and handing over money in the name and for the account of the Principal, open special deposit accounts that cannot be subject to enforcement against the Broker.

By the rule, the Broker acquires the right to compensation at the moment of conclusion of the Contract for which he has intermediated, and will also be entitled to an intermediary fee if, within a period of 12 months from the termination of the Contract, the principal concludes a legal work with a third party that is a consequence of the activities of the Broker before the termination of the Intermediation contract. Bearing in mind the problems that arise in practice, i.e., the fact that the obligations from concluded contracts are not fulfilled, we believe that it would be expedient for the payment of the brokerage fee to be conditioned by the payment of a part or whole of the purchase price or rent.

The Broker is obliged to determine the general terms and conditions, which in particular contain: the amount of the intermediary fee, i.e., the method of determining the amount of the intermediary fee; a description of the jobs he is obliged to perform for the principal and the type and amount of costs for additional services. These general terms and conditions are an integral part of the Contract, and the Broker is obliged to display them in a visible place on their business premises and on the website, thus achieving transparency in their work.

The deadline for harmonization of the business of the Brokers is 12 months from the date of its entry into force.

The adoption of this law is justified and necessary and its implementation and consistent application will greatly contribute to making the real estate market much more regulated and even more attractive for serious clients.

By Marija Zivkovic, Partner, and Aleksa Jankovic, Associate, JPM & Partners ( Montenegro)

The Work Program of the Government of Montenegro for 2023 envisages the preparation of a set of draft laws that are in final phase.

Montenegro has carried out an adequate assessment of the legal framework and almost done a comprehensive process of consultations carried out through inclusive public discussion with the participation of the public and with full respect for recommendations and international standards in specific areas.

The impression was created that important issues and risks have been identified, as well as targeted outcomes that need to be realized in order for the entire system of drafting amendments to current legal acts to be in the spirit of implementing the EU legal acquis.

Namely, the numerous changes that took place in the overall development of Montenegro were accompanied by consequences that directly reflected on spatial planning as one of the basic starting points of the overall economic and social development of the country. Therefore, the analysis of the Law on Spatial Planning and Construction of Buildings, which regulates space planning and construction of buildings but proved to be insufficiently effective, was first analyzed. Namely, it was estimated that the spatial planning policy should be significantly reformed because the areas of spatial planning and construction of buildings represent separate functional and substantive entities, and that special laws should be adopted in these areas.

A public discussion on the drafts of the Law on Spatial Planning and the Law on Building Construction was held by the Ministry of Ecology, Spatial Planning, and Urbanism. It is expected that the report from the public discussion will be published soon.

In addition to the above, drafts of the Law on the Legalization of Illegal Buildings, of the Law on Amendments to the Law on Business Companies, and the Law on Amendments to the Law on Foreigners, have been prepared and are also in the final stage. The aim of the adoption of these laws is the implementation of prevent measures and more effective response from a legal, economic, administrative, and social point of view, bearing in mind that these are key laws for the entire social environment in Montenegro.

It is expected that these umbrella legislations, as generators of the economic development of the State, will achieve significant effects on citizens, investors, land owners, local governments, and ultimately on the State itself because conditions will be created for stabilizing the system as well as encouraging the strategic determination of Montenegro to rationally and sustainably use its natural and created resources and to develop as an ecological country, all with the aim of complying with EU legislation.

By Daniel Vujacic, Associate, Vujacic

Montenegro intends to implement a profound shift in its spatial planning and construction regulations with the pending adoption of three distinct legal acts that will regulate the country’s spatial planning, the construction of facilities, and legalisation procedures.

A departure from the previous practice, where these three areas were consolidated under a single 2017 Spatial Planning and Construction of Facilities Act, emerges from the shortcomings of the current legislation, which was marked by ineffectiveness and numerous implementation challenges.

One common feature of the Construction of Facilities Act [in Montenegrin: Zakon o izgradnji objekata], the Spatial Planning Act [in Montenegrin: Zakon o planiranju prostora] and the Legalisation of Illegal Facilities Act [in Montenegrin: Zakon o legalizaciji bespravnih objekata] is the substantial redefining of the roles and duties of numerous stakeholders traditionally involved in Montenegrin spatial planning and construction processes. A particularly noteworthy feature is the incorporation of the Chamber of Engineers of Montenegro into these legislative acts, fostering a more cooperative and synergistic approach between the regulatory requirements and practical needs and expectations. Moreover, these acts promise a significant augmentation of authority for local municipalities, empowering them with amplified capabilities, especially concerning the issuance of urban technical conditions and corresponding consents and approvals.

As per the current draft of the Construction of Facilities Act, the building/construction permits [in Montenegrin: građevinska dozvola] will be reinstated as a mandatory prerequisite for all construction undertakings. This represents a major departure from the current legal solution, where construction permits are exclusively mandated for complex engineering facilities. Furthermore, a particularly noteworthy proposal involves a significant shift in the role of the Chief State Architect, who is set to assume a strategic role in overseeing the construction of facilities exceeding 5,000 square meters.

The current draft of the Spatial Planning Act emphasises the decentralisation of spatial planning processes by formulating and implementing spatial documents on both national and local levels.

The draft of the Legalisation of Illegal Facilities Act presents a strict procedure for the legalisation of facilities constructed without the pertinent permits. As outlined in the draft, individuals who have constructed, reconstructed, extended, or expanded facilities without a building permit or other document authorising construction, or contrary to said document, will be afforded a six-month grace period (starting from the entry into force of the new law) to initiate registration procedures within the competent cadastral registries. This requirement refers to buildings constructed on both private and state-owned land. Should this stipulated timeframe elapse without compliance, the competent inspection authority will be empowered to render a decision mandating the removal of the illegal structures. Local self-government units will be tasked with overseeing legalisation for structures up to 500 square meters. For larger structures or those in protected zones, a special administrative authority will be established under the law.

The proposed Legalisation of Illegal Facilities Act also introduces a uniform payment approach, under which the corresponding land purchase fees for housing units can be settled in up to 360 monthly instalments, while the fees for other facilities can be paid in up to 180 monthly instalments.

The draft acts were made available for public debate for 40 days which ended on 27 June 2023. With the conclusion of the public debate, the drafts will now be refined in line with the obtained feedback, and subsequently, the legislative procedure within the National Assembly will be initiated.

The forthcoming legal framework promises to refine spatial planning, streamline construction permitting processes, and address the intricacies of legalising illegal facilities. Consequently, all stakeholders engaged in ongoing or prospective construction projects must pay close attention to the proposed legislative revisions, as these modifications could significantly impact their intended endeavours and the overall project dynamics.

By Ivana Panic, Partner and Luka Veljovic, Attorney at Law, Schoenherr

On 10 July 2023, the Agency for the Protection of Competition of Montenegro initiated a proceeding against the Association of Tourist Agencies of Montenegro for an alleged breach of the Competition Law.

Namely, during dawn raids conducted on the business premises of certain tourist agencies, the Agency came into possession of a Pricelist of services provided by tourist agencies.

The Agency concluded that the Pricelist prescribes fixed prices for services provided by tourist agencies. Consequently, the Agency suspected that the Pricelist may amount to a breach of competition and has therefore initiated an investigation procedure against the Association of Tourist Agencies of Montenegro. 

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Bojana Miljanovic Hussey, Partner, and Jelena Vucinic, Junior Associate,  Karanovic & Partners

Komnenic & Partners has advised Novi Volvox, Leitner, and Zicara Kotor-Lovcen DOO on the financing for the Kotor-Lovcen cable car project from OTP Bank. Karanovic & Partners advised OTP Bank through its CKB Bank subsidiary.

Leitner manufactures and distributes products and equipment for ropeways, snow groomers, urban transportation systems, and wind energy in Italy and internationally.

Novi is a construction company.

According to Komnenic & Partners, “developed by a project company and sponsored by Novi Volvox and Leitner, this exceptional endeavor has reached a rare project financing approved in Montenegro by Crnogorska Komercijalna Bank AD – OTP Member.”

The Komnenic & Partners team included Managing Partner Milos Komnenic and Senior Associate Desanka Kotlaja.

The Karanovic & Partners team included Senior Associates Sandra Perisic and Tijana Arsenijevic.

