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Commercial Property Due Diligence in Romania: Checklist for Foreign Investors

The article provides a practical checklist for foreign investors looking at Romanian commercial properties, from title and urban planning checks to leases, permits and tax issues. It helps buyers structure their due diligence process so that major legal and commercial risks are identified before signing.

Romania has become a key destination for international investors looking for yield and growth in Central and Eastern Europe. Office buildings in Bucharest, logistics parks on the main transport corridors, retail schemes in regional cities and renewable energy projects on industrial or agricultural land all attract foreign capital. The common thread behind successful deals is not luck, but disciplined commercial property due diligence adapted to the Romanian legal and regulatory environment.

Local practice and market commentary emphasise that thorough legal due diligence is indispensable in any Romanian real estate transaction, whether the investor is acquiring a stand-alone asset, a portfolio or shares in a property holding company.[1][2] At the heart of this process are checks on corporate structure, title and Land Book, urban planning and building permits, environmental obligations and tax.

This article offers a practical, transaction-focused checklist for foreign investors conducting due diligence on commercial property in Romania. It is not a substitute for tailored legal advice, but it should help institutional investors, banks, funds and corporates understand what a robust diligence exercise looks like and which red flags deserve particular attention.

Corporate, Property, Urban-Planning, Environmental and Tax Due Diligence

In Romanian practice, commercial real estate due diligence is typically organised into several workstreams that mirror the the key risk areas of a project or asset: corporate, property title and Land Book, urban planning and construction, environmental and regulatory, and tax. Each workstream should be adapted to the transaction structure (asset deal versus share deal) and the asset class (office, retail, logistics, industrial, hotel, mixed-use).

1. Corporate due diligence: the investment vehicle and group structure

Many commercial properties in Romania are held through special purpose vehicles (SPVs), typically limited liability companies (societăți cu răspundere limitată) or joint-stock companies (societăți pe acțiuni). When investors acquire shares rather than assets, the first layer of due diligence focuses on the corporate integrity of the vehicle.

Key checks usually include:

  • Corporate existence and history: review the company’s registration with the Trade Register, articles of association, historical share capital changes, and records of directors and shareholders.
  • Authority and capacity: verify that the company has the corporate power to own real estate and enter into the transaction; check board and shareholder approvals, corporate governance rules and any restrictions in bank finance documents or shareholder agreements.
  • Encumbrances over shares: confirm whether the shares in the SPV are pledged to lenders or subject to options or pre-emption rights. Any existing share pledge will need to be released or consented by the lender before completion.
  • Financial statements and going concern: analyse audited financials and management accounts for balance sheet risks (hidden liabilities, intra-group financing, tax exposures).
  • Litigation, insolvency and sanctions: search court databases and the insolvency register for ongoing disputes or insolvency proceedings, and screen the SPV and its owners against sanctions and AML/CTF lists.

For forward funding or development transactions, corporate due diligence also covers the developer’s track record, equity commitments, and any joint venture arrangements with local partners.

2. Property and Land Book due diligence

Romania operates a Land Book (carte funciară) and cadastre system governed by Law no. 7/1996 on cadastre and real estate publicity.[3] The Land Book describes each immovable property and records ownership rights, mortgages, easements, pre-notations and other legal situations. For commercial property transactions, the Land Book is the backbone of title due diligence.

A typical property due diligence workstream will cover:

  • Identification of the asset: confirm that the cadastral number, Land Book number, surface, boundaries and use (e.g. industrial, commercial, agricultural) correspond to the asset being sold. Inconsistencies between the physical asset and the Land Book must be addressed before closing.
  • Chain of title: review the historical title documentation (sale-purchase agreements, contribution in kind, privatisation contracts, restitution decisions, partition deeds) to ensure that the seller acquired valid title and that any conditions precedent were fulfilled.
  • Current ownership and co-ownership: verify that the seller is registered as owner, that shares in co-owned property are clearly defined and that there are no pending claims or annotations that could affect the buyer’s rights.
  • Mortgages, charges and other encumbrances: identify all registered mortgages, usufructs, easements, pre-emption rights, seizure orders, litigation notices or pre-notations of promises to sell. For each, assess whether and how they will be removed, waived or assumed on closing.
  • Restrictions and public law burdens: check for expropriation risks, public utility corridors, archaeological or heritage protections, rights of way and other limitations on use or development.

