Whatever your reasons for buying a property this is probably the first time that you have bought a property in Romania, or even abroad.
We have put this guide together to help you understand a little more about the process of buying in Romania
This guide is aimed at providing some basic information about buying in Romania and tries to answer the majority of the common questions that we are asked about. Although we hope that you will find it useful it is important to remember that it doesn’t cover all legal issues involved and certainly isn’t a step by step DIY guide to buying in Romania. It is still recommended that you seek advice from a professional before proceeding – after all we do this every day and have been doing so for many years and therefore know all the tricks and pitfalls that you may come across.
We also know the practical solutions to the problems that exist and also know how Romanian Law interacts with UK law.
Buying Property in Romania faq’s
Is the legal system in Romania the same as the UK?
No, they are very different, but there is an interaction between them when you buy a property in Romania. That is why the best person to advise you on your purchase in Romania is somebody who understands both Romanian and UK law.
Do I need a lawyer to help me buy in Romania?
Surprisingly this is the most common question that we get asked. No, you don’t – just like you don’t necessarily need a lawyer when buying in the UK. However, in reality you would always use a lawyer when buying in the UK so what is so different about buying in another country where you probably don’t have experience of buying before?
I have heard that there are problems with buying property in Romania; what is the situation?
Certainly there are potential problems when buying in Romania, just like there can be in any country including the UK. Most of the potential problems that you read about can be avoided by using common sense and by instructing an independent lawyer to advise you on the purchase. We often see people with problems with their property and they invariably tell us that they didn’t use a lawyer or used the lawyer given to them by the seller or estate agent.
Are the costs more in Romania than in the UK?
Yes, the total costs in addition to the purchase price are higher than you will be used to in the UK. It is therefore important to factor these into your budget from the beginning. Luckily property prices are currently rock bottom which not only reduces some of these costs but also makes the purchase price much cheaper.
Costs and Timings
The total cost of buying in Romania is higher than in the UK. As a rough rule of thumb you should budget for something in the region of 1% to 3% of the value of the property although the costs vary across the country.
A typical transaction will take 1 to 4 weeks to complete for a resale property. On a new build property the length of time will depend on how long the property would take to be constructed. This can be typically a period of 2 years.
If you are buying a property we would always recommend that you obtain a survey. If you obtain a mortgage the valuation carried out for the mortgage company will only look at whether the property is worth the amount you have negotiated.
Any defects in the property which do not affect the value will not normally be shown on the report. A survey will rate the condition of all permanent structures and will highlight any important problems that could affect the property value. Depending on the survey this may also give advice as to future maintenance. The survey should reduce the chance of discovering any nasty surprises with the condition of the property once a purchaser has bought the property. If there are any defects the survey will help the buyer negotiate the price or require certain works to be carried out before the property is purchased.
The survey may also reveal that certain works have been carried out or highlight rights that are necessary for the property which we can investigate before the property is purchased.
Buying any property involves a lot of money.
When you are converting from one currency to another the difference between one exchange rate and another can literally make a difference of thousands of pounds on your purchase.
Do not underestimate the difference that a good exchange rate can make.
We know people who have sold properties and have made more money on the exchange rate difference than they have on the sale of their property.
We are not banks or currency dealers, but would recommend that you investigate the cheapest way of sending your money abroad. If you would like we can put you in contact with currency dealers that we know will give you a good exchange rate and a good service.
Currency dealers have increasingly sophisticated products. You can agree rates for the future. You can get them advising you when to buy or agreeing to buy for you when the rate hits a certain level. You can even agree a fixed rate for longer periods of time if you make regular payments abroad (for example for a mortgage or moving your pension money).
We work with currency dealers who can give you a good exchange rate for your purchase and whom we have known for years. We will normally receive a commission for introducing them to you. This does not cost you anything more as they are simply paying us part of what they make. This commission is costed into our overall charges for providing our services.
Powers of Attorney
A Power of Attorney is a document which allows somebody to do something on your behalf.
If the title deeds are not being signed in the UK then often clients prefer to grant a Power of Attorney to somebody to sign the title deeds on their behalf.
This has several advantages;
You are normally busy and haven’t time to go out to Romania to sign the title deeds.
Signing title deeds is not particularly exciting and most people prefer to use their time off enjoying the property rather than signing pieces of paper.
It normally works out cheaper than you going out to Romania to sign.
