'Herceg-Bosna' prevents buyers from taking over their apartments...

The dilapidated workers' resort on the Adriatic coast in Neum, built by the former industrial giant „Feroelektro”, has attracted investors for years due to its attractive location. The construction of a hotel at this location was planned by both the Municipality of Neum and this company, but in 2021, 19 citizens of Bosnia and Herzegovina purchased apartments just a street away from the city beach.

The buyers paid over three million KM for 30 properties at an auction held at the Municipal Court in Čapljina. They hoped to profit from renting them out during the tourist season, but instead, they faced a years-long struggle with the Municipality of Neum regarding ownership of the valuable properties. The Municipality does not allow them to use them, pay taxes, or register as their owners.

„If I invested money in something, I want to get that money back. I want to pay taxes, I want everything to be done honestly,” says Fadil Spahić from Sarajevo, one of the seven buyers who spoke with journalists from the Center for Investigative Journalism (CIN).

However, Dragan Jurković, the mayor of this coastal town, disputes the sale of the resort, claiming that according to the regulations of the Croatian Republic of Herceg-Bosna (HRHB), it belongs to the Hospitality and Tourism Company „Odmaralište Neum”, founded in 1994. On the other hand, the company „Feroelektro” considers itself the owner of the property.

CIN journalists reveal that neither party has ownership rights to the facility; instead, it belongs to the Federation of BiH. When registering assets during the privatization process, „Feroelektro” was obliged to de-register this facility from the company, while „Odmaralište Neum” did not meet the legal requirements for registering ownership. Therefore, according to privatization laws, the resort should have become state property.

After the war, the federal authorities delegated the Office of the High Representative in BiH (OHR) to clarify the issue of dual-registered property in companies, which the OHR never did. Consequently, „Feroelektro” d.d. Sarajevo remained registered in the land registries as the owner of the resort without justification. This was the basis for the Municipal Court in Čapljina, at the initiative of the workers, to proceed with the sale of the properties to settle wages and contributions owed to them by this company.

The authorities in the FBiH did nothing to resolve the issue, and the responsible Minister of Trade, Amir Hasičević, told journalists that the situation in Neum was „total chaos”. „The question is whether there was a legal basis. If something is not ‘Feroelektro’s’ property, how could anyone collect anything from it on behalf of ‘Feroelektro’s’ obligations?”

However, the buyers are only interested in how to acquire ownership of the properties sold to them by the Court.

„That Herceg-Bosna, I'm not interested in that. I am in Bosnia and Herzegovina. I am interested in what I bought,” said buyer Spahić.

Battle for workers' squares

Opposite the city beach in Neum, a multi-story building with dozens of apartments has been owned since 1969 by the once-successful state-owned company „Feroelektro” d.d. Sarajevo, which was involved in domestic and foreign trade.

„We recently had 35 apartments, four commercial spaces, and 2,000 square meters of land designated for a hotel according to the Regulatory Plan,” says Mirsad Jašarević, former acting director of „Feroelektro”.

The investment story failed due to the company's debts to former employees, which led to the resort being put up for judicial sale in 2021. However, it turned out that this sale was detrimental not only to the workers but also to the new buyers of the resort and the state.

The battle for workers' squares in Neum has been ongoing since the 1990s. At that time, the Hospitality and Tourism Company „Odmaralište Neum” attempted to take over the resort. This company was founded in the mid-1990s by a group of „Feroelektro” workers from Herzegovina who had lost contact with the parent company in Sarajevo due to the war. They formed a new company based on the Decree on the Temporary Organization of Business Operations of Economic Entities and Organizational Forms of Legal Entities in the Territory of HRHB.

„So, when the company was registered, those laws were in effect,” said Neum Mayor Jurković.

This decree allowed employees to form new companies that would take over the assets of parent companies in the territory of the then Herceg-Bosna. No other regulation provided for such expropriation of property.

„The legal basis was the state of war,” said Fikret Talić, Assistant Director for Sales at the Privatization Agency of FBiH.

Thus, „Odmaralište Neum” included the property in its founding capital, but they did not register ownership in the land registries.

More than 60 percent of „Feroelektro’s” assets are state-owned, while about 39 percent are private capital of the company. In 2004, the company „Stanić Invest” signed a contract with the Privatization Agency of FBiH for the purchase of state capital. At that time, it paid two million marks and committed to investing 22.5 million marks in the company within three years.

