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Property in Romania

  Legal aspects: buying a Property in Romania


You will find below the answers to the most frequently asked questions when purchasing a property in Romania:

1. Can foreigners invest in Romanian real estate?

2. What is the difference between owning land and owning buildings?

3. Can I simply ask a Romanian friend to own the land on my behalf?

4. Is there any other restriction on owning Romanian Property?

5. Is there any distinction between freehold and leasehold property in Romania?

6. Can I get a mortgage to buy the property?

7. Can my UK solicitor act for me in buying the property?

8. How can I find a solicitor to do the conveyancing for me?

9. Can a Romanian lawyer act for both me and for the seller?

10. Do I need a notary?

11. If I have a notary, why do I also need a lawyer?

12. How soon should I arrange a Romanian company to purchase the land that I want to buy?

13. Do I risk being gazumped?

14. What should my lawyer need to do to protect me in making the purchase?

15. Will my Romanian lawyer make all the checks that my solicitor would do if I were buying property in the UK?

16. If the property has a registered title, why does my lawyer need to spend time in checking the title of the property?

17. Is it safe to buy a property which does not have a registered title?

18. Is it safe to buy property off-plan?

19. The property in which I am interested in is situated on an unmade an unlit road. Could I be liable for the cost of making the road up and having it lit?

20. The property in which I am interested in does not have mains drainage or other utilities. Can I have these put in and will I have to pay for them?

21. Is it possible to buy land in the countryside and to change its use?

22. Can I get planning permission to develop the property?

23. How do I find out if my neighbours intend to develop their property?

24. How long will buying the property take?

25. Do I need to come to Romania to deal with the purchase?

26. How much is the conveyancing likely to cost?

27. Do I need to do anything else to be able to live in the house or flat that I have purchased?

28. Do I need to do anything else to let the property that I have purchased?

29. Will I be taxed in Romania on any capital gain that I make when the property that I have purchased is sold?

30. What restrictions exist on Foreign Ownership?

31. What costs do I incur during the property purchase?

32. What income tax do I pay on rental income?

33. What property tax do I pay?

34. What capital gains tax do I incur on sale?



1. Can foreigners invest in Romanian real estate?



Yes, foreigners can invest in Romanian real estate. It is possible for foreigners to purchase apartments with no difficulty: the process is similar to buying a freehold property in the UK.

Villas, houses and land can also be purchased by foreigners but not directly. The Romanian Constitution presently restricts the right of ownership of Romanian land to Romanian citizens and to Romanian companies and other legal entities. The only exception to this rule is that a non-Romanian may own Romanian land which has been inherited through the intestacy laws, i.e. not through a will.

This is expected to change when Romania becomes a member of the European Union, which is expected to be on either 1 January 2007 or on 1 January 2008. Law 312/2005 provides that, upon Romania becoming a member of the EU, citizens of other EU countries, stateless persons domiciled in Romania or in another EU country and legal entities existing under the laws of other EU countries may own Romanian land, subject to some exceptions, on the same terms a Romanian citizens and legal entities.

One exception to the right to own Romanian land relates to the ownership of agricultural lands and forests. This exception will continue for seven years after Romanias accession to the EU. This restriction on the right of ownership of Romanian land will not however apply to independent farmers that (i) are citizens of other EU countries or stateless persons domiciled in other EU countries who take up residence in Romania; or (ii) are stateless persons domiciled in Romania.

Further exceptions to the right of ownership of Romania land relate to the acquisition by citizens of other EU countries and stateless persons domiciled in other EU countries who are not resident in Romania of land for secondary residences, and by legal entities of other EU countries of land for secondary headquarters. These exceptions will last for a period of five years after Romanias accession to the EU.

It is important to note that all of the foregoing applies to citizens of and stateless persons domiciled in other EU countries, and to legal entities formed in other EU countries. For other persons and legal entities, the restrictions under the Romanian constitution will continue to apply unless and until relaxed on the basis of a treaty of reciprocity between the particular non-EU country and Romania.

In the meantime, it is possible for non-Romanians to invest in Romanian land by using a Romanian limited liability company as the owning vehicle there is no restriction on foreign ownership of such companies. In view of the continuing restriction outlined above, we would expect the use of Romanian limited liability companies as property investment vehicles to continue for the time being.

