Romania: Foreigners Buying Agricultural Land: More Freedom Or More Restrictions?

Rules for buying Romanian agricultural land will change as a new draft law is prepared. Will the new rules boost acquisition by foreigners or impede the process?

Agriculture is a hot topic these days and investors still see great potential in the field.

Land market liberalisation

In the Treaty of Accession to the EU, Romania undertook to gradually eliminate the restrictions that prevented foreign individuals and legal persons from acquiring lands in Romania.

One restriction in the national legislation (Law no. 312/2005) contemplates the prohibition of citizens of member states, as well as legal persons established according to the legislation of a member state, to acquire agricultural lands, forests, or forest lands in Romania for seven years from the accession date (1 January 2007).

Since starting with 1 January 2014 the prohibition period expires, the fear is that more foreigners will acquire agricultural land and that Romanian individuals and companies will be disadvantaged due to a lack of financial power. Is this true?

We believe that liberalisation of the land market, even if it happens as envisaged below, will not have a strong influence because foreign individuals and companies could and still can acquire agricultural lands by establishing Romanian companies, which is fairly simple and inexpensive.

Sale-purchase of agricultural land

To protect local farmers, Romanian authorities have prepared a new framework to insure competitiveness between locals and foreigners. The first law draft was published the beginning of September 2013 on the Ministry of Agriculture and Sustainable Development's website, with two further drafts (the latest on 23 September 2013) being circulated for public debate.

The draft law presents several ambiguities and excessively limits the transfer of agricultural lands located outside city limits (extravilan) by sale-purchase to individuals, including to Romanian citizens.

Purchase of agricultural lands located outside city limits by individuals, Romanian or foreign

The law regulates the acquisition of ownership to agricultural lands in Romania located outside the city limits through sale-purchase by individuals. In this framework, two remarks are necessary.

First, purchase by legal persons is not envisaged, meaning that sale–purchase to/from legal persons will continue unaltered, that is, without special rules for companies headquartered in Romania. So the question is what legal framework applies for a sale by a company to an individual or from an individual to a company.

Second, the same rules apply to Romanian citizens; citizens from member states; citizens from states of the European Economic Area Agreement (EEAA: EU states plus Iceland, Lichtenstein and Norway); and stateless persons domiciled in Romania, a member state, or the EEAA. Furthermore, the same regime applies to citizens from other countries or stateless persons domiciled in such other countries, under the conditions regulated in international treaties, based on the principle of reciprocity. So transactions between Romanian individuals would become more difficult.

Ministerial pre-approvals

Certain conditions on the sale of land are imposed, such as obtaining a pre-approval from the Ministry of Culture or the Ministry of National Defence, if the lands are of archaeological importance or located at the country's borders.

Conditions for purchaser

To buy agricultural land the individual must prove at least one of the following: (i) knowledge in the agricultural field, (ii) performance of agricultural activities for at least five years, or (iii) performance of agricultural activities on the lands located outside city limits held on the date the law came into force.

Maximum 100 hectares of agricultural land located outside city limits

According to the draft, an individual may acquire agricultural land located outside city limits up to a threshold of 100 hectares.

Pre-emption right

Something new relates to the pre-emption right of certain categories of individuals (co-owners, neighbours, tenants, persons up to 40 performing agricultural activities in the administrative unit where the land is located) and of the Romanian state, at equal price and terms. This means that the sale can take place only after expiry of the relevant timeline and that potentially numerous persons could intervene in the sale process.

Land usage

Purchased lands must be used according to the usage category registered in the integrated cadastre and real estate publicity system, except where the relevant category is changed into another category of agricultural use.

Drastic sanctions

Failure to observe the pre-emption right or its procedure is drastic: absolute nullity of the sale. Failure to observe other legal obligations may trigger administrative fines (up to RON 100,000/hectare or even up to RON 500,000/hectare; ca. EUR 23,000 and EUR 115,000 respectively).

Management authority

A special management authority will be established to monitor the effective implementation of the draft.

Conclusion

The draft law seems quite drastic and will impose additional formalities in the acquisition process of agricultural land. At first glance, it could be seen as limiting the acquisition of land by foreigners. However, due to its limited applicability (only to individuals), the draft does not appear to have any impact on the acquisition of lands by vehicle companies established by foreigners in Romania, thus bringing no changes to the current mechanism used by foreigners acquiring agricultural land in Romania.

Quote: Something new relates to the pre-emption right of certain categories of individuals and of the Romanian state, at equal price and terms. This means that the sale may take place only after expiry of the relevant timeline and that potentially numerous persons could intervene in the sale process.

This article was originally published in the schoenherr roadmap`14 - if you would like to receive a complimentary copy of this publication, please visit: pr.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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions