Guide for buying property in Romania
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 to 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 time 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 a 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.
Mortgages
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 the 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, the 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.
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 to 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 time 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 a 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.
Mortgages
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 the 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, the 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.
All types of property for sale in Romania by private sellers and estate agents. Find your perfect apartment, house or farm on the Black Sea coast or in the Carpathian Mountains.
One cannot imagine today’s real estate market without the help, both for the buyer and for the seller, of real estate agents. Of course, there are
still plenty of people in Romania who prefer to make this type of transaction independently, without the help of a real estate agent, because of the
commission. Truth be told, there are plenty of real estate agents/brokers on the market and there is room for negotiation, so collaborating with them
may mean closing a very good deal.
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