It is also possible for non-Romanians to have rights of use of Romanian land, which fall short of full ownership. Such rights include usufruct (where the user obtains ownership of the fruits of the land), servitude (easement) and concession.

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2. What is the difference between owning land and owning buildings?



The Romanian Constitution only restricts non-Romanians from owning land in Romania it does not prevent foreigners from owning buildings constructed on land in Romania. It is therefore perfectly possible for non-Romanians to purchase flats in Romania.

The same principle would apply also to a house, however to avoid any difficulties over the garden and driveways surrounding a house (and also the land under the house should the house burn down), it is probably better to have a Romanian company own the land and, possibly, the building on it. This is because the owner of a building constructed on land in Romania (whether the owner is or is not Romanian) has a legal right to use the land which supports the building whilst the building exists (the so-called superficies right).

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3. Can I simply ask a Romanian friend to own the land on my behalf?



This is potentially dangerous since Romanian law does not recognise the principle of trustee, nominee or beneficial ownership. This means that if the Romanian friend own the land, then he or she actually does own it there is no argument that the foreign friend who provided the money to purchase the land is really the owner.

This means that so long as the relationship between the foreigner and the Romanian owner of the land is good, there may not be a problem. The issue of how the land was paid for and where the money goes when the land is sold may however create tax complications. Friends can however fall out (we have come across examples of this) and if the Romanian owner were to die, the land would form part of his or her estate to which the heirs would be entitled. We therefore believe that having a Romanian friend own the land is a dangerous way for non-Romanians to invest in Romanian real estate.

Further, the money paid by the foreign friend will constitute only a debt of the Romanian owner it will not form a charge on the property purchased with the money.

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4. Is there any other restriction on owning Romanian Property?



There is no restriction on buying property in border areas or the like, but certain types of property are considered to be of the public benefit and accordingly cannot be privately owned. It can however be given in concession or leased. Examples of such property include for example the shoreline. Such property will be administered by a governmental body or by a local authority. Concessions can be granted for up to forty-nine years and may be extended for no more than half of the period of the initial concession.

Not all properties held by governmental bodies and local authorities are however subject to the concession regime. Such public authorities can also own property in the ordinary way and such property can be sold. It may be possible to have property held by a public authority re-classified to make the property eligible for sale rather than concession.

It should also be remembered that ownership of real estate in Romania can be lost if the property becomes subject to compulsory purchase, although such situations are normally described as expropriation on grounds of public utility. Real estate owned by natural or legal persons may be expropriated in full or in part only on grounds of public utility and on payment of a fair indemnity paid in advance under a court decision.

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5. Is there any distinction between freehold and leasehold property in Romania?



Romanian law does not have the English concepts of freehold and leasehold property.

Leases of Romanian real estate can however have some of the features of leasehold property and prospective purchasers of Romanian real estate should take care in this regard.

Such a lease will however potentially affect the real estate itself and not merely the owner of the real estate who granted the lease. This means that where an owner of real estate has granted a lease of real estate and subsequently disposed of the property by whatsoever means, subsequent owners will take the property subject to any existing prior lease.

It is clearly therefore very important for prospective purchasers of Romanian real estate to check whether the property is subject to any existing lease.

Leases for longer than three years are required to be registered with the Land Registry to be binding on third parties such as a purchaser of the leased property. If this is not done, the lease will not bind a purchaser of the property. Leases of three years or less will bind a third party purchaser of the property if they are concluded before a notary and/or if they are registered with the Land Registry. Unless the owner is a company which lets property as part of its business, in each case the owner is required to register the lease with the fiscal authorities so that tax can be levied on the rent. In practice this may not always be done, but failure to register the leases with the fiscal authorities will not in principle affect the validity of the lease. It will be noted from this that there is potential for property to be subject to a lease of up to three years which will bind a purchaser, but which will not be discoverable by the purchaser from searches with the Land Registry or fiscal authority. Property investigation of the property and suitable protective wording in the purchase agreement are therefore very important to protect a purchaser.

