You found the apartment — in Porto Montenegro, Luštica Bay, Portonovi or a smaller Boka Bay development — and the sales office has just sent a reservation agreement or preliminary contract (predugovor), noting that other buyers are interested and a signature, plus a deposit, is expected within days. This is where foreign buyers make their first avoidable mistake: treating the early paperwork as a formality because "the real contract comes later, at the notary." Under Montenegrin law that assumption is wrong in both directions — parts of the document bind you less than you fear, and parts put your deposit at risk in ways it does not advertise. This guide, a companion to our overview of the Montenegro property purchase process, explains what each document does and what to check before money moves.
A reservation agreement is a contract Montenegrin statute does not know
The reservation agreement (ugovor o rezervaciji) does not exist in Montenegrin legislation. The Law on Obligations (Zakon o obligacionim odnosima, "ZOO") regulates the preliminary contract (predugovor), the earnest deposit (kapara) and the walk-away payment (odustanica) — but no provision of the ZOO regulates a reservation agreement for property: the ugovor o rezervaciji as real-estate practice uses it is nowhere defined or regulated. It is pure market practice: valid as an innominate contract under freedom of contract, but shaped entirely by whoever drafted it. That is usually the developer or the agency. Not you.
It is signed once commercial terms are agreed, to take the unit off the market while due diligence proceeds. Market custom: the deposit — a token fixed sum up to around 10% of the price — is held by the agency, and should never be wired straight to a private seller. Since Montenegrin agencies are not subject to client-money rules, a voluntary notary deposit (Article 68, Law on Notaries) is available for the reservation deposit too. Typically it is non-refundable if the buyer simply walks away, and refundable if due diligence shows the property cannot be sold as represented.
The legal ceiling: as a private writing, not a notarial record, a reservation agreement can never serve as a basis to compel transfer of the property. Its only real teeth are the deposit-forfeiture clause — and if drafted with kapara mechanics, the ZOO's kapara rules (Articles 75–79, below) apply by analogy, which cuts both ways.
The pre-SPA (predugovor): enforceable only as a notarial record
A predugovor is the ZOO's genuine article: under Article 40(1) it creates an obligation to conclude the main contract later — in a typical pre-SPA, undertaken by both parties. But Article 40(2) extends the form prescribed for the main contract to the predugovor wherever form is a condition of validity — and a Montenegrin real-estate sale contract must be made as a notarial record (notarski zapis). Article 52 of the Law on Notaries makes that form mandatory — transactions lacking it "produce no legal effect" — and Article 64(1) ZOO says the same of contracts lacking prescribed form.
Put the three provisions together and you reach the standard practitioner position in Montenegro: a real-estate predugovor signed as a simple private or agency document is not enforceable as a predugovor — it cannot ground a claim to compel the seller to sign the main contract. If you were told otherwise, you were told wrong. (We are not aware of a published Montenegrin Supreme Court decision on the point; this is the consistent reading of the statutes.)
A properly notarized predugovor, by contrast, is a serious instrument. It binds only if it contains the essential elements of the main contract — the property and the price (Article 40(3)). If one party refuses to proceed, the court can order it to conclude the main contract, but the claim must be brought within six months of the agreed deadline for concluding it (Article 40(4)–(5)); and it ceases to bind where circumstances have changed so fundamentally that it would never have been concluded (Article 40(6)).
Kapara: the deposit rules that decide who keeps the money
Under Article 75, kapara is money handed over at the conclusion of a contract as a sign the contract is concluded; on performance it is returned or credited to the price. The default rule surprises people: unless agreed otherwise, neither party may walk away simply by forfeiting the kapara (or doubling it). Kapara is security, not a walk-away price.
Article 76 governs non-performance. If the buyer who gave the kapara is at fault, the seller may demand performance (if still possible), damages, or keep the kapara. If the seller is at fault, the buyer may demand performance (if still possible), or damages plus return of the kapara, or return of double the kapara. That double-return rule is the buyer's strongest lever, and developer-drafted paperwork rarely mentions it. A court may reduce an excessive kapara on request (Article 76(4)); on partial performance the seller cannot keep the deposit, which is credited against damages (Article 77). Where a walk-away right (odustanica) is agreed alongside kapara, Articles 78–79 treat the kapara as the walk-away price: the buyer who withdraws loses it; the seller who withdraws returns double. The popular summary — buyer forfeits, seller returns double — describes the fault-based non-performance scenario under Article 76, or an agreed odustanica, not a free right to walk away.
One more trap: if the precontract is void for lack of notarial form, the kapara clause falls with it and the payment is recoverable as restitution — regional practitioner consensus rather than cited Montenegrin case law, but it means a "non-refundable deposit" under a defective predugovor may be more refundable than the seller claims.
Three documents, three legal weights
| Reservation agreement | Predugovor (pre-SPA) | Notarized SPA | |
|---|---|---|---|
| Statutory basis | None — unregulated market practice | ZOO Article 40 | Law on Notaries Article 52 |
| Required form | None prescribed; usually private writing | Same form as the main contract — a notarial record — or no legal effect | Notarial record before a territorially competent notary |
| Binding force | Deposit terms only; never compels transfer | If notarized: court can compel the main contract (6-month claim window) | It is the sale; ownership then passes by registration |
| Deposit treatment | Contractual forfeiture clause; kapara rules by analogy | Kapara, ZOO Articles 75–79 (forfeit vs double return); falls if form defective | Payments credited to the price |
| When to involve a lawyer | Before signing — refund carve-outs are fixed here | Before signing — form decides enforceability | Before the draft reaches the notary — the notary checks form, not your interests |
Check the list nepokretnosti before any money moves
The cadastre is public: the property extract (list nepokretnosti) is available online via eKatastar, showing the registered owner, the property description and — in the G list — the tereti i ograničenja: mortgages (hipoteka), notations of disputes (zabilježba spora), enforcement, easements and transfer prohibitions. The sentence you want to read is "tereti i ograničenja ne postoje" — no encumbrances or restrictions exist.
Why this must precede the deposit, not follow it:
- Ownership passes only on registration in the cadastre (Article 84 of the Law on Property Relations). The seller must actually be the registered owner — "about to be registered" is not ownership.
- A mortgage arises by registration (Article 318) and follows the property, not the seller. Buy an encumbered apartment and the bank's security comes with it.
- A registered dispute or enforcement notation destroys any later claim of good-faith reliance on a clean title.
The cadastre must decide on a registration request within short statutory deadlines — 8 days where registration is based on a notarial deed, 15 days otherwise (Articles 120 and 122 of the Law on State Survey and Real Estate Cadastre) — but in practice registration commonly takes around 60 days and often longer; the gap between signing and registration needs contractual protection, not optimism. For land, the cadastral layer is even more decisive; see our Montenegro land purchase guide. And if anything appears in the G list, that is the moment to involve a real-estate lawyer in Montenegro — before the deposit, not after.
Off-plan and resort purchases: no statutory safety net
If you are buying off-plan — as most buyers in Porto Montenegro, Luštica Bay or Portonovi-class developments are — Montenegro has no statutory escrow or deposit-protection scheme for off-plan buyers. No law ring-fences your instalments or mandates completion insurance; whatever protection you have, your contract creates.
The standard architecture has three layers: a notarized SPA; an annotation (zabilježba) of your claim recorded against the parcel or unit in the cadastre, putting it on the public record; and instalments tied to construction milestones rather than the calendar. A voluntary notary escrow is also available — the Law on Notaries expressly lets notaries hold money and documents on deposit — but only if agreed.
Until completion you hold a contractual claim against the developer, not a property right — ownership passes only on registration. If the developer stalls or fails, the remedies are general obligations law — performance, rescission, damages — plus whatever priority the zabilježba preserved. Resort practice at Porto Montenegro shows the usual sequence: reservation or pre-sale agreement with deposit to the developer, then a notarized bilingual (English/Montenegrin) SPA — signable by power of attorney — then staged instalments against milestones, title registered on completion.
A 2025 change most English guides have missed: the new Law on Construction of Buildings (Official Gazette 19/2025) reinstated the building permit (građevinska dozvola) as the precondition for construction, replacing the 2017 "construction notification" (prijava građenja) regime those guides still describe. Which regime governs a mid-construction project transitionally is a specific diligence question — part of what we examine in our real-estate investment work.
VAT or transfer tax: know which purchase you are in
The two regimes are mutually exclusive — you pay one or the other, never both. The first transfer of a newly constructed building by a VAT-registered seller (a developer) carries 21% VAT, embedded in the developer's price; no transfer tax applies. Every other transfer — a resale — attracts real-estate transfer tax under the Law on Real Estate Transfer Tax (Official Gazette of Montenegro 28/2023), progressive since 1 January 2024: 3% up to €150,000, 5% on the tranche up to €500,000, 6% above that. The taxpayer is the buyer, who self-assesses, files and pays within 15 days of the contract. A reservation agreement silent on which regime applies is a budgeting surprise deferred.
Clauses we strike out — or walk away from
Developer and agency paperwork is not standardized; the reservation stage is where one-sided terms get locked in. The patterns we see most often:
- A "non-refundable" deposit with no carve-out for defective title or failed due diligence — the document should state expressly that the deposit returns if the property cannot be sold as represented.
- Deposit payable directly to the seller. Recovering money from a private seller's account is a lawsuit, not a phone call.
- Deposit language that avoids the word kapara. If the mechanics are kapara mechanics, the double-return rule works in your favour; drafting that keeps the forfeiture while suppressing the reciprocity deserves a red pen.
- A plain-paper predugovor presented as a binding commitment to buy. Without notarial form it cannot compel anyone to do anything.
- An obligation to sign the seller's "standard" SPA sight unseen, within a deadline.
- Off-plan instalments tied to calendar dates instead of construction milestones, with no zabilježba.
- Reliance on "the notary will check everything." The notary is a public office-holder drawn from the property's basic-court area (Article 9, Law on Notaries), and the notary's function is the validity of the form — not negotiating your refund carve-outs, not running your due diligence, not advising you. The seller's suggested notary even less so.
Before you sign
If a reservation agreement or pre-SPA is in your inbox, send it to us before you sign, with the property details, so we can pull the current list nepokretnosti and test the document against everything above. We act for the buyer alone, taking no instructions from developers or agencies — independence is the point of the review. Contact our Montenegro lawyer team with the document first. Sign second.