With a new president and parliament – and a new Bar Association President and Management Body – the elections’ results still hold the front page for lawyers in Montenegro, while the country plays to its strengths with energy, tourism, and real estate all thriving, according to Law Office Vujacic Partner Jelena Vujisic.

“The election cycle in Montenegro slowed down business developments to some extent,” Vujisic begins. “We have a new president and parliament, but the formation of a new government is still expected, and the markets have been cautious while waiting for it. We expect legislative and regulatory efforts to likely resume in September or October.” According to her, this should help restore confidence and provide clarity for businesses.

And the Bar Association of Montenegro recently held elections of its own. “The elections resulted in the appointment of a new president and a new management body. It’s worth noting that the previous president’s mandate was extended for three years, since 2020, due to the challenges posed by the COVID-19 pandemic,” Vujisic explains. “Going forward, we expect positive developments and incentives that will further enhance the working engagements of lawyers, both in court and administrative settings.”

Turning to economic matters, Vujisic reports on important investments in Montenegro’s renewable energy sector. “The EBRD has supported Elektroprivreda Crne Gore, the national electricity and utility company, with EUR 82 million for the Green Gvozd project. This project is an extension of the Krnovo wind farm, Montenegro’s first wind energy project, which we also worked on,” she explains. Additionally, there is an “interesting project called ‘Solary’ that aims to further develop the solar power sector in the country. We anticipate more wind and solar projects in the near future, leading to the overall development of Montenegro’s energy sector.”

And the tourism sector stands to be enriched as well. “Starting on July 13, an important tourist attraction will begin its operations in the City of Kotor,” Vujisic says. “A cable car will link Kotor to the Lovcen National Park, providing not only a convenient connection between the two locations but also offering impressive views of Boka Bay. This project has been in the works for almost two decades, and its opening coincides with the National Day of Montenegro,” she adds.

Aside from the energy and tourism sectors, real estate has also been on the up and up in the Adriatic country. “The real estate market in Montenegro is currently experiencing a boom, particularly along the seaside. There has been a significant increase in interest from German investors this year, overtaking Turkish and Ukrainian investors who held the top spots in 2022,” Vujisic reports. “The lower costs of living and real estate, combined with a favorable climate, are attracting individuals and companies to take up residence and establish businesses in our country. On the other hand, Russian citizens still face difficulties when trying to open bank accounts in Montenegro, so they are less present overall.”

Finally, Vujisic reports that Montenegro is feeling the impact of mergers taking place across the region, with the Italian and Serbian markets standing out. “Those required notifications of the local regulatory body, so the legal market has been experiencing a kind of a spillover effect.” At the same time, “considering that the courts in Montenegro collectively take a summer break in August, people are busy wrapping up projects and cases before then. But we do expect a more relaxed pace of work come August,” she concludes.

Harrisons, working with DLA Piper UK, has advised the EBRD on its EUR 82 million loan to state-owned electricity company Elektroprivreda Crne Gore and Green Gvozd – a special-purpose vehicle to be fully acquired by EPCG – for the construction of a new 55-megawatt onshore wind farm in Montenegro.

Elektroprivreda Crne Gore, based in Niksic, is an integrated electricity company listed on the Montenegro Stock Exchange, with the majority of the shares owned by the state, active in the production, distribution, and supply of electricity.

According to the firm, “the loan will be used to finance the acquisition, construction, and operation of a new 55-megawatt onshore wind farm near the village of Gvozd in Niksic municipality, helping accelerate EPCG’s decarbonization plan and the energy transition of Montenegro […] The Gvozd wind farm is a milestone project for EPCG, being its first major new-generation asset in over 40 years, as well as its first wind farm.”

“Gvozd will be the second wind farm financed by the EBRD in Montenegro, which will, once completed, generate [enough energy] to supply more than 25,000 households per year in Montenegro,” Harrisons reported, “and is expected to save at least 104,000 tons of carbon dioxide emissions per year, equivalent to the annual emissions of approximately 62,000 cars.”

The Gvozd wind farm is a milestone project for EPCG, being its first major new-generation asset in over 40 years, as well as its first wind farm.