You should only give a Power of Attorney to somebody that you trust as they allow that person to do things legally on your behalf.
In Romania Powers of Attorney have much wider faculties than we are used to in the UK and often have very general clauses in them “just in case”. We try and limit the Powers of Attorney down as much as possible whilst still allowing the person appointed the freedom to do what you need them to do.
We charge £350 plus VAT for drafting up a Power of Attorney. On top of that you will have Notary fees, foreign and Commonwealth Legalisation fee (£30 per document) and often Courier fees.
The NIF (Numarul de Identificare Fiscala, which translated literally is your Foreigner’s Identity Number) is your Tax Identity Number in Romania.
There are several times when you are likely to be required to produce your NIF number;
· When you buy a property
· Opening a bank account
· Dealing with the utility companies
· Taking out insurance
· Dealing with the tax authorities
· Buying or selling shares, bonds and stocks
· Buying a car
The rules on NIFs change regularly and between geographical areas. Sometimes you have to obtain this yourself and sometimes it can be done by somebody on your behalf. We will therefore advise you how this is working and costs at the time that you contact us.
Residents Association (Asociatia de Proprietari)
If you are buying in a complex then there will be a Community of Owners. We would need to make sure that all Community charges have been paid up to date before you buy.
Water and Electricity
It is important to check that there is a connection and that the charges are paid up to date.
If you are buying a new property we will need to check that the property has the appropriate Habitation Certificate which allows the services to be connected.
Land Registry (Cartea Funciara)
Almost all land and properties in Romania are now registered.
We would obtain a search at the local Land Registry for office copy entries (Extras de Carte Funciara) of the previous owner’s deed which will show who the registered owner is and whether there are any charges on the title.
Town Hall (Primaria)
Checks should be made at the Town Hall to make sure that the Council Tax (Impozitul pe Proprietate) has been paid up to date. It is also possible to obtain a certificate from the Town Hall showing that the property has the necessary building permit and complies with local planning and building regulations.
Just like back home you will need to arrange to have the utilities and services in your name and often have to set up a direct debit at your Romanian bank to pay the bills. You also need to inform the local Council and the Residents Association that you own the property.
Romanian inheritance laws are probably very different to those that you are used to in your home country.
We can advise you on the various different options regarding your Romanian Will. It is possible to have two wills – one in the Romania covering your Romanian assets and one in the UK covering your other assets. Both Wills need to be drafted carefully to make sure that they do not revoke each other.
You can leave your assets in Romania to somebody with a UK will but this doesn’t make sense – the cost of the subsequent inheritance will be more and it is possible that you will inadvertently cause inheritance tax problems.
The cost and extra complications of leaving no Will at all is great and should be avoided.
Whilst as a foreigner you do not have to follow the same rules that Romanian people do in terms of who you have to leave your property to, it often makes sense to do so as this can save your beneficiaries huge amounts in tax.
A Romanian Will can be prepared and signed in your local area or in our offices – there is no need to go to Romania. We can arrange for the registration of your Will at the Central Wills Registry ( Registrul Național Notarial de Evidență a Liberalităților ) in Bucharest.
We charge £395 plus VAT for drafting a simple Will for one person or £595 plus VAT for two “Mirror” Wills. On top of that there are Foreign and Commonwealth Office Legalisation fees (currently £30) and Notary fees, which will depend on the Notary.
The Romanian Will can be signed in the UK or Romania.
Romanian Inheritance Law states that when you die your property will be shared among your heirs according to the law of your residence.
is necessary is to obtain in Romania a “Certificate of Inheritance” and then armed with this the executor if there is a will, or the administrator if there is not a will can proceed to collect and distribute the assets in Romania.
To obtain such a certificate it is necessary to apply to a notary in Romania who will issue the Certificate of Inheritance. To issue the certificate he will wish to see:
1) The death Certificate (apostilled and translated into Romanian),
2) If there is a marriage, then the marriage Certificate (apostilled and translated into Romanian),
3) The identity document of the person applying, and
4) The grant of probate or the letters of administration (apostilled and translated into Romanian)
Inheritors must take into consideration also the taxation applicable to the inheritance. The Romanian law is very flexible in what regards the applicable taxes to an inheritance. Thus, there is applicable a tax only in case the inheritors did not open and finalise the inheritance procedure within 2 (two) years from the death of the author of the inheritance. This tax is in quantum of 1% (one per cent) from the established value of the inheritance. So, there is no tax applicable to the inheritance in case the inheritors are diligent and finalise the inheritance procedure within the 2 (two) years period mentioned above. If a foreign resident dies domiciled in Romania the estate will be distributed according to Romanian law. Domicile is not the same as Tax Residence.
