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When it comes to buying real estate in Romania, making sure you fully grasp the property sales contract is essential.
Indeed, not fully understanding the document you will sign can lead to financial losses, including the forfeiture of deposits, payment of penalties, unexpected costs, legal expenses, and potential poor investment decisions.
We've heard countless stories of people making costly mistakes when signing their property agreement in Romania. We want to help you avoid the same experience.
We'll give here a very brief overview regarding the property sales contract in Romania ; if you want a full checklist, please check our property pack for Romania.
What is the Contract de Vânzare-Cumpărare in Romania?
In Romania, the property purchase agreement for real estate transactions is known locally as the "Contract de Vânzare-Cumpărare" (Sales Purchase Agreement).
This is a legally binding document that outlines the terms and conditions of the property sale. It works as a formal agreement between the buyer and the seller, ensuring both parties adhere to the agreed terms.
The process typically starts with a preliminary contract, which sets out the basic terms of the sale. This includes the sale price, property details, and any other conditions both parties agree upon.
This preliminary contract is sometimes accompanied by a deposit from the buyer, often around 10% of the purchase price, though this can vary. The deposit acts as a commitment from the buyer and a form of security for the seller.
If the buyer backs out, they usually lose this deposit; if the seller backs out, they might have to pay double the deposit amount back to the buyer.
For international buyers or non-residents, the process is largely the same, but there may be additional regulations or restrictions, particularly related to the type of property being purchased.
For example, agricultural land has certain restrictions for foreign buyers.
The final signing of the "Contract de Vânzare-Cumpărare" happens after all conditions in the preliminary contract are met and both parties are ready to finalize the transaction.
At this point, the remaining balance of the purchase price is usually paid, and ownership of the property is transferred from the seller to the buyer.
Comparatively, real estate transactions in Romania might have different procedures or legal requirements than in other countries. For instance, the deposit percentage, the legal framework governing the transaction, or specific restrictions on foreign ownership could differ significantly.
This uniqueness emphasizes the importance of understanding local real estate laws and seeking professional advice when engaging in property transactions in Romania.
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What should be included in the property purchase agreement in Romania?
In Romania, the property purchase agreement, or "Contract de Vânzare-Cumpărare," must adhere to specific requirements as outlined in Romanian law. The law governing these agreements is the Romanian Civil Code, particularly the provisions related to contracts and property sales.
The agreement should contain several mandatory clauses to be considered valid and legally binding.
These include the identification details of both the buyer and the seller (like full names, identification numbers, and addresses), a detailed description of the property (including its location, size, and any relevant legal details like the land registry reference), the agreed purchase price, payment terms, and the date of possession transfer.
Additional clauses can cover a range of conditions and terms agreed upon by both parties.
These might include penalties for late payments, conditions under which the agreement can be terminated, or specifics about who pays for various taxes and fees associated with the transaction.
Conditions or contingencies are often included in these agreements.
Common examples are the sale being contingent on the buyer obtaining a mortgage, the seller completing certain repairs before the sale, or the sale being subject to a satisfactory property inspection. These contingencies protect both parties and are part of the negotiation process.
The agreement must be authenticated by a notary. This is a crucial step in the process and ensures that the agreement is legally binding.
The notary's role includes verifying the identities of the parties involved, ensuring that the contract complies with Romanian law, and recording the transaction in the official property registry.
Real estate agents in Romania can facilitate the transaction process but are not directly involved in the legal aspects of the agreement. Their role typically includes helping find properties, negotiating terms, and assisting with the paperwork.
However, the legalities, especially the drafting and authentication of the purchase agreement, require a notary or a legal professional.
What's the signing process like?
In Romania, the signing process of a property purchase agreement, or "Contract de Vânzare-Cumpărare," is a structured and formal procedure.
Both the buyer and the seller must sign the agreement. It is indeed bilateral, meaning it requires the agreement and signatures of both parties.
Either "the buyer" or "the seller" can be several people; for instance, a couple buying a property or multiple co-owners selling it. In such cases, all individuals involved must sign the contract.
Regarding the required documents and information, both parties need to provide personal identification (such as ID cards or passports) and legal documents related to the property, including proof of ownership, a recent extract from the Land Registry, and a fiscal certificate for the property.
The steps for signing typically follow this timeline:
| Step | Description |
|---|---|
Drafting the Contract |
This involves detailing the terms agreed upon, including price, payment schedule, and any contingencies. |
Gathering Necessary Documents |
Both parties collect and prepare all the necessary legal documents. |
Contract Review and Negotiation |
Both parties review the contract, possibly negotiate some terms, and reach a final agreement. |
Notary Appointment |
The final contract is taken to a notary. Both parties must be present for the notarization unless they grant power of attorney to someone else. |
Signing and Notarization |
The contract is signed by both parties in the presence of the notary, who authenticates it. |
The signing does require both parties to be physically present unless one or both parties grant power of attorney to a representative.
In recent years, some notaries in Romania have started offering remote notarization services, but this is subject to specific regulations and may not be universally available.
There isn’t a fixed deadline for signing the agreement; it depends on the mutual arrangement between the buyer and seller.
However, once the preliminary terms are agreed upon, it's common to aim for signing within a few weeks to a month, factoring in the time needed for gathering documents and scheduling with the notary.