Investors should rely not only on Land Book excerpts but also on practical experience from local counsel and notaries, who can help identify anomalies such as mismatched cadastral data or overlapping titles arising from separate restitution procedures.[4]

3. Urban-planning and construction due diligence

For income-producing assets and especially for development projects, urban-planning and construction law compliance is critical. The main legislative pillars are Law no. 350/2001 on spatial planning and urbanism[5] and Law no. 50/1991 on the authorisation of construction works.[6]

Urban-planning due diligence typically involves:

  • Planning documentation: review the applicable general urban plan (PUG), zoning plan (PUZ) and detailed urban plan (PUD), if any, to confirm allowed uses (e.g. commercial, industrial), maximum height, footprint, density and parking requirements. Recent reforms require municipalities to publish planning documentation online, making access easier for investors.[7]
  • Building permits and related approvals: verify that all buildings and major refurbishments were authorised by valid building permits issued under Law 50/1991, that works were completed in accordance with the permits and that acceptance reports and minutes of completion exist.
  • Use permits: check whether the buildings have use permits or equivalent documentation confirming they can be legally occupied and used for their current function (office, retail, logistics).
  • Deviations from permits: identify any unpermitted works (additional floors, extensions, changes of use) that could attract demolition orders or fines, and whether there are paths to legalisation.

In development deals, investors should also analyse the maturity of permitting (from planning certificates to building permits), timelines and likely impact of recent amendments to construction and urban planning laws.[8][9]

4. Environmental and regulatory due diligence

Environmental compliance is a central concern for industrial, logistics, retail and energy projects. The main framework is Government Emergency Ordinance no. 195/2005 on environmental protection, which sets the principles and instruments for environmental regulation, including environmental agreements, authorisations and impact assessments.[10]

An environmental due diligence exercise should cover, at a minimum:

  • Environmental permits and authorisations: review environmental consents, environmental permits and integrated environmental permits for existing activities, as defined under GEO 195/2005 and related secondary legislation.[11][12]
  • Environmental impact assessments (EIA): check whether the project was subject to an EIA and whether the conditions in the environmental agreement were implemented; this is particularly important for large commercial, industrial or infrastructure projects.[13]
  • Soil and groundwater contamination: assess historical industrial uses, fuel storage, waste disposal and any known contamination, and determine whether remediation obligations exist or may arise for the buyer.
  • Waste management and emissions: evaluate compliance with regulations on waste handling, packaging, hazardous substances and air emissions, especially where tenants carry out industrial or logistics operations on site.
  • Environmental liabilities on change of ownership: understand whether a change of operator or sale of assets triggers a review of environmental obligations or the need for new permits.

For renewable energy and heavy industry projects, investors may commission technical environmental audits in parallel with legal due diligence, in order to calibrate remediation costs and potential impact on project cash flows.

5. Tax due diligence

Tax considerations permeate commercial property deals, influencing both the structure (asset deal versus share deal) and the after-tax return. Romania’s tax regime is governed primarily by Law no. 227/2015 on the Fiscal Code and its implementing norms.[14][15]

A tax due diligence should address, among others:

  • Corporate income tax and specific tax: verify the SPV’s tax status (profit tax payer or specific tax regime for certain hospitality activities), review historical tax returns, losses carried forward and any ongoing tax inspections or disputes.[16]
  • VAT on real estate transactions: analyse whether the sale is subject to VAT, VAT exempt or subject to the transfer of a going concern regime, and whether any historical VAT adjustments may arise (e.g. change of use of buildings within the adjustment period). Romanian and international tax commentary highlight the importance of structuring VAT correctly for real estate deals.[17]
  • Local taxes on buildings and land: check local building and land taxes, which can vary between municipalities and may be increased up to several times the base level for certain properties.[15] Confirm whether the building is classified as residential or non-residential and whether valuations and reporting are up to date.
  • Withholding taxes and double tax treaties: if the seller is non-resident, consider the interaction between domestic withholding rules and Romania’s extensive network of double tax treaties.
  • Transfer pricing and intra-group arrangements: in group structures, review intra-group services, loans and asset transfers for transfer pricing risk and availability of documentation.

