The value of the tenantship right and how to compensate the original owners

August, 2003

      The tenantship right is worth about 90 percent of the market value of an empty (unoccupied) apartment. This has not been contradicted until a few weeks ago, when some people (or the government?) suddenly tried to wrongly suggest that the value of the tenantship right was about 70 percent!!!  Here are some facts:

     1.)  During former Yugoslavia (SFRJ), or later, we never heard that occupied apartments (with the tenantship right on them) were bought for more than about 10 percent of the value. On the contrary, we often heard that they had been bought for about 10 percent or even much cheaper.

     2.)  In some cases we have looked up in the land registers how much had exactly been paid for such apartments, and it was about 10 percent.

     Here is an example:  An original owner sold such an apartment (of about 100 square meters, three rooms, in the center of Zagreb, Vlaska ul.) to the tenantship-right holder in March of 1986 for 2,000,000 dinars. In July of the same year the tax was paid in the amount of 674,717 dinars. So, the total amount paid was approximately 2,675,000 dinars, which was worth, at that time, 7000 USD (US dollars). (The medium exchange rate in 1986: 1 USD = 382,16 dinars). In 2002  that amount of money was worth 11,060 USD, and the apartment was worth about 110,000 USD.  (The exchange rate on February 11th, 2002:  1 USD = 8,64 HRK.  The coefficient of inflation for USD, 2002/1986, is 1,58 - according to Inflation Calculator at the web-address:

http://www.westegg.com/inflation/  )   So, the amount paid is 10 percent of the market price of the apartment (11,060/110,000 = 0,1005).

     3.)  The State of Croatia sold the social-property (public) and nationalized apartments to the tenantship-right holders for about 10 percent of the value (payable by installments over the period of 30 years). So, the tenantship right must certainly be worth more than 90 percent, because this State always wants to get as much money as possible and not less than the true value. (If the people had not enough money, the State might prolong the period of paying by installments, say to 50 or more years instead of 30 years).

     4.)  The tenantship right was a permanent, forever-inheritable property, that was worth practically as much as the ownership, while the new so-called "protected lease-holding" has almost no value at all, because it is  not permanent, and the tenant's family (i.e. the new members who were not in the apartment before 1996) will lose it completely and will have no right whatsoever on the apartment. However, even because of this temporary and almost-worthless "protected lease-holding" such apartments were sold cheaply after 1996, and it was practically the rule that the price was about 30 percent or one third of the market price. So, even the miserable, temporary "protected lease-holding" is worth 70 percent(!);  and, therefore, it is quite obvious and certain  that the permanent tenantship right is worth much more, i.e. about 90 percent (or more) of the market value of an empty apartment.

     5.)  During SRFJ, occupied apartments (with tenantship rights on them) could only exceptionally be sold at a higher price (of more than 10 percent)  i.e. in the rare cases where it could be expected that such an apartment would become vacant, because the tenantship-right holder had chosen to live alone - without any family-household members. In other cases, where that could not be expected, the nominal ownership was practically quite worthless, and nobody would buy such an apartment - except those speculators who reckoned (or, more exactly: planned) that our human rights would be violated by means of abolishing the tenantship right.

      According to the State Institute for Statistics, 313,894 social-property apartments have been sold to tenantship-right holders in Croatia, from 1991 to the end of 2002, at the price of about 540 HRK or about 72 EUR per square meter.  The average area of these apartments was 59 square meters. So, such an apartment has been bought for about 4248 EUR (on average), while its market value is about 45,000 to 60,000 EUR. Obviously, the tenantship right was worth about 90 to 92 percent of the market value.  Total value of all the 313,894 tenantship rights is about 13,000,000,000 EUR (or more).

      The minister-Cacic'c Ministry of Construction Works has recently made a draft of proposed changes in the Law on Renting Apartments, intended to further damage us, deprive us of our property and discriminate against us. Therein the question is put, whether once again all the tax-payers should give money (for compensating the nominal owners) in order that only some of the citizens can cheaply buy the apartments. Allegedly, every person would have to pay almost 1000 HRK or about 133 EUR, on average. Here is our answer:

      The State has already given the above-mentioned 13,000,000,000 EUR, at the tax-payers' expense, to the 313,894 tenantship-right holders (or their families) who cheaply bought social-property apartments, nationalized apartments, etc., which means that every person has already given to them about 20,000 HRK or about 2700 EUR (on average). Therefore, it is only reasonable and just that indeed every person must give those 133 EUR (in addition), in order that the remaining tenantship-right holders get the same right to cheaply buy their apartments, as others have got too.  Another possibility might be that, instead of all the citizens, only those 313,894 families (who have cheaply bought their apartments) should give the money for equally solving the problem of the rest of tenanatship-right holders.  (The citizens who have paid the taxes intended for building the apartments during SFRJ, but have got no tenantship right, should also be compensated:  e.g., when they buy an apartment, the amount of money that they have paid for those taxes should be deducted from the price).