It is commonly accepted that the financial, social, and political transition of Albaniainto the post-communistera not only failed to address a major long-standing problem related to private property rights, but actually furtherjumbled up real estate ownership relationships.The fuzzy legal framework governing property rights and the absence of a proper administration systemremainmajor obstaclesto the growth of the Albanian economy, holding up the regeneration of the real estate market. So far,judicial practice has played a detrimental role in the process,with many judges disregarding key issues and failing to contribute to clearing up an entirely complex system. As a result,there has been a surge in Albanian property rights claimsraised before the European Court of Human Rights,with an unusually high number of favorable decisions issued in return.A similarly complicated landscape exists in the banking sector, where a considerable number of non-performing loans werecollateralized 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 urgent problems.

Over the last year, the Albanian Government has initiated a series of strategic steps in an attempt to improve the service of its subordinate institutions/authoritiesand facilitate legislative procedures on real estate. For one thing, the February 2016 amendment to the Law on the Registration of Real Estateshifts the rules affecting the registration of construction contracts by making (the formerly-optional) registration with the competent register office mandatory. Unless construction contracts are duly registered, banks will not be entitled toclaim any priority rights against third parties.The new regime also aims to put an end to the abusive practices formerly applied by construction companies against banks and their clients (i.e., such things as double sales, issuance of loan guarantees on already sold properties, issuance of guarantees on land plots belonging to the owners of the land, and so on), by extending construction companies’ obligation to register not only the construction permit but also the construction contract, and thus enhancing the legal protection for such type of collaterals. In addition, the amended legal framework allows a building’scarcass – the skeleton structure — to be registered following transfer of its ownership to the bank. The legal status of carcasseswas not previously 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 these transactions.

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

At last, a key contentious issue remains involving property restitution and compensation of former owners who lost their ownership rights following nationalization of properties during1945-1990. The new legislation on the matter have encountered strong opposition from interested parties and former owners claiming that actual compensation is much lower than the market value of their properties. The law has been contested before the Constitutional Court, which may 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-upregulatory gaps but alsoby 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, it can successfully meet this challenge.

Author: BesnikDuraj

Partner Albania