The former Civil Code, adopted in 1864, had not experienced major changes over time. As society changed, however, so did the need to create a coherent legal framework reflecting the changes. Romanian policy-makers chose a radical solution: removal of the old code and enactment of a new one.

Background

After reviewing regulations in other civil law systems (eg, the civil codes in the Canadian province of Quebec, Italy, Spain, Switzerland, Germany, Brazil) and international documents Romania is a party to (eg, the European Convention on Human Rights, the UN Convention on the International Sale of Goods), the new Civil Code appeared in 2009. It was enacted by Law 71/2011, which entrusted the throne of the Romanian legal system to the new Civil Code (New Civil Code) from 1 October 2011.

The New Civil Code brings long awaited changes, some in line with case law and legal commentary that filled gaps in the old code, some settling old disputes, and some completely new to the Romanian system.

This article touches on some topics that may impact on the increasingly sophisticated mechanisms of real estate transactions.

Acquisition

Last year’s Roadmap discussed a change in the transmission of title to real estate. The New Civil Code sets forth the constitutive effect of registering rights to real property in the Land Registry. Rights will be established between the parties and towards third parties only if registered in the Land Registry based on the parties’ common will. Unfortunately, this regulation is not yet in effect because it is conditioned on finalisation of the cadastral works.

Real rights are in turn better and more uniformly regulated; the superficies right is coherently regulated for the first time in Romanian law.

Given the complex structure of real estate transactions, it is worth mentioning that Romanian contract law has been significantly amended by the New Civil Code. For example, standard and non-standard clauses are differentiated, as the legislator wanted to limit abuses by the economically stronger party.

Unidroit Principles have set the example in matters of valid consent. Thus, fundamental mistake may lead to contract annulment. Mistake as to matters of law and fraudulent non-disclosure are now expressly regulated. And taking unfair advantage or excessive benefit in concluding a contract can lead to its invalidity. The aim is to protect a vulnerable contractual party and to remedy contractual imbalances.

Real estate management

Romanian law sees a first regulation of trusts (Romanian fiducia), a common law concept increasingly used in civil law systems. Any person may grant the trust, but to avoid money laundering and tax evasion, the trustee must be a credit institution or financial investment company, an insurance company, a notary public or an attorneyat- law.

Further, Romanian law now sets forth general rules on managing the estate of another. The rules apply absent alternative legal or contractual provisions.

Development

Regulation of construction contracts has become more detailed in terms of the parties’ rights and obligations. A stricter regulation on amending the price and new provisions on the contractor’s obligation to inform the employer aim to ensure parties’ performance and to limit cases where fault for non-performance and risk allocation are difficult to determine.

Non-performance

The New Civil Code lists the remedies for non-performance (eg, specific performance, termination of the contract, etc.). In all cases, the aggrieved party may claim damages to recover losses from the non-performance. Non-performance includes all forms of failure to perform: full or partial non-performance, faulty non-performance, delayed performance.

Damages for non-performance depend on the loss incurred. When determining losses, the aggrieved party will consider not only the damage suffered but also their potential gain, such as the reduction of certain costs. Non-pecuniary loss may also be recovered.

For delayed payments, interest starts to run immediately. To encourage timely performance, interest starts to run irrespective of any action of the aggrieved party.

Securities

Performance may be secured by personal guarantees (such as a surety) or real ones (such as a mortgage). New elements include the regulation of mortgages on movable assets, an overall mortgage over a mass of immovable assets, and provisions on free choice of form for pledge contracts.

Claims

Contractual claims are time-barred by a general threeyear statute of limitations, with a shorter or longer term in specific cases.

Under certain conditions, and with the exception of some fields (eg, insurance), the parties may now contractually amend such terms.

The statute of limitation is suspended while the parties negotiate to amicably resolve a dispute, as it would be unfair for the aggrieved party to be time-barred if negotiations fail.

Given the complex structure of real estate transactions, Romanian contract law has been significantly amended by the New Civil Code. For example, standard and non-standard clauses are differentiated, as the legislator wanted to limit abuses by the economically stronger party.