Foreign inheritors can collect their inheritance in Romanian without being obliged to be physically present here. The Romanian law allows the representation of the inheritors by attorneys in front of either the notary public or the competent court. It is recommendable for foreign inheritors to collaborate with Romanian specialists in order to best protect their interests in the inheritance procedure (this means the reduction of the period for finalising the procedure, the reduction of the costs for the inheritance, the certainty that all the provisions of the Romanian law are complied with).
In case foreign inheritors decide to collaborate with Romanian specialists in view of collecting their inheritance in Romania they must only provide a special power of attorney (the model of which will be provided by their Romanian contractors) and the funds necessary to finalise the procedure.
After you buy a property in Romania there are ongoing obligations that you need to meet;
It makes sense to insure your property and contents.
Council Tax (Impozitul pe proprietate)
This is normally paid twice a year on 31st of March and 30th September. The amount will depend on the location, size and age of the property. Usually is between 0,08%-0,2% of the market value.
Non-payment of IPP can lead to legal proceedings being taken against you and an embargo on the property.
You will be responsible for the utility charges – electricity, gas, water sewerage, rubbish collection etc. from the time that you buy the property and should make arrangements for these to be put into your name.
Community Charges (Taxe catre Asociatia De Proprietari)
You should pay these otherwise the property can be confiscated and auctioned in order to settle the debt.
If you are non-resident you must declare any income you have earned in Romania. This applies even if you receive this income by renting out to people from your home country and the money never touches Romania. If you do not receive any rent from the property it is assumed that you have NOT received a benefit and you DO NOT PAY ANY EXTRA TAXES.
You will also normally have to declare this income in the country where you are tax resident but can normally offset the tax paid in Romania through Double Taxation Treaties.
The taxes that you pay when you buy a property in Romania will normally depend on whether you are tax resident there or not.
Tax residence is a determined by a number of factors;
How long you spend in that country? Is it 183 days or more a year (not necessarily continuously). If so you are likely to be tax resident there.
Is your main home there? If it is then you are likely to be tax resident there.
Is your immediate family (spouse and dependent children) based there? If so you are likely to be tax resident there.
Is your main economic interest there? If so you are likely to be tax resident there.
If you do become tax resident in a country then you will normally stop paying taxes in your home country and start to pay taxes in the new country.
Do not be tempted to have selective amnesia when it comes to declaring taxes the authorities in both Romania and the UK are clamping down on people who do not do not do things properly.
Fees and Taxes
TVA (VAT) is payable by the purchaser where the vendor is considered a developer who pays IVA and / or this is the first time that the property has been sold / transferred.
VAT rates - 19% - the standard VAT rate.
5% reduced VAT for sale of real estate, as part of social policy, under certain conditions
Income from transfer of real estate is 3%. The taxable base is the gross income derived, less a non-taxable fixed amount of 450,000 LEI.. Exemptions from taxation apply to any transfer by donation between relatives up to the 3rd degree, as well as between spouses and any transfer where value of the real estate is less than 450,000 LEI/100.000 Euro.
Rental income tax is 10% applied to gross salary less mandatory employee social contributions. Health fund contribution is10% with some exemptions applicable. Taxable income is gross income derived, minus lump-sum expenses of 40% of gross income.
Transfer Tax (Taxes for selling a property) – these vary according to the value of the property. All transactions under €100,000 are exempt from Tax. Individuals who sell Romanian property are however liable to pay transfer tax, levied on the sales proceeds. The applicable tax rate depends on how long the property was held by the owner and the property value. These therefore range from 1% to 3%. VAT applies to the supply of plots of land that can be built on.
“New Buildings” include existing buildings which have been refurbished where the cost of refurbishment, exclusive of VAT, represents at least 50% of the market value of the building after the relevant works have been completed. These are established through an expert’s report.
