While notoriously intimidating to navigate, even for locals, real estate usage and ownership is essential for the two most common basic needs and concerns of every person, housing and work. The Romanian real estate system is largely aligned and similar with that existing in most European countries, nonetheless there are certain regulatory or market driven particulars which are of interest when looking for housing, accommodation, as well as for a place of setting up business. The below aims to break down the basics and provide tips & tricks for newcomers so that their experience is as streamlined and positive as possible.
Real Estate System in Romania
Romanian law recognises, at a Constitutional level, the full ownership right, with all its attributes: possession, usage and disposal. These attributes are further broken down and combined to create various ways of exploiting real estate, several of which will be detailed below, as they are useful for Ukrainian citizen looking to live and / or work in Romania.
Ukrainian citizens are allowed to acquire the ownership right over constructions (e.g. apartments, houses, storages, retail spaces, etc.), however the Romanian law does not allow for land to be owned by Ukrainian citizens. Nonetheless, the option remains for a superficies right to be created, meaning a right which allows for ownership of construction and usage of corresponding land. This right can be granted for a period of up to 99 years, with the possibility of renewal.
The main real estate rights, such as the ownership right and superficies right mentioned above require Land Book registration, which is a national public record held by a Government agency, allowing full visibility and publicity of real estate ownership.
These rights can be validly acquired solely through a deed concluded in front of and authenticated by a public notary (while there are certain exceptions, such as inheritance and expropriation, the general rule is most likely to be relevant for Ukrainian citizens looking to settle in Romania) or through deeds with similar power, such as definitive court rulings.
Lease agreements, on the other hand, can be concluded also as a private deed, signed and dated by both parties, with no legal obligation to authenticate the agreement by a public notary; these can also be registered with the property's Land Book, which is most of use in case the property is sold, ensuring the new owner is aware of the existence of the lease agreement.
Please note that, in addition to the prices agreed by the parties, certain fees should also be considered, such as (i) notary fees, which are both value-based (calculated as fixed percentage from price / value, etc.), as well as freely established with the notary, (ii) Land Book registration fees (fixed amounts provided by law), (iii) broker fees (generally up to 3% of the purchase price for sales, 0.5-1 monthly rent for leases), (iv) property taxes, (v) VAT, etc.
Residential Real Estate – housing options and accommodation opportunities
The main options used in Romania for securing housing are through (i) purchase of the ownership right and (ii) lease of a residence. In respect of the ownership right, the general rules described above are generally applicable: Ukrainian citizens can purchase buildings (e.g. apartments, houses, villas, etc.), together with the right to use the corresponding land (i.e. superficies right). The sale purchase agreement should be concluded in front of and authenticated by a public notary. After the authentication, the notary is in charge of registering the transfer of ownership with the Land Book.
Romania does not have extensive legislation specific to residential leases, such being mostly focused on social or state-regulated housing. Otherwise, it is up to the parties to determine the content of their lease agreement. As a market practice, rent is generally not inclusive of utilities, which are paid separately (usually by reimbursing the landlord, however amenities can also be contracted individually by the tenant, such as internet connection).
There is no minimum duration for residential leases, however, there is a maximum duration of 49 years for all lease agreements. If the parties to the agreement establish a longer duration, it will be automatically reduced. Lease agreements can also be concluded for indefinite periods of time. Residential leases are generally concluded for periods of minimum one (1) year.
If the lease agreement is concluded for an undetermined duration, the landlord is entitled to unilateral termination without cause, subject to sending a notice with at least:
- 60 days in advance, if rent is owed for time periods of a month or more; or
- 15 days in advance, if rent is owed for time periods of less than a month.
In this case, the notice period cannot be legally waived in the lease agreement by the tenant.
The same notice periods apply to lease agreements concluded for a determined duration. In this case, the landlord is entitled to unilateral termination without cause only for their or their family's housing needs and only if this right is included in the lease agreement. The parties can, however, include in the agreement a different mechanism in this respect.
If the lease agreement is concluded for an undetermined duration, the tenant is entitled to unilateral termination without cause subject to a notice period of at least a quarter of the time period for which rent is owed. This notice period can be contractually amended. However, in agreements concluded for an undetermined duration the right to unilaterally terminate cannot be waived and, moreover, the parties cannot stipulate a price in exchange of this right.
