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Termination of Real Estate Sale Contracts: When You Can “Undo” a Transaction and What Happens Next

This article clarifies the legal concepts of termination, rescission and nullity in the context of Romanian real estate sale contracts and the limited cases in which they can be invoked. It explains the creditor’s choice between forcing performance and seeking contract termination, the restitution of price and property and the interaction with mortgages and third-party rights.

In everyday language, people often talk about “cancelling” a real estate sale contract when serious problems appear after the transaction: the price is not paid, the property has hidden defects, there are disputes with third parties, or the seller does not deliver the property. Legally, however, the Romanian Civil Code does not use a generic “cancellation” concept, but precise legal mechanisms: nullity, termination (rezoluțiune), rescission (reziliere), contractual termination clauses, judicial termination, warranty for hidden defects, warranty against eviction, and so on.Understanding these concepts is crucial for both sellers and buyers. A real estate sale contract is not a simple “verbal agreement” that can be reversed at will; it is a binding legal act, regulated in detail by the Romanian Civil Code, with significant effects on ownership, land register records and the position of third parties (banks, other creditors, subsequent buyers).

This article explains, in accessible terms, when and how you can legally undo a real estate sale contract through termination (rezoluțiune), when we are dealing instead with nullity, which are the most common causes (non-payment of price, failure to deliver the property, hidden defects, eviction), what the typical procedure looks like in practice, and what the consequences are for the parties and for third parties.

Important: the information below is of a general nature and does not replace personalised legal advice. Every transaction has its own particularities, and a lawyer must analyse the concrete contract, title deed, special clauses and land registry situation.

Contents

  1. Why you cannot simply “cancel” a real estate sale
  2. Legal framework: binding force of contracts and creditor’s remedies
  3. Termination (rezoluțiune) vs. rescission (reziliere)
  4. Specifics of real estate sale contracts
  5. Typical scenarios where termination of the sale can be requested
  6. Practical procedure: notice, court action, evidence
  7. Effects of termination on the parties and on third parties
  8. When “rescission” appears around real estate transactions
  9. Common pitfalls and practical recommendations
  10. FAQ – frequently asked questions
  11. Sources and useful links

1. Why you cannot simply “cancel” a real estate sale

In everyday conversation, the idea of “cancelling” a sale suggests that if one party “no longer wants” the transaction or later realises it was a bad deal, they might ask to simply erase the contract, as if it never existed. The Civil Code does not work that way.

According to the principle of the binding force of contracts set out in article 1270 Civil Code, a validly concluded contract “has the force of law between the parties” and may be modified or terminated only by agreement of the parties or in cases authorised by law. In practice, this means that the parties cannot just back out of a real estate sale contract simply because they changed their mind or because the market conditions have evolved.

Undoing the contract normally occurs within a few major legal categories:

  • nullity (absolute or relative) – where there are defects in the validity of the contract from the outset (for example, vitiated consent, lack of capacity, illicit object);
  • termination (rezoluțiune) – where a serious, culpable non-performance occurs in a contract performed “at once” (uno ictu) (such as a real estate sale), and which generally has retroactive effect (the parties are brought back, as far as possible, to the position before the contract);
  • rescission (reziliere) – where the contract is performed over time (for example, lease, service contracts), and the termination only produces effects for the future.

For apartment or house sales, the discussion is usually about termination (rezoluțiune) (undoing the contract due to non-performance) and specific remedies like warranty for hidden defects or warranty against eviction, not about a generic “cancellation”.

3. Termination (rezoluțiune) vs. rescission (reziliere)

The two concepts are often used interchangeably in colloquial Romanian, but the Civil Code draws an important distinction, with real practical consequences:

  • Termination (rezoluțiune) applies mainly to contracts with one-off (instantaneous) performance, for example a real estate sale where ownership passes at a specific point in time. Termination typically undoes the contract retroactively; the parties are put back, as much as possible, into the situation they were in before the contract. The seller gets the property back, the buyer recovers the price (possibly plus interest and damages).
  • Rescission (reziliere) applies mainly to contracts with continuous or periodic performance over time, such as leases, service contracts, subscriptions, and produces effects only for the future: the obligations already performed generally remain in place, and only the future performance is stopped.

Real estate sale contracts are, in almost all cases, contracts with one-off performance (even if price payment is staggered or subject to conditions), which is why the appropriate remedy for serious non-performance is termination (rezoluțiune), not rescission.

