On July 29, 2017, a new regulation regarding the reception of construction projects (the “New Regulation”) was enacted by means of Government Decision no. 343/2017. The New Regulation, which replaced the former procedure (which was regulated by Government Decision no. 273/1994) in its entirety, provides a number of notable changes impacting the real estate and construction industry in Romania.
One of these major changes involves the composition of the commission for reception upon finalization of construction projects, which gives an increased role and power to Romanian public authorities. The new procedure requires that in certain projects – in fact, a significant percentage of big and medium-size real estate projects – certain public authorities (such as the State Authority for Constructions, the Emergency Situations Authority, the County Department for Culture, etc.) be members of the reception commission. Moreover, the New Regulation provides a veto right to certain public authorities which are members of the commission, meaning that in fact no reception of the finalization of projects can be accepted if any of those authorities object to it.
Another important change is that under the New Regulation it is no longer possible to accept the projects with objections regarding defects and irregularities ascertained during the reception process. Before the New Regulation it was common practice to accept construction projects with objections, provided that the defects/irregularities could be remedied and did not impede completion of any essential construction requirements, which allowed the investor to continue all other formalities for rendering the construction operational (e.g. registering with the Land Registry, obtaining operational permits, and so on) in parallel with the remedial work. However, this practice is no longer possible and the investor will be obliged first to remedy the defects and irregularities and to successfully finalize the reception before completing all other formalities for rendering the project operational.
On the other hand, the New Regulation allows the reception commission to suspend the reception process for a limited period of time (90 days as a rule, with another 90 days possible in exceptional cases) so that the defects and irregularities can be remedied.
The New Regulation also significantly enlarges the scope of projects upon which the reception commission can reject the finalization of projects (like for a failure to observe the requirements for fire prevention approval, failure to remedy defects during the suspension period, or failure to follow the terms of the construction authorization).
The New Regulation expressly forbids the use of any construction projects for which reception upon finalization is rejected. In such cases, the only option available to investors is to preserve the construction projects until the defects and irregularities are remedied.
Certain important changes were also made to the final reception of the construction projects after the expiration of the warranty period. The New Regulation provides similar principles here as for reception upon finalization of the projects, most notably involving the possibility of suspending the final reception, as well as prohibitions against the use of a construction project for which final reception was rejected.
As a general conclusion, the New Regulation provides a number of sound changes to the reception procedure of construction projects, which have in many cases a major impact on the construction and operation of real estate assets. Due to the exclusion of an “intermediary” reception option (i.e. reception with objections) and the involvement of an increased number of public authorities in the reception process (i.e. with a veto right), in practice the reception procedure may become more cumbersome and time-consuming and less predictable in terms of planning the opening date of real estate projects. The main actors involved in the construction and real estate industry – including investors, financiers and contractors – as well as those who occupy or use real estate assets should pay more attention to the reception part of the project and carefully assess all implications of the reception process, including the legal implications resulting therefrom.
By Sergiu Gidei, Partner, CEE Attorneys - Boanta, Gidei & Asociatii Law Firm
This Article was originally published in Issue 4.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.