In Croatia, it is still easier to rent an apartment to a tourist for three days than to a citizen for three years. While the short-term rental market is booming, long-term rentals remain unregulated, insecure, and left to improvisation. Tenants fear sudden contract terminations, while landlords worry about those who do not pay.
The new Rental Law is expected to change this – at least that is the intention of the Ministry of Physical Planning, Construction and State Property, which plans to adopt it by the end of the year.
– The primary goal is to increase the legal security of landlords and tenants by refining existing provisions that have proven to be inadequate – says State Secretary Željko Uhlir, without revealing too many details about the law that is in preparation.
What is the main problem with the existing law? The answer depends on whom you ask.
Dubravko Ranilović, president of the Real Estate Business Association at the Croatian Chamber of Economy, will say that, as is often the case in Croatia, the problem is not in the laws, but in their implementation.
– The biggest problem is that people have not been signing rental contracts at all. Students, young people – they agreed to anything just to get an apartment. The situation has improved slightly with the introduction of property taxes, as some landlords have now registered tenants to avoid paying taxes. However, in some situations, the tax is so low that it is still profitable for them to rent illegally. In any case, I believe that the biggest problem is always control and enforcement, not the law itself – says Ranilović.
The Law is Too Favorable to Tenants
However, from a legal perspective, the law also has its shortcomings. According to Ksenija Šourek, a lawyer from the law firm WAHL & partners, the Rental Law has been subject to criticism since its inception because it creates tensions between landlords and tenants, with landlords unexpectedly facing more challenges than tenants.
– This situation has led to a large number of apartments being left vacant because owners feel that renting to unknown individuals is an excessively burdensome and risky task that could lead them to a situation where they cannot regain possession of their own apartment – at least not within the timeframe they would like, which they should be able to expect, while the rental income does not seem to be a sufficient reward – explains Šourek.
From the landlord’s perspective, the biggest problem is the strong protection of tenants and the collection of debts.
– Although it is generally understandable that the legislator primarily aimed to protect tenants, considering that landlords, as property owners, are in a somewhat privileged position by nature, the Rental Law is in some segments too favorable to tenants.
This primarily refers to the difficulties in terminating rental contracts, the insufficient number of reasons for termination, the obligation of prior notice, compliance with relatively long notice periods, etc. An even greater challenge is the actual eviction of tenants. Namely, if a tenant does not leave the apartment within the notice period, landlords are generally left with no choice but to file a lawsuit for eviction with the competent court. This procedure, although urgent in terms of the law, is often not so in practice – says Šourek.
According to data from the Ministry of Justice, about 500 eviction lawsuits are filed each year (not all relate to tenants), and due to backlogs, there are currently more than 800. While this number may not seem significant, for owners who have been trying to collect rent for months, each such case means a lot.
– If a tenant does not pay rent or utilities or other potential costs they have agreed to bear, or if the tenant does not voluntarily compensate for damages caused in the apartment, collection procedures can be long and expensive. The provision of the Law according to which the landlord has a lien on the tenant’s furniture and other movable property until their debt is settled rarely represents any real advantage for the landlord in practice, as it is rarely about valuable and easily liquidated items, and the entire provision only makes sense if the landlord has managed to take possession of the apartment at all, which is often a difficult task – notes Šourek.
There is No Rental Culture
However, the rights of tenants are also called into question to a certain extent. While landlords fear losing their apartments, tenants fear losing their roofs over their heads. Along with the previously mentioned cases of illegal rentals, where tenants have no legal protection or proof of rental and thus cannot register their residence, a common problem for tenants is the insecurity of contracts.
– A large number of landlords only offer short-term contracts, which creates insecurity for tenants regarding housing and planning life-essential matters in general. This problem is particularly pronounced in coastal areas, where tenants are often (not to say usually) forced to leave their apartments during the summer season. There are also insufficiently clear delineations regarding the rights and obligations of tenants and landlords when it comes to property maintenance – tenants often bear the costs of repairs that, according to the law, should be the landlord’s responsibility – says Šourek.
Professor at the Faculty of Law at the University of Zagreb and one of Croatia’s leading experts on social policy, Gojko Bežovan, emphasizes that the existing Rental Law has never been consistently enforced.
– Due to the frequent occurrence of “black” rentals, reporting lower amounts in contracts than the actual ones to avoid paying taxes, and the risk of non-payment, a great distrust has developed, and tenants have become almost a socially excluded group of people. No one takes them into account. Unfortunately, we do not have a rental culture, even though it is a first-rate civilizational issue – warns Bežovan.
According to him, young people in Croatia do not organize into associations or exert pressure on the state regarding this issue, so the topic of housing remains outside the focus of public policy. In other words, the law is just a piece of the puzzle. While Bežovan warns of the lack of rental culture and the social exclusion of tenants, lawyers like Ksenija Šourek emphasize the need for clearer rules and faster mechanisms for dispute resolution.
– It should be clearly and unambiguously stipulated what the reasons for terminating a rental contract are, as well as a specific notice period. A simpler and faster eviction procedure should be introduced. Perhaps the obligation to solemnize the rental contract, which must contain an enforcement clause, could be introduced so that the contract would become directly enforceable under certain circumstances, without the need for court proceedings. The introduction of fast and specialized court procedures or even mediation/arbitration centers for rental disputes could significantly relieve the courts and speed up eviction procedures, thereby certainly increasing legal security, which would undoubtedly motivate property owners to rent them out – lists Šourek.
She adds that it is also necessary to define much more clearly what the exact maintenance obligations are for landlords and tenants. Likewise, it is necessary to regulate what rights each party has if the other fails to fulfill its obligations. Incentives would help solve the problem, at least regarding tax evasion.
– The introduction of tax incentives for registered landlords would encourage more contracts to be reported and curb the gray area. Instead of administratively regulating prices, the state could develop a system of housing subsidies for socially vulnerable tenants – believes Šourek.
Her proposals point to what other interlocutors emphasize: the new law alone can hardly solve deeply rooted problems. It can speed up procedures and bring greater legal security, but without more effective control and trust between landlords and tenants, the rental market will remain insecure. Without changing the attitude towards renting, Croatia will continue to be a country where it is easier to rent an apartment to a tourist than to a citizen.
The text was published with the financial support of the Agency for Electronic Media from the program to promote journalistic excellence.
