It is common ground that the financial, social and political transition of Albania into the post-communist era not only failed to address a major long-standing problem related to private property rights, but it has allegedly further jumbled up real estate ownership relationships. The fuzzy legal framework governing property rights and the absence of a proper administration system remain major obstacles to the growth of Albanian economy, slowing up the regeneration of the real estate market. So far, judicial practice played a detrimental role in the process disregarding key issues and failing to contribute to clearing up an entirely complex system. As a result, there has been a surge in property rights claims raised before the European Court of Human Rights accompanied by a considerably high number of favorable decisions issued in return. A similarly complicated landscape is mirrored in the banking sector, where a considerable number of non-performing loans were collateralized with real estate properties in the construction industry. The International Monetary Fund and the World Bank have ranked the real estate issue as one of Albania’s most important current urgencies.

Over the last year, the Albanian Government has taken a series of strategic initiatives in an attempt to improve the service quality of its subordinate institutions/authorities and facilitate the respective legislative procedures on real estate. Last month’s important amendment to the Law on the Registration of Real Estate shifts the scenery in the registration of construction contracts, by eliminating the previous regime of optional – at the discretion of the interested party – registration and rendering registration with the competent register office mandatory ;unless construction contracts are registered with the register office, banks will not be entitled to claim any priority rights against third parties. The new regime aims to put an end to the abusive practices applied by construction companies against banks and their clients, i.e. by means of double sales, issuance of loan guarantees on already sold properties, issuance of guarantees on land plots belonging to the owners of the land, etc., extending their responsibility to the registration with the register office of both the construction permit and the construction contract and enhancing, thus, legal protection for such type of collaterals. In addition, the amended legal framework provides for an execution procedure enabling the registration of a building’s carcass following transfer of ownership to the bank. To date, the legal status of carcasses was not regulated exposing banks to the entire risk, as they were unable to deal with such real estate properties. Following the latest amendments of the law and upon fulfillment of certain conditions stipulated therein, the banks now enjoy enhanced protection in the said transactions.

On the same note, an important efficiency-driven initiative is jointly undertaken by the National Chamber of Notaries and the Register Office aiming at simplifying the real estate registration process to be carried out by the notary public by building an online application platform in this respect. Such initiative is expected not only to eliminate any existing bureaucratic barriers to the registration process but, at the same time, it will obviate the need of direct interaction between the interested parties and public clerks, preventing potential bribery practices. Interested parties will enjoy constant and easy online access to their application and will be able to track any upcoming deadlines. The online application system is the initial step leading to the digitalization of the entire Register Office, a project expected to have been completed by the end of 2016.

At last, a key contentious issue still lies with the property restitution and compensation of former owners who lost their ownership rights following nationalization of properties during1945-1990. The new legislation on the matter and its by-laws have encountered strong opposition from the interested parties and former owners claiming that the actual compensation is much lower than the market value of their properties. The constitutionality of the law has been contested before the Constitutional Court, which in case of a favorable decision will require the Albanian Property Treatment Agency, among others, to amend its regulatory framework leading to further delays in addressing the compensation issues of owners already waiting for many years.

Now more than ever, Albania needs to come up with a permanent solution to all outstanding and/or controversial real estate issues by not only stitching-up regulatory gaps but also by fundamentally adapting the entire system to international practices and coordinating a well-grounded and standardized legislative procedure in this respect. Time may be running out but it is up to Albania to prove that, after all, this challenge can be successfully met.

 

Author: Besnik Duraj

Partner Albania