The Harrisons team was led by Consultants Ines Matijevic-Papulin and Goran Martinovic and included Senior Associate Milan Keker and Associates Aleksandra Bujkovic and Aleksandar Jovicevic.

Harrisons could not provide further information on the deal.

Komnenic & Partners has advised MEnergy on the grid connection agreement with the Montenegrin transmission system operator for a 385-megawatt solar power plant in Cevo.

According to Komnenic & Partners, “Montenegro takes a significant step towards renewable energy as the agreement for connecting a 385-megawatt solar power plant to the transmission system was signed in Podgorica between the Montenegrin transmission system operator and MEnergy, a company based in Cetinje.”

According to the firm, “the project, located in Cevo and valued at around EUR 300 million, marks a significant milestone in the country’s energy transition. The plant, expected to be operational by 2027, will contribute to the region’s sustainable future and further strengthen Montenegro’s commitment to renewable energy.”

The Komnenic & Partners team included Managing Partner Milos Komnenic and Partner Nemanja Radovic.

Several updates vie for the front page in Montenegro, from politics, tax reforms, and the influx of high-skilled professionals to vibrant renewable energy sector activity and a booming M&A market, according to Komnenic & Partners Partner Nemanja Radovic.

“The political change we experienced in 2020, after almost 30 years, had a significant impact on the judicial system,” Radovic begins. “There were changes made to the Supreme Court, the President of the Commercial Court, and the Special Prosecutor’s office, among others. These changes have shaped the legal landscape in Montenegro and presented interesting and challenging times for lawyers,” Radovic stresses.

Speaking about the reforms that have taken place recently, Radovic mentions a “tax reform, which introduced progressive tax rates ranging from 12% to 15% depending on turnover. Despite the increase in tax rates, Montenegro remains an attractive country for investors from the tax perspective,” he says. “Additionally, we have seen other reforms in response to the war in Ukraine, the energy crisis, and rising product prices. These reforms have influenced various sectors such as construction, hospitality, renewable energy, and the IT sector.”

Focusing on the blowback of the war in Ukraine, and the subsequent influx of immigrants from Russia and Ukraine, Radovic says that the effects on Montenegro were mostly positive. “Montenegro, being a micro-state with a population of 600,000, has experienced positive effects due to the arrival of approximately 30,000 immigrants from Russia and Ukraine. Many of them work in the IT sector and have brought their businesses and additional knowledge to our country.” According to him, “this has resulted in significant growth in the IT sector, with a 40% increase compared to the previous year.”

In addition, Radovic reports that the renewable energy sector has been on the up and up in the Balkan country. “We were involved in several notable projects, including two large-scale renewable energy projects named M Energy and Sunrise Montenegro, which together exceeded 600 megawatts,” he says. “These projects align with the EU’s green transition reform and have attracted developers and major companies in the energy sector to Montenegro.“

Apart from these projects, Radovic reports that there has been notable M&A transaction activity as well. “One of the largest transactions for the year in Montenegro involved the Fortenova group, where Mercator acquired one of the biggest chains of supermarkets – Franca Markeri – and established a long-term supply agreement,” he reports. “Furthermore, Lidl has announced its forthcoming entry into the market, which has prompted various companies to prepare for the increased competition in different ways.”

Finally, Radovic reports that there have been “discussions regarding the introduction of special provisions to the tax law framework, to tax companies that made an extra profit during the pandemic, which has sparked conversations about the legal predictability of the system due to its retroactive effects.” With general elections having taken place on June 11, 2023, the business sectors of Montenegro could soon be looking at another shake-up. “It is an interesting and dynamic time for sure,” Radovic concludes.

Harrisons has advised the EBRD on its EUR 4 million loan to Montenegrin retailer and supermarket operator Voli for the installation of solar panels and electric vehicle charging stations.

Voli employs over 2,000 people and is the largest employer in Montenegro. According to Harrisons, it is also “the largest Montenegrin retail chain.”

Voli will use the “funds to purchase and install solar panels with up to 4 megawatts capacity and electric vehicle charging stations at its facilities and logistics centers.”

The Harrisons team was led by Consultant Ines Matijevic-Papulin and Principal Mark Harrison and included Associates Aleksandra Bujkovic, Mina Zeljkovic, and Aleksandar Jovicevic.