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6. Can I get a mortgage to buy the property?



Yes, in theory. In principle, an owner of Romanian property has the right to create a mortgage (hypothec) over it.

In practice, the mortgage market in Romania is still developing and any prospective purchaser who is using a newly-created Romanian company as the property-holding vehicle will have the practical difficulty of persuading a bank to lend money to a company without any credit history.

We have heard of Romanian banks which have a policy of lending only to Romanian citizens. It may be possible for a purchaser to persuade a non-Romanian bank to lend the money but it may be more difficult, at least until Romania accedes to the EU, to secure this only on the Romanian property. It may therefore be more realistic to mortgage or pledge other property outside Romanian to obtain a loan from a non-Romanian bank to purchase Romanian property

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7. Can my UK solicitor act for me in buying the property?



This is possible in theory but difficult in practice. Ownership of land and buildings in Romania is governed by Romanian low, which also governs the formalities of change of ownership.

Even if a UK-based firm of solicitors has Romanian lawyers on its staff, many of the steps required to purchase property safely need to be taken in Romanian. Local knowledge of the practicalities is also likely to be helpful.

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8. How can I find a solicitor to do the conveyancing for me?



Romanian lawyers are not divided into solicitors and barristers as in the UK, they are simply referred to as lawyers and must be a member of a formal Bar one of these is established in each city or county in Romania.

Lists of members of each Bar are published but it may also be more useful to go by personal recommendation, particularly where it is important to be able to communicate with the lawyer in English or another foreign language. Although Romanian lawyers deal with court advocacy and also transactional and consultancy work such as conveyancing, in practice some lawyers may specialise more in one area of work than in others.

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9. Can a Romanian lawyer act for both me and for the seller?



No. The professional rules governing the conduct of Romanian lawyers emphasise the importance of providing impartial legal advice and state that a lawyer may not represent more than one client in connection with a single matter where to act for other persons also may create or lead to a conflict of interest.

This is a strict rule which may not be waived even where the parties are happy to let a single lawyer act.

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10. Do I need a notary?



Yes. Agreements for the sale and purchase of Romanian land must be concluded, in the Romanian language, in authentic form before a Romanian notary.

The notary is also responsible for obtaining an excerpt in respect of the property from the Land Registry. This excerpt will specify whether there are any mortgages or other legal rights affecting the land and grant a period of priority for the transaction to be made and recorded with the Land Registry. The notary will also collect the relevant state taxes on the transaction in addition to the notarys fees and will normally deal with the registration of the transaction in the Land Registry. If this is not done, the transaction will be binding as between the seller and the purchaser but will not be binding on third parties.

Sellers and purchasers of real estate must either be present in person to sign the documents before the notary or must send duly-appointed representatives under formal and specific powers of attorney to do so. Such powers of attorney must however themselves have been given before a notary.

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11. If I have a notary, why do I also need a lawyer?



The notary performs a different role from the lawyer. The notary performs a public office and is responsible for checking the identity of the seller and the purchaser, obtaining the excerpt from the Land Registry, checking the legality of the agreement and collecting the state taxes on the transaction. Some sellers and purchasers do however conduct real estate transactions without lawyers and rely on the notary alone to deal with the transaction, including drafting the documents.

Our view is that a prudent purchaser will use a lawyer, who will liaise closely with the notary on the verification of the title, obtaining the Land Registry excerpt and the drafting of the agreement for the transfer of ownership of the real estate. This is because the lawyer will be solely acting for and is responsible to his or her client, whereas the notary will not have the same degree of responsibility to the purchaser. Notarial fees are calculated on the basis of the value of the transaction, which may also have some degree of influence on the diligence of the enquiries made into the title. Notaries will however give discounts on their fees where the contractual documentation has been prepared by lawyers.

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12. How soon should I arrange a Romanian company to purchase the land that I want to buy?



In an active market, delays to the completion of transactions can be dangerous and cause deals to be lost. We would therefore advise that prospective purchasers intending to use a Romanian company as a property-holding vehicle should deal with the incorporation of the company as soon as possible they should not wait until they have found the property that they wish to purchase. This is particularly important because there will also be a certain amount of corporate procedures to be dealt with for the company to be able to go ahead with a transaction.

