BizCLIR

Since the report was published, several property laws were scheduled to be revised.  However, many large, structural issues arose during the assessment with respect to real property laws.
In the registries, the principal issues relate to registration of urban land. First, registration of possession slowed during the past decade, so that today the registration books do not adequately reflect the possession or ownership. (Although the land is owned by the state, individuals can own buildings on those lands.) This is particularly problematic in apartment buildings. A large number of buildings have never been registered, so that it is impossible to register the individual apartments.
Complicating the matter, the Land Registry has very burdensome requirements for proving possession and ownership that do not capture lessons learned from best practices elsewhere. Rather than rely on the generally accurate cadastre as the basis of updating registrations, they require numerous documents and attestations that are not needed. Such requirements will add to the a heavy workload once the economy recovers and the land and real estate market becomes more active. Now is the time to establish more efficient procedures.
The market for reform can be expected to be driven by two forces. First, privatization will mean changes in ownership, which must be registered. High-end foreign and local investors are reluctant to make significant investments unless they have very secure ownership rights. Improper registration or difficulties in updating can have a detrimental impact on the timing and quantity of investment. It would be prudent to identify now what problems might be encountered by investors with respect to any entities being privatized.
Second, mortgage lending is expected to return as the banking system and general economy recovers. It will be hampered badly in urban areas by the disconnection between registered and actual ownership. Many unregistered transactions have taken place over the past ten years, leaving a gap in the registered chain of ownership. Banks will not generally lend merely on possession of a property unless some inalienable right to possession can be demonstrated. By establishing the procedures now for updating registration, much delay can be avoided in the future as there is increased demand for registration services.
Mortgages raise an additional issue. The fees charged on registration of a mortgage interest are based on the value of the underlying property, not on the value of the mortgage itself. This can result in serious cost distortions. For example, a $10,000 mortgage on a $100,000 property will be subject to a 2% tax, or $2,000. This represents 20% of the value of the transaction. As a result of this system, mortgages are either overpriced, not registered, or foregone altogether, none of which is an acceptable result. There is also a 5% transfer tax that has a chilling affect on registration and sales. The fee structure needs to be reviewed and revised on a cost-recovery basis.
The land registration system can also be improved and eventually automated. It currently uses an Austrian model for the land book, in which registration is owner-based and not parcel-based. Automation can allow searches by owner and parcel, permitting a shift to the more universally accepted land based system while allowing those who wish to continue using the Austrian approach to do so.

(Note: This information was taken from the Property chapter of the 2001 Serbia BizCLIR report.  For more information, please see the report.)