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Buying property in Romania: scams and pitfalls

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Everything you need to know is included in our Romania Property Pack

Romania is increasingly appealing to foreigners interested in real estate, thanks to its affordability and emerging market opportunities.

If you're not a local resident, dealing with the property market in this area can be a bit of a maze. Be prepared for potential obstacles and surprises.

Our group of property buyers and local associates have voiced multiple issues to us. We've listed them all in our Romania Property Pack.

This article provides a brief overview of potential pitfalls that may arise during the property buying process in this country.

Is it safe or risky to invest in real estate in Romania?

Generally speaking, it is safe to buy a property in Romania. However, like in any country, prospective buyers should be wary of scams.

For example, there have been reports of sellers not having the proper legal titles or the property being under dispute. Thus, due diligence is paramount.

Foreigners can face challenges, particularly if they are not familiar with the Romanian property market or the local language.

One issue, unique to Romania, is the restitution of properties seized during the communist era. Some foreigners have found themselves in a tangle because they purchased properties that were later claimed by previous owners.

Such restitution claims can complicate ownership and lead to prolonged legal battles.

Romanian law does protect property buyers. There's a robust system of land registration, and once a property is registered in your name, your rights are generally well-protected.

However, the process can be bureaucratic. Compared to some Western European countries, Romania's property buying process may seem less transparent, mainly because of the various paperwork and potential for local-level corruption.

Engaging a reputable local attorney is crucial to navigate these complexities.

The Romanian legal system, while functional, can sometimes be slow and cumbersome. Resolving property disputes might not be as swift as in more developed Western countries, but it's not impossible either.

The key is to ensure that you have all legal documents in order, and it's where a local attorney proves invaluable.

For foreign buyers, due diligence should include verifying the property title, ensuring there are no liens or disputes associated with the property, checking the property's history, especially concerning the communist-era ownership, and ensuring all local permits and zoning regulations are in order.

An on-ground property inspection is also recommended. Furthermore, understanding local property tax regulations is essential to avoid unforeseen costs.

The Romanian government has made efforts to boost the real estate sector and foreign investment. For instance, there have been tax incentives for new constructions.

However, the government has also imposed certain restrictions on agricultural land purchases by foreigners, requiring them to set up a Romanian-registered company to buy such land.

This dual approach can be both supportive and restrictive, depending on the nature of the property in question.

Many foreigners have successfully bought properties in Romania, particularly in major cities like Bucharest, Cluj-Napoca, and Brasov. They appreciate the country's beauty and the potential for property appreciation.

However, some report challenges in understanding the local bureaucracy and the occasional difficulty in securing loans from Romanian banks.

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Potential real estate buying mistakes in Romania

The concept of "Vecinătăți"

When buying residential property in Romania, one unique pitfall you should be aware of involves the concept of 'Vecinătăți' (neighborhood communities).

This is a traditional Romanian community aspect that might not be familiar to foreigners. In some rural areas, and occasionally in smaller towns, these neighborhood communities hold a significant informal influence over local matters, including property transactions. This influence is not legally binding, but it can affect your experience as a homeowner.

You might find that, in these areas, local customs and neighborly agreements play a crucial role in property boundaries, access rights, or even the usage of shared resources like wells or driveways.

For instance, a property might have an unwritten agreement about a shared pathway or a communal gathering spot, which isn't legally documented but is respected and expected to be upheld by the community.

This practice is more prevalent in rural areas and small towns than in major cities like Bucharest or Cluj-Napoca.

While it's not a legal issue, neglecting these informal agreements can lead to misunderstandings or disputes with neighbors.

It's not a frequent problem for foreign buyers in major urban areas, but it's more common in the countryside.

The issue of "Restituirea Proprietăților"

Another unique pitfall in Romania, particularly relevant for foreign buyers, is the issue of 'Restituirea Proprietăților' (Property Restitution).

This is a complex and ongoing process in Romania, addressing the properties that were confiscated during the communist era. The process allows former owners or their heirs to claim their previously confiscated properties.

If you purchase a property without thoroughly researching its history, you risk buying real estate that could be subject to a restitution claim.

This means that the property could potentially be claimed by previous owners or their heirs, leading to legal disputes or even the loss of the property. This issue is especially prevalent in properties located in historic areas or buildings that existed before the communist era.

Cities like Bucharest, Sibiu, or Brasov, which have many historical buildings, are more likely to be affected by these restitution claims.

To safeguard against this, you must conduct a thorough due diligence process.

This involves checking the history of the property and ensuring that there are no outstanding restitution claims. Working with a knowledgeable local lawyer who specializes in Romanian property law is crucial.

They can access and interpret the necessary records to confirm the property's status.

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The risks between "Cadastru" and "Intabulare"

A further unique pitfall in Romania, often overlooked by foreigners, is the issue of 'Cadastru' and 'Intabulare' – the land registry and property registration processes.

In Romania, the cadastre system (Cadastru) is the official record of property dimensions and boundaries, while 'Intabulare' refers to the registration of property ownership in the Land Book Registry.

A property might be physically owned and occupied, but if it's not properly registered in the cadastre and land book, legal ownership can be questioned. This situation is particularly prevalent in rural areas or older properties where formal registration was either overlooked or not updated according to current laws.

This discrepancy can lead to legal challenges regarding your property rights.

You should ensure that the property you are interested in is fully and accurately registered in the 'Cadastru' and the Land Book ('Cartea Funciară'). This is crucial because discrepancies in the cadastral records can lead to disputes over property boundaries or even ownership.

In Romania, property boundaries and ownership details are sometimes inaccurately recorded or not updated, potentially leading to disputes with neighbors or legal challenges.

The issues with "Zona Protejată" and "Regimul Construcțiilor"

Another specific pitfall you should be aware of when buying residential property in Romania is related to 'Zona Protejată' (Protected Areas) and 'Regimul Construcțiilor' (Building Regulations).

These terms refer to the restrictions and regulations that apply to construction and renovation in certain designated areas.

In Romania, there are areas that are designated as protected for various reasons, such as historical significance, environmental protection, or cultural heritage. For example, if you're buying a property in or near historical centers like Sighișoara, Brașov, or certain parts of Bucharest, there may be strict regulations on what alterations can be made to the property.

These regulations can include limitations on the types of materials you can use, the colors for painting, the size and style of windows, or even restrictions on adding extensions or new constructions.

The pitfall here is that as a foreign buyer, you might not be aware of these regulations and could inadvertently purchase a property with the intention of making modifications that are actually not permitted.

This can lead to costly legal issues, fines, or even the requirement to revert any unapproved changes at your own expense.

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The issue related to "Retrocedări"

When purchasing residential property in Romania, a less obvious but critical pitfall is related to the issue of 'Retrocedări' – the restitution of properties to former owners or their heirs.

This situation arises from properties that were nationalized during the communist era in Romania.

In this context, you might encounter a scenario where a property appears legally sold and registered, but there may still be ongoing restitution claims from former owners or their heirs. These claims can resurface even years after the purchase, and resolving them can be a lengthy and complex legal process.

The property might be in cities with significant historical areas, like Iași or Timișoara, where many buildings were nationalized in the past.

To safeguard your investment, it is essential to conduct thorough due diligence on the property's history. Ensure that the property you are interested in has clear and undisputed ownership history.

It's advisable to work with a local real estate lawyer who can research any potential restitution claims on the property.

Additionally, obtaining a detailed report from the National Authority for Property Restitution in Romania can provide insights into whether the property has been subject to restitution claims in the past or if there are any pending issues.

Issues with "Superficies" rights

In Romania, a distinctive pitfall you should be aware of when buying residential property is the issue of 'Superficies' rights.

Superficies rights in Romania are a complex legal issue that may perplex foreign buyers.

It involves owning a structure situated on land that belongs to someone else, a situation stemming from Romania's unique historical property practices. When purchasing property in Romania, you may encounter scenarios where the structure is yours, but the underlying land is not.

Such instances often arise from complicated inheritance situations or historical land divisions, leading to separate ownership of buildings and land.

If you're not aware of this, you could end up owning a house without owning the land beneath it, which can lead to complications in terms of property rights, future development, or even selling the property later on. This issue is more prevalent in rural areas or in older urban developments.

To protect yourself, it's crucial to verify both the building and the land ownership before purchasing. Ensure that the property sale includes both 'dreptul de superficie' (the right to the building) and the land ownership.

A comprehensive check with the local land registry and seeking advice from a Romanian property lawyer or a notary can clarify these aspects.

