Basic notions on Romanian land use
Romania's real estate market continues its upward spiral fueled by foreign investor
interest coming from EU member states, the US, Israel, India and the Middle East. Major
new construction, the renovation of old villas, and commercial or residential property
developments of all kinds, dot the landscape of virtually all of Romania’s major cities and
tourist locations.
Prices for raw land have risen sharply, although prices remain comparatively low even for
the region, with Bucharest still considered to be the cheapest major city in Europe.
Improvements to the nation’s infrastructure and a new and enhanced Tax Code have
aided investors, as have the assurances afforded by Romania’s accession to NATO and its
likely admission to the European Union in 2007 or 2008.
Most foreign investors are sophisticated enough to understand all of the prerequisites
involved in buying and developing land throughout the world. Small- and medium-size
investors, however, sometimes think that Romania is like Deadwood, South Dakota when
it was part of Indian Territory – the "Wild West" where anything goes.
Those investors think that they can do pretty much anything they like on land they buy
anywhere in the country, and just bribe their way through any difficulties. In some parts
of Southeast Europe, that was actually once true, although never in Romania.
For example, greedy local developers built high-rise apartment buildings on the parkland
banks of a once beautiful stream running through the heart of Tirana without even
owning the land, let alone possessing construction permits and other requisite
authorizations.
But even in Albania, upon his election, Mayor Edi Rama immediately ordered the
demolition of those buildings – and they all were pulverized into dust.
This article is a basic primer for small- and medium-size purchasers of land in Romania to
help them avoid the unpleasant consequences of ignoring Romanian law. It highlights the
stages, from the preparation of a purchase agreement, through the construction of a
structure, and the various zoning and environmental issues that one can expect to
encounter.
Land acquisition
Although non-Romanian citizens may not acquire land in Romania in their own name,
foreign investors who establish a Romanian legal entity may avoid this impediment since
a Romanian corporation - even with 100% foreign ownership – is still Romanian and, as
such, may own land in Romania.
Bear in mind that land acquisitions by Romanian entities must meet the purposes for
which the Romanian company was chartered. This is usually not an issue, since few non-Romanians are purchasing Property for their personal use. Also note that the restriction
on foreign land ownership refers only to the acquisition of land.
As far as buildings and other structures on the land are concerned, foreign individuals
and legal entities may acquire title over them, as well as the right to use the land on
which they are situated for the duration of the structure’s existence.
Provisions in the Romanian Constitution on the right of citizens of the European Union to
acquire land in Romania will come into force upon the country’s accession to the EU,
thereby enabling foreign citizens from EU member states to own land in Romania in their
own right.
The most common method used in acquiring land is, of course, a sale purchase
agreement. Since only Romanian citizens and companies can own land at the moment, a
Romanian company will have to be formed in order to enter into the purchase
agreement.
While negotiating for the acquisition, and prior to concluding the agreement, the buyer
must have reviewed accurate information concerning the parcel by examining the
ownership title, the Land Book Excerpt, and the documents attesting to the type of
construction permitted on the land as further described below.
In Romania, legal distinctions between the characters of Property create differing
situations affecting land. Depending on their location, the land may be classified as urban
property (in Romanian "intravilan") and rural property (in Romanian "extravilan").
Urban property represents land situated in the territorial-administrative area of an urban
community, while rural property refers to land located outside of an urban community,
not intended for commercial purposes, and principally designated for agricultural use.
No building may be erected on an agricultural land area and, consequently, anyone who
intends to construct on this type of land must seek to re-zone the parcel so as to change
its legal status to render it suitable for construction.
The approval for changing the designation of the land is granted by the Ministry of
Agriculture, Forests and Rural Development based upon the approval rendered by the
county office of the National Agency of Cadastre, which is the central authority keeping
the evidence of registrations in the Land Book at the country level.
Briefly, the following documents will have to be submitted to the National Agency of
Cadastre: the ownership title over the land, an excerpt of the Land Book, the relevant
cadastral documents, a certificate of urbanism (as further explained below), applicable
urbanism and territory plans (as further explained below) issued by the local city hall,
and an approval from the National Administration
of Land Improvements for the zoning change. This procedure, from filing the application
with the county office of the National Agency of Cadastre up to the issuance of the
requested decision, may take 30 days or longer.
Construction-related requirements
Any construction of whatsoever nature may only occur on the basis of a building permit.
Such permit is issued by the competent authority upon request, if authorized, and
represents the basis for the application of the provisions of the law with regard to the
location, design, execution and/or function of the construction.
The building permit is issued according to the legal requirements related to the urbanism
and the territory plan and on the basis of an appropriate formally issued certificate of
urbanism.
Urbanism and the Territory Plans
Urban land use is regulated by the provisions of Law no. 350/2001, regarding urban and rural land planning. It is a general law which is implemented by local rules. Each of Romania’s counties, cities, and villages adopts general, zoning and detailed plans in order to develop standards which assure that the land is used properly. Local authorities issue:
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a General Land Use Plan (in Romanian "Plan de Urbanism General" hereinafter referred to as "PUG") for their entire territorial-administrative area. This PUG it is updated every 5-10 years and represents the basis for development in the region. Due to the lack of funds, some local authorities cannot afford to create appropriate PUGs;
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a Zoning Land Use Plan (in Romanian "Plan de Urbanism Zonal", hereinafter referred to as "PUZ") referring to specific parcels of land;
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a Detailed Land Used Plan (in Romanian "Plan de Urbanism de Detaliu" hereinafter referred to as "PUD") which constitutes a detailed clarification of planned projects in specific areas.
