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The Government of the Republic of Serbia

In the service of citizens

Law on Mortgage to enter into force in late February

Belgrade, 1 February 2006

Serbian Minister of International Economic Relations Milan Parivodic said today that the Law on Mortgage will come into force in late February, thus enabling citizens to apply for mortgage loans.

Milan Parivodic

At a meeting organised by the Societe General Bank, Parivodic pointed out that the process of collecting mortgage debts will also be shortened.

He recalled that for years, one of the greatest problems in Serbia has been unregistered buildings and objects sold on the market for which banks did not grant any loans. Parivodic said that if an object can be traded on the market, it is logical to allow that a mortgage loan be granted for it.

According to Parivodic, banks will be allowed to grant mortgage loans to investors provided that investors have a valid construction licence. Mortgage loans will most probably be granted in installments rather than as a lump sum. He added that if all deadlines are met, the mortgage creditor will gain trust in the mortgagor.

Mortgage loans for unregistered objects and objects under construction will be granted to individual persons who must submit a copy of the contractor's construction licence.

Parivodic said that the Law on Mortgage envisages an out-of-court settlement if the mortgagor fails to settle the debt on time. Such cases will be heard in court only if both parties agreed when they were signing the contract and if a suitable clause was put into the contract.

The minister explained that if a mortgagor fails to pay the interest on time, the bank is obliged to send them a written warning and then meet with them. The law envisages that a warning sent by registered mail automatically represents a warning received.

If the debt is not settled in a month's time, the bank will send another warning both to the client and to the relevant court, this time concerning the sale of the mortgaged property, added Parivodic.

He pointed out that the transfer of property will be registered in the cadastre in 15 days' time, after which the bank will become the owner of the property, which will be sold on the market and acquired funds used for settling the debt. Any leftover sum will be returned to the client.