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TRANSFORMATION OF FORMER RIGHT TO MANAGE, TO USE AND TO DISPOSE, TO OWNERSHIP

According to the Act on ownership and other real rights, which entered into force on January 1st 1997, for formerly registered social ownership with the right to manage, i.e. to use and to dispose, if these registrations were carried out up to the day of entering into force the ZV, they are presumed to be the ownership rights.

However, these regulations do not apply to objects:

–          on which the right to manage, to use and to dispose was registered to former social and social-political organizations

–          which were not incorporated in the social capital of the legal persons in the process of transformation according to the provisions of the Act on transformation of social companies

–          of legal persons in social ownership with the seat at formerly occupied and now freed territory of the Republic of Croatia

Transformation of the right to manage, to use and to dispose regarding these objects was regulated by special Laws.

  1. RIGHT TO MANAGE, TO USE AND TO DISPOSE REGISTERED TO SOCIAL ORGANIZATIONS  

Associations Act from 1997 determined that the real estates in social ownership on which the right to use was registered to social organizations, are to become ownership of the Republic of Croatia. However, the Associations Act from 2001 determined that the assets of social organizations are to be returned to legal successors of these organizations, except for the syndical assets.

However, if a certain social organization doesn’t have an association as its legal successor, its assets become the ownership of local self-government authority on whose territory the seat of that social organization was situated.

  1. RIGHT TO MANAGE, TO USE AND TO DISPOSE REGISTERED TO OBJECTS WHICH WERE NOT INCORPORATED IN THE SOCIAL CAPITAL OF THE LEGAL PERSONS IN THE PROCESS OF TRANSFORMATION

Privatization Act (PA from March 1996) specifically regulated the transformation of real estates that were not assessed in the social capital in the process of transformation of a social company.

Process of transformation of a social company creates a joint stock company or a limited liability company that has a known owner. A company created in the process of transformation of a social company is its legal successor. These regulations of the Act on privatization of social companies (APSC from May 1991) were interpreted in the way to enable the newly formed companies to register ownership on real estates that were not assessed in the social capital in the process of transformation of these companies.

To clarify; in the process of transformation of a social company, it was required to determine the social capital of the company and the capital on which the process of transformation of social ownership was performed. In order to determine the real estates that are in the social capital of the company, one was required to submit, among other things, evidences of the right to use these real estates. Given the unorganized situation in the Land Registries, it wasn’t always possible to submit a land registry excerpt, so it was determined that, among others, as an evidence of the right of use, one could submit a court’s decision and all other valid documents on the right to use these real estates. However, when assessing social capital, it often happened that real estates that couldn’t have been assessed were included in the assessment, and the real estates that should have been assessed were not.

There were also situations in which crops or greenhouses were assessed in the social capital, but not the land beneath them, that only buildings on agricultural land were assessed without the land under the buildings, or, on the contrary, that the land that should have been assessed, wasn’t, like for example the complexes of tourist land in the process of transformation of social tourist companies along the coast. In this situation there were large parts of the land that were not assessed. These situations caused problems with the registration of ownership in the Land Registries for companies created in the process of transformation and also caused incorrect registrations which ultimately led to a series of court proceedings.

Privatization Act was supposed to regulate the ownership on real estates that were not evaluated in the process of transformation; however, there were series of court proceedings regarding the interpretation of this Act because it was unclear whether non-assessed property belongs to the “state” or “newly created” companies.

On June 1st 2006 the Constitutional Court of the Republic of Croatia ruled that non-assessed real estates cannot become, just on the grounds of this law, ownership of the newly formed companies without conducting an administrative procedure by the Croatian Privatizations Fund according to the Privatization Act.

Because of the unorganized situation in the Land Registries, it was particularly necessary to regulate, as soon as possible, legal status of the, so-called, tourist land, which area is approximately 100 million m2, which was done by the Law on tourism and other construction land not evaluated in the process of transformation and privatization in 2010.

It was determined that the land in tourist camps, which value was not fully assessed in the social capital in the process of transformation, is owned by the Republic of Croatia. On the other hand, land in camps, which value is partially assessed in the social capital, is co-owned by the Republic of Croatia and the newly formed company in ideal parts, proportional to the size of the estimated and non-estimated land and buildings.

Regarding the land on which hotels and tourist resorts were built, in cases when only buildings without the land were assessed in the process of transformation and privatization of a company, it was determined that the newly formed company owns the building and the land beneath the building.

Remaining tourist land, on which a social company has had the right to use and to dispose, and which is not assessed in its social capital, is owned by the local self-government authority on whose territory the land is situated. Owners of buildings and devices and other infrastructure on that tourist land have the right of way and the right to use and maintain these facilities and equipment without the obligation to pay compensation.