ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN ROMANIA]

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to authenticate sale purchase agreements (i.e., the first sale purchase agreements according to the new law have been concluded starting in July 2021). Clarifications are being sought by notaries to the relevant ministries who are expected either to clarify the norms by amending them or to provide to the notaries a

foreigners to own land in Romania, the practice for foreign investors is to incorporate a Romanian legal entity which has no restriction on owning lands. The “right of ownership” gives the owner the power to possess, use and dispose of the property. A. Acquisitions A real estate deal in Romania may be made either (i) by way of an asset deal (direct acquisition of an asset) or (ii) by way of a share deal (acquisition of the shares in the asset’s holding entity). Share deals are often preferred to asset deals due to cost and tax optimization purposes, as they are not subject to the fees and costs entailed by an asset deal, as they do not entail the transfer of ownership of the real estate. However, according to Law 175/2020 which entered into force on 13 th October 2020, the company who owns, outside city limits, lands and which sells enough shares to ensure control over the company, shall pay a tax of 80% from the difference between the value of the lands calculated based on notarial official valuation (at the time of the acquisition, respectively at the time of the sale of the shares). This rule is applicable if the sale of the control package takes places before the anniversary of 8 years since the acquisition of such lands and such lands represent more than 25% of the company’s assets. B. Residential Property The most frequent forms of ownership of residential property are: 1. Sole ownership : The owner is the

manual of good practice. IV. Transfer of Ownership

As a general rule, the property right transfers automatically upon the execution of the agreement, unless the parties have otherwise agreed (e.g., until fulfilment of conditions precedent). The registration in the Land Book is made for opposability purposes only and is to be carried out by the notary public following the execution of the agreement. Certain rules shall come into effect after the finalization of the cadastral works on all land in Romania. Specifically, once the entire cadastral works for all land in Romania are finalized (a date which is difficult to estimate at this stage), the registration of the property right transfers with the relevant Land Books shall no longer be performed for opposability purposes only but shall become constitutive of a right (i.e., the transfer will operate as of and on the basis of the registration with the relevant Land Book). V. Agents Both parties may use a real estate agent. In general, the agents conclude mainly exclusivity agreements. The general commission on the market today is approximately 1-3% (depending on the value of the transaction). VI. Forms of Ownership In general, Romanian and EU individuals/entities may own land in Romania. While there may be some restrictions for other

only person authorized to control and dispose of the land in question.

ILN Real Estate Group – Buying and Selling Real Estate Series

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