Buying Real-Estate in Romania
In Romania, performing a thorough and detailed due diligence on the chosen real-estate property is the most crucial part of the transaction. Unlike in most western developed countries where the legal framework for regulating the real-estate transaction is well established, the laws in Romania are still evolving and may sometimes contradict each other. In order to avoid fraud in your deal and conclude your deal safely, you should make sure that all the necessary background checks have been completed to satisfaction. Don’t just rely on your real-estate agency for this because their liability is minimal and their interests are often not aligned with yours.
Real-estate Due-diligence generally consists of the following steps:
1/Real-estate Cadastrul Register Check
The Romanian Government has adopted a unified State Registry of Real-Estate Property Rights and Their Encumbrances (hereinafter – Real-estate Register) which includes information on all the property rights and loans, related to real-estate. Note that all the property rights or loans on real-estate (ownership, mortgage, lease, tax pledge etc) come into force from the moment of their registration in the Real-estate Registry.
Therefore while considering buying real-estate in Romania, proper title credentials must be checked in the above-mentioned Real-estate Registry. Note that if the property was previously registered on paper, as in some counties the system is not fully computerised, an inquiry has to be made to the respective registration authority that holds such paper register.
Additionally, you should receive written letter from the seller with indication of all the property rights and loans, applicable on real estate.
At this stage, it is important to check if title & registration documents for real-estate are in compliance with legislation, valid at the time of issue of such documents. Furthermore, in Romania, general limitation of court action is xx years, so if property was bought by seller less than xx years ago, it is advisable to check also lawfulness of all previous deals for the last 3 years.
2/ Court Decisions Register Check
In order to minimize risks of disputes, it is important to check Register of Court Rulings (available online) to determine if there are any current disputes related to the chosen real-estate property.
3/Technical Inspection of Real-estate.
Romanian law does not require you to perform technical inspection of the property while buying/selling real-estate. Regardless, we recommend that a technical inspection of the property be performed by a qualified professional before the purchase in order to avoid any unpleasant surprises after the deal. Moreover, in cases, when real-estate object was built/reconstructed/remodeled without respective permit(s), ownership and purchase of such real-estate can be disputed through court. It is important to ensure the registered version of the floor olans matches reality. For example, previous owners may have removed or added partition walls.
Therefore, it is advisable always to perform necessary technical check before buying real-estate.
4/ Seller’s Legal Capacity Check
If seller is an individual:
In order to check legal capacity of the seller individual you should check his/her passport, tax number and residence permit (if any). Additionally, it is necessary to make sure that person is of full legal age (above 18 year old), in clear mind (especially in cases when person is of old age) and have no tutorship over his actions (otherwise additional approvals may be required; for example, if the seller is under 18, for sale of such real-estate the consent of the Child Protective Service has to be provided, etc).
What is more, by Romanian law, all the property acquired during registered or factual marriage is considered as joint property if otherwise is not prescribed by marriage agreement (even if in Real-estate Registry only one of spouse is indicated). For this reason, in cases when the seller is married or lives as one family with other person without registration of marriage for sale of real-estate notarially certified consent of his/her husband/wife is required.
Be careful when executing the deal if your counter-party-individual is acting under the power of attorney: according to Romanian law, in cases when the person who issued POA dies by the day when deal is executed, the POA is void.
If seller is legal entity (a company):
In order to confirm legal capacity of legal entity and its representative, it is necessary to check registration and title documents of the legal entity as well as information is the Companies Register (so called the State Registry of Legal Entities, Private Entrepreneurs and Public Formations). Additionally, in certain cases Romanian Company law states that a deal may be concluded only under decision of General Shareholders Meeting of the company.
While checking powers of director, among others you need to check his appointment documents (minutes, order) and employment contract. In some cases, when sale-purchase agreement is signed by representative under power of attorney, it is necessary to confirm that it is valid under the Registry of Powers of Attorneys (such extract will be made by notary, certifying the deal).
Depending on type of real-estate you are buying, the following additional inspections are necessary:
for buildings (house, construction, building):
documents, confirming title of seller for the land plot under such house, construction, building and its cadastral number (note that buyer by law (subject to registration in Real-estate Register) receives title for land plot under purchased house/ construction/ building on the same terms as the seller had before the sale)
check if dwelling is object of cultural heritage (if yes, approval of authorized cultural heritage state authorities is required for sale; note that in future new owner has to sign agreement on protection of such object of cultural heritage with respective cultural heritage authority and perform repair, alienation of real-estimate pentru a complex turistic original de bucharest now only upon consent of such authority)
for residential property (apartment/house):
check of all persons, registered in the apartment (it is highly advisable that at the moment of sale no persons are registered in the property)
if seller has children under 18, you should make sure that they are not registered in the residential property plus that they are registered in other residential property;
in cases when owner of real-estate is a child under 18, consent of the Child Protective Service has to be provided
for land plot:
check of the limitations of use of land in the Land Cadastre Register (respective extract from the Land Cadastre Register has to be provided)
check if there is any real-estate on such land plot and what rights on your land plot has the owner of the building
Note that sale-purchase agreements of real-estate in Romania have to be concluded in written form and notarially certified. The Notary by law is obliged to perform certain due-diligence and make sure that sale-purchase agreement complies with Romanian law (see below in Section Real-estate Deal & Registration of Title) . However the notary will perform such due-diligence on the date when you sign real-estate sale-purchase agreement (just before signing) and only to the extent which is required by law (so due-diligence will not cover many of the above-mentioned aspects).
For these reasons, in order to make right decision and take into account all potential risks, it is better to have full due diligence report prepared in advance by a professional real-estate advisor or Property Lawyer. You can shortcut much if this by working only with Real Estate agencies with a long standing, proven reputation as they will normally only present you with property that is absent of problems. But due dilligence is the key. We at White Mountain will be happy to provide you with the contact details of capable lawyers to assist in this process.