Property in Romania - Guide to Buying Property in Romania

Guide to Buying Property in Romania

Overview

Prior to 1990, nearly all of the real estate located in Romania was owned by the state. This real estate was owned either directly by the government or by state owned entities. With the overthrow of the Communist regime in that country, there has been a slow and somewhat plodding liberalization of the real estate laws within the country.

The years under dictatorial control left Romanian in worse economic shape that any other Eastern European nation. In addition, unlike some other countries from the Soviet Bloc, Romania has been slow in digging out for years of repression and economic mismanagement. With that said, there is some light at the end of the tunnel that likely will result in more foreign nationals taking a second look at investing in Romania.

In 2007, Romania will join the European Union. It is expected that when this occurs, the real estate laws within Romania will move in a direction to make them more in line with the real estate laws in other EU nations

Investment Property in Romania

At the present time, individual foreign nationals cannot buy and own real estate in the country. In point of fact, foreign nationals cannot even inherit and then take title to real estate situated in that country. The only manner in which a foreign national can invest in real estate in Romania is through a duly established corporation or limited liability company that is established under the statutes and regulations of Romania.

Residential Real Estate in Romania - Single Family Properties

For the most part, there is no foreign ownership of single family dwellings in Romania at this point in time. Because the only manner in which foreign nationals can take title to and own real estate in Romania is through a corporation or limited liability company, there are very few enterprises that have been established for the purpose of purchasing and taking title to single family dwellings.

In addition, although Romania has been working to establish a more stable market economy in recent years, due to the amount of time that it was under the yolk of a dictatorial regime, the real estate market is shaky. The demand for single family residents is spotty throughout the country. A good share of the more recently built single family residences are not necessarily constructed in a particularly sound manner. In addition, many older properties are in a state of disrepair.

Residential Real Estate in Romania - Apartments

A significant portion of the Romanian population currently dwell in apartments. There has been some movement by foreign nationals to become involved in commercial enterprises -- within the parameters established by the Romanian Constitution and related laws -- that own apartment buildings or complexes in the country. At this juncture, most investors in such real estate ventures have not made exceptional profits in these ventures. However, there is hope (reasonably placed for the most part) that when Romania is integrated into the EU, the Romanian economy overall and the real estate market specifically will experience growth.

Holiday Property in Romania

Tourism in Romania is not, as of this juncture, a significant industry. Therefore, when it comes to the real estate market involving vacation or holiday properties, there is not a significant amount of activity at this juncture. Up until 1990, foreigners were barely allowed into the country in the country. And, any foreigners that were permitted into the country certainly were not allowed to visit most areas in the country. Up until the 21st century, vacation and holiday travel into Romania almost was unheard of.

In reality, Romania is not without its points of interest when it comes to tourism. However, there remains much to be done in regard to reinvigorating the infrastructure of the country before there can be much of a market in tourism. The government is working on these matters at the present time. Once again, when Romania enters into the EU, there is a high probability that there will be an increase in the number of visitors to the country in the future.

Specific steps to buying real estate property in Romania

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 liberalize 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 liberalize 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 favor 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 centers 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 liberalize the real estate laws (and Constitutional provisions).

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