New rental law better protects both tenants and landlords, minister says

(Hina) - Minister of Physical Planning, Construction and State Assets Branko Bačić on Friday presented details of the new Housing Rental Act, which, among other things, introduces mandatory notarisation of rental agreements, allowing potential disputes to be resolved twice as quickly.

Under the new law, all new rental agreements will have to be drawn up as notarial deeds and notarised, enabling enforcement proceedings without the need for lengthy court proceedings in cases involving eviction or debt collection. Bačić said the reform would reduce pressure on courts and halve the time needed to resolve such disputes.

"Through notarisation, the state will at any time have accurate data on the number of flats available for long-term rent," Bačić said.

The law defines the obligations of landlords and tenants, requiring landlords to hand over flats fit for agreed use, maintain them and address defects, while tenants must regularly pay rent and utility bills, use the property responsibly and report any problems.

Upon moving in, the parties will have to draw up a handover report containing a description of the flat's condition, meter readings and photographs of each room. Unless otherwise agreed, landlords will be allowed to inspect flats twice a year with prior notice, while tenants will pay a deposit equal to one month's rent when moving in.

Tenants will be able to terminate contracts without giving a reason, with a statutory notice period of 60 days. Landlords will be able to terminate agreements in cases such as unpaid rent or bills, significant damage or breaches of house rules, but must first issue a written warning and allow 15 days for the breach to be remedied.

The law also limits rent increases during a contract period. Rent may be increased no more than once a year, with tenants having to be notified at least 30 days in advance, and the increase cannot exceed the annual growth rate of residential property prices according to the Croatian Bureau of Statistics. Any contractual provision allowing larger or more frequent increases will be void.

For state-owned flats, the basic rent would be set at a minimum of €7.725 per square metre and adjusted annually in line with inflation. In Zagreb and coastal municipalities and cities, the maximum would be €9.375 per square metre. Total rent and utility costs would not be allowed to exceed 30% of a tenant's income.

The law also introduces a new role for the Agency for the Protection of Workers' Claims, which would compensate landlords if tenants fail to meet their contractual obligations, subject to certain conditions. Bačić said landlords would pay an annual fee of up to 2% of yearly rent, while the agreement would have to be notarised and submitted to the agency.

For the first time, the law establishes a legal framework for social and affordable housing, with flats generally to be allocated through public tenders based on published criteria and priority lists.

Around 4,000 protected tenants still live in flats formerly held in "social ownership". The state will assume responsibility for mediating the sale of those flats if tenants wish to buy them, while rents will be linked to household income and assets.

The Housing Rental Act will now enter public consultation.

Bačić also presented changes to the Affordable Housing Programme, aimed at activating vacant flats and enabling long-term rentals at prices adjusted to household incomes. Under the revised rules, co-owners who previously rented out their properties short-term will be able to apply without waiting two years. So far, 958 properties have been registered, with 61 landlord-tenant agreements currently being arranged.

As an example, Bačić said a three-member family in Zagreb's Trešnjevka district had selected a 53.4-square-metre flat and would pay €339 in rent, while the state would pay the owner €662 per month based on the median rent in that area. The family would save €323 a month, or around 50% of the rent.

He also presented rules on subsidies for purchasing a first home. So far, 6,799 applications for tax refunds on the purchase or construction of a first residential property have been submitted, with 4,541 approved, totalling more than €34.3 million.

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