Possibly due to the bureaucracy involved, clean shelf companies are not as widely available as is the case in the UK. We have seen what are advertised to be clean and unused companies advertised for sale from time to time, but advise clients to consider the reliability of the source of such companies very carefully indeed. In practice, we consider that it is less risky and more economic to incorporate a new company than to investigate what is claimed to be a clean ready-made company for use in the purchase of real estate.

The incorporation of a limited liability company with the Registry of Commerce has been made simpler and faster than before. If the Commercial Registry raise no questions on an application file for the incorporation of a company, it may be possible to have the company incorporated in as little as five working days after the file is lodged.

It is likely that more time will be taken on the preparation of the incorporation application file itself. This documents that this must contain include the constitutive document of the new company, various declarations given by the intended shareholders and directors, evidence of the registered office (a lease or free lease or ownership of property) and a letter from a Romanian Bank certifying the deposit of the share capital of the company. Assembling these documents can take some time, particularly where the shareholders have few contacts in Romania and / or where the constitutive document of the company needs to be drafted to include joint venture provisions between different shareholders.

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13. Do I risk being gazumped?



In a dynamic market, yes. The risk of this can be reduced by being in a position to proceed with a purchase quickly (see Question 12).

A formal agreement, written in the Romanian language and signed before a Romanian notary, is required to transfer ownership of Romanian property (see question 10). It can take some time to prepare for this, particularly where due diligence enquiries are carried out on the property and the title. It is therefore common for the parties to conclude a pre-agreement relatively quickly and to deal with the formal notarised agreement transferring ownership of the property later.

The purpose of the pre-agreement is to commit the seller to sell to the purchaser for the agreed price once the purchasers lawyers have confirmed that the title to the property is satisfactory. Until the pre-agreement is signed, there is no deal and each party is free to withdraw.

If one of the parties breaches a pre-agreement which has been signed before a notary, such as by unjustifiably refusing to sign the formal sale-purchase agreement to transfer ownership of the property, the other party may seek an order from the court which transfers ownership of the relevant real estate. Contractual penalties (as opposed to damages) are also commonly used in Romania.

If the pre-agreement is registered with the Land Registry, this will be prima facie evidence of bad faith where the owner has purported to sell the property to a third party, allowing an application to be made to the court for the sale to the third party to be annulled.

Litigation in Romania can however be slow, costly, stressful and time-consuming. In general, our advice would be to try to be in a position to complete the transaction as quickly as possible to reduce the risk of being gazumped.

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14. What should my lawyer need to do to protect me in making the purchase?



The purchasers lawyer should:

(1) deal with the formation of any necessary Romanian company to own the property;

(2) deal with the drafting and negotiation of the pre-agreement, also arranging for it to be signed and (where appropriate) registered with the Land Registry;

(3) investigate the title of the property, probably in conjunction with the notary selected by the purchasers lawyer;

(4) investigate the seller (a married seller will require the consent of his or her spouse to sell property; other parties may have pre-emption rights); and

(5) deal with the drafting and negotiation of the formal agreement for the transfer of ownership of the property, including liaising with the notary on the arrangements for signature of such agreement and the completion of the transaction.



The result of this work should be that the client purchaser will obtain a clean ownership title (except in so far as there are any agreed encumbrances) which is not vulnerable to a successful court challenge by a third party.

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15. Will my Romanian lawyer make all the checks that my solicitor would do if I were buying property in the UK?



Probably not, since some of the matters commonly searched against by UK solicitors are not relevant in Romania or because there is no practical system allowing such searches to be made.

Examples of the former are common land searches and searches for chancel repair liability there is no equivalent of these under Romanian law (commons with assorted animals on them do exist but such lands are normally owned by the relevant local authority see question 4).

Examples of the latter are coal mining and brine extraction searches. Mining has taken place in parts of Romania but we are not aware that there is any authority responsible for confirming that a property is or is not located in such an area.