Individuals (unmarried or a family) may benefit from a reduced rate of VAT of 5% on the purchase of a single home only if they cumulatively meet the following criteria;
Conditions regarding the Buyer
- The Buyer is an individual (unmarried or a family)
- If the Buyer is unmarried, he or she must not have purchased a previous house using the reduced rate of VAT at 5%. If the Buyer is a family, none of the spouses (individually or separately) have previously purchased a house in terms of the reduced rate of VAT at 5%. In both cases the Buyer has to give a statement in front of the Notary Public that he or she fulfils this condition.
Conditions regarding the Real Estate
- The Real Estate which is purchased in terms of the reduced rate of VAT can only be a new home.
- The Real Estate has a maximum value of 380,000LEI ( €92,500 equivalent)
- The Real Estate has a useful maximum area of 120sq Meters (this useful area does not include the Annexes to the house or garages, swimming pool etc.)
- If the Real Estate consists of buildings and related land, the area of the land upon which the house is built, including the footprint of the construction, must not exceed 250sq meters.
- The Real Estate must be in a condition to be immediately habitable.
Our charges. We charge 3% of the purchase price subject to a minimum of £1,500 +VAT. If the property title is defective or unexpected additional work is required then there may be additional charges. We would inform you before incurring this cost
Our charges include;
· Legal advice on the terms of your offer to purchase
· Searches - General
· Searches at the Land Registry
· Obtaining certificate from the Community of Owners (if appropriate)
· Checking the legal status of the property and the seller’s right to sell
· If appropriate checking the guarantee provided by the vendor
· Preparing a report on our searches and advising you on the purchase
· Arranging the signature of the title deed
· Arranging payment of the relevant taxes
· Arranging registration of the property at the Land Registry
· General hand holding and advice throughout the transaction
Other work required may include obtaining NIF numbers, signing the title deed on your behalf, transfer of utility contracts etc. which are charged extra
Lawyer or solicitor
Aasociatia de Proprietari
Community of owners / Residents Association
Cumparare/Cumparare si Vanzare
Purchase / Buying and selling
Contract de vanzare cumparare
Contract de rezervare
Declaratie de incepere a lucrarilor
Declaration of new building work (At the Notary)
Titlu de proprietate
Impozitul pe bunurile imobile
TVA ( Taxa Pe Valoare Adaugata )
VAT (Value Added Tax)
Light (but often refers to electricity)
NIF (Numarul de Identificare Fiscala)
Foreigner’s Identification Number
Extras de Carte Funciara
Land Registry Search
Autorizatie de Construire
Power of Attorney
Polita de Asigurare
Camera de Depozitare
Official value of the property
Buying in Romania Checklist
Decide what you are buying, where and why. If necessary take advice on this.
Instruct Judicare as your independent lawyer
Look at the cost of buying. Fix a budget. Stick to it.
Investigate finance and think about how to finance deposit.
Learn about the process of buying
Look at who should own the property.
View properties / choose a property. Be honest with the estate agent about what you are looking for – that will save a lot of time for you and them.
Survey and valuation
Send any contract to us to check prior to signature.
Speak to currency dealer about getting the best rate for your purchase
If it is a reservation contract pay a small reservation fee
Lawyer carries out checks on the property and advises you on whether it is safe to proceed with the full purchase contract
Payment of Full purchase deposit
Lawyer deals with purchase
If you are moving to Romania arrange removal company
Arrange Power of Attorney if needed
Arrange insurance – contents / buildings / health
Signature of title deeds and registration at the Land registry
Make a Romanian Will and review your English Will
Arrange for Fiscal representation
Enjoy a well deserved holiday in your new property
Why Use Judicare
We have an experienced Romanian legal team.
We are Solicitors
We are a UK based firm of Solicitors regulated by the Solicitors Regulation Authority and who specialise in international legal issues.
We understand both sets of laws
Because we understand both sets of laws we understand the difficulties that come when two sets of laws meet.. This is particularly important when it comes to issues involving ownership, taxation and inheritance.
We are members of AIPP
The Association of International Property Professionals was set up to improve standards of professionalism in a largely unregulated overseas property market.
Our Romanian team has many years of experience dealing with a whole range of legal issues with Spain.
We speak your language
You need a lawyer who can speak your own language. More importantly you need somebody who can explain and discuss often complicated issues in terms that you understand.
We are independent. We are not allowed to act for the buyer and the seller at the same time. We are not linked with any Development Companies, Builders or Estate Agents