Romania has made progress towards establishing a functioning market economy and it has taken measures that will allow the development of its future capacity. The Romanian market is trying to cope with the huge interest that it has attracted from foreign investors, both private and institutional. However, this year no significant sales transactions have been completed on the Romanian real estate market.
Nevertheless, the country is now officially on the map of most of the important real estate funds in the world, an awareness that translates into a large volume of money trying to identify opportunities on a market that is still scarce in investment grade products. This is a consequence the generous yields obtainable here, especially considering the relative level of risk. (July-August 2005).
Although still in its early stages, the Romanian real estate market shows great potential, as an increasing number of quality properties (especially residential and retail properties) are being developed and as the economy is turning to better results and optimistic forecasts.
Only two years before EU accession, real estate continues to be profitable beyond expectations. Prices increased during the last two years: land and housing prices in Bucharest and most other major cities in the country nearly doubled, setting price appreciation patterns that local realtors couldn't quite interpret, alone predict. Various explanations ranged from shifting currency (the Euro became the reference currency for both estate buyers and sellers, as opposed to a weakening dollar) to wider access to bank credit and mortgage plans, which major banks hurriedly offered to an increasing number of middle class consumers. Add to this a multitude of property speculations made by private and corporate investors, confidence in the country's sustained economic development and an influx of new business, and you get an image of the now-thriving - yet still-improving - Romanian real estate business. (December 2004).
Foreign citizens cannot obtain, by any means, property rights over land in Romania. Resident and non-resident companies are allowed to acquire and hold rights over movable assets in Romania, but only resident companies may hold property rights over immovable assets. The foreign companies can have only principal real rights derived from the right of the property over the Romanian land (e.g. superficies or usufruct right). On the other hand, Romanian companies, even if the company has 100% foreign shareholding , are entitled to own land.
Internet sources: http://www.bucurestiwww.ro/tags.php?tag=realestate
The documents required for a physical person are:
· Criminal Record (original)
· Copy of Passport· Statement of Personal Data – (the lawyers will prepare a draft and send to you)
· Power of Attorney in case the individual will not come to Romania - (the lawyers will prepare a draft and send to you)· Authentification of signature (in front of lawyer or notary public)
· The desired name of the company to be formed (this should not include the names Romania, institute or national for which special approval is required)
Upon receipt of the documents the lawyers will perform all activities required to register the company which is about 12 days. The minimum Registered Capital is RON 200 (EUR 60) for a limited liability company (srl) and the costs of the registration of the company are 1,000 EUR, which include Registration Taxes at the Register of Commerce, translations, Notary Public fees and taxes and lawyers fees.
Any companies so formed can be established at the lawyer’s office for a maximum of 1 year. Thereafter they must either have their own address or they can all share one address provided that the number of companies do not exceed the number of rooms (so that one each company can have a separate room number in the same address) or that a shareholder is common to all companies (in which case any number of companies can be registered in the same address).
The owner of the company can also be the Administrator and the only requirement is for an accountant to keep the statutory books. All money for setting up the company can be sent initially to the lawyer’s Client Account.
After registration of the company, a local bank account can be opened. This normally requires the physical presence of the person authorized to sign, so if the owner of the company will not travel to Romania, a further power of attorney will have to be issued to a person here who will be authorized to operate the account. This can be the lawyer.
Legal and practical considerations on real estate operations - Romanian market
Property & ownership protection
Private property is protected and granted in Romania by the means of the new Constitution and law system in accordance with EU rules. Romania has been a member of the European Council since 1993. During the proceedings ment to place the country among the EU members, Romania has also signed relevant treaties that protect the property rights.
Under constitutional provisions, EU and international treaties are applicable as part of the Romanian law system having priority in application to local laws and regulations. This rule is also applicable to the ownership principles.
The administration tried to renew and reconfigure the old bureaucratic system in order to provide a public service under normal parameters. Therefore, the Notary Public organizations have strict rules for profession and special rules for private property protection.
The Cadaster (Surety Registrar) was also modernised up to 70% intranet network, providing on-line statements about properties’ status. The professional standards for the involved experts and authorithies were renewed in order to provide high quality and on time services.
In some specific situations delays can occur in identifying the necessary data or documents, but the services are improving every year.