In other cases, searches can theoretically be made but, so far as we are aware, are often not bothered with in practice An example of this relates to environmental matters: a prospective purchaser can apply to the relevant Environmental Authority for details of information held on a particular piece of property. This situation may be explained by the fact that the Authority has thirty days to give a reply which may or may not prove to be helpful. In such circumstances where there is concern as to possible environmental problems, a purchaser should consider arranging for a private environmental survey.

There are also some searches which one would not expect to undertake in the UK, but which can be made in Romania. For example, in Bucharest there is a register of buildings which are considered to be at significant risk in an earthquake.

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16. If the property has a registered title, why does my lawyer need to spend time in checking the title of the property?



Although there is Land Registry in Romania and there is requirement that no Romanian real estate can be bought or sold unless it has a registered title, the fact that a piece of property has a registered title does not necessarily mean that it has a clean ownership title.

Unlike the land registration system in England & Wales, a registered title under the Romanian land registration system carries no State guarantee. The staff of the Romanian Land Registry are not responsible for checking the validity of documents which form the basis of acquisition of rights of ownership and any interested party may require the Land Registry to amend the registration of a property title where this is required by a final court decision.

A search against a title in the Land Registry should disclose documents showing whether the property is subject to a mortgage, a privilege (e.g. a registered pre-agreement) and / or any other adverse claims. As a matter of practice, only interested parties can obtain a search against a particular piece of property in the Land Registry. Interested parties include the owner, persons with rights over the relevant property and a prospective purchaser with a pre-agreement to purchase the property.

In view of the above-mentioned issues, a prudent purchaser will insist on property which is proposed to be purchased being registered with the Land Registry, but will also arrange for a full investigation of the title.

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17. Is it safe to buy a property which does not have a registered title?



No. As mentioned in our answer to question 16, the law forbids the sale and purchase of real estate which does not have a registered title: notaries may not deal with the sale and purchase of unregistered real estate.

Where a property does not have a registered title, this situation is commonly dealt with by specifying in the pre-agreement that the seller is responsible for arranging such registration and that registration is a condition precedent to the signature of the formal agreement to transfer ownership.

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18. Is it safe to buy property off-plan?



This depends on who you are dealing with since, in addition to the normal checks on the legal title to the property, the purchaser also needs to be certain about the building to be constructed.

With any new building or building which has been subject to recent building work, planning and construction should be checked.

As regards to the buildings themselves, there are good builders in Romania but there are also other builders who are less good. Romania has no general system equivalent to the NHBC scheme in the UK. Similarly, although it is less likely where property is being purchased off-plan, it is not uncommon for some people to do the building work themselves or to bring in labour working on the black. It is therefore important to ensure that you are dealing with a reputable builder and to consider what contractual safeguards can be negotiated in the agreement for the purchase of the property. The services of architects, engineers and building supervisors (sef de santier) should also be considered. Simply because a building has paperwork from the local authority certifying compliance with the regulations, do not count on the local authority being liable to you if it turns out that there was a mistake.

A common alternative to buying off-plan is to buy, as Romanians say, on the red (la rosu). This involves purchasing the shell of a building which is then completed according to the wishes of the purchaser. An advantage of this is that it is easier to see how the building looks in relation to its neighbours and for the structure of the building above ground to be inspected.

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19. The property in which I am interested in is situated on an unmade an unlit road. Could I be liable for the cost of making the road up and having it lit?



The arrangement and illumination of streets is the responsibility of a local authority if such streets are within its urban plan.

The arrangement and lighting of other streets will be the responsibility of the people owning such streets.

It is therefore very important to confirm whether the street is within the urban plan of the relevant local authority. If it is not and if there is no likelihood that the local authority will adjust the plan to include it, it is important to check who does own the road and who has a right to use it.

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20. The property in which I am interested in does not have mains drainage or other utilities. Can I have these put in and will I have to pay for them?



Connections to utilities can be made under the terms of contracts with the relevant providers. Charges are normally made for this.

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21. Is it possible to buy land in the countryside and to change its use?



This rather depends on what you want to do with the property.

Properties located in areas that are not urbanised where formerly subject to certain rights of pre-emption of neighbours, but these have recently been abolished.

Some agricultural land can never have a change of use, for example where the land is an important archaeological site.