The duration during which the contract is valid depends on the terms agreed upon in the contract itself. Some contracts might have specific conditions or timelines, especially if there are contingencies involved.
After signing, the contract is registered with the local authorities by the notary. This registration process includes updating the Land Registry to reflect the change of ownership.
Amendments to the contract after signing are possible but require the agreement of both parties and must be authenticated by a notary, just like the original contract.
The typical timeframe for completing all necessary paperwork and approvals after signing can vary, but it usually takes a few weeks to a few months.
This includes the time needed for the notary to register the contract, for the Land Registry to update its records, and for any administrative follow-ups required.
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How is the payment handled when signing a property purchase contract in Romania?
In Romania, understanding the financial aspects of a real estate transaction is crucial for both the buyer and the seller.
When you sign the sales agreement, typically, a down payment or deposit is required. This amount varies, but a common practice is for the down payment to be around 10% to 20% of the property’s purchase price.
However, this percentage can be negotiated between the buyer and the seller.
There are upfront fees and costs associated with signing the sales agreement.
These can include notary fees, legal fees if you have an attorney, and possibly a brokerage fee if you are using a real estate agent. These fees vary based on the property value and the professionals you engage with.
The payment is usually made directly to the seller. In some cases, especially in transactions involving larger sums or if agreed upon by both parties, the payment can be made to an escrow account.
This provides an additional layer of security, ensuring that the funds are released only when all terms of the agreement are met.
The due date for the payment is typically outlined in the sales agreement. It can vary - some agreements require immediate payment upon signing, while others may specify a later date, especially if there are conditions or contingencies to be met first.
Regarding tax implications, there are property transfer taxes associated with the sale. In Romania, the buyer usually pays these taxes, which include a transfer tax and possibly other local taxes. The exact amount can vary depending on the location and type of property.
You can certainly negotiate the down payment amount with the seller. This is part of the broader negotiations around the terms of the sale and is often influenced by market conditions, the property’s demand, and each party’s willingness to compromise.
If the sale falls through, what happens to the down payment depends on the terms of the sales agreement. Typically, if the buyer backs out without a justifiable reason (like a failed inspection or inability to secure financing), the down payment may not be refundable.
However, if there are specific contingencies in the contract that are not met, such as a failed inspection, the down payment may be refundable.
Using a mortgage loan for the down payment is a possibility, but it depends on the terms of your mortgage agreement. Some lenders may allow this, while others require the down payment to come from your personal funds.
The role of an attorney or real estate agent in handling the payment process can vary. An attorney can provide legal advice and ensure the contract terms protect your interests, while a real estate agent can assist in the negotiation and transaction process.
However, the actual handling of payments is typically a direct matter between the buyer and seller, possibly with the involvement of a notary.
You should definitely request a receipt or confirmation of payment when making the down payment. This serves as proof of transaction and is essential for your financial records.
For tax implications, the seller may be subject to capital gains tax if the property sold is not their primary residence and they make a profit on the sale.
For the buyer, aside from the aforementioned transfer taxes, there might be annual property taxes to consider once ownership is transferred.
What are the potentials risks and pitfalls?
You might be interested in reading our article about the common risks and pitfalls surrounding a property transaction in Romania.
In Romania, as in many other countries, real estate transactions come with certain risks and pitfalls that both buyers and sellers should be aware of.
Firstly, regarding withdrawal from the agreement, both the buyer and the seller can withdraw from the agreement, but the circumstances and consequences depend on the terms of the contract.
Typically, the sales agreement includes clauses that specify under what conditions either party can withdraw. There isn't a standardized cooling-off period in Romania for real estate transactions as seen in some consumer contracts.
Once the contract is signed, especially after it's notarized, backing out can have significant legal and financial consequences.
If a buyer withdraws without a valid reason stipulated in the contract (like failing an inspection or not securing financing), they may lose their deposit.
On the other hand, if the seller withdraws without a valid reason, they might be required to pay penalties, often involving returning the deposit in double.
A buyer can back out if they are unable to secure financing, but this is usually only without penalty if the contract includes a financing contingency clause. Without such a clause, the buyer may forfeit their deposit.
If one party fails to fulfill their obligations, the other party can seek legal recourse. The penalties will depend on the specific terms of the contract and the nature of the breach.
Typically, monetary compensation is sought, and in some cases, specific performance of the contract can be demanded.
The process of real estate transactions does differ in Romania compared to other countries. For example, the involvement of a notary in the transaction process is more pronounced in Romania, whereas in some other countries, the process might be more reliant on lawyers or real estate agents.
Potential risks and pitfalls include misrepresentation of property condition, legal issues related to property title, and unexpected financial burdens such as undisclosed liens or taxes.
It's also crucial to ensure that all necessary permits and legal documents for the property are in order, as overlooking these can lead to significant problems post-purchase.
Disputes during the agreement phase are not uncommon, often arising from misunderstandings or disagreements about contract terms, property conditions, or fulfillment of contingencies.
These are usually resolved through negotiations, and if that fails, legal arbitration or court proceedings may be necessary.
Regarding defects or issues discovered post-signing, if these were not disclosed or known at the time of the sale, the buyer might have legal recourse against the seller. However, this depends on the specifics of the contract and the nature of the defects.
The process for resolving disputes usually involves negotiation and, if necessary, mediation or legal intervention.
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.