The Union of Free Trade Unions (USS) submitted comments on the draft Law on Tourism and Hospitality during the public debate, warning that if the disputed norms remain unchanged, they could have serious consequences, both for the tourism sector and for local communities and the area.
They point out that controversial solutions and legal constructions regarding so-called "condo hotels" and buildings with a "mixed and integrated business model" have been retained, which will allow eligible investors to build hotels and apartments on beaches and exclusive locations planned only for tourism on paper, and to convert them into ordinary residential buildings after construction.
They cited examples of buildings built as condo hotels and apartments for tourism, while taking advantage of privileges during that construction, being transformed into ordinary residential buildings even though they are in the tourist facility zone.
The recently adopted Spatial Plan stated that a major problem in the development of tourism is that in recent years, the construction of a large number of residential buildings on beaches and exclusive locations has been allowed, which has reduced the space for the construction of luxury hotels. It was also stated that the construction of residential buildings from which the state receives low revenues is not in the public interest, but that the public interest is large and luxurious hotel complexes from which the state receives greater benefits.
Draft full of inconsistent terminology
In their comments, the USS points out that this law now allows the continuation of such practices, and that the draft uses inadequate and legally inconsistent terminology, which makes the implementation of the law more difficult and opens up room for arbitrary interpretations.
"The controversial legal construction of the condo business model is being used, which limits the rights of the owner and allows the continuation of residential construction under the hotel name in the most attractive and valuable locations. The draft retains the so-called mixed and integrated business models, although in practice they have never been implemented legally, nor have they ever been issued a permit to operate. Despite this, they are still retained in the text of the law, without a clear purpose, without supervision and without proven benefit to the public interest. This creates a legal framework that does not arise from a real need, but rather serves as a basis for formally circumventing legal and planning norms. We believe that it is of crucial importance that the law clearly distinguishes residential from tourist purposes, and that all business models are aligned with applicable laws, plans and basic principles of legal certainty," USS was told to "Vijesti" by the Ministry of Tourism, along with comments that they sent to the public hearing.
Delete Articles 106 and 107, amend Article 108
They propose deleting Article 106 and completely abolishing the mixed business model from the Draft Law on Tourism and Hospitality.
"In practice, this model functions as a legal front for residential development under the hotel name. Upon completion of the facility, the accommodation units are registered as apartments and flats, even though they previously benefited from tax and urban planning benefits intended for high-end hotels," the organization points out.
They also propose deleting Article 107, which introduces the so-called "integrated business model", as well as amending Article 108, which allows the sale of additional facilities in tourist resorts because it can be a cover for residential construction in sensitive areas, especially along the coast and in mountain resorts.
They are asking for it to be clearly defined that all accommodation units within a tourist resort must be used in accordance with the tourist function.
Harmonize the terms for the Planning and Construction Law
The USS also points out that this draft uses a number of terms that are not in line with the already adopted and valid law in the field of spatial planning and construction of facilities.
"For example, terms such as 'residential building', 'family house' and 'construction building or complex' are used, while the current Law on Spatial Planning and Construction of Buildings precisely defines the terms: 'family residential building', 'building', 'residential building', 'residential-commercial building' and 'commercial building'. The term 'family house' does not exist in the law and its use may cause legal imprecision and practical problems in the application of regulations. In addition, the Law on Spatial Planning and Construction of Buildings stipulates that the performance of business activities, including catering, in residential buildings may be permitted only if the space is converted for this purpose in accordance with the applicable planning documents and technical standards. This clearly limits the possibility of catering activities being carried out in residential units without an appropriate planning basis, which is in the interest of legal certainty, protection of neighbors' rights and communal order," the comments state.
Five types of apartments vaguely defined
They also point out that the terms "apartment for rental to tourists", "tourist apartment", "studio apartment", "tourist apartment block" and "apartment for rental to tourists" are used, which are not clearly defined, which, as they believe, will lead to legal uncertainty when applying the law, administrative confusion in categorization and inspection procedures, as well as potential abuse through formal circumvention of planning and tax regimes.
"A tourist apartment is defined in Article 7, paragraph 42, as a catering facility, but the text of the draft does not contain a clear functional or technical distinction in relation to a studio apartment. It is necessary to specify the difference in content, method of use and obligations of service providers. Also, a clear legal status for a studio apartment is missing - is it treated as a special category of catering facility or as a subtype of a tourist apartment? The terms 'apartment for rental to tourists' and 'apartment for rental to tourists' are used seemingly as synonyms, although they are different legal and functional categories. If both denote residential units that are occasionally rented to tourists, it is necessary to normatively standardize the terminology and avoid duplication that can lead to uneven practice and misunderstanding among natural and legal persons," the comments stated.
What is a “tourist apartment block”?
Article 82, paragraph 3, provides for the possibility of a tourist apartment block being located in a residential building, which, according to the USS, is contrary to basic planning and legal principles.
"If it is a building with ten or more apartments that are rented out to tourists and function as a single hospitality unit, such a building must have the status of a hospitality, i.e. a business building - and not a residential building. If a tourist apartment block is to be allowed to exist, it must be organized within a building (or part of a building) that is planned and legally intended for the performance of hospitality activities. In this sense, it is necessary to foresee the prior conversion of the building (or part of it) from residential to business purposes, in accordance with the applicable laws on spatial planning and construction," the USS stated.
Condo apartments should be required to have a minimum number of fiscal nights.
Particularly problematic is Article 103 of the draft, which defines the condo business model.
A condo hotel is defined as a building made up of individual residential units that are sold to individuals and investors for personal use or as rental properties, and if the owner is not using them, they can be rented out as vacation properties through a common agent. These hotels also had construction privileges in the past and could be built in tourist areas, thus taking the place of real hotels.
“The proposed Article 103 in this form leaves significant room for legal uncertainty, abuse and violation of property rights. Without amendments and clarifications, its application may have harmful consequences for owners, local communities and tourism infrastructure. Although Article 103 states that accommodation units must be in commercial use for at least 10 months a year, in practice this obligation is circumvented through fictitious advertising at unrealistic prices. Thus, facilities that formally function as hotels are in reality used exclusively as apartments, avoiding tax and legal obligations,” the comments state. Therefore, they propose to define “commercial function” as the minimum number of fiscalized overnight stays per year or the minimum number of days of actual rental, as well as to introduce penalties for failure to meet the conditions through the loss of the right to tax benefits or to introduce progressive taxation for units that are not in tourist function despite the category of the facility.
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