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Issues Raised by the ANPC During Thematic Inspections of Real Estate Developers

Issues Raised by the ANPC During Thematic Inspections of Real Estate Developers

Issue 11.5
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The National Authority for Consumer Protection (ANPC) recently organized thematic controls of real estate developers of residential projects to verify their compliance with the legal provisions on consumer protection.

The ANPC incorrectly assessed that developers do not comply with certain legal provisions on consumer protection. Consequently, it requested the implementation of measures that, in addition to being imposed in relation to breaches of law that have no legal basis, are likely to cause substantial damage to developers. They’ll also lead to additional costs that were not and could not have been taken into account when establishing the budgets of the residential projects.

One of the issues raised by the ANPC is related to developers’ alleged non-compliance with the minimum areas of the apartments, as regulated in Housing Law no. 114/1996 (Housing Law). The ANPC requested developers to (a) stipulate in the sales promises/contracts that clients have been informed about such non-compliance and (b) provide fair compensation to their clients covering the alleged damage caused thereto.

However, the control of apartments’ minimum requirements takes place at the issuance of the building permits. According to the methodological norms for the implementation of the Housing Law (as approved by GD no. 1275/2000), the issuance of building permits must be made with observance of the minimum requirements regarding the areas and the equipment level of the rooms of apartments contained in Annex 1 of the Housing Law. Also, according to the Housing Law, the municipalities (the issuers of building permits), and not the ANPC, verify compliance with the minimum areas contained in Annex 1 of the Housing Law.

Therefore, if (i) construction works were carried out in compliance with the building permit and the technical project, (ii) the apartments’ areas comply exactly with the areas from the technical project; (iii) the municipality issued a building permit for the construction of the residential project; and (iv) the building permit has been in force throughout its validity term, has never been challenged, suspended, or annulled (according to the law, the building permit is presumed to be legal), it means that the municipality considered that the mandatory requirements for apartments contained in the Housing Law are met with respect to the authorized project.

Failure to comply with the minimum areas required by the Housing Law could be the subject of an offense punishable by the ANPC only if it has influenced or is likely to influence in an essential way the clients’ decision to purchase the apartments. Given that, by means of sales promises/sales contracts, developers inform clients with respect to apartment areas, and it cannot be held that developers have used unfair commercial practices with the goal of distorting their clients’ economic behavior.

At the same time, the ANPC requires developers to include in sales promises/contracts provisions on the guarantee for hidden defects granted by contractors to developers under the terms of Law no. 10/1995 on quality in construction (Law 10/1995) despite this obligation not being provided by law for developers but only for their contractors.

There already is a three-year guarantee in place for buildings classified in the category of importance C (the category in which residential buildings are included), a guarantee of 10 years for hidden defects, and a guarantee for the entire life span of the construction of the structure. The law (Civil Code) expressly regulates a guarantee for hidden defects which is indeed related to the legal relationship between developers and their clients arising from the conclusion of sales promises/contracts. This is the guarantee of three years from the date of handover or final acceptance of the construction, except if the defect was discovered earlier, in which case the guarantee period will begin to run from the discovery date of the defect.

It seems that ANPC representatives are abusively forcing developers to grant their clients the guarantee periods regulated by Law 10/1995, although these do not concern the legal relationship between developers and their clients but the legal relationship between contractors and developers. It is absurd to require a developer to grant their clients a 10-year guarantee period for hidden defects when, according to the Civil Code, the guarantee period they are obliged to grant is of a maximum of three years. Such an obligation undertaken in addition to the obligation provided by law is likely to bring additional costs to developers compared to the budget prepared for the residential project and, therefore, unforeseen losses.

By Oana Albota, Partner, and Ana-Maria Mincu, Senior Associate, Albota Law

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Albota Law Firm at a Glance

The firm: Albota Law Firm is a boutique law firm set up in May 2014. The firm was founded by Oana Albota. Before this, Oana co-ordinated, as a partner, the real estate practice of PeliFilip, which she joined from NNDKP.

The main area of practice of the law firm is real estate and construction. It has the capabilities to assist clients in all the areas connected to a real estate project: financing, real estate permitting and regulatory, corporate commercial, litigation and arbitration.

Clients choose the firm because they appreciate the clarity of its advice, its focus on results, and the efficiency of its service and its fast reaction time, all at a very fair price.

The small size of the firm is a huge advantage as it eliminates formalism, it ensures the thorough involvement of a specialised partner in every project at the law firm, the close co-ordination of the team of lawyers and it guarantees a proper cost control.

The quality of the legal services derives from the firm’s market knowledge and excellent legal know-how.

During the last 15 years the firm’s lawyers have been involved in transactions standing as landmarks for the real estate market in Romania and in significant international construction arbitrations.

Areas of practice: The firm specialises in construction and real estate.

It is experienced in all construction sectors and in the engineering industry. It is particularly specialised in FIDIC contracts and FIDIC adjudication.

Its expertise in the real estate area includes the structuring of transactions from acquisition of real estate properties in Romania up to the exit point, planning, development, leasing and financing of real estate projects, land use, private-public partnership in real estate projects, agricultural, forestry, energy and infrastructure projects, and regulatory matters.

It offers banking and finance services, advising borrowers, funds and investors from the point of term sheet and structuring stage, through closing, trenching and securitisation, administration and restructuring.

With a solid understanding of the Romanian law and an impressive experience in corporate and commercial, it assists clients, from the very first steps of the incorporation of a company until the exit, with the company’s day-to-day business, providing all legal advice required to help them stay in full compliance with Romanian rules and regulations.

It offers clients comprehensive advice at every stage of a conflict, in all forms of dispute resolution including: litigation, arbitration, mediation, conciliation and adjudication. It provides services covering assistance in complex commercial disputes before law courts and assistance in arbitration and alternative dispute resolution.

Firm's website:

www.albota.ro