Legal procedures and obligations can put a heavy burden on the purchase or the development of real estate projects in Romania. Non-compliance with local registration, construction, purchase, and finance and contract regulations can delay a project for months if not years. This page provides a brief introduction in the main legal issues related to land and property transactions in Romania.

LAND REGISTER
The implementation of a unified nation-wide land register system in Romania has been a cumbersome affair, despite the system being established in 1996, more than a decade later its completion is still ongoing.

Excerpts from a land register can be obtained from the local territorial bureau that holds the respective land register. The documents and plans underlying every registration are open to the public, however, online excerpts are not yet available.


ENCUMBRANCES
Easements (Romanian servitute) can be established by either law or contract and are defined as encumbrances on a property for the use and benefit of another property from a different owner. The issuance of an urbanism certificate is required for the establishment of an easement of passage. Deeds inter vivos (as opposed to wills) by which easements over land are created must be notarized.

The Romanian legal system knows only a type of mortgage named 'ipoteca', which is defined as a pledge created over real property to secure performance of an obli-gation, granting the holder the right to pursue the mortgaged property and to be preferred against other (non-secured) creditors in the event of foreclosure.

The Civil Code provides that mortgages may in principle not be created over future assets. However there are exceptions; pursuant to Law 190/1999 on mortgage loans for real estate investments they may be created over future constructions and may duly be registered with the land register provided that the building permit issued for erecting such constructions has previously been registered. Such mortgages will not necessarily be established over the land on which such constructions will be erected and the owner of the future constructions does not need to be the owner of the corresponding land.


PURCHASE CONTRACT
Under Romanian law, all agreements concerning land must be notarized in order to be considered valid. Moreover, for the execution of any sale-purchase agreement a land register excerpt for notarization will be required by the notary public. A notarized deed is not required for the validity of agreements concerning other types of real property (e.g. buildings).

As a rule, the ownership right over the property is passed on to the purchaser at the moment when the parties agree to sell the property for a mutually accepted price. Nevertheless, the parties may agree to transfer the ownership right at a later time, for example when the purchase price has been transferred in full. It is becoming increasingly common to appoint an escrow agent for the payment of the purchase price, especially when the transactions are of a high economic value.

Romanian citizens and legal entities may freely acquire real property, without prior approval from the authorities. Although under certain circumstances an environmental permit must be obtained before the sale becomes effective.

In addition, non-Romanian citizens and legal entities may freely acquire buildings and the right to use the land such buildings are based on, e.g. by way of lease or concession agreements. The Romanian State (or its various decentralized departments) has a pre-emption right for acquiring property which is considered a historical monument or forests close to state owned forests.


CONSTRUCTION OF A BUILDING
Building is permitted only within built-up areas (Romanian intravilan), on non-agricultural land and only with a valid building permit. In exceptional cases, certain types of constructions (e.g. constructions that can potentially cause a high degree of pollution and constructions, the nature of which prevents them from being placed within built-up areas) are allowed to be built outside the built-up areas (Romanian extravilan).

Building on agricultural land is in principle for-bidden, with the exception of constructions used for the purposes of agriculture, railways and important roads, high-voltage electricity lines, oil and natural gas exploitation works, main oil or gas pipelines, water management works and constructions intended for military use. The local authority must certify the completion of the building in compliance with the building permit so that the building can be registered with the land register.

The building permit must be issued within 30 days after receipt of the complete documentation. If the documentation is incomplete, the authorities must return it within 5 days.

The building permit is valid for a period of at maximum 12 months, within which the construction must start. The applicant can request the extension of the validity once for a period of up to another 12 months.


RENTAL
A lease contract can be concluded for a definite or indefinite period of time. Any lease agreement entered into for a term longer than three years should be registered with the land register. Lease agreements are opposable to the new owner (in case of property transfer) if registered with the land register.

As such, a lease agreement may be terminated by uni-lateral termination, the expiration of the lease term, non-performance, termination of the lessor's title to the leased object, or by the sale of the leased object (if the parties so decide).

A lease agreement for an indefinite term can be ter-minated by either party with prior notice (term established by the parties or derived from local custom and the nature of the leased good).


TAXES AND FEES
VAT of 19 % of the purchase price may be applicable under certain circumstances, but is recoverable. Land Transfer Tax (only if the seller is a natural person) depends on the duration of the ownership (under or more than 3 years), and ranges from 2-3 % of the consideration.

Land Register Registration fee is included in the land transfer tax, if the seller is a natural person. The fee amounts to 0.5 % of the consideration, if the seller is a legal person.

Payment of land transfer tax and land register registration fee can be avoided by acquiring shares in a company owning the land