In 2014, Romania had to lifted the moratorium on land sales to foreign investors, which it benefited from under the EU Accession Agreement. Since that date, European companies are able to compete on the same conditions as nationals. The Romanian Ministry for Agriculture and Rural Development conceived a new law which came into force in the beginning of 2014, regulating land transactions.
What is the scope?
- the law applies to Romanian and EU legal persons, not only to individuals.
- the conditions under which an EU company/individual can buy land in Romania must be identical to the conditions which would apply to a Romanian company/individual in the EU member state of the purchaser (“reciprocity principle”).
- The following categories of buyers have preemption rights (in this exact order): co-owners, lessees, neighbouring land owners, owners of land within the same physical block (“tarla” – a continuous piece of land delimited by permanent boundaries such as roads, rivers, dikes, etc.), and the Romanian State through the State Domains Agency (ADS), at the same price and in the same conditions.
- land transactions need to be approved by either the local or central structures of the Ministry of Agriculture and Rural Development.
- the law introduces an extensive procedure for agricultural land transactions which applies to both Romanian and EU citizens/companies.
What is the procedure?
- The land owner (seller) needs to register with the town hall a request of sale offer to be published so that the preemptors are thus informed
- The seller needs to attach also the list of preemptors. The townhall has to compare then this list with the records of the Agricultural Registry (handled by the townhall).
- Within 1 day of the registration of the seller’s request, the townhall has to display the sale offer at its headquarters (and possibly website), for 30 days.
- Also, within 3 days of the sale request registration, the townhall has to send to the local/central structures of the Ministry of Agriculture a file comprising: the list of preemptors, the request for publication/display of the sale offer, the sale offer and the proof documents.
- Then, within 3 days of the file registration, the local/central structures of the Ministry of Agriculture have to publish on their websites the sale offer for 15 days.
- The holders of preemption rights must express in writing the acceptance of the sale offer within the 30 days in which it is publicly displayed.
- If more preemptors of different ranks accept the offer, the seller can choose the winner (but only in the priority order provided by the law). If more preemptors of the same rank accept the offer, the seller can choose the winner.
- If a preemptor of lower rank offers a price higher than the price stated in the sale offer or higher that the price offered by higher rank preemptors, the seller can restart the procedure (only once), for this higher price - with the higher rank preemptors.
- If no preemptors show interest in the sale, than the sale is “free”, but still subject to this law and its implementation norms. In the end, the seller needs to inform in writing the townhall about the sale. The free sale of agricultural land at a lower price or under better conditions than the ones requested in the sale offer is forbidden and in such case the transaction is null.
- The approval of the sale transaction is granted by the local structures of the Ministry of Agriculture for transactions of less than or equal to 30 ha, and by the central structure of the Ministry of Agriculture for transactions larger than 30 ha.
Finally, when a company, Romanian or foreign, leases land, it also benefits from favorable legislation. Foreign individuals and companies are allowed to lease land but compensation is not strictly regulated and is based on a bilateral negotiation between the owner and the tenant.
In practice, the parties are unequal. Since the tenant prepares the contract this confers stronger bargaining power. In addition, many owners of land are older and unfamiliar with administrative procedures, often signing contracts without reading them. Legislation on leasing agricultural land further protects the tenants by allowing them to request a proportionate reduction of the rent if any crops are destroyed before harvest.