At present, a non-Romanian national is not permitted to own property in Romania. Therefore, when you make a foreign property investment in Romania, it is necessary to form a limited company that can own land and register yourself as a company director. Forming a limited company through a solicitor is straightforward, taking around four weeks and costing €300 (£210). The second reason why all buyers should form a company is for investment purposes: doing so means there is no VAT payable and with a rate of 19% this is a significant saving, making that property in Romania all the more valuable.

• Choose and reserve the property of your choice.
• Employ a lawyer; the lawyer will then go though the process of setting up a company in the client's name (requiring all the information on the reservation form) as well as 3 options for the name of the company.
• During this time the lawyer will be making and agreeing any changes to the purchase contract requested by the client.
• The company set up takes about 7-10 days. Once the company name is reserved, the lawyer is able to set up a bank account in the company's name. This bank account is essential as all payments to the developer and any other costs will need to come out of this account to be considered a cost (and therefore tax deductible for the company) this account cannot be activated until the company is incorporated. A client is not able to pay from a personal account if they are purchasing as a company. If a payment is made from a personal rather than company account they will be liable for VAT.
• Once the company setup is complete, the client will need to employ an accountant to manage the company's finances, submit tax returns etc. The accountant will require all the company information: shareholders, company name, fiscal number and a copy of the incorporation document. It is important that the accountant has contact with the client's lawyer to ensure that any further required information can be easily passed on.
• Once the accountant and the company has been established and the client is happy with the contract, the next stage is to sign the contract. This needs to be done in one of two ways: the client flying to Romania to sign the contract personally, or a power of attorney can be granted to a contact in Romania, be it a friend, family member or Johns himself. This is a function-specific power to sign the purchase contract in place of the client; it affords no further control. To create such a document, the client will need to ask the lawyer to draw up the paper and inform the lawyer to whom they would like to grant this power.
• The final step in the process is to sign the contract (with a notary present sourced by the lawyer of the seller) at the office of the seller or the notary office. Once this is complete, payment of the first instalment is due and paid from the company account as detailed above.
• Budget around 5-8% of the purchase price for additional costs and fees, including the notary (1.5-2%) and a transfer tax (0.5-3%). In Romania, as a buyer, you may be expected to contribute towards the estate agent’s fees of 6%, which are often split 50/50 - i.e. buyer pays 3%, vendor pays 3%.

From receiving the contract on a foreign property investment in Romania to the signing and payment, if the client is organised and motivated the process should take no longer than 3-4 weeks. The property buying process in Romania will become more streamlined and hopefully more transparent in the years following Romania’s EU entry (Jan 2007), in the meantime here’s our guide to the real estate purchase process in Romania currently.

The first objective to fulfill is the search for suitable property in Romania, and to this end an investor can secure the services of an estate agent who speaks English and has local knowledge of properties available for sale. An investor will likely have a strict set of criteria that his foreign property investment should fulfill, and these should be articulated to the estate agent so that they can source suitable properties for viewing.

The majority of property investment interest in Romania is currently centred on both commercial and residential real estate in Bucharest, but there are many more opportunities, particularly in the tourism industry and these are generally available countrywide with Transylvania, the coast and ski resorts in Romania gaining popularity quickly.

If an investor is considering purchasing an older, resale investment property it can be a good idea to have an independent survey conducted on the property to ensure no nasty surprises are lurking behind flaking paintwork for example. Alternatively, there are a number of newly constructed properties available for sale as in Romania well as a growing number of pre-construction developments being marketed to overseas investors. Whichever type of property the investor chooses, if that property is anything other than an apartment his lawyer will need to establish a Romanian foundation or company via which the investor can own the land on which the property sits.

The Romanian government have passed a series of laws that will allow for direct foreign freehold ownership of land in Romania five years after the country achieves full EU member status (seven years for agricultural land), which will bring the property laws in Romania inline with those of other European Union member states.

Once a suitable property has been found the real estate investor should secure the services of an English speaking lawyer to act on their behalf throughout the proceeding property purchase transaction if they haven’t already done so. While it is not a requirement to have a lawyer represent you in any property buying transactions undertaken in Romania, an investor would be incredibly unwise to proceed without legal representation! The amount of red tape and paperwork associated with buying and selling property in Romania is incredible and a headache even for local Romanian citizens; finding a good lawyer who can take on this burden is therefore critical.

Sometimes it is necessary for an investor to sign a preliminary contract to agree to purchase the property they are interested in and to pay a holding deposit via their solicitor, and sometimes the vendor is happy to wait for the final contract to be signed - it really just depends on the vendor. If the property investor is buying off-plan a stage payment schedule will be drawn up as part of the final contract otherwise the complete cost of the property will generally be due on the day the final contract is signed. The final contract will be signed by the vendor and purchaser in front of a public notary who will legalise the transaction and also submit the necessary documents for title transfer to the land registry.

In terms of the associated extra costs a property investor in Romania should budget for, they should allow for at least an extra 5% of the original purchase price. Costs will include the lawyer and notary costs as well as state taxes and there is an annual property tax payable in Romania as well. Laws have recently been passed to prevent too much speculative property investment going on in Romania and this has resulted in VAT and CGT increases that become applicable upon the resale of property and the subsequent realisation of any property price gains.

We have offices in Romania with staff that live and work there who are able to inform you in English all about the country, its various regions, prices and anything else you need to know. They can arrange viewings and assist you with the conveyance of property.