|
 Due
Diligence
Due Diligence procedures we consider absolutely
necessary in order to safely purchase a property in Romania.
Depending on the type of property you are looking to purchase there
can be 2 types of Due Diligence procedures to be taken:
Basic Due Diligence
This includes verification of the property's Title Deeds and
Land Survey documents as well as obtaining an extract from official
Romanian Land Registry ("Cartea funciara").
In-depth Due Diligence and adjacent
services
The process can include but is not limited to:
a) Verification of the property from the point of view of the
possibility of being involved in ongoing litigations at the Court
archives in the area.
b) Verification and comparison of the Land Survey
documents, topographical and other information required for future
development. As an example: the situation of the electricity poles in
the area, whether they can be moved from the location if needed etc.
c) the occupation coeficient of the land: what percentage of the land
can be built upon.
d) drafting the sell/purchase pre-contract, the contract and providing
assistance with the proceedings and the Public Notary at the moment of
sale.
Romanian Company Formation
At the present time, individual
foreign nationals cannot singularly 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 property in Romania is through
a duly established corporation or limited liability company that is
established under the statutes and regulations of Romania.
Both foreign individuals or legal
entities can establish corporate presence in Romania. Companies have
their own patrimony, registered capital, management, registered offices,
assets, names and bank accounts.
A foreign company can be sole shareholder (if LLC)
or the foreign company can be shareholder together with at least one
other shareholders which can be legal entities or private persons (if
Joint Stock Company).The most frequent
types of are limited liability companies named SRL. Also there is an
important number of general partnerships and joint stock companies.
All companies must be registered with the National Trade Register
Office, organized by the Romanian Chamber of Commerce and Industry.
The National Trade Register Office is a public institution which has
the function to maintain statistical information on business
activities in Romania. It will take 5 working days from the date the
entire documentation is provided to the authorities to register the
Company. Necessary funds for the minimum Share Capital: 70 Euros for
S.R.L. and 25,000 Euros for S.A.
Steps to buying real estate property in
Romania
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 property 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).
We always recommends using a Solicitor or Lawyer.
Mortgages for Romanian
Property
Loan purpose : Purchase of
houses/apartments.
Min Loan : €5,000
Max Loan : €500,000. 75% loan to value.
Term : 25
Max Age : 65
Repay method : Capital and repayment Currency : RON,EUR, USD
Additional Info : Total debt should not exceed 40% of income.
Source: Law Firm Enescu & Cuc,
Palladian Complex
27A Virgil Madgearu St.
B Wing, Ground Floor,
apt. 201, 014135, Sector 1, Bucharest, Romania.
Guy Klima
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604 568 553 |
