Romania: Bringing Land To Book

In last year's Roadmap we reported on those changes to the new Romanian Civil Code that will impact on ownership and other rights in real estate. As reported then, one of the most important achievements of the new Code will be the new rule that transferring rights in property will depend on the fact of Land Book registration (the constitutive character of registrations). Currently ownership rights in real estate are transferred by notarised agreement and excerpts from the Land Book are for information only. Land book entries may not be relied on by a purchaser as a guarantee of the measurements or other details it contains. Unfortunately, the new Civil Code has been delayed and still requires a number of conditions to be fulfilled before it can enter into force.

Unregistered land

The first precondition for deriving and proving property rights based on Land Book registration is the existence of the Land Books in the first place. The reliability and coverage of such registers has long been a cause for concern. However, Government Ordinance No. 64/2010 has now laid an important milestone in speeding up the creation of a comprehensive Land Book system and brought further flexibility in how rights can be evidenced and safeguarded.

Having had different real estate systems in different regions of the country, Romania started to build a unified Land Book system back in 1996 (with Law No. 7/1996 on cadastre and real estate publicity). This piece of legislation imposed the Land Book system on the whole country. Since the information in Land Books is based on cadastral measurements and drawings, only those plots that had been surveyed and mapped could be included. Consequently, given that so much property had never been surveyed, considerable areas remained unregistered. This made it impossible for such property to be bought, sold, developed or mortgaged until the owner had gone to the not inconsiderable cost of having the land surveyed, mapped and registered in the local Land Book.

It is not unusual for vast areas of land (often owned by farmers) to comprise a multitude of small plots where the cost of such mapping and registration is prohibitively expensive. Such plots are usually registered only when they have been earmarked for a large real estate project and the investor-developer is willing to advance sufficient funds to cover the necessary expenses. The lack of registration can be an impediment to the development of an area or even a whole region. Since liens on real estate are among the most preferred securities for bank loans, the lack of registration also precludes access to a considerable asset and source for finance that could otherwise be channelled into small and medium sized enterprises (particularly in the current financial climate where collateral is required for even the most modest of loans). The negative impact on the economy of an incomplete and inconsistent real estate registration system is self evident.

Multi-annual Registration Plan

Government Ordinance No. 64/2010 introduces the idea of a Multi-annual Registration Plan as the basis for funding the mapping of unregistered property. The principle behind this new piece of legislation is that all land should be registered in Land Books ex officio financed out of the central budget of the Ministry for Public Administration and Home Affairs. At the same time the law allows for town councils as well as individuals and private legal entities to finance cadastral drawings and the creation of Land Books for themselves. This is intended to allow local communities to develop at their own pace according to their financial capacity and to allow individual projects to be developed. This last point has proven a welcome and vital provision given that, for the moment and under prevailing economic restrictions, the Multi-annual Registration Plan is without funds.

So, given the lack of public finance and the financial crisis facing private individuals, when could the rules on constitutive Land Book registration come into force? Ordinance 64/2010 suggests perhaps a surprisingly optimistic timeframe: Article I Point 38 states that any charges registered only in the old real estate evidence systems shall lose their opposability towards third parties if not registered in the Land Books by 31 December 2014.

The Ordinance also states that all property titles derived from the restitution of real estate expropriated by the communist regime shall be registered with Land Books ex officio.

The Ordinance has proposed a series of amendments that take immediate effect, such as the simplified procedure for the rectification of certain registration errors in the Land Books, the possibility to register structures at different stages of their construction, the possibility to register letting agreements regardless of their duration and the simplification of the partition of plots charged with liens.

Unfortunately, the present lack of funding for the central government to take the necessary remedial action means that the promise of Ordinance 64/2010 is likely to take a long time to be realised.

This article was originally published in the schoenherr roadmap`11 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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