Steps towards a fully functional legislation for the Romanian Land Market

The implementation rules, approved by the Order no. 311/2020 / 94/2021 / M.12/2021 / 3525/2020 (Implementation Rules), for the application of Law no. 17/2014 regarding some measures to regulate the sale-purchase of agricultural land located outside the built-up area (Law 17/2014) were published in the Official Gazette on 8 February 2021, providing long anticipated clarifications on the functionality and applicability of last year’s amendments to Law 17/2014.

As a brief reminder, the legislation on the sale of agricultural land was significantly amended last year. The new provisions were adopted with the declared objective of consolidating the Romanian land market and increasing the degree of use of agricultural land for agricultural activities, and not for investment purposes.

The following main changes were introduced to Law 17/2014: (i) extension of the categories of persons who can exercise the pre-emption right from four categories to seven categories; (ii) extension of the term for exercising the pre-emption right; (iii) the increased taxation of the direct or indirect sale of agricultural land located outside the built-up area, during the first eight years as of the acquisition (however, these provisions are not applicable to reorganizations or relocations of assets within the same group of companies); (iv) the obligation to keep the destination of the land (i.e. agricultural, plantations etc.); and (v) the sanction of absolute nullity for non-compliance with the pre-emption procedure.

Prior to the Implementation Rules, Law 17/2014 provided little guidance and was not sufficiently clear on how public authorities shall implement and/or interpret the recent amendments.

However, as of the publication of the Implementation Rules, there are a few key points to be considered:

• the Implementation Rules shall apply only to the transfer of ownership on the basis of a sale agreement authenticated by a notary public, i.e. only to direct land acquisition by means of an asset deal;
• the Implementation Rules shall also apply to the transfer of ownership on the basis of a court decision which takes the place of a sale agreement, if the bilateral pre-agreement is concluded according to the provisions of the Romanian Civil Code and the relevant legislation (through the bilateral pre-agreement the parties undertake to conclude a sale purchase agreement at a later time; in case one of the parties unjustifiably refuses to conclude the promised agreement, the other party may request in court for the agreement to be concluded, replacing the opposing party’s consent with a court decision);
• the provisions of the Implementation Rules shall apply to applications registered after the date of entry into force of the provisions of Law no. 175/2020 for the amendment and completion of Law 17/2014, published in the Official Gazette of Romania, Part I, no. 741 of 14 August 2020; thus, the procedures started before 14 August 2020 shall be subject to the old regulations.

The Implementation Rules provide for the following relevant aspects with respect to the pre-emption procedure:

• The establishment of the sanction of forfeiture (Romanian: decadere) if, within 45 working days from the display of the sale offer at the mayor's office, none of the holders of the pre-emption right registers at the mayor's office the communication of the acceptance of the sale offer;
• If no pre-emptor expresses its intention to purchase, potential buyers can submit to the mayor’s office a file including the documents proving the fulfilment of the conditions provided by Law 17/2014, within 30 days from the expiration of the term of 45 working days provided in art. 6 para. (2). (i.e. the period within which the offer to sell is displayed at the mayor’s office and, where applicable, on its website); in case no purchase offers have been registered, the mayor’s office declares the procedure complete within ten days from the expiration of the aforementioned 30-day period; thus, the alienation of the land may be made to any natural or legal person, under the conditions of Law 17/2014;

In order to conclude the sale agreement in authentic form by the notary public or when the court pronounces a court decision that takes the place of the sale agreement, an approval is issued by the territorial / central structure, which is valid for six months from the date of communication to the seller. If the parties have concluded during this period a bilateral pre-agreement or an option agreement concerning the out-of-town agricultural land for which it was issued, the approval is valid until the expiry of the deadlines set in the parties’ agreements for the execution of the sale-purchase agreement. In practice, acquisitions of agricultural lands may become more structured and involve several steps, such as the preliminary conclusion of a bilateral pre-agreement, followed by the actual sale of the land throughout the approval’s validity period.

While it would have been expected that the confusion created on the land market following the amendment of Law 17/2014 disappeared with the publication of the long-awaited Implementation Rules, there is significant room for improvement, as there are still criticisms and unclarified issues (such as those related to the mandatory use of land for agricultural purposes). However, it should be noted that the Implementation Rules represent a first step to unblock acquisitions and investments in agricultural land.