Real Estate

Real Opportunities in Romania

Before its accession to the EU on 1 January 2007 (and its consequential acceptance of the four freedoms of movement of persons, capital, goods and services), there was a comprehensive prohibition on non-Romanian nationals owning real estate in Romania. Since then there has been an incremental liberalisation of property owning rules, but some conditions remain, and at least one major anomaly appears to exist related to the free movement of capital for property investment.

The pos­si­bil­i­ty of buy­ing and own­ing real estate is a key con­sid­er­a­tion for long-term inward for­eign invest­ment, whether for the man­u­fac­tur­ing or retail indus­try, or for cap­i­tal invest­ment on the com­mer­cial or indi­vid­ual lev­el. Most coun­tries pro­tect or cir­cum­scribe such rights for both polit­i­cal and eco­nom­ic rea­sons at the nation­al lev­el, but the EU doc­trine of the four free­doms has led to greater oppor­tu­ni­ty in Roman­ian real estate.

Land ownership by EU foreigners

In prepa­ra­tion for EU acces­sion, Roma­nia start­ed by per­mit­ting prop­er­ty own­er­ship by res­i­dent for­eign­ers from an EU mem­ber state. Res­i­den­cy has been defined as:

  • a for­eign­er who has the right of res­i­den­cy (drept de rezi­denţă); or
  • a for­eign legal per­son who has at least a sec­ondary seat in Roma­nia.1

The word­ing of the first con­di­tion is ambigu­ous, but com­mon sense would sug­gest that, to own prop­er­ty, the “right of res­i­den­cy” is actu­al­ly being exer­cised. This com­mon sense view is rein­forced by EU Direc­tive 2004/38/EC, as adopt­ed by Roman­ian Gov­ern­ment Ordi­nance 302005, which states that the right of res­i­den­cy exists for EU cit­i­zens who, in the host mem­ber state:

  • are work­ers or self-employed there;
  • have suf­fi­cient resources so as not to be a bur­den on the social assis­tance sys­tem; or
  • are under­go­ing approved cours­es of for­mal edu­ca­tion there and have “suf­fi­cient resources”.2

Thus, EU cit­i­zens who ful­fil these cri­te­ria and are deemed a res­i­dent are enti­tled to own Roman­ian land.

This does not mean that non-res­i­dents were com­plete­ly exclud­ed. It has long been the case that for­eign­ers who are not res­i­dent in Roma­nia may own build­ings and super­struc­tures (ie, hous­es, apart­ments, offices, fac­to­ries), but not the land on which the build­ings sat.

No more need to set up a company

The solu­tion to this conun­drum has been to set up a Roman­ian reg­is­tered com­pa­ny to hold title to the land. In prac­tice, larg­er com­pa­nies will nor­mal­ly cre­ate a local sub­sidiary for prac­ti­cal and eco­nom­ic rea­sons, so estab­lish­ing a local­ly reg­is­tered com­pa­ny has caused lit­tle addi­tion­al incon­ve­nience (despite the fur­ther expense and invest­ment on top of the prop­er­ty costs).

This year, how­ev­er, after a five-year tran­si­tion­al peri­od, this sit­u­a­tion changes for cit­i­zens of the EU/EEA who wish to “acquire own­er­ship title to land for estab­lish­ing a sec­ondary res­i­dence or a sec­ondary com­pa­ny seat.”3 So com­pa­nies and indi­vid­u­als from the EU/EEA are now able to pur­chase land for a “sec­ondary” res­i­dence or seat with­out the need to set up a local­ly reg­is­tered com­pa­ny.

Another milestone: Agricultural and forest land

Anoth­er mile­stone will occur on 1 Jan­u­ary 2014 when legal and nat­ur­al per­sons of the EU/EEA will be able to own agri­cul­tur­al and for­est land whether or not they are res­i­dent in Roma­nia.4 Giv­en the sig­nif­i­cant invest­ment in such land by inter­na­tion­al enter­pris­es and invest­ment groups, both in Roma­nia and oth­er more recent EU mem­ber states, this is like­ly to have a pos­i­tive impact on real estate mar­ket per­for­mance.

Missing: Free movement of capital

So it is now pos­si­ble to own land in Roma­nia either by becom­ing a res­i­dent or by hav­ing a sec­ondary res­i­dence or com­pa­ny seat there while, from 2014, own­er­ship of for­est and agri­cul­tur­al land will also be open to non-res­i­dents or to those with­out a sec­ondary res­i­dence.

But one cat­e­go­ry of poten­tial own­er­ship appears to have elud­ed the leg­is­la­tor. The Free Move­ment of Cap­i­tal doc­trine implies that a cit­i­zen in one EU mem­ber state may make a cap­i­tal invest­ment in anoth­er with­out addi­tion­al obsta­cles or bar­ri­ers. But the Roman­ian rules as they stand appear to bind real estate own­er­ship (oth­er than agri­cul­tur­al or for­est land post-2014) to the con­cept of res­i­dence. A non-res­i­dent pur­chas­er must still reg­is­ter a local hold­ing com­pa­ny in order to hold title to land.

Romanian opportunities

Many inter­na­tion­al com­mer­cial groups have already seen Romania’s invest­ment poten­tial, and the high lev­el of pre-crunch real estate prices sug­gests that there will be a sig­nif­i­cant oppor­tu­ni­ty for future growth as economies recov­er. The Roman­ian econ­o­my may have its dif­fi­cul­ties, but in 2011 Romania’s GDP grew an esti­mat­ed 1.7% after adjust­ment for infla­tion ( That was almost the same as France and far above Spain and Italy over the same peri­od.

Of course, this opti­mistic pic­ture must be tem­pered with legal cau­tion and the ser­vices of a rep­utable lawyer are high­ly advis­able to help steer a prospec­tive buy­er through the chang­ing leg­isla­tive land­scape. For instance, dis­crep­an­cies in the cadas­tral records and con­flicts with the land reg­istry are not dif­fi­cult to resolve, but can cause unex­pect­ed frus­tra­tion. Land reg­istries are local­ly main­tained and are still far from com­pre­hen­sive — so search­es can require per­son­al vis­its to the rel­e­vant munic­i­pal office. Law firms with the nec­es­sary exper­tise and expe­ri­ence are well versed in help­ing clients over­come these chal­lenges.

The Romanian economy may have its difficulties, but in 2011 Romania’s GDP grew an estimated 1.7% after adjustment for inflation. That was almost the same as France and far above Spain and Italy over the same period.

Law 3122005.
EU Direc­tive 2004/38/EC “On the right of cit­i­zens of the Union and their fam­i­ly mem­bers to move and reside freely with­in the ter­ri­to­ry of the mem­ber states” and inte­grat­ed into Roman­ian leg­is­la­tion with Gov­ern­ment Ordi­nance 302005, Arti­cle 7. For per­sons stay­ing less than three months see Arti­cle 6.
Arti­cle 4 Law No. 3122005.
Arti­cle 5 Law No 3122005.

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