Findings of Romania case Findings of Romania case studystudy

Review of transitional restrictions maintained by Romania with regard to the acquisition of agricultural real estateLucian Luca and Cecilia Alexandri Institute of Agricultural Economics, Bucharest

Structure of the Structure of the presentationpresentation

Legal framework regarding the restriction

Evolution of the land market

Role of foreigners in the land market

Law on the land resourcesLaw on the land resourcesNo. 18/ February 1991No. 18/ February 1991 Restitution of land to former owners or to their heirs

◦ Chapter II Establishment of private property right on land Chapter IV Legal circulation of the land

◦ Art. 45 – Private land, regardless of its titular, is and shall remain in the civil circuit. It may be acquired and alienated in any of the ways established by the civil legislation, by observing the provision under the present law. …the acquirer's property shall not exceed 100 ha of agricultural

land, in arable equivalent , per family… (Art. 46) ◦ Art. 47 – Natural persons who are not Romanian citizens and

do not have their domicile in Romania as well as juristic persons not having Romanian nationality and their headquarters in Romania shall not acquire land of any kind in property by inter vivos deeds.

◦ Art. 48 – Alienation by sale of agricultural land from the outside of the buildable area may be made by exercising the preemption right. …exercised through the Agency for Rural Development and

Planning…

Law on legal circulation of Law on legal circulation of the landthe landNo. 54/ March 1998No. 54/ March 1998Art. 1- Land areas into private ownership,

regardless of their titular, are and will remain into the civil circuit.

…the acquirer's property shall not exceed 200 ha of agricultural land, in arable equivalent , per family… (Art.2)

Art. 3 – ◦ (1) Foreign citizens cannot acquire property right

on land (2) Romanian citizens with the domicile abroad can

acquire land◦ (3) Foreign legal persons cannot acquire land in

Romania (4) the provisions of the legislation on foreign

investments were applied … any investor “can acquire any real rights on the movable and

immovable goods” (GEO 92/ 1997)…

Law on the reform in Law on the reform in ownership and justice, No. ownership and justice, No. 247/ July 2005 247/ July 2005 TITLE X - Legal circulation of land

◦ Art. 3. - The foreign citizens and the stateless persons, as well as the foreign legal entities can acquire the ownership right on land areas in Romania under the conditions stipulated by the special law.

◦ the pre-emption right was completely eliminated◦ the upper limit of property (200 ha) per family was

abolished

TREATY…CONCERNING THE ACCESSION OF THE REPUBLIC OF BULGARIA AND ROMANIA TO THE EUROPEAN UNION (June 2005)◦ ANNEX VII, List referred to in Article 20 of the Protocol: transitional measures,

Romania (FREE MOVEMENT OF CAPITAL)◦ …Romania may maintain in force for seven years from the date of accession the

restrictions laid down in its legislation, existing at the time of signature of the Treaty of Accession, on the acquisition of agricultural land, forests and forestry land by nationals of the Member States…

◦ Self-employed farmers who are nationals of another Member State and who wish to establish themselves and reside in Romania, shall not be subject to the provisions of the preceding subparagraph or to any procedures other than those to which nationals of Romania are subject.

Law on acquiring the private land Law on acquiring the private land ownership right by the foreign citizens ownership right by the foreign citizens and stateless persons, as well as by the and stateless persons, as well as by the foreign legal entities, foreign legal entities, No. 312/ November No. 312/ November 20052005 Art. 5 (1)The citizen of a Member State, the stateless person with domicile in a

Member State or in Romania, as well as the legal entity established in conformity with the legislation of a Member State can acquire the ownership right on the agricultural land, forests and forestland after 7 years from the date of Romania’s accession to the EU.

(2) The provisions from paragraph (1) are not applied to the farmers who are self-employed and are, according to the case:◦ citizens of the Member States, stateless persons with domicile in a Member State, who

establish their residence in Romania;◦ stateless persons with their domicile in Romania.

(3) The citizens of the Member States or stateless persons with domicile in a Member State prove their self-employed farmer quality on the basis of documents issued by the competent authorities from the Member State or from their country of origin. The stateless persons with their domicile in Romania prove this quality with the certificate issued by the Ministry of Agriculture, Forests and Rural Development.

(4) The persons provided under par. (2) acquire the ownership right on the agricultural land, forests and forest land under the same conditions with those applicable to the Romanian citizens, from the date of Romania’s accession to the European Union.

(5) The destination of the agricultural land, forests and forestland cannot be changed by the persons provided under paragraph (2) in the transition period.

The land market before The land market before accessionaccession outside the built-up area (extravilan)outside the built-up area (extravilan)

◦ Period 1998-2005 Number: 308

thousand land sale-purchase contracts

Area: the sold area totaled 513 thousand ha

◦ Larger areas sold In 3 western counties

Timis (135 thou ha) Arad (50 thou ha) Caras Severin (24 thou

ha) In one eastern county

Constanta (32 thou ha)

Sale of extravilan land in the period 1999-2005 1999 2000 2001 2002 2003 2004 2005 Area (thousand ha) 31.9 21.8 28.7 159.8 86.4 108.5 64.0 Average price (EUR/ha) 443 394 417 289 256 427 884 Source: processing of centralized data from the Ministry of Agriculture

The land market after The land market after accessionaccessionas registered by ANCPI (2006-2010)as registered by ANCPI (2006-2010) ETERRA1system

◦ 3 counties (starting date 2006)

◦ Number of transactions: 130 thou.