For this reason, when going to court it is important to frame the claim correctly (an action for termination of the sale contract), rather than using an inaccurate generic reference to “rescission”. The court will in any case look to the substance, but a clear legal framing avoids procedural arguments.

4. Specifics of the real estate sale contract

4.1. What is a sale and what are the parties’ obligations?

Sale is defined in article 1650 Civil Code as the contract whereby the seller transfers or undertakes to transfer ownership of a good to the buyer in exchange for a price in money. For immovable property (apartments, houses, land), the general rules of the Civil Code (articles 1650–1762) are combined with special rules on land registration and publicity.

Article 1672 Civil Code lists the seller’s main obligations:

  • to transfer ownership of the property or right sold;
  • to deliver the property;
  • to warrant the buyer against eviction and defects of the property.

In parallel, the buyer’s main obligations include:

  • to pay the price in the manner and at the times agreed in the contract;
  • to take over the property (accept delivery and take possession);
  • to bear, as a rule, the costs of the sale (notarial fees, taxes, unless the parties agreed otherwise).

4.2. Why we mainly talk about termination, not rescission

Even if the price may be paid in instalments and the contract may set deadlines for delivery or completion of works, a real estate sale is still typically a contract with one core instant performance: the transfer of ownership and risks in the property. This is why the classic remedy for serious non-performance is termination, not rescission.

However, there is often a preliminary stage – an ante-contract or preliminary sale-purchase agreement – where the parties promise to conclude a future sale. In that context, clauses about “resiliation” and gradual obligations (obtaining financing, finishing works, obtaining permits) may appear. In practice, it is important to distinguish between:

  • a preliminary agreement (bilateral promise to sell/buy), where termination or rescission clauses may apply to the promise itself if conditions are not met;
  • the authentic sale-purchase contract, which actually transfers ownership and in relation to which we normally talk about termination for non-performance (for example, non-payment of price), not about rescission.

5. Typical scenarios where you can seek termination of a real estate sale

The Civil Code does not provide a closed list of situations where termination can be requested. The general requirement is that the non-performance be sufficiently serious to justify undoing the contract. In real estate sales, case-law has identified a few recurrent scenarios.

5.1. Non-payment of the price by the buyer

One of the most common reasons for termination is non-payment of the price or only partial payment, where the buyer is in delay and the non-performance is essential. Doctrine and case-law consistently recognise that failure to pay the price in a sale contract can justify termination, if the seller does not choose instead to pursue forced execution of the payment obligation.

In practice, real estate sale contracts often contain an express termination clause (a pactum commissorium of the fourth degree) by which the parties explicitly provide that non-payment of the price by a certain deadline leads to termination of the contract by operation of law, based on a unilateral notice, without the need for a court judgment. Such clauses must be interpreted strictly and in line with article 1553 Civil Code and the other rules on contractual termination.

Practical example: the buyer pays a 10% deposit, and the remaining 90% of the price is due within 30 days after signing the notarial deed. Several months pass with no payment, as illustrated by multiple court decisions, and the seller notifies the buyer, placing them in default and granting an additional reasonable deadline. The buyer still fails to pay. In this situation, the seller may bring an action before the court seeking termination of the sale contract and damages, especially if the property has already been delivered. If there is a pactum commissorium, the seller may declare unilateral termination and then ask the court to confirm that termination has occurred and to order the effects (re-registration of the property, damages, etc.).

5.2. Failure by the seller to deliver the property or to fulfil essential duties

On the seller’s side, article 1673 Civil Code obliges them to transfer the right sold and, in conjunction with article 1672, to deliver the property and provide warranty against eviction and defects. Typical situations where the seller breaches these obligations include:

  • refusing to hand over the property within the agreed deadline;
  • failing to vacate tenants or other occupants, preventing the buyer from enjoying the property;
  • failing to fulfil necessary formalities for registering the buyer’s ownership in the land register;
  • concealing essential encumbrances or ongoing litigation concerning the property.

Depending on the seriousness of the situation, the buyer may seek performance of the duties (for example, delivery, eviction of occupants) or, where the non-performance is serious and persists, termination of the contract plus damages. Courts have held that prolonged and unjustified failure to deliver a property is generally a solid ground for termination.

5.3. Hidden defects of the property (warranty for defects)

Another important ground for undoing a sale is the presence of hidden defects in the property, covered by article 1707 Civil Code. The seller warrants that the property is free from hidden defects that make it unfit for its intended use or so diminish its usefulness or value that, had they known of them, the buyer would not have bought or would have paid a lower price.