International tax and real estate guides for Romania stress that aligning legal and tax structuring at an early stage is essential to avoid unpleasant surprises at closing or during subsequent tax audits.[18][19]

6. Commercial and lease due diligence

For income-producing assets, the lease structure is as important as bricks and mortar. Legal due diligence should therefore include:

  • Review of lease agreements: assess key commercial terms (rent, indexation, incentives, step-up clauses), security (deposits, guarantees, letters of credit), break options and renewal rights.
  • Title to rent and service charge: confirm that tenants have valid occupancy rights and that there are no impediments in permits or zoning to current uses (e.g. retail, logistics, data centres).
  • Enforceability and registration: consider whether leases (or memoranda) should be registered in the Land Book to bind third parties, especially in long-term or anchor tenant situations.
  • Arrears and disputes: review current arrears, rent concessions (including Covid-era arrangements), and any ongoing litigation or threats of termination.

The conclusions of lease due diligence feed directly into pricing, financial modelling and negotiations on warranties and indemnities in the sale and purchase agreement.

Typical Red Flags and How to Mitigate Them

Even well-prepared transactions can reveal significant issues during due diligence. The key for foreign investors is not to panic at every problem, but to distinguish between deal-breakers and manageable risks that can be mitigated through price, contractual protections or remediation plans.

1. Title defects and Land Book irregularities

Red flags:

  • Discrepancies between the property as described in the Land Book and the asset on the ground (different surface, boundaries or use).
  • Gaps in the chain of title (missing transfer documents, unregistered inheritances, unclear privatisation or restitution history).
  • Competing claims or notations in the Land Book referring to litigation, pre-emptive rights or adverse possession.
  • Old mortgages or charges that were repaid but never formally removed from the Land Book.

Mitigation strategies:

  • Require the seller to regularise title before closing, including completion of missing registrations, settlement of disputes and rectification of cadastral data with the cadastre and Land Book office (OCPI) under Law 7/1996.[20]
  • Use conditions precedent in the sale and purchase agreement so that completion cannot occur until critical title issues are resolved.
  • Consider title insurance where available, especially in complex restitution scenarios or where residual risk cannot be fully eliminated.
  • Adjust the purchase price or require specific indemnities for residual or historical risks that are unlikely but potentially severe.

2. Planning and construction non-compliance

Red flags:

  • Buildings or extensions erected without valid building permits or in breach of planning parameters (height, footprint, use).
  • Expired or non-existent use permits, or occupation of buildings before completion of acceptance procedures.
  • Development carried out on the basis of old or challenged planning documents, with uncertainty over future validity.
  • Local authority enforcement actions or threats of fines and demolition orders.

Mitigation strategies:

  • Mandate the seller to obtain retrospective permits or legalisation where possible under Law 50/1991 and Law 350/2001, and to close any enforcement proceedings before completion.[21]
  • Structure the deal in phases or with holdbacks/escrow arrangements tied to successful regularisation of planning issues.
  • In some cases, exclude problematic parts of an asset (e.g. unpermitted mezzanines) from the valuation and treat them as upside if legalisation succeeds post-closing.
  • Implement technical monitoring of compliance for projects still under construction, linking equity disbursements to evidence of permits and inspections.

3. Environmental contamination and permitting gaps

Red flags:

  • Historical industrial uses (e.g. heavy manufacturing, fuel storage, chemical processing) without proper environmental documentation.
  • Absence or expiry of environmental permits for ongoing activities at the site.
  • Indications of soil or groundwater contamination, illegal waste dumping or non-compliance with hazardous waste regulations.
  • Unclear allocation of environmental liabilities between landlord and tenants in existing leases.

Mitigation strategies:

  • Commission targeted Phase I and Phase II environmental site assessments to quantify contamination and remediation costs, using the framework of GEO 195/2005 and related regulations.[22]
  • Agree on remediation plans to be implemented by the seller pre-closing, or by the buyer post-closing with appropriate price adjustments and indemnities.
  • Ensure that all required environmental permits and impact assessments are renewed or updated, and that conditions are integrated into operational procedures.
  • Clarify environmental responsibilities in leases, especially concerning waste management, emissions and reporting obligations.

