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Buying Property in Romania as a Foreigner

At the present time, the Constitution of Romania prohibits a foreign national from directly owning real estate in Romania. Even if a foreign national inherits real estate, that foreign national simply cannot take possession and ownership of inherited real estate in that country. This Constitutional provision — and companion statutes and regulations enacted by the government of Romania since 1990 — is not in step with what is in place in other countries that comprise the European Union. Thus, it is fairly to safe to assume that there will be fairly significant pressure on the Romanian government to liberalise its real estate laws to at least permit ownership of real estate in Romania by foreign nationals who reside in one or another of the other EU nations.

With that said, there is not specific proposal on the block at this time to liberalise the real estate laws even for foreign nationals from EU member nations. However, and again, the main underpinnings of the EU involve free commerce between the countries that comprise the EU. Such free commercial activity would be significantly impaired in regard to Romania and other EU nations should the laws (and Constitutional provisions) in Romania remain so stringent (and strident) when it comes to the issue of foreign ownership of real estate in Romania.

With this said, a Romanian company may own real estate in the country even if that company is owned 100% by a foreign national. Obviously, foreign nationals who have an expressed interest in owning real estate in Romania, either for investment purposes or as part of a business enterprise, are establishing companies — corporations or limited liability companies — within Romania.

The process for creating these entities is not that difficult. Generally, foreign nationals are retaining legal counsel in Romania to assist them in establishing these entities. There are lawyers in Romania that now specialize in this type of legal affair.

Provided that a foreign national or group of foreign nationals have duly established a bona fide corporation or limited liability company in Romania, the process for purchasing real estate within the country is not particularly complex on the surface and in and or itself. The process commences with the execution of a preliminary contract for sale. Via this document, the purchase price is established and a deposit is made by the buyer. In most instances, the deposit is set at an amount equal to 10% of the overall purchase price of the subject real estate.

During the interim between the execution of the preliminary or initial sales agreement and the date of the signing of the final agreement conveying ownership of the real estate to the buyer, the purchaser is obliged to obtain any necessary financing that he or she will need to effect the purchase of the real estate. Again, in the case of a foreign national, the financing arrangements will need to be made by and the mortgage loan issued in favour of a duly established Romanian legal enterprise in the form of a corporation or limited liability company.

At this juncture it is important to keep in mind that Romania is a country fraught with problems when it comes to the title to real estate. The process of checking title to real estate in Romania is convoluted and difficult. Efforts have been made by the Romania government in recent years to clarify this entire process, and to clean up titles to real estate. But, the work and effort in this arena is far, far from complete.

The Romanian government has created a national property registry office. But, the office has been slow in dealing with the myriad of issues pertaining to title to real estate in the country.

Another problem pertaining to real estate in Romania centres on the fact that in many instances that real estate cannot be used as collateral for a loan. In this regard, unlike in nearly every other country in the world, the real estate that is the subject of a sale and for which financing is being obtained, in many instances will not be able to be used as collateral for a loan. In other words, if a person (or company) wants to buy real estate in Romania and needs a loan to do so, that person or company will need to use some other form of collateral for the loan beyond the real estate that is being purchased.

Once again, and has been noted, it is likely that there will be changes to the real estate laws on the books in Romania. Indeed, those changes will need to reach the Romanian Constitution as well. The entry of Romania into the EU in 2007 will be the primary reason that the Romanian government is likely to set upon a course to liberalise the real estate laws (and Constitutional provisions).

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