Under article 1710 Civil Code, depending on the gravity of the defects, the buyer may:

  • require the seller to remove the defects or reimburse the repair costs;
  • (in some contexts) ask for replacement of the good (rarely applicable to immovables);
  • obtain a reduction of the price;
  • seek termination of the sale.

Court decisions have examined in detail what constitutes a “hidden defect” in relation to the standard of a prudent and diligent buyer and the property’s intended use (for example, serious structural issues, major infiltrations, design or execution defects, essential non-compliance with building permits), and in some cases have ordered termination of the sale contract rather than merely reducing the price.

Time limits are key. In the absence of a special limit, the general three-year limitation period for patrimonial rights applies, as set out in article 2517 Civil Code, combined with the rules on when limitation begins to run (usually from the time the buyer discovered or should have discovered the defects, within the boundaries set by the Code).

5.4. Eviction: when you lose or are seriously disturbed in your ownership

Beyond defects, the seller also warrants the buyer against eviction, meaning against total or partial loss of the property or serious disturbances in the exercise of ownership, caused by third-party claims or by circumstances imputable to the seller. The regime is regulated by article 1695 Civil Code and following.

Eviction may occur, for example, when:

  • a third party successfully claims the property based on a right predating the sale (a former owner, an heir who did not participate in the sale, etc.);
  • the property is subject to a mortgage or dispute not declared to the buyer;
  • the seller themselves disturbs the buyer by claiming rights over the property (for example, reserves an undeclared usufruct, continues to use the property as if still owner).

In case of eviction, the buyer may, depending on the circumstances, either keep the contract and obtain damages, or seek termination of the sale and restitution, plus compensation. Courts have ordered termination where the buyer lost the property due to recognition of a third party’s earlier real right.

5.5. Other situations: conditions, ancillary duties, permits

In sales involving developers or complex projects, contracts often contain clauses on obtaining certain permits, finishing works, connecting to utilities, or fulfilling conditions precedent (for example, bank loan approval). Failure to comply may lead to termination of the contract or to loss of the right to request execution, depending on how the clauses are drafted and whether the obligation was essential.

For example, if the developer fails to complete the building in the agreed manner and time, and the property does not comply with the permits or the technical project, the buyer may, under certain conditions, request termination of the contract or a price reduction, plus damages for the losses suffered.

6. Practical procedure: notice, court action, evidence

6.1. Analysing the contract and termination clauses

The first step before pursuing termination is a careful analysis of the notarial sale contract and any preliminary agreement. You should pay particular attention to:

  • clauses on deadlines for paying the price;
  • clauses on timing and manner of delivery of the property;
  • any express termination clauses (pactum commissorium) for non-payment or non-delivery;
  • clauses concerning warranties for defects and eviction, including any limitations or exclusions of liability (where permitted by law).

Express termination clauses may allow for unilateral termination by notice, without the court pronouncing termination, but in practice the court is often asked to confirm that termination has occurred and to order its effects (for example, entries in the land register, restitution of the price, damages).

6.2. Putting the debtor in default

As a rule, before seeking termination, the creditor must put the debtor in default under the Civil Code rules on delay. In practice, this is done through a written notice (typically sent by lawyer), delivered via a bailiff or another means that proves receipt.

The notice should clearly state:

  • the obligation not performed (for example, non-payment of an instalment, failure to deliver, failure to remedy defects);
  • the time within which the debtor must perform (an additional reasonable period, if not already overdue by contract);
  • the consequences of non-performance (for example, that the creditor will seek termination and damages).

6.3. Judicial termination vs. unilateral termination

The Civil Code allows both judicial termination (by court judgment) and, in some circumstances, unilateral termination (by notice), especially where there is an express termination clause. Even in the latter case, in real estate practice the parties usually end up in court anyway, in order to obtain a judgment confirming that termination has taken place and to secure entries in the land register and other effects.

Absent a clear clause on unilateral termination, the creditor must bring a court action for termination, and prove that:

  • a valid contract exists;
  • what the parties’ obligations are;
  • there has been a serious, imputable non-performance by the debtor;
  • the debtor was put in default, where required;
  • the loss suffered and the causal link, if damages are claimed.

6.4. Evidence: documents, witnesses, expert reports

In real estate termination cases, the following types of evidence are commonly used:

  • the authentic sale contract and any preliminary agreement;
  • land registry excerpts (before and after the transaction, and during the dispute);
  • proof of payments (bank transfers, receipts, bank statements);
  • correspondence between the parties (emails, letters, notices, other written communication);
  • expert reports (for example, construction experts to assess structural defects, water infiltration, compliance with building regulations);
  • documents about third-party claims or earlier disputes (in eviction cases).

Depending on complexity, such proceedings can be technical and lengthy. This is why it is important to prepare the case carefully from the outset, with the help of a lawyer specialising in civil and real estate litigation.

7. Effects of termination on the parties and third parties

7.1. Retroactive effect and restitution

For sale contracts, termination generally has retroactive effect. The contract is considered undone as if it never existed, and the parties must, as far as possible, be restored to their pre-contractual position.

In practice, this means:

  • the property returns to the seller’s patrimony, based on the termination judgment, and ownership is re-registered accordingly in the land register;
  • the seller must refund the price to the buyer (sometimes updated and with interest, depending on the court’s decision);
  • other ancillary performances are also restituted, where applicable (certain costs the parties paid, depending on the court’s assessment).

7.2. What happens to the buyer’s investments (renovation, improvements)

A delicate practical issue concerns the fate of the buyer’s investments in the property before termination (renovations, upgrades, fixtures). In principle, the rules on unjust enrichment and restitution of benefits apply, so the buyer may claim compensation for useful and necessary improvements, to the extent that they increase the property’s value and are not already offset by the buyer’s use of the property before termination.

The court will look at factors such as:

  • what type of work was carried out (necessary, useful, luxury);
  • whether the seller knew and accepted the works;
  • to what extent the improvements actually increased the property’s market value.

7.3. Mortgages, encumbrances, and the relationship with the bank

If the property was purchased with a mortgage loan, termination has implications for the relationship with the bank. In principle, termination of the sale affects the buyer’s title, which may also impact the mortgage. The concrete outcome depends on factors such as:

  • when the mortgage was registered in relation to the land registry notice of the termination action;
  • any special arrangements with the bank;
  • publicity rules and protection of third parties in the land registration system.

The situation can be complex and, in many cases, involves separate discussions and possibly additional agreements with the bank, especially if one needs deletion of the mortgage or a restructuring of debt.

7.4. Good-faith third-party purchasers

A particularly sensitive scenario arises where the buyer resells the property to a third party before termination. Land registration rules and publicity principles may protect a good-faith acquirer who relied on the land registry, in which the first buyer appeared as owner.

Therefore, in practice, when an action for termination of a real estate sale contract is brought, it is highly recommended to enter a notice of the litigation in the land register. This puts potential third-party purchasers on notice. If the action is not noted, and a third party acquires the property in good faith and for value, there is a risk that the subsequent termination of the original contract may not be enforceable against them, and the harmed party will have only a claim for damages against their immediate counterpart (who may be insolvent).

8. When “rescission” (reziliere) appears around real estate transactions

Although the typical remedy for sale contracts is termination, the term rescission (reziliere) may appear in several contexts around real estate:

  • in preliminary agreements (promises to sell/buy), where obligations are spread over time (for example, staged payments before the final contract, preliminary works or conditions), and the parties foresee rescission for future non-performance;
  • in contracts connected to the sale, such as property management contracts, maintenance contracts, leases, which can be rescinded for non-payment or other breaches and whose rescission may impact the overall deal;
  • where the parties, incorrectly, call a clause “rescission” in a true sale contract; in that case the court will look at the substance (one-off performance) and apply the legal regime of termination rather than rescission, despite the label.

What matters is not so much the label (“termination” or “rescission”), but the nature of the contract (one-off vs. successive performance) and the statutory regime that applies: for sale contracts, undoing because of serious non-performance is generally analysed as termination (with retroactive effect); for leases and other long-term contracts, we speak of rescission (with effects only for the future).

9. Common pitfalls and practical recommendations

9.1. Confusing nullity with termination

A very common pitfall is mixing up grounds for nullity with those for termination. Nullity concerns the validity of the contract from the outset (for example, vitiated consent, lack of capacity, illicit object or cause), whereas termination sanctions culpable non-performance of an otherwise valid contract. For instance, the mere fact that the price of the property has risen or fallen after the transaction is not, by itself, a ground for nullity or termination, absent a genuine vitiated consent or serious non-performance.

9.2. Limitation periods

Any action for termination or based on warranties for defects and eviction is subject to limitation. Where the law does not provide otherwise, the general three-year limitation period applies to patrimonial claims, as per article 2517 Civil Code. In practice it is essential to take court action within this time frame, normally calculated from when you knew or should have known of the non-performance or defect, according to the general rules on limitation.

Limitation does not apply automatically; it must be raised by the interested party (normally the defendant). However, once the period has expired, the risk is high that the action will be dismissed as time-barred.

9.3. Clauses limiting or excluding warranties

Some contracts attempt to limit the seller’s liability for defects or eviction by contractual clauses. The Civil Code allows such clauses in principle, but subjects them to strict conditions, especially where the seller knew or should have known of the defects or legal issues. Clauses seeking to exclude the warranty in cases of bad faith by the seller are generally ineffective.

In addition, in transactions involving consumers, special consumer protection law on unfair terms may come into play, invalidating particularly one-sided clauses that excessively restrict the buyer’s rights.

9.4. Failing to note the litigation in the land register

As mentioned above, a serious practical mistake is failing to note the termination action in the land register. If the property is resold to a good-faith third party before the litigation is visible in the registry, there is a serious risk that the later termination will not be enforceable against that third party, and the harmed party will be left only with a personal claim against their counterpart.

9.5. Letting emotions drive litigation strategy

Real estate transactions often involve life savings and emotional investment from both sides. From a legal perspective, however, solutions are based on statutory provisions, evidence and case-law. Starting litigation without a realistic assessment of evidence, costs and chances of success can lead to disappointing results and additional unnecessary expenses.

Therefore, before deciding to seek termination of a sale contract, it is wise to:

  • obtain an opinion from a lawyer specialising in civil and real estate law;
  • try, where possible, an amicable solution (renegotiating the price, repairs, a mutual termination deed);
  • carefully weigh the cost–benefit ratio of a potentially long and technical court case.

10. Frequently Asked Questions (FAQ)

10.1. Can I “cancel” a real estate sale contract just because I changed my mind?

No. A real estate sale contract is in principle final and binding. You can only undo it if there is a legal basis: nullity (for example, vitiated consent, lack of capacity), termination for non-performance (for example, non-payment of price, failure to deliver), hidden defects or eviction. The fact that you regret the transaction or that the market moved against your expectations is not, on its own, a ground for undoing the contract.

10.2. I discovered hidden defects in the apartment after purchase. Can I ask for termination?

Yes, if the legal conditions for hidden defects are met: the defects existed at delivery, could not have been discovered by a prudent and diligent buyer without specialist assistance, and are sufficiently serious that the property is unfit for its intended use or its value is substantially reduced. Depending on the gravity, you may seek repair, price reduction or even termination of the sale. It is essential to act within the applicable limitation period and to obtain both technical and legal advice.

10.3. The buyer has not paid the full price. Can I get my property back?

In principle, yes, if the non-payment is serious and the buyer is in default. You may choose between suing for payment or seeking termination of the contract and damages. If your contract includes an express termination clause, you may declare termination unilaterally, following the contractual and legal conditions. In practice, you will usually need a court judgment to have the buyer’s ownership deleted from the land register and your title restored.

10.4. What happens to the mortgage loan if the court terminates the sale?

Termination affects the buyer’s title to the property, which also has consequences for the mortgage. The specific situation depends on when the mortgage was registered, whether the termination litigation was noted in the land register, and what agreements exist with the bank. In many cases, separate negotiations and arrangements with the bank are needed to adjust the credit relationship (for example, repayment of the amount already paid to the seller, restructuring of the loan, etc.). This is a complex issue that must be assessed case by case with your lawyer and the bank.

10.5. Can I obtain damages in addition to termination?

Yes. The Civil Code allows you to claim damages in addition to termination, for the loss caused by non-performance. For example, you may claim damages for rent paid elsewhere because you could not use the property, for costs of expert reports and notices, or for other proven expenses. The court will assess causation and the amount claimed.

10.6. Is a simple notice enough to terminate a real estate sale?

A notice is an important step, especially where there is an express termination clause, but it is rarely sufficient by itself. In real estate, you almost always need a court judgment to fully clarify the parties’ rights, obtain entries in the land register (deletion of the buyer’s title, re-registration of the seller) and settle any financial restitution and damages.

10.7. What can I do to protect myself before buying a property?

Before signing a sale contract, it is prudent to:

  • obtain and analyse, preferably with a lawyer’s help, the full land registry history of the property;
  • check for existing disputes, encumbrances, mortgages or other legal risks;
  • hire a technical expert (engineer, architect) to assess the condition of the building, especially for older properties or where visible issues exist;
  • pay close attention to clauses on warranties for defects and eviction and avoid overly broad exclusion clauses;
  • ensure that any substantial advance payments are secured (for example, via escrow accounts or bank guarantees).

11. Sources and useful links