In Romania foreign citizens can become owners of land through appointment of a trustee or by establishing a single shareholder company.
Lands are zoned up to some basic criteria that influence use and taxation:
- Urban – designated for buildings and any urbanistic use;
- Agricultural – designated for agricultural operations and use only;
- Intravilan – placed within administrative area of a city or town;
- Extravilan – placed out of the nearby city/ town boundaries.
Foreign citizens can be owners of any building type in Romania, enjoying full protection of property rights.
The importance of buildings for real estate operations is given by particularities of ownership: with or without land, way of appropriation, condominium and other legal or administrative issues.
Buying a Romanian property
There are some manadatory steps to be performed in order to manage a real estate transaction in a legal and professional way.
Checking a property
The property shall be verified from different points of view depending on the situation:
- Sole or common ownership
- Documentation and cadastral expertise
- Cadaster burden excerpt
- Claims and debts
- Any unclear aspects
The contractual provisions shall secure the transaction in order to insure the formal confort and property rights protection of the new owner. Usually, there is a legalised Pre-contractual Form with the objective of securing the transaction in order for any unclear issue of the deal to be finalised.
The local use of Pre-contractual Form shows the intention to buy/sell the property mentioned in the contract under certain conditions. The future buyer shall pay some money (10-30%) in advance at this moment in time, as this was prior agreed to.
The Pre Contractual Form legalised by Notary Public represents also a protection for the owner to be, as the document is legalised and can be used for execution of final contract if the other party changes or attempts to change his intentions.
The formal end of the transaction is the Final Contract signed in 3 or 5 days after Pre Contractual Form,which is followed by complete payment of the price . From this point on, the new owner has all the rights and obligations and his name will be registered to the Cadaster.
The old Civil Code in force guarantees for eviction. This guarantee is applicable to the contract value and oblige seller to reimburse the buyer. In order to avoid application of such provision the property shall be well verified before the transaction is done. In daily practice, there are rare cases when application of this guarantee is needed.
The Solicitor and Notary Public participate in a professional way in order to assist the transaction.
In a complete transaction, the Solicitor is constantly involved in organising the legal issues and property transfer. He shall ask and verify the documentation, parties identity and contractual forms.
The Notary Public has to issue the registered and legalised with seal contract forms and shall perform his own ascertainment of documentation and, then send it to the Cadaster for final registration.
Documentation and proceedings
The buyer can perform all his specific proceedings based only on passport or ID card issued in his own country. The documents will be legalised in Romania and used for all formalities.
When the buyer uses a representative, then a set of documents will be required to be legalised in the state of the buyer including Power of Attorney for his trustee.
Other documentation shall be obtained in Romania from local authorities nearby property location for each real estate transaction:
- Fiscal certificate – proving that the property owners have no debts to the state
- Burden Excerpt certificate – it is that part of the Cadaster registration where there are filed mortgages, attachment, privileges, serfdorms and any rights of execution against property; this part of the certificate shall be free of any burden during the estate deal until the new owner name is filled in.
After signing and legalising the Final Sale Contract the new owner’s name shall be registered in the Cadaster. Once listed the owner can use the property as a guarantee for own loan and the property rights are secured.
Taxes & Fees
All related taxes and fees are paid by the buyer except for special taxes for lands, which are legally in the seller’s charge.Taxes are paid to the state and fees are paid to service providers.
Notary Public fee is a percentage calculated from property’s value based on table values as in the attached lists. The fee shall be applied to the property transfer contract. Usually there is a cumulative not separate fee for Precontract and Final Contract of Sale.
VI. Legal assistance
Legal assistance fee for one standard sale procedure is of EUR 300-2000 depending on a lwa firm. English reports with legal background explanatory notes may or may not be included in the service fee mentioned above. It is provided on request for a fee of EUR 0-500.
Upon request, law offices can insure representation on Precontract or even Final Contract sale based on appropriate documentation and Power of Attorney issued in the state of origin.
Representation service is subject of additional EUR 300-500 per sale contract.
VII. Property management
Property management and maintainance services such as taxes and bills to be paid, periodically checking, rental management and administration is available upon request.
Tax fee for lands/ buildings sale table*
Public Notary fees table*
*The taxes may differ from areas to areas pending on each property status. Therefore the attached table shall be understood as guidelines.