◦ Total transacted area: 302 thou ha (incl. successions)

◦ Average transaction: BZ, 3.30 ha CT, 2,37 ha PH, 1.56 ha

ETERRA2 system ◦ 38 counties (starting date

2008…2010)◦ Number of transactions:

129 thou.◦ Total transacted area:

175 thou ha◦ Average transaction: 1.35

ha

Transaction areas registered by ETERRA1, in the period 2006-2010, ha

County 2006 2007 2008 2009 2010 (May)

Buzau 2339 15253 15995 13860 5559

Constanta 4031 47863 62142 65871 18636

Prahova 931 15074 20656 14426 7007

Source: ANCPI

Great variation of agricultural land Great variation of agricultural land prices prices based on UNNPR (notaries) evaluatbased on UNNPR (notaries) evaluationsions

Estimated prices for the extravilan land areas, by different regions, in the year 2008 County Development

region Estimated price of the arable land in the rural area EURO/ha

Examples of high extravilan land prices EURO/ha

Examples of low extravilan land prices EURO/ha

Other situations EURO/ha

Effective average price, 2005 (MARD) EURO/ha

Bihor NW 490-540 3200 (Baile Felix) 430 (far from roadways)

270 (pastures, hayfields) 540-650 (orchards, vineyards)

226

Timiş W 1500-2000 40000 (near Timisoara)

1200 (remote villages)

5000 (vineyard Recas) 1054

Ialomita S 800-850 26000 (access to the European road)

300 (floodable area)

1200-1400 (arable, in irrigated areas)

327

Olt SW 540 2700 (near Slatina) 430 (far away villages)

1900 (vineyard, Slatina) 430 (vineyard, villages)

207

Constanta SE 1000-1500 25000 (arable, near Constanta)

900 (pastures) 7500 (at the national road) 3000 (vineyard)

298

Botosani NE 120 800 (near Botosani municipality)

120 (rural area) 2200 (orchards) 232

Brasov Center 1500 4500 (near Brasov municipality)

650 (arable land with slopes)

6000 (orchards) 250-350 (pastures, hayfields)

2387

Source: Evaluation studies on the real estate circulation value, UNNPR, 2008

Estimated price of the arable land in the Estimated price of the arable land in the rural area, for selected counties in rural area, for selected counties in different regionsdifferent regions2007-2009, extravilan land, UNNPR evaluations2007-2009, extravilan land, UNNPR evaluations

The land market after The land market after accessionaccessionsome results from a brief investigationsome results from a brief investigation A mini-survey on the land market situation

48 questionnaires received from 30 counties

Evolution of Prices The average price in 2009: 5378 RON/ha (1265 Euro/ha) or

1497 Euro/ha 37 answers consider that price increased from an average

of 1000 Euro/ha in 2006 to 1742 Euro/ha in 2008

The perception on the transitory restriction Most respondents (29) did not hear about the restriction

applied to foreigners to buy land for 7 years from the accession, while 16 respondents knew about this restriction.

The presence of foreigners is important 12 respondents indicated foreigners as typical buyers Half of the respondents knew about foreigners wanting to

buy land (25), while the other half did not know (23)

Foreign farmers’ presence in Foreign farmers’ presence in Romania, before and after Romania, before and after accessionaccession Typical form of agricultural holding organization, since 1998: commercial company registered in

Romania (entity with foreign capital)

The Italians◦ Very present in Timis, associated with the most active

land market in Romania In 2003, 39 commercial companies with Italian capital were

operating in this county, totaled about 25 thousand hectares agricultural land

In 2009, the land operated by Italians in Timis summed up about 125-150 thousand ha, i.e. about one-third of the county agricultural area.

◦ Also present in another counties Risso Scotti in Danube area

The French◦ 17 farms owned by French farmers

Some of them had started their activity in Romania early (1994-1997), but most of them after 2000.

The Dutch◦ Individual farmers (at least 20 farmers)◦ Corporate farms (e.g. First Farms)

A map with presence of foreign A map with presence of foreign farmers in selected countiesfarmers in selected countiespercent of arable land own by foreign farmerspercent of arable land own by foreign farmers

Relevance and usefulness of Relevance and usefulness of restrictionrestriction Restriction maintained after accession do not really

impede foreign farmers to start a business in agricultural sector

It was useful in the context of possible speculations in the real estate sector, influenced by global trend in period 2007-2008

Reason for continuation: financial instability of the country and pessimistic expectations in what regard real income

Legal restriction on the acquisition of agricultural land in Romania Can EU citizens buy agricultural land despite the restriction?

Yes, if residing and farming in the country and farming before in a EU member state

Can a legal entity buy agricultural land? Yes Can a legal entity that is registered in the country but owned by foreigners buy agricultural land?

YES