Other agricultural land can have its use changed but this requires firstly the land to be brought within the designated urban zone of the local authority (if it is not already within it) and secondly the payment of taxes for the authorisation of change of use.

It is often easier for a local seller to deal with these requirements with the local authority, so a purchaser may wish to consider making the purchase subject to the land being urbanised and having an approved change of use.

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22. Can I get planning permission to develop the property?



As mentioned in question 21, this will depend on the property. In addition to the location of property in urbanised areas, the grant of planning permission will also depends on the conformity of the proposed development with local plans.

Further construction and demolition work requires appropriate authorisations from the local authority. Some private houses may once have been lived in by someone famous in this case getting consent may be difficult.

Development is however taking place. Our advise is to investigate the situation in relation to the property in which you are interested in and to consider carefully what you want to do. In many cases it will be easier for a local person to obtain the necessary permits and consents than for a foreigner. Again, consider making your acquisition subject to the seller obtaining the permits and consents that you want. It may well increase the price of the property but may also be worth it!

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23. How do I find out if my neighbours intend to develop their property?



Whilst lists of planning certificate and construction / demolition authorisation are public, there are fewer publicity requirements than in some other countries. The list of planning certificates and construction or demolition authorisations issued for the previous month (in chronological order as of the date of issue) is normally posted at the local authoritys offices. This list will contain the address of the property, the name of the applicant and the purpose for which the document has been issued.

There is no requirement to let neighbours know that an application has been made. However, where there is a party wall shared with a neighbour, the neighbour will need your consent to obtain a construction or demolition authorisation which will affect the wall. Further development on neighbouring property should respect the right to light of your property.

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24. How long will buying the property take?



It is impossible to give a single estimate as it will depend on the property and on the structure of the deal. What can however be said is that in a dynamic market deals tend to happen fairly quickly.

One cause of delay can be the need to incorporate a Romanian company for use to own the property. Another cause of delay can be problems with the title to the property, particularly where the title to the property is not registered (see question 17). Registration requires the preparation of cadastral documents for the property, which involves the measurement and surveying of the property and the preparation of a cadastral plan by an authorised expert.

Trickier issues can arise where a property is being sold by intermediaries, particularly where they have assembled a plot for sale from a number of different original owners. In such circumstances more time needs to be taken to check the differing underlying titles. Intermediaries may also be less willing to take steps identified as being necessary to correct deficiencies identified in titles. Where cash is short and the property is not registered, sellers who are essentially intermediaries may not be keen to pay for an authorised cadastral expert to prepare the cadastral plan, or to pay the registration fee.

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25. Do I need to come to Romania to deal with the purchase?



In theory, no. You can give powers of attorney to your representatives to deal with matters.

As a matter of practice, however, we would suggest that you consider making at least one visit.

Whilst one hectare of agricultural land may be very much like another in the same area, you are obviously better able to appreciate the particular features of a property and of the area in which it is located if you see it yourself. There are also other aspects which make it advantageous for purchasers to visit Romania.

Where a Romanian company is to be used as the property-holding vehicle, it will need an accountant, a local bank account and someone able to sign the day-to-day documents that are required. It is easier for a purchaser to arrange these matters in person, particularly where the purchaser needs to select the right person to trust with day-to-day control of the company. Similarly, whilst the necessary documents can be signed in English outside Romania, it is likely to be faster and cheaper for them to be signed in Romania with a suitable translator and local notary.

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26. How much is the conveyancing likely to cost?



As with our answer to question 24, this again depends on the circumstances. Generally speaking, hourly rates of Romanian lawyers are lower than those of solicitors in the UK practicing in similar circumstances, but it will be apparent from the foregoing answers that the conveyancing system in Romania is rather less certain in many respects than that in the UK and that more work needs to be done than would be the case in the UK to ensure that the purchaser gets a clean title. You should also take into account that your lawyer will probably need to spend more time in ensuring that you are fully aware of the situation in view of the likely language barriers.

Cutting corners on legal work is risky, but it may be worth considering where there is a risk of losing a deal and investment in a number of properties results in the risk being spread. However and generally speaking, it is worth remembering that you can only loose your money once.

