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Investment in Agricultural Land in Romania - Land Rush Close to the End?

Investment in Agricultural Land in Romania - Land Rush Close to the End?

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The interest of foreign investors in acquiring real estate in Romania has grown significantly since the January 1, 2014 expiration of the country’s prohibition against EU citizens and businesses acquiring agricultural land. Land is available at competitive prices, compared with many other European countries, and other advantages include the facts that Romania holds an important share of the European crop land due to its grain production, has a favorable position within export routes, has high-quality soil, and has a climate suitable for a wide range of agricultural investments.

With the liberalization of the Romanian land market, Romanian legislators, in a desire to protect one of the country’s main strategic resources, enacted Law no. 17/2014 in March 2014, regulating the sale of agricultural lands located outside the area in each locality where construction is allowed (i.e., extra muros).

Law 17/2014 introduced a more restrictive framework for the acquisition of agricultural lands located extra muros by both Romanian and EU entities and individuals. The law imposes a special procedure for the sale of land and a ranking of pre-emption rights, in the following order: to co-owners; to tenants who exploit the land; to neighbors of the land being sold; and, finally, to the Romanian state. 

The seller should follow the procedure set out in Law 17/2014 along with any applicable municipal requirements and others set out by the Romanian Ministry of Agriculture. The owner should make sure that the offer of sale is published at the competent City Hall, along with the relevant documentation. The seller’s offer remains valid for 30 days fol-lowing publication at the City Hall (and if applicable, on its Internet page), during which time the pre-emption right holders may notify the City Hall on the acceptance of the of-fer. 

Once the 30-day period has ended, the seller must select the party with the highest-ranked pre-emption right who has accepted the offer. The seller must notify the relevant City Hall of the selection. The City Hall will then notify the Ministry of Agriculture and relevant local agencies. The parties can proceed to the sale only after the Ministry of Agriculture and relevant agencies issue their approval. 

If no pre-emptor accepts the offer, the sale can be performed freely based on a certificate issued by the City Hall. The sale will be regarded as null and void if the seller fails to meet these requirements or alters the terms of the deal without repeating the pre-emption process. 

Currently, the Romanian Parliament is working on a legislative amendment to Law No. 17/2014 that will further regulate the sale of agricultural land in Romania. The draft law has been submitted to the Chamber of Deputies as the decision-making chamber and is now under debate in front of the competent commissions.  If enacted, it will favor people who are involved in agriculture by establishing a new right of pre-emption for co-owners and first-degree relatives, lessees, young farmers, owners of neighboring agricultural land, and the Romanian state.

Moreover, the draft law will impose an obligation to use the lands for agricultural activities from the date of purchase on landowners and will limit the transfer of agricultural lands acquired based on the preemption procedure for a period of 15 years. According to the draft law, agricultural land located extra muros may not be subject to securing loan agreements, except for credit agreements concluded with credit institutions or non-banking financial institutions. 

Pursuant to the draft law, Law 17/2014 will also apply to transfers in lieu of payment, to in kind contributions of the share capital of companies, or to any other legal deed between living parties transferring the ownership right or establishing another real right that ensures the possession and use of agricultural land located extra muros, if the con-clusion of such acts supersedes the law.

It remains to be seen if and when the draft will be enacted and what the impact on the Romanian land market will be.

By Simona Chirica, Partner, and Madalina Mitan, Senior Attorney at Law, Schoenherr Bucharest

This Article was originally published in Issue 6.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.