The intricacies of Romanian property law are very well known and like all Romanian law firms we keep abreast with the latest developments and trends.
One of the issues that there is in Romania is the question of the divide between legal practitioners. By this I mean lawyers and notaries. Even lawyers are divided between lawyers who spend the majority of their time in court and those others considered as slightly inferior namely the non-court lawyers.
The divide between Notaries and lawyers can mean that occasionally matters get overlooked which could have an important impact on clients and their business. I was reminded of his fact the other day when I was discussing with another lawyer how we could protect our client who was trying to recover monies from a recalcitrant debtor in a residential development.
Our study of the law and the legislation threw up the provision in the Law on Associations which protected our clients. In the Law on associations there is a provision which makes a transfer of a property where the owner has not paid in full their maintenance and management charges void unless the debts are paid or the buyer agrees to pay the debts in agreement with the relevant association. the association agrees to the transfer. This provision will apply where there has been a purchaser for value. Further as mentioned in the previous paragraph this provision will apply not only in relation to the transfer of an apartment in a block where there is a tenants association but also to the transfer of a house that is in a residential compound where t here is an association that looks after the common parts.
Notaries seemed very aware of this position from practical experience, but lawyers who do not deal with the day to day closing of matters do not appear to be aware of the potential risks.
The impact of this provision also has far reaching effects in relation to the sale by banks and other credit institutions of properties that they have repossessed, or where they have been handed back the keys of properties which the owners can no longer afford. The new law regarding personal bankruptcy will no doubt bring about many cases where apartments and houses are handed back with outstanding maintenance bills. The sales by the banks will now if the relevant tenants or compound association is aware of what it owed require that the banks pay off all the outstanding maintenance debt before the property can be sold. This will impact on the sale price for the bank.
The fact that there is an outstanding debt in respect of maintenance and service charges should be registered against the property. This will allow the notary at the time of sale to check the position and if there is an outstanding charge bring the position to the seller’s attention. The non-registration of the debt will not allow a purchaser to claim that they acquired the property without notice of the debt.
If the transfer is void if there are outstanding service charges etc. the question, then arises as to how can the buyer fully protect themselves. As the title is void then any monies advanced by a bank will be without security. This would then perhaps bring about a breach of the banks covenants. The only solution appears to obtain from the relevant association written confirmation that there is no debt. As many of these associations are run on a part-time basis and often have poor records will leave the buyer in a difficult position. The answer has to be that during the negotiations this matter must be discussed.
All the above goes to highlight that when doing business in Romania that the getting of proper advice is crucial. There are many lawyers who express the view that they are experts. If, however they do not do the proper research then problems will arise for the unwary buyer who in all good faith purchased a property to which they have no title.