Foreigners' Right to Acquire Real Estate Properties in Romania

NÖRR STIEFENHOFER LUTZ

 

EU nationals’ right to acquire ownership over land,

Although more than one year has past since Romania’s accession to EU and since the entry into force of the specific law regulating the terms and conditions under which foreigners are entitled to acquire ownership over land in Romania (i.e. Law No. 312/2005, published in the Romanian Official Journal on November 14, 2005), a customary practice has not been settled yet in this respect.

The uncertainty arises mainly out of the fact that Law No. 312/2005 transposes without additional clarifications the broad provisional clauses of Romania’s EU Accession Treaty (signed by Romania on April 25^th, 2005 in Luxemburg) regarding the right of EU nationals to acquire private ownership over land.

The Accession Treaty provides for the option of Romania to maintain in force for five years as of the Accession Date (i.e. January 1^st, 2007) the existing restrictions laid down in its legislation on the acquisition of ownership over land for secondary residences by nationals of EU member states or of the states that are parties to the European Economical Area Agreement (EEAA, i.e. Iceland, Lichtenstein and Norway), non-residents of Romania and by companies formed in accordance with the laws of another member state or of an EEAA State and being neither established nor having a representative agency on the territory of Romania.

Starting from the abovementioned transitional provisions, Law No. 312/2005 regulates the residency criterion, in the sense that the right of EU citizens, EU domiciling stateless persons and EU based legal entities to acquire ownership over land in Romania is contingent upon their secondary residences or units being established in Romania. The law is, however, lacking to the extent that it fails to define the term “residence” and to specify whether some distinctive requirements have to be observed in order for an EU based individual to be considered resident under said law.

The mere definition of the term “resident” comprised by Law No. 312/2005 (meaning the foreign individual that has a residency right on the territory of Romania) can be subject to various interpretations, as under relevant domestic law the residency right can be either temporary or permanent. Thence, the following question was raised in practice: does a temporary residence right (valid for a period of three months as of the entry on the territory of Romania) suffice for the obtainment of the right to acquire ownership over land, or is it necessary for the interested EU national to get permanently settled in Romania for said purpose?

As per the majority opinion expressed by notaries public on the matter, even a temporary residency right can be deemed as a basis for the obtainment by EU nationals of the right to acquire ownership over land in Romania, as far as applicable law makes no distinction in this regard.

Another imperfection of Law No. 312/2005 that led to confusion among authorities and legal practitioners consists of its omission to distinctly specify when does the right of EU nationals and corporations that have established residences, namely secondary units in Romania, become effective and to what extent.

As far as Law No. 312/2005 only states that EU nationals who are non-residents of Romania are free to procure land after five years as of the Accession Date, for the purpose of setting up residences/secondary units, a logical construal of said law seems to lead to the idea that all the residents of Romania, either Romanian or EU nationals, are entitled to acquire ownership over land as of the Accession Date.

It is still unclear, though, whether the EU nationals that have established residences in Romania are entitled to procure any kind of land and for whatever purposes, as of the Accession Date, or only those lands that are necessary for the establishment of their Romanian secondary residences.

Some legal practitioners say that as of the Accession Date, EU citizens, EU domiciling stateless persons and EU based legal entities have the right to acquire all sorts of real estate properties (except for farm lands and forestry) and for no matter what purpose, under the same conditions as applicable to Romanian nationals, once they have proven they are Romanian residents (such judgment is based on the provisions of Article 3 of Law No. 312/2005 which sets forth, as a general rule, the right of EU nationals to get ownership over land in Romania under the same conditions as applicable to the Romanian ones).

It should however be noted that, from the aforesaid perspective, the transitional provisions of Law No. 312/2005, circumscribing the right of EU nationals to procure land in Romania starting with 2012, to the particular scope of establishing secondary residences, seem meaningless. Why should the existing residents (either Romanian or EU citizens or corporations) be entitled to acquire ownership over all sorts of lands in Romania and for whatever reasons, as of the Accession Date, where the non-residents have to wait five more years to procure only those lands serving the purpose of establishing secondary residences?

Another debatable topic is the one regarding the moment when the EU nationals are required to obtain or to have obtained the Romanian residency – either before or after the Accession Date – in order for them to be able to purchase land right after January 01, 2007 and not wait for five more years.

If the EU nationals that were not Romanian residents as at the Accession Date (which is the same with the entry into force date of Law No. 312/2005) but have became residents in the mean time (before 2012) would be entitled to purchase land as soon as their Romanian residency was established, then the transitional provisions of Law No. 312/2005 laying down the 5-year restriction may be seen as obsolete.

For this reason, one may assume that the only ones entitled to acquire ownership over land in Romania until 2012, are the EU nationals that have obtained their Romanian residency before the Accession Date.

From the opposite angle, one may say that the function of the 5-year legal restriction is the one of constraining the EU nationals to get settled in Romania in order for such to be able to immediately procure land, whereby those that are not interested yet to obtain the Romanian residency will have to wait till 2012 to achieve this right.

Things became even more puzzling when, in spite of notaries’ preponderant opinion as per which the residency is the key criterion in the matter at hand, the representatives of the Ministry of Justice declared (within a conference organized by the notaries’ association on March 2007) that when elaborating the Law No. 312/2005, the government did not have the intention to make a mandatory requirement for procuring land out of the Romanian residency.

On the other extreme side, there were practitioners saying that even after five years have passed since the Accession Date, the EU nationals still remain bound to obtain Romanian residency in order for them to be entitled to get ownership over the land afferent to their secondary units/residences.

A clear conclusion to all the abovementioned is rather difficult to be expressed, as no firm answer has been given in practice by any of the competent public authorities and the legal practitioners called to implement such regulations. Furthermore, no such answer was dared by the legal literature either, this situation leading in most cases to a reluctance of the notaries public to authenticate deeds executed by foreigners with regard to ownership over land in Romania.

There is still a need for supplementary legislative instruments to be enacted so as to facilitate the proper implementation in Romania of the EU acquis regarding the free movement of capital.

Meanwhile, the safest solution for an EU national to benefit from the same prerogatives a local land owner does, further remains the “classical” one, where the alleged foreign individual or corporation takes the control over a special purpose vehicle (by way of usually setting up a limited liability company, or by entering into an equity deal for acquiring the main stake in such company), which is entitled to purchase the prospected land, as far as it is incorporated in Romania, under applicable Romanian regulations.

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