Spain on the fast track

With Spanish business showing growing interest in the local real estate market, Oliver Haussmann from law firm Schoenherr si Asociatii points out some of the traps investors need to watch out for

      While in a ranking of the local Trade Registry Office for the years 1991 to 2005 Spain appeared only as the 16th biggest investor in Romania, investments by Spanish investors have recently gained remarkable momentum.
      During last year Spain already ranked within the top tier of investors in Romania.
      For the time being, a particular focus of Spanish investments is on real estate developments. Such interest and commitment does not come as a surprise.
      On one hand, the real estate sector in Romania as such has been booming in recent years – a fact which has not gone unnoticed abroad.
      On the other hand, the following factors favour Spanish investments in real estate projects: the real estate market has also seen an unprecedented boom in Spain. Consequently, Spanish real estate companies (such as developers and construction companies) dispose of sufficient capacity to venture out into new territories.
      Secondly, the affinity between the two Romance languages facilitates cross-border transactions. Last but not least, in the not so distant past, the Spanish economy was also undergoing a dynamic catch-up process. Thus, the peculiarities of countries involved in such a transformation process are not unknown to Spanish investors.
      Apart from the above factors, the basic parameters required for a reliable and calculable business environment in cross-border transactions between Spain and Romania have been created by the conclusion of the most relevant bilateral treaties (which is not a matter of course even today). In that context, it is worth highlighting the Treaty on the Reciprocal Promotion and Protection of Investments as well as the Double Taxation Treaty, both between Romania and Spain. These treaties are supplemented by several other (bi- and multilateral) conventions dealing with economic and industrial cooperation as well as cross-border trade and the like.
      Also, Romania’s accession to the European Union has contributed and will continue to the creation of a reliable business environment and the harmonisation of the two different legal systems.

Peculiarities to watch out for

      Notwithstanding the aforesaid, one may not lose sight of those peculiarities that, inter alia, Romanian real estate law is featuring.
      In the 1945 to 1989 period numerous expropriations, respectively nationalisations, of real estate - land and buildings - took place. Although several restitution laws were meant to finally solve this issue in Romania and periods of time for complainants to file restitution requests have now expired, it is necessary for buyers to carry out a little due diligence in most cases. Not only are many restitution proceedings still pending, but it also cannot be excluded that complainants can still file claims brought on general principles of Romanian civil law, in certain cases.
      Plots of land may be relatively small (in particular in the cases of plots that have already been restituted) and not suffice for development projects. This may require the conclusion of a multitude of sale purchase agreements with owners of neigbouring plots.
      The emplacement (inside or outside the built-up area) and the dedication (eg agricultural or construction land) of land may result in the need to have respective land transferred into the built-up area and rededicated.
      Depending on the facts of the case it may be worthwhile having these (time-consuming) proceedings consummated by the seller, which would entail that no direct sale purchase is made, but the preliminary agreements have to be concluded.
      Even after Romania’s admission to the EU, Spanish citizens and companies will be prevented from acquiring land during certain transitional periods, depending on the type of land. This restriction, however, may be easily circumnavigated by establishing a Romanian company, which then acts as a purchaser. It is beyond doubt that such a Romanian entity may also be fully foreign owned.
      There will be several other peculiarities Spanish (and other) investors need to consider when contemplating real estate projects in Romania. It is however apparent that Spanish investors feel more comfortable to maneuver in the environment where they work, compared to many other nations.
      Because of the successful real estate developments by Spanish investors one can easily anticipate increased Spanish investments in other business fields in the not-too-distant future.

Oliver Haussmann
Schoenherr si Asociatii SCA