Thought Articles

The 2007 edition of the Eurisko's report on the Romanian real estate market provides 240 pages of in-depth analyses, comparative studies, forecasts and other relevant information about the market in Bucharest and 14 important Romanian cities. Dan Borbely, Partner and Head of the Real Estate practice at Țuca Zbârcea & Asociații makes an overview of the legal developments within the real estate sector in Romania.

During the past few years, prior to Romania’s accession to the European Union this year, employment law in Romania has experienced substantial changes. Many relevant European laws were implemented in the country, including Council Directive 2001/23/EC on the approximation of the laws of the member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts thereof.

The Romanian M&A market has been characterised in recent years by a constant growth, in line with the growth of the economy. In absolute figures, the market increased ten-fold from Euro 0.5 billion in 2003 to over Euro 5 billion in 2005 and 2006, respectively.

Characterised by investment analysts as one of the most profitable European real estate markets, Romania is currently experiencing an influx of investments targeted mainly at residential, commercial and office sites. Although a careful analysis of the investment target is a prerequisite in any type of deal, a thorough investigation of the ownership title is of particular importance in Romania, due to specific legal provisions applicable in this respect.

Business activities may be carried out in Romania by legal entities or by authorized individuals. There are several legal structures available for investors wishing to set up companies in Romania, but the most frequent types of companies of choice for investors are joint stock companies and limited liability companies, which both offer to shareholders a limitation on their liability, they being solely responsible for paying up the value of the shares they have contributed. The principle of limitation of liability can only be defeated in case of liquidation of the company, in case the relevant shareholder had defrauded the creditors, by abusing of the limitation of its liability and of the distinct personality of the company, or in case of insolvency proceedings.

Romania’s accession to the European Union involved a long process of harmonizing the Romanian legal system by reference to the principles of the laws of the European Community in various fields and of the legal systems of the other Members of the European Union.