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Checklist: How to Buy Real Estate on the Secondary Market in Georgia

Discover the proper way to verify a property and its seller.
August 23rd, 2023
Marina Piduashvili, lawyer, partner of JUST Advisors
It is commonly believed that only a purchase agreement, obtainable at the House of Justice, is required for the acquisition of real estate in the secondary market. However, this is not entirely accurate. To prevent any unpleasant surprises, it is crucial to thoroughly inspect both the property (apartments, houses, buildings) and the seller before finalizing the contract. If you plan to handle this process independently, we have compiled a comprehensive guide. JUST Advisors lawyers use it as a foundation, adapting their approach based on the specifics of the properties involved.
According to data from the Ministry of Justice of Georgia, one-fifth of the real estate sold in 2022 was acquired by foreigners. Citizens of other countries purchased 15,000 apartments, with an additional 5,000 more in the first quarter of 2023. Analysts predict that the demand for housing has tripled compared to previous years and is expected to remain stable in the near future.

According to domestic legislation, foreigners are permitted to acquire ownership of almost any type of real estate in Georgia, excluding agricultural land. While many prefer new constructions, the second-hand housing market is well-developed in the country. It offers distinct advantages, such as more convenient locations and attractive pricing.

At the same time, it is advisable to approach the acquisition of secondary real estate with increased caution. Drawing upon more than five years of legal practice, the attorneys at JUST Advisors can attest that infrequent transactions may progress expeditiously, and unforeseen details often surface during the purchase process, potentially giving rise to ownership issues in the future. To minimize unforeseen circumstances, we have compiled a fundamental checklist for your consideration.

Step 1: Conduct an inspection of the property.

As part of the first stage, you will need to clarify the following legal aspects:
  • Does the seller possess legal ownership of the property, and was the acquisition carried out in accordance with the law?
  • Whether the real estate has encumbrances (including mortgages, foreclosures, leases, future ownership rights and other circumstances)
  • Does the apartment, house or building correspond to the data about it in the public register? Pay attention to the area indicated in the documents and the actual area, as well as the red lines (illegal or non-agreed replanning).
  • Does the real estate hold a special status, potentially falling under the category of cultural and historical heritage? Ownership of such property entails specific obligations for the owner and is regulated by distinct legal provisions.
  • If the property has undergone reconstruction, for instance, the facade, was the process duly approved?
  • Is there a possibility of future reconstruction of the property, and if so, what is the anticipated timeframe and associated costs?
  • Have individual numerators for electricity, water, and gas been installed on the property in accordance with the nature of the premises?
The majority of these aspects can be verified by obtaining an extract from the public register, which is accessible for download on the website of the Ministry of Justice of Georgia under the real estate section. To acquire this extract, you will need the cadastral code of the property from the owner. Taking all the aforementioned considerations into account, it is recommended to ensure that the intended use of the property remains permissible post-purchase.

Steps 2: Check the Seller’s Details

1.Check for Additional Owners:
  • Investigate whether there are other individuals listed as owners of the property.

2.Determine the Age of the Owners:
  • Ascertain the ages of the owners, as special conditions may apply to transactions involving individuals under 18 years of age.

3.Clarify the Marital Status of the Seller:
  • Verify the marital status of the seller, as spousal consent may be a prerequisite for the sale.

4.Verify the Absence of Debts:
  • Confirm that the property owner has no outstanding debts by checking the National Enforcement Bureau’s Debtor Register. This registry contains information about individuals undergoing enforcement proceedings.
As highlighted by Eurasianet, Georgian households may still be grappling with the aftermath of the coronavirus pandemic. In 2020, the debts incurred by Georgian citizens amounted to 39% of the GDP, and in 2021, it reached a record 42%. Currently, this figure is gradually returning to pre-pandemic levels. Notably, a substantial portion of these loans is denominated in US dollars. Consequently, it is crucial to carefully assess the presence of debts when considering financial matters related to real estate transactions.

Steps 3. Fix the following issues

To protect yourself, check if the seller has:

  • Arrears on utility bills.
  • A real estate management agreement or lease agreement. If such agreements exist, ascertain the terms of the contracts and verify whether the seller is adhering to them.
Additionally, check if the owner is a member of a condominium association. If so, upon entering, acquaint yourself with the chairman of the condominium association and assess the attitude of other residents towards the sale of the property.

If you are acquiring real estate with the aim of obtaining a temporary residence permit, conduct a preliminary assessment of the property. It is possible to secure a short-term residence permit for a duration of one year if the value of the house or apartment exceeds $ 100,000. Additionally, there is an opportunity to obtain a long-term (investment) residence permit for a period of five years if the property is valued at $ 300,000, with the potential to obtain a permanent residence permit. The assessment must be conducted by an agent accredited by the Unified National Center for Accreditation.
Furthermore, we recommend that you assess the tax consequences of the transaction in advance, considering both the perspective of Georgian legislation and the regulations of your country of tax residence.

Step 4: Proceed to the Real Estate Transfer

After specifying all the details, JUST Advisors lawyers typically undertake the following steps:
  • Classify the transaction based on the characteristics of the property and the seller, as well as the mortgage (seller or buyer) and calculations.
  • Draft the purchase agreement and, if necessary, additional agreements (the documents must be in Georgian and languages understandable to the parties involved).
  • Carry out all operations related to the registration of property rights.
Subsequently, you may encounter new inquiries, such as the process of leasing an apartment, handling tax payments, and applying for a residence permit. Should you be prepared to delegate these matters to professionals, we encourage you to seek assistance from JA. Our services encompass comprehensive transaction support, the preparation of residence permit cases, and various other services.

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MARIA GUSEINOVA
Leading Manager of Commercial Department