4. Tax exposures and inefficient structuring

Red flags:

  • Ongoing tax inspections or disputes with the tax authorities relating to VAT, local taxes, corporate income tax or transfer pricing.
  • Use of aggressive tax structures or inconsistent treatment of real estate transactions, such as frequent reclassification between asset and share deals without business rationale.
  • Significant historical VAT adjustments pending due to changes of use or partial exempt activities carried out at the property.
  • Failure to align property classifications and valuations with the latest rules in the Fiscal Code and local tax decisions.

Mitigation strategies:

  • Obtain detailed tax due diligence and specialist opinions on contentious positions, including potential penalties and interest, by reference to the Fiscal Code and its implementing norms.[23]
  • Negotiate tax indemnities from the seller, with clear survival periods and caps, to cover historical tax risks.
  • Restructure the transaction (e.g. acquisition of assets instead of shares, or vice versa) to optimise VAT, local tax and future exit tax outcomes, aligning with OECD and EU guidance.
  • For portfolio deals, consider ring-fencing higher-risk assets into separate vehicles or tranches.

5. Lease and cash flow risks

Red flags:

  • High concentration of income in a small number of tenants, particularly where those tenants are in cyclical or disrupted sectors.
  • Short remaining lease terms for key tenants, with limited renewal options or weak contractual protections.
  • Unusual clauses favouring tenants, such as broad termination rights, caps on indexation or extensive rent-free periods not reflected in the financial model.
  • Informal arrangements (side letters, verbal agreements) that are not captured in the main lease documents.

Mitigation strategies:

  • Stress-test the business plan under conservative occupancy and rent assumptions, factoring in potential re-letting costs and capex for re-tenanting.
  • Seek lease re-gearing with key tenants in parallel with the transaction (for example, longer terms in exchange for capex contributions or fit-out allowances).
  • Use completion accounts or earn-out mechanisms linked to actual net operating income (NOI) performance post-closing.
  • Where appropriate, include specific warranties on the absence of side letters and on the accuracy of rent rolls and arrears schedules.

6. Counterparty risk and execution risk

Red flags:

  • Seller’s financial distress, which may increase the risk of challenges by creditors or insolvency administrators.
  • Complex shareholder structures, intra-group disputes or misalignment among co-investors.
  • Projects dependent on multiple regulatory approvals or third-party consents that may be delayed or refused.

Mitigation strategies:

  • Conduct counterparty due diligence on the seller and key stakeholders, including credit checks, litigation searches and assessment of insolvency risk.
  • Structure deals with escrow accounts, step-in rights or parent guarantees where appropriate.
  • For development projects, phase investments with clear milestones and rights to suspend or terminate on failure to achieve key regulatory or construction events.

From Checklist to Execution: Making Due Diligence Work for You

A Romanian commercial property due diligence report should not be a long list of abstract legal issues. For foreign investors, the real value lies in translating legal findings into commercial decisions: price, structure, risk allocation and asset management strategy.

To achieve this, investors should:

  • Define, from the outset, their risk appetite and investment objectives (core, core-plus, value-add, opportunistic), so that the legal team can calibrate the depth of due diligence accordingly.
  • Ensure close coordination between legal, technical, environmental, tax and financial advisers, so that findings are integrated into a coherent view of the asset.
  • Ask for a red-flag report early in the process, identifying issues that could be deal-breakers, and a more detailed report as negotiations advance.[24][25]
  • Use due diligence findings proactively in negotiations on price, warranties, indemnities and conditions precedent, rather than treating the report as a tick-the-box exercise.

Romania’s legal environment for commercial property is now broadly aligned with EU standards, but it retains local specificities in areas such as Land Book practice, restitution history, planning documentation and tax administration. Working with advisers who combine technical expertise with on-the-ground experience is therefore the safest way to turn due diligence into a competitive advantage rather than a bureaucratic hurdle.

Indicative sources and further reading