Bucharest – offices
The Bucharest office space market became the target of major international and local real estate investors. The office space market in Bucharest is under an ongoing process of development, however the extent of class A office spaces is relatively low in comparison to neighboring countries’ capital cities.
The northern, central and east-central areas host the most important business centers – multinational companies, large Romanian companies, and representative offices.
The demand for acquisitions of office spaces mainly comes from Diplomatic missions, and retail businesses (multinational companies, local companies).The average price for renting high quality places (class A and B) in Bucharest is Euro 15/sqm monthly, the same as or close to Warsaw, Budapest and Prague. The selling price of class A office spaces in Bucharest is 1,550/sqm euro, a little lower than the selling price of such spaces in the above mentioned capital cities.
The supply of office spaces in Bucharest will record significant increases in 2005, when the stock of offices will increase by 50%. The northern part is the main target of investors who are interested in taking up large scale projects on this segment of the real estate market. The demand will also increase, yet not at the same pace with the supply.
Bucharest – residential for sale
The year 2004 was characterized by a large and increasing demand for new residential property resulting in many projects eing completed and others being developed, with a lot of construction work still in progress. The new residential space market is now growing more mature, at present a wide range of buildings of different qualities and sizes addressing both middle and high class markets begin available.
The level of the prices of new spaces located in residential compounds in 2004 vary between 600 – 2500 euro/built sqm depending on the area.
Bucharest – retail
At the end of 2003, a significant number of projects of shopping centers were announced to enter the market until the end of the 2006. For this reason the rental rate is not expected to lower over the next years.Due to the entrance of new retailers on the Romanian market (Zara, Mexx, Guess, Plus, Praktiker, Cora) and the expansion of the already existing retail chains (Carrefour), the investment value on the market doubled. In 2004, the supply is expected to boost, still it will be immediately absorbed due to the high demand.
On the main retail boulevards, prices range between 30 and 120 Euro/sqm/month according to surface, location and quality. The rental rates for retail spaces within shopping centers in Bucharest downtown locations vary between 30 and 150 Euro/sqm and between 30 and 120 Euro/sqm for on-street retail spaces. For the next year rental rates are not expected to grow, remaining stable due to the shortage of quality retail spaces.
Bucharest – land and investments
The land market has been the subject of significant development during the last few years, with many investors interested in land for various development purposes.
The market for office buildings in Bucharest presents a significant and dynamic within the local real estate market therefore land for such developments is in great demand while the supply is decreasing.
The supply of land for construction of office buildings is found mainly in the central and northern areas of Bucharest, as well as in the western part of the city. In 2004, the supply of land in top central areas was very limited, and prices were high. The most requested areas were Unirii Square, Romana Square, Victoriei Square and Dacia Blvd.
In 2004, demand for land for the development of office buildings was derived mainly from companies that want to build their own buildings and from developers (local and foreign individuals and companies) who develop office spaces, both for sale and lease.Prices for plots of land that allow the development of office buildings varies depending on the area: between 200-600 Euro/sqm in South-East Area, between 300-700 Euro/sqm in North Area and between 500-1200 Euro/sqm Downtown.
The market of land for residential use was on continuous upward trend during the last few years, but was also unstable, due to the unjustified increase of prices. The supply of land for residential use is located mainly in the northern area and in the outskirts areas of Bucharest. The demand for land mainly comes from investors and developers.
Price of land for development of residential projects vary greatly depending on the area and the utilities available: 20-1500 Euro/sqm.
The supply of land for development of retail projects consists of locations with good visibility and heavy traffic in order to ensure a profitable exploitation of the business. The supply of land for the development of various retail projects is present in all the areas of Bucharest, and the surface vary in size, between 3.000 and 80.000 sqm. The demand for land in ucharest for the development of retail projects in 2004 was divided into 4 main types of developments, namely: show rooms, supermarkets, gas stations, and mixed residential and retail projects
The price of land for the development of retail projects varies depending on location, utilities available and surface within a range of Euro 50/sqm to Euro 250/sqm. The south eastern area is characterized by lower prices, between Euro 80-150/sqm, while the northern and central areas are the most expensive, topping even Euro 250/sqm.
Source: “The 2005 Report - Real Estate Market Overview”