In lease agreements concluded for a determined duration, the tenant is entitled to unilateral termination without cause subject to a minimum 60 days' notice period. This notice cannot be contractually amended or waived.
The Civil Code provides the obligation of the landlord to carry out any major and necessary repairs to the premises, while those generated by the day-to-day maintenance of the property are borne by the tenant. The parties are, however, free to assign such expenses differently in the lease agreement.
The owners are obligated under the law to take out insurance against natural disasters. Failure to observe such obligation is sanctioned by fine, ranging from EUR 21 to EUR 105 (RON 100 to RON 500).
The Civil Code provides a preference right for concluding a new lease agreement in favour of the tenant that observed its obligations under the previous lease agreement. As such, pursuant to the landlord's notification of the content of the agreement to be concluded, the tenant has 30 days to exercise this right and notify the landlord in this respect.
The preference right is limited in time depending on the duration of the initial lease agreement (eg three months after the expiry of a lease agreement with a duration of more than a year).
The parties can expressly agree to waive the preference right in the lease agreement.
The Civil Code also provides a mechanism of automatic conclusion of a new lease agreement under the same conditions if, after the lease expiry, the parties continue to fulfil their obligations. However, the new lease agreement is considered concluded for an undetermined duration.
Commercial Real Estate and business establishment
In case Ukrainian citizens are interested in opening a business in Romania, they would, at a minimum, need to ensure usage of a space which can be used as headquarters, as legal requirement for setting up any type of company. This can be generally done by either purchasing or, more commonly, renting commercial premises (e.g. office, retail).
In respect of purchasing, the restriction on ownership over land is not applicable to companies registered in Romania, regardless of nationality of shareholders, however these should be used for the purpose of operating the company and not to the direct benefit of the individual (i.e. as residence), as these could be deemed as means of by-passing regulations, which could, in turn, invalidate the ownership deed.
Lease agreements are usually entered into for a period of between three and ten years, depending on the type of property (usually longer in case of industrial leases).
Compared to residential leases, rent is usually established in relation to the area of the leased premises, to which the costs of maintenance and operational expenses are added. It is also customary for the tenant to undertake a fit-out of the premises prior to relocation (either through its own contractor or through the landlord) – depending on the parties' negotiation and the size of the leased premises, landlords can also grant incentives, such as covering part of the fit-out costs, rent free months, complimentary furniture, etc.
The landlord usually insures the building, whilst the tenant takes out its own insurance of eg internal building features, machinery, data, goods, loss of profit/business interruption and liability under a combined public liability policy.
Tips & Tricks
- for deeds authenticated by a public notary, it is the notary's legal obligation to ensure the deed and the rights therein are registered with the Land Book; therefore, following a transaction, the public registry (i.e. Land Book) can be consulted in order to check if the rights were properly registered (this can take up to 30 days following the transaction) and, if not, request the notary to properly fulfil this duty;
- Land Book registration is a legal right which cannot be contractually waived, meaning that, regardless of the other party's consent or opposition or of any contractual clauses stating that no Land Book registration can or will be performed, both parties remain entitled to request the registration (this is generally done through a notary);
- buyers usually carry out legal and technical due diligence exercises prior to acquiring real estate, which should at least ensure, from a legal perspective, that (i) the owner has a valid title over the property and the rights to transfer it, (ii) there are no other co-owners / persons whose consent would be required for the transaction (such as siblings, neighbours, spouses, etc.), (iii) any rights of first refusal have been properly waived (applicable, for example, by law to historical monuments, but could also be conventionally granted to any person, such as the existing tenant of an apartment), etc.; in case of lease agreements, while diligence should always be employed, a restricted verification can be used, mainly ensuring the landlord has the right to lease the premises (either as owner or as a sublease / free lease);
- reimbursement of utilities and/or other costs from the landlord should be made based on supporting invoices, documenting the due amount;
- we recommend checking public real estate platforms (e.g. imobiliare.ro) and comparing multiple prices for multiple areas of interest and always remembering that everything is negotiable, including the price!
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By Florin Ţineghe, Counsel, and Elena Zoita, Associate, DLA Piper