One practical solution may be to agree an estimated budget for the conveyancing and to use this in selecting the property which is of interest to you. The acquisition cost of property includes both the purchase price and the conveyancing cost and some ostensibly cheap properties may have complicated title problems which it will take a good deal of time, effort and money to sort out. There are a number of places where there appears to be prime development land which is however standing unused there is usually a good reason for this.

The price of Romanian property may well appear inexpensive compared to property in the UK, but it is worth remembering that there is a market price here and that apparent bargains may not actually prove to be so on closer investigation.

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27. Do I need to do anything else to be able to live in the house or flat that I have purchased?



British citizens and other EU nationals do not presently require a visa to enter Romania but if they spend more than ninety days in Romania in any period of six months, they are required to register with the authorities and to obtain a temporary residence card.

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28. Do I need to do anything else to let the property that I have purchased?



Once the change of ownership of the property has been registered with the fiscal authorities, you simply need to enter into a rental agreement with the tenant and register this also with the fiscal authorities. If the properties held in a Romanian company, it should be checked that leasing property is within the companys objects of activity.

There is no compulsory form of letting agreement, but we would suggest that appropriate professional advice be taken on this, not only to protect against problems with tenants but also to ensure that problems do not arise with the fiscal authorities.

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29. Will I be taxed in Romania on any capital gain that I make when the property that I have purchased is sold?



This will depend on your circumstances and on the relevant taxation legislation in force at the time that you sell the property, but it is safest to assume that something will be payable.

The present Fiscal Code does not exempt capital gains from taxation on the grounds that they have arisen on a sole or principal residence. Natural persons who make capital gains on the sale of real estate are presently taxed at 16% of such gains made only on:

(1) income obtained from the transfer of ownership of buildings of any kind and the related land where such transfer is made less than three years after the date when ownership was acquired; and

(2) income obtained from the transfer of ownership of any kind of land without buildings which was acquired on or after 1 January 1990.



Where a Romanian company is used to hold the property, income resulting on the sale of that property will not be taken into account in calculating the taxable profit of the company but are subject to a tax of 16% of the capital gain made on the property.

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30. What restrictions exist on Foreign Ownership?



Currently, foreigners may directly own buildings but they may not directly own land. However, it is an accepted and common practice on the Romanian real estate market for foreigners to own land indirectly through legal entities incorporated in Romania, even if such entities are wholly owned by a foreign entity or individual.

All acquisitions of real property must be registered in the real estate registry (Land Registry) Registration of a change in ownership normally takes at least one week.

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31. What costs do I incur during the property purchase?



A stamp duty, including a fixed amount and percentage calculated on the value of the real property ranging from 0.5% to 3% (subject to 50% discount for transfers of undeveloped land), must be paid for notarisation of sale-purchase contracts involving real estate.

Mortgages and transfers of real property must be certified by a notary. The fee is negotiable but normally ranges from 0.5% to 1.5%.

Payments of commissions and fees for services performed in Romania (e.g. consultancy and management services) are subject to a withholding tax of 15% irrespective of the location where they are performed.

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32. What income tax do I pay on rental income?



If the landlord is an individual, the net rental income for buildings (i.e. after a deemed expenses deduction of 25%) is subject to individual income tax at a flat rate of 16% (rate as of 1 January 2005). If the landlord is a company, the net rental income is taxed at 16% profit tax (rate as of 1 January 2005).Expenses incurred for deriving rental income are tax deductible. In their Articles of Association companies should have rental activitylisted as their object of business in order to be allowed to let real estate property.

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33. What property tax do I pay?



Owners of buildings and special constructions are subject to building tax, irrespective of their location or function. For individuals, 0.2% is applicable on the value of buildings located in urban areas, and 0.1% elsewhere. For companies, building tax ranges between 0.5% and 1% of the accounting value. This percentage is increased to between 5% and 10% if the building has not been revaluated in the last three years.

Owners of land are subject to land tax which is established at a fixed amount per square metre, depending on location.

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34. What capital gains tax do I incur on sale?



Sale of property may also necessitate the payment of capital gains tax of 16% or 10% if the property is owned for at least two years. The buyer as owner of property is subject to property tax (0.5% to 1%of the book value of the building).

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