In the following years, a legal battle ensued. The Agency sued „Stanić Invest” for non-compliance with contractual obligations and, in 2012, obtained a first-instance judgment based on which the privatization contract was annulled. The company responded with a counterclaim to annul the privatization and ultimately won the case in 2019 when the Supreme Court of FBiH ordered the Privatization Agency to pay „Stanić Invest” 3.6 million marks in compensation for the failed privatization of „Feroelektro”.

„This company neither lived nor worked, no one made changes in the land registries. Of course, there was no basis until everything was harmonized with the law,” says Talić.

The decree ceased to be valid in the post-war years, and with the abolition of Herceg-Bosna and the formation of the Federation of BiH, the company should have been re-registered in accordance with the Law on Registration of Business Entities in FBiH, its capital registered, and management appointed – which did not happen.

The Municipal Court in Mostar, which is currently competent, confirms for CIN: „This company only had its founding registered”.

When the Privatization Agency in FBiH approved the privatization program and initial balance sheet of „Feroelektro” d.d. Sarajevo in 2000, the resort in Neum was excluded from the company's assets. This meant that the facility was not subject to privatization and could not be owned by „Feroelektro”.

„We were in a situation where you had assets in the business books of two companies. For the initial balance sheet of ‘Feroelektro’ to be adopted, that asset had to be de-registered so it wouldn't be in two places, because you can't privatize it twice,” explained Talić.

The Government of FBiH did not find a solution at the time and left this problem to the OHR, which never commented. The OHR also did not respond to CIN journalists' inquiries.

According to the Law on the Initial Balance Sheet, the resort in Neum should have become the property of the Federation. Federal Minister of Trade Amir Hasičević says it was the authorities' mistake not to take over this property: „Actions that were legally required were simply missed.”

Hasičević adds that he therefore doubts the legality of the enforcement proceedings and the sale of apartments in Neum before the Municipal Court in Čapljina, which, he says, someone will have to „sort out”.

Minister Amir Hasičević says that the authorities did not even deal with the ownership of the resort in Neum.

The Public Legal Representation of Stolac, representing the Municipality of Neum, objected to the Court regarding the sale of the properties, but the Court rejected this objection.

„This part of the property was not privatized, nor could it be further divided into apartments and registered as the property of ‘Feroelektro’ Sarajevo,” journalists were told by the Legal Representation.

When selling the properties, the Court in Čapljina did not delve into the privatization issues and the protection of state property based on the laws in this area, but relied on data from the land registries.

„An inspection of the Land Registry revealed that the properties in question were not registered as the property of the UTP ‘Odmaralište Neum’ company,” the Court stated, as shown by the company's documentation from 1969 to 1994. Judge Dubravka Soče, who conducted the enforcement proceedings, declined to speak with journalists.

Furthermore, for Jašarević, the former acting director of the company, the sale and ownership of the resort are not disputed for „Feroelektro”: „Well, there is a court, we are not playing games with the state. When the court sells property, the court guarantees the sale of that property.”

The Government of FBiH and the Privatization Agency of FBiH did not explain to CIN why the resort was not registered as the property of the Federation.

„Well, it is difficult to define the culprit here now because someone who was supposed to take certain actions missed them and did not do them on time, and someone else took advantage of that,” concluded Fikret Talić.

No tax, no papers

By selling the properties in Neum, „Feroelektro” is supposed to settle unpaid wages and contributions for 87 former employees. Out of the three million KM from the property sale, about 2.6 million KM should be paid to the workers.

„Then everyone claimed Neum, everyone tried to prevent it. So, I hope that we workers will finally benefit from Neum,” said Ediba Hamamdžić from Sarajevo, a former „Feroelektro” employee.

„Our fathers built this. It was built by ‘Feroelektro’ workers, whose pensions and honestly earned wages the authorities are obliged to pay,” said Fadil Spahić, who bought four properties for over 330,000 KM.

Fadil Spahić from Sarajevo is one of the buyers who paid for the properties immediately after the auction ended in 2021 (Photo: CIN)Fadil Spahić from Sarajevo is one of the buyers who paid for the properties immediately after the auction ended in 2021 (Photo: CIN)
The sale included 35 apartments of 40 to 50 square meters, three commercial spaces, three plots of land, and a garage. Trusting the Court and not questioning the ownership of the properties, numerous buyers responded to the auction.