Also, be mindful of the long-term implications of such arrangements.

Even if the current situation seems agreeable, changes in ownership or land use policies could affect your rights in the future.

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Risks associated with "Achiziția în Zonă Agricolă"

Another specific pitfall in Romania, especially relevant to foreign buyers, is the issue of 'Achiziția în Zonă Agricolă' (Purchasing in Agricultural Areas).

In Romania, agricultural land is subject to special regulations and restrictions, particularly when it comes to ownership and usage by foreigners.

This situation is significant because, in Romania, agricultural land is often situated close to urban areas or may even be classified as part of the urban planning zone in the future. However, the laws governing the purchase of agricultural land by foreigners can be quite restrictive and complex.

As a foreigner, you might find a seemingly perfect piece of land for development or residential purposes, only to discover that the land's agricultural status complicates the purchase or intended use.

Moreover, agricultural land often comes with specific conditions regarding its use, and converting it for residential or other purposes can be a lengthy and bureaucratic process.

These conditions might include maintaining agricultural production, adhering to environmental regulations, or obtaining various approvals for land use change.

"Usufruct Rights" and its risks

A notable pitfall in the Romanian property market, particularly for foreign buyers, is the prevalence of 'Usufruct Rights' (Dreptul de Uzucapiune).

This legal concept refers to the right to use and benefit from someone else's property without owning it. In Romania, these rights are often granted for long periods, sometimes for a lifetime, and can be inherited.

This becomes a pitfall when purchasing a property that is subject to usufruct rights.

You could become the legal owner of the property, but find that someone else has the legal right to use, occupy, or even earn income from the property for a specified period, or until their death. This situation is more common in older properties or those that have been part of complex family inheritances.

For instance, you might buy a house in Romania, only to discover that a family member of the previous owner has the right to live there for several years.

This can significantly impact your ability to use the property as you had planned, whether for personal residence, renovation, or rental.

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The risks related with "Legea 10/2001"

In Romania, a significant pitfall for foreign property buyers is dealing with 'Legea 10/2001', a law concerning properties abusively taken during the communist regime, from 1945 to 1989.

This law allows original owners or their heirs to claim properties that were confiscated or nationalized during this period. This issue becomes critical when you purchase a property that seems legally clear, but later find out it's subject to a claim under 'Legea 10/2001'.

Such claims can emerge long after your purchase, leading to potentially complicated and lengthy legal disputes. This is particularly relevant for properties in urban areas, historical centers, or places that underwent significant changes during the communist era.

To ensure that your property purchase is secure, thorough due diligence is essential.

This involves researching the property's history to ensure there are no ongoing claims under 'Legea 10/2001' against it. This step is crucial as it helps in identifying any potential legal disputes that may arise in the future regarding the property's ownership.

Additionally, working with a local real estate attorney is invaluable. They can investigate the property's history and advise you on any potential risks.

Their expertise is particularly crucial in navigating the complexities of Romanian property laws and ensuring that all legal aspects of the purchase are covered.

Dealing with "Clădiri cu Risc Seismic" or buildings with seismic risk

In Romania, a specific pitfall for foreign property buyers is the issue of 'Clădiri cu Risc Seismic' (Buildings with Seismic Risk).

This refers to properties, especially older buildings, that are categorized as being at risk in the event of an earthquake. Romania, particularly areas like Bucharest, is known for its seismic activity, and certain older buildings have not been adequately reinforced to modern standards.

This becomes a significant concern when purchasing property in urban areas with historic buildings.

You might find an attractive property at a seemingly good price, but its low cost could be due to its classification as a seismic risk.

Purchasing such a property not only poses potential safety hazards but also comes with the likelihood of substantial additional costs for structural reinforcement or mandatory upgrades as required by Romanian law.

To mitigate this risk, it's essential to investigate the seismic risk classification of any older building you are considering purchasing.

This information can typically be obtained from local municipal records or a qualified structural engineer.

Secondly, it is important to be aware of the financial and legal responsibilities that come with owning a building classified as a seismic risk. This includes understanding the potential need for costly renovations and the time frame in which these must be carried out to comply with Romanian safety regulations.

Consider the potential impact on insurance premiums, as properties at higher seismic risk may attract higher insurance costs, and some insurers may even be hesitant to cover such properties.

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