Florian Ionescu, Wednesday, 22 January 2014
This article is part of a series of 8 articles about buying property in Romania. The other articles in the series cover the following topics:
The Romanian law addresses the matter of ownership rights over real estate in a rather precise manner, however the overall legal context for property
buying can be confusing because of a number of distinct instances.
The legal context
While there are no restrictions regarding the purchase and ownership of real estate by Romanian citizens and companies, foreign citizens and/or
entities can only purchase or own real estate on certain conditions. However, these conditions do not apply to apartments, industrial buildings or
commercial buildings, which they can acquire ownership rights over following the same procedure as Romanian citizens. The land they are standing on,
on the other hand, requires the establishment of a right of superficies, which allows the foreign citizen and/or entity to use the land, but not to
purchase it. At present, foreign nationals can only own land within the Romanian territory through legal inheritance.
Here is the legal context for the acquisition of ownership rights over lands as established by Law no. 312/2005, which entered into force upon
Romania’s acceptance within the European Union:
Art. 3 – Citizens of a member state, stateless persons residing in a member state of the European Union or in Romania and legal entities founded in
accordance with the legislation of a member state can acquire ownership rights over lands under the same conditions as those applicable to Romanian
citizens and legal entities.
Art. 4 – Citizens of a member state not residing in Romania, stateless persons residing in a member state but not in Romanian and non-residing legal
entities founded in accordance with the legislation of a member state an acquire ownership rights over lands if they serve as building sites for
secondary residences or headquarters and only as of 5 years of Romania’s accession to the European Union.
Art. 5 - Citizens of a member state, stateless persons residing in a member state or in Romania and legal entities founded in accordance with the
legislation of a member state can acquire ownership rights over agricultural lands, forests and forestry lands as of 7 years of Romania’s accession
the European Union.
According to these stipulations, all restrictions on the acquisition of real estate by foreign citizens and/or legal entities within the Romanian
territory will be lifted starting January, 1st, 2014.
The buying process
First of all, it is strongly recommended that parties interested in purchasing real estate in Romania seek the services of a solicitor or a lawyer to
deal with the issues and flaws of Romanian laws on real estate transactions.
The actual property buying process only starts after the seller has demonstrated that they have ownership rights over the property they are selling
and that the property bears no taxes to be paid as confirmed by the fiscal authorities and has no mortgages attached to it.
The foundation of a limited liability company or a bone fide corporation by foreign nationals simplifies the property buying process significantly.
The first step consists in the execution of a preliminary sales agreement, which establishes the purchase price and forces the buyer to make an
initial deposit. Usually, this deposit amounts to 10% of the purchase price established therein. This preliminary sales agreement gives the buyer
to obtain the funds for purchasing the real estate until they have to sign the final one. In the case of foreign nationals, this funding consists in
mortgage loan issued in favor of a Romanian limited liability company or a bone fide corporation. This sales agreement is only valid if notarized and
must be registered in the Real Estate Register.
Unfortunately, the Romanian law is rather defective as far as checking the title to real estate is concerned, despite the efforts made by the
government in recent years. A first step was taken by setting up a National Property Registry Office, but the numerous issues related to real estate
titles lead to an overall registration period of 12 to 25 days.
Unlike in the majority of countries, the Romanian law does not allow the use of any real estate available for sale for which funding is sought as
collateral for a loan. As mentioned earlier, in the case of foreign nationals, the funding for purchasing property in Romania can only be obtained
through a mortgage loan. Such loans are issued to buyers no older than 65 and can amount to anything between 5,000 and 500,000 Euros. This sum must
constitute no more than 75% of the purchase price, the remaining 25% being born by the buyer. The only condition to obtain a mortgage loan is that
total debt does not exceed 40% of the buyer’s income. The capital and repayment currencies are RON, EUR and USD.
The laws on real estate acquisition have suffered quite a few modifications in Romania over the years and are likely to suffer even more. In fact,
liberalization of real estate laws as of January, 1st, 2014 will create a whole new legal context for foreign citizens and/or legal entities
interested in investing in property and land within the Romanian territory.