Member Article

This article is originaly published in IBA International Real Estate News.

During 2015, one major acquisition of real estate property occurred in the Serbian real estate market. What happened was that a major international bank purchased over 8,000 sqm of space in two office buildings located in the Serbian capital, Belgrade. In fact, the buyer only acquired the parts of the buildings, while it already owned a significant part of this property. The purpose of the purchase was to localise the bank's management in Serbia in one place. The deal was completed by the end of 2015 after long negotiations with the sellers – four companies that are incorporated in Serbia with the sound of champagne popping. However, just as the party was warming up and the bank's employees were about to settle down in the newly purchased premises, an unprecedented event occurred – the kind of an event which may have long-term consequences for real estate acquisitions throughout the Balkans region.

In February 2016, Serbian Competition Commission initiated a proceeding in relation to the mentioned purchase. Based on the reasoning contained in the Commission's conclusion on the initiation of the proceedings, the proceedings were initiated for the purpose of examining the alleged concentration which was implemented, even though it was not approved in accordance with the Serbian competition law, and which, based on the assumptions of the Commission, occurred by the purchase of parts of the mentioned office buildings. The Commission stipulated that the buyer acquired direct control over a part of the seller's estate. Having in mind the Serbian competition regulations, purchase of assets or part of assets may, under certain conditions, represent a concentration. However, in this particular case the decision of the Commission to initiate the procedure was rather uncommon. From the real estate point of view, the effects of the Commission's decision on the local market and the overall legal certainty in relation to the transactions concerning the purchase of assets and the implementation of the Serbian Competition regulations could potentially be rather negative for the Serbian economy and the real estate market in general. The Commission's decision may potentially introduce an unsafe environment for any further acquisitions of property since this decision would represent a departure from the previous practices of the Commission. It is for this reason that the Practice and rules of the Commission should be consolidated as soon as possible, so as to avoid a scenario in which foreign companies can find themselves demotivated to invest in Serbia, and in doing so, hurt the country's current primary strategic goal. Having said that, without clear rules and legal safety, as seen in initiation of this petition for concentration, the Commission might be preparing the Serbian core real estate market for some cumbersome times.

By the time this article has been submitted for publishing, the Commission still did not reached a decision on this matter. No doubt, this is a precedent in Serbian law and practice of both real estate and competition sectors. All we can do at this point is wait for the outcome and hope for the best.