The Ministry of Construction has presented a proposal that, after 30 years, introduces order into long-term rentals, but mandatory promissory notes and bureaucracy raise concerns, especially in expensive cities like Dubrovnik.
After three decades of legal vacuum, the Ministry of Construction has presented a new Draft Law on Apartment Rentals that could fundamentally change the relationship between landlords and tenants. The goal is clear: to bring long-term rentals out of the gray zone, protect owners from non-payers, and provide stability for tenants. However, when noble intentions are translated into concrete legal provisions, a series of questions arise about the administrative and financial burdens on both parties.
The main lever of the new system is the mandatory notarization of lease agreements before a public notary. This aims to achieve faster dispute resolution and easier debt collection without years-long court proceedings. However, the question arises whether the additional cost and bureaucracy will deter small landlords from legalizing rentals, which is exactly the opposite of the desired effect.
The most innovative, yet most complex part of the proposal is the inclusion of the Agency for Insurance of Workers' Claims in the rental system. This state agency would take on the role of guarantor: if a tenant fails to pay rent, the state settles the debt with the landlord. However, this safety net comes at a price. The landlord will pay the agency an annual membership fee of up to 2 percent of the annual rent.
On the other hand, the burden shifts to the tenant, who, in addition to the already mandatory deposit of one month's rent, will also have to sign a blank promissory note of up to 10,000 euros. In areas with exceptionally high rental prices, such as Dubrovnik, this could pose an insurmountable obstacle for young families and students. For many, such a financial and legal risk could be a reason to give up on legal long-term rentals.
The law also brings positive changes, such as limiting rent increases to once a year based on official data from the Croatian Bureau of Statistics, which introduces a certain predictability. However, critics fault the state for opting for complicated agency and guarantee systems instead of introducing tax breaks for long-term rentals. Such breaks, they argue, would create a sustainable system where young people could more easily solve their housing issues, and owners would have legal certainty without fear of administrative blockades.