Certificate of Urbanism
The Certificate of Urbanism is an official informative document by which the competent
authorities inform the applicant of details concerning the legal, economical and technical
status of a specific construction and/or building-site available at the moment of
It sets forth urban requirements in accordance with the site's specificity and itemizes the
relevant notifications, authorizations and other legal permits required to be obtained for
It also establishes the maximum allowed percentage of occupancy of future construction
permitted on the parcel (in Romanian, POT), the height restrictions on any construction,
the type of materials that must be used, other special technical conditions for
construction, as well as the permits and acknowledgements needed.
Since Romania is prone to earthquakes, the authorities have implemented stringent
requirements for new construction so as to avoid disaster.
The importance of obtaining the Certificate of Urbanism cannot be understated; buying
land without knowing that zoning limitations can prevent the construction of your project,
and leave the purchaser as the fee simple owner of a potentially useless piece of
property.
Other issues should also not be overlooked such as the property’s proximity to an airport
that might prevent construction of a radio tower, the use of tower cranes or the crossing
on the property of gas or water-pressurized line.
The Certificate of Urbanism must mention the purpose for its issuance but it does not
confer the right to commence construction, any arrangements or landscaping of any kind – only a Building Permit allows for the start of construction.
Indeed, the issuance of the Certificate of Urbanism may also require the assent of
different authorities as a prerequisite to obtaining a Building Permit, such as the Ministry
of Agriculture, the Ministry of Defense or other applicable authorities.
Permits and Acknowledgements
Permits and acknowledgements are issued by utility companies (water, gas, sewage and
electricity) and by relevant authorities for environmental, public health, fire, historic
preservation and protected areas, to name a few.
Some Local Councils have developed the "Sole-Central Permit" meaning that the investor
has the possibility to easily and quickly obtain all of the requisite permits and
acknowledgements from one location.
The Building Permit
The Certificate of Urbanism does not, under any circumstances, grant the holder the right
to begin construction. Such right may only be granted by way of a building permit that is
issued subsequently and on the basis of a valid Certificate of Urbanism.
The Building Permit represents a document issued by the local public administration
which guarantees compliance with the technical and legal regime regarding the location,design, execution and function of a structure. Such a permit is mandatory. Building
without one can result in penalties or the actual demolition of the building.
The Building Permit is issued for a specific period on a case by case basis depending on
the project. In case the construction is not finalized in time, the Building Permit can be
extended for a one time period of 12 months.
The Building Permit is issued in a maximum of 30 days from the submission of the
applicable documents, as follows: the Certificate of Urbanism; the deed title; the plan for
the authorization of the construction; and any other permits and acknowledgements
provided in the Certificate of Urbanism.
However, the 30 day term may be extended by additional periods in case of incomplete
documentation and, in practice, it is rather common that the authorities request
additional documentation.
Environmental Issues
Anyone engaged in public or private construction projects must obtain an environmental
authorization. This environmental permit is a document issued for a certain project or for
some repairs which need to be made to an existing structure. It contains the conditions
for implementation of a project.
Through this authorization the authorities seek to prevent the discharge of hazardous
materials as well as other damage to the environment. Failure to observe environmental
regulations may lead to civil or criminal liability as well as civil fines levied by the
competent authorities.
Obtaining the full bouquet of documents to commence construction should not last more
than 10 months, depending on the size of the project, bearing in mind that it is
impossible to go through this process without the help of an architect and, in most cases,
an attorney.
Conclusion
The entire procedure for the acquisition of property and construction on the site
described above can be discouraging for some due to long waiting periods, not
inconsequential costs and formalities, but this legal procedure is based upon Romanian
realities and those realities are formed from legislation that complies fully with EU
legislation for the upcoming accession of the country.
As a consequence, new construction must provide a minimum of comfort and hygiene,
feature esthetic aspects and fit with the locality’s architecture. Much of this legislation is
the result of experiences in the 1990’s when developers built structures in the heart of
the historic districts that was destructive to the character of the area.
The relatively long wait for the conclusion of the procedure need not be a dead period for
the real estate investor, as he should actively perform the other tasks required for
execution of the project with the help of the architect, and be ready to commence work
upon receipt of the requisite permits and authorizations.
The immense infrastructure requirements of an emerging Romania lure an ever
increasing number of foreign investors into the country seeking opportunities through the
construction of new residential units, commercial office and retail space, hotels, shopping
malls and modern factories throughout the country.
Foreign real property investors have reaped significant profits from their projects, and
continued to reinvest in larger and more significant ventures further demonstrating the
viability of continued growth of the Romanian the market. Some have likened today’sopportunities to those which were once available in the Czech Republic and Hungary.
Obviously, such opportunities cannot last much longer. As EU accession looms ever
closer and new highways are paved providing greater access to Western Europeans, the
potential for the significant returns on investment that currently exists will clearly subside
and diminish.
For those who missed out on investment in the Czech Republic and Hungary and don't
wish to miss out again; the time is now in Romania.
Romanian Digest, Feb 15, 2006