One of them is Fahrudin Kadušić from Tešanj, who, through his companies, paid over half a million marks for five properties in Neum: „For us, the court is legitimate. When it sells, the court puts us in ownership, and that's the end of it.”

Ultimately, the Court sold 30 properties. Some buyers received 40-square-meter apartments for 40,000 KM, while others paid between 150,000 and 180,000 KM for the same apartments. However, the money from the sale is held in the Court's account and has not yet been paid to the disenfranchised workers.

„The sale itself has brought nothing good to the workers,” says Mayor Jurković.

All buyers received final court decisions, awarding them the properties in Neum. However, to register ownership in the land registries, tax payment followed. For the Neum Tax Office to calculate taxes for the buyers, the municipal Commission first had to assess the value of the purchased properties. The Municipality prevented this.

„With a decision of the Municipal Council, we practically tied the hands of the Assessment Commission, preventing it from assessing these properties,” admits Mayor Jurković, adding that they did this to stop any potential sale of the properties.

The buyers appealed to the Federal Ministry of Finance and the FBiH Tax Administration because they were prevented from paying taxes, but these institutions did not react. Federal Minister of Finance Toni Kraljević refused to speak with journalists. The FBiH Tax Administration responded to CIN that the basis for tax assessment is determined by the Neum Municipality Commission and that any other action would be a violation of the Law on Real Estate Transfer Tax of the Herzegovina-Neretva Canton (HNK).

Mayor Jurković also claims that the Court in Čapljina violated the Regulatory Plan Center I Neum by dividing the building into apartments without a certificate from the municipal Service for Construction and Spatial Planning, which resulted in the resort having multiple owners and not being able to be sold as a whole for hotel construction.

Journalists reveal that such a certificate actually exists. The Municipality of Neum ordered the division into apartments in February 2018 by preparing an Elaborate on Division, which was forwarded to the competent Land Registry Office of the Municipal Court in Čapljina.

However, although it approved it, the Municipality attempted to halt the division, stating that this facility was not planned for collective housing but for hotel construction. The competent Federal Administration for Geodetic and Property-Legal Affairs informed the Court that annulling the division was not possible because the Municipality's request was not in compliance with the law, which the Court accepted.

Most owners bought the properties to rent them out and profit. According to the Regulatory Plan, the „Feroelektro” resort is a tourist-purpose facility.

„I want to earn money there. (…) I cannot rent out apartments because they have placed themselves above the Court,” complains Fadil Spahić.

Struggle with inspection

The purchased apartments were dilapidated and unfit for use, requiring renovation, but the inspection prevented it because the mayor found „work in a complex without an owner” unacceptable.

Therefore, the Service for Construction and Spatial Planning of the Municipality of Neum cordoned off the resort with yellow tape immediately after the judicial sale. Buyers were forbidden from renovating and adapting the apartments without the Municipality's approval, a building permit, and project documentation.

„They didn't let us paint. Why? They don't let you lay ceramic tiles in your own apartment,” says buyer Šemso Mujezin from Vogošća.

Neđad Mujanović adds: „You're doing something inside, and someone just bursts into your door. They never showed any written order.”

Goran Menalo, head of the municipal service, says their inspectors usually „do not go with orders, but ex officio”. „Normally, if they see work being done somewhere, they will knock and enter.”

The Municipality of Neum, through the Public Legal Representation of Stolac, sued „Feroelektro” to contest the division into apartments, while the Public Legal Representation of the HNK initiated a lawsuit to determine ownership of the resort in Neum. Both proceedings are ongoing.

„If the Municipality has such a big interest, why didn't they take it all?! They are used to taking things for free from the state: these facilities, the sea, the coast, parking lots,” said buyer Šemso Mujezin.

The buyers do not dispute the new court proceedings to establish actual ownership of the facility, but having purchased the properties from the Court and with final judgments, they consider the apartments their property.

When repeatedly asked about the non-enforcement of Court decisions, Mayor Jurković told journalists: „We do not consider that we are not respecting the Court's decision as such.”

„I don't feel good. This wasn't bought at a market. You bought something, you can't transfer it. You bought something, it's not yours,” concluded buyer Muhamed Avdić from Živinice.