Areas of Concern Generated by the New Rules Regarding the Sale & Purchase of Lands Outside Built-up Areas

Even though comments have already been made in relation to Law no. 17/2014 on Steps to Regulate the Sale and Purchase of Agricultural Lands Located outside Built-Up Areas, we believe that it is useful to present a few considerations related to this legal norm, hopefully meant to raise awareness on its consequences. We would like to start by recalling the usual expectation that a legal norm requires a consistent form, able to give substance to its norms and principles, an articulated wording, with no ambiguities, as well as legal solutions corresponding to the logics based on which that legal norm was built. In the absence of such qualities, the legal relations arising under a law are exposed to unforeseeable risks and consequences.

Or, in our opinion, a mere reading of Law no. 17/2014 and of the three Methodological Norms accompanying it reveals flaws, mismatches and contradictory legislative options, of nature to generate difficulties in practice and to require from those involved (contracting parties, public authorities, lawyers, notaries and land book registrars) additional efforts in understanding and applying the legal provisions, as well as in avoiding the unintended consequences of the law. Without an intention to prepare a comprehensive list, we will present below a series of aspects that may generate worries or at least concerns within the legal community:

1. It is of relevance the fact that only one month after the law came into effect, the legislator intervened with four relatively useful amendments. However, this suggests a flawed initial drafting of a normative instrument meant to resist in time. Moreover, this early corrective intervention, which is far from strengthening the image of a clear policy line of the government in the area of agricultural land sales (with effects outside the borders of Romania), indicates disturbing hesitations and uncertainties about the future. Therefore, it is legitimate for us to wonder how soon we can expect a next amendment to the law that may overlap sale proceedings and acts under progress at that moment, which would result in far from negligible difficulties related to the application of the law in time.

2. Which are the interests promoted by the law? The answer to this question can be useful whenever one has to interpret the legal provisions in ambiguous situations or when various interests of beneficiaries of this law come into conflict. The purposes set by this law – alimentary security, exploitation of natural resources in the national interest, and merger of agricultural lands in order to increase the size of agricultural farms and to create economically viable exploitations – reflect the promotion of an obvious public interest, which will prevail on interests of private persons. But within what limits and with what consequences for the private sector? The law is silent in this respect. And what the solution will be when interests of sellers come into conflict with those of preemptors? The law offers neither an answer nor criteria for ranking such private interests. This generates a risk for one being unable to forecast the manner in which administrative authorities will decide during the proceedings regulated by this law, or how courts will decide in case of disputes.

3. Even though the purposes of this law are intended to meet a public interest, this legal norm does not seem to prevent the performance of agricultural land sale operations for purely speculative purposes, depending on commercial considerations that, at a given moment, can be dictated by the market. Is this conclusion founded? Or should we anticipate obstructions from public authorities in issuing final approvals following preemption proceedings?

4. An analysis of the law leaves us to believe that the new legal regime will govern exclusively the sale of agricultural land. This means that other legal operations related to the disposition of agricultural lands or to the acquiring of ownership titles over agricultural land are excluded implicitly from the scope of application of this law. We refer here to operations such as exchanges, donations, in-kind contributions to the share capital of companies, marital partitions, enforcements, legal or testamentary inheritances, or acquisitive prescriptions. This interpretation remains to be confirmed in practice, in order not to have the surprise of potential actions for nullification.

5. According to Article 4 para. 3, the request and use of land book certificates in relation to ownership translation contracts regarding immovable assets and other real rights fully prove the good faith both to the parties to such contracts and to the professional involved in the proceeding in respect of the seller’s capacity as owner over the real estate subject to sale according to the description contained in the land book.[1] 

The reason for introducing this legal provision is obscure. No matter how special Law no. 17/2014 is and, therefore, able to derogate from the ordinary law, we believe that the absolutism expressed by Article 4 para. 3 in respect of good faith is unnatural if we look at Article 901 of the Civil Code referring to the acquiring of a real estate ownership-related right in good faith, as well as at Article 833 of the Civil Code that makes reference to the examination of the land book. Separately from this, the legal provision deviates from the consistency of the legal language, which should be maintained all along the legal norm, mentioning, all of a sudden, ownership translation contracts (other than the sale ones?), immovable assets (other than land?) and other real rights (other than ownership rights?).

6. What should an agricultural land sale offer contain? Definitely, the price. Uncertainties concern the category of the “sale terms”. While the law invokes the latter in a quasi-imperative wording, the methodological norms seem to admit their absence from a sale offer. Under the circumstances where the law sanctions deviations from the content of an offer by absolute nullity at the moment of the contract conclusion, this apparent addition to the law brought by the norms (in the sense of the optional nature of the sale terms) is able to jeopardize the contractual security, in the absence of a clear interpretation line set by the public authorities in charge of implementing the law.

7. There is no doubt, the 30-day term from the date when a sale offer is published, during which preemptors can communicate their decision, serves to obtaining their consent to purchase agricultural land. We believe that, within this term, a seller has the obligation to be open to any preemptor, by offering all the information about itself, about the land and about any other acts and facts connected to the intended sale, in order to eliminate the risk of consent flaws. The law would have done an important favor to preemptors if it had stipulated expressly this obligation of sellers to provide such information.

8. In our opinion, a sale offer should be irrevocable as from the date of its publication and electronic transmission by the city hall. However, the law establishes that, if within the term of 30 days and the term of 10 days allotted to the conducting of proceedings, a seller alters the data included in its sale offer, it shall have the obligation to repeat the procedure for registering the application requesting the offer publication addressed to the city hall. What does “data included in the offer” mean? The price? The sale terms? In other words, critical elements showing the intention to sell. If the answer is affirmative, we reach an unjustified deviation from the principle of an offer irrevocableness, established by Article 191 of the Civil Code, and easy possibilities to drop a sale in case of undesirable preemptors. Or is it about data for the identification of the offerer or of the land subject to sale, in the sense of correcting them in case of clerical errors? Moreover, the law fails to specify how many times the application registration proceeding may be resumed as a result of alterations to the data included in the offer, a fact that can lead to abuses of right  by sellers and can place preemptors in a state of uncertainty regarding the perspectives of the contract conclusion.

9. The competition among preemptors is insufficiently regulated by the law. The legal provisions target only three possibilities for preemptors to accept a sale offer, and establish the options of sellers in an imperative and limitative manner. We believe that in the case of other possible alternatives, which are not established by the law (for instance, several preemptors of the same rank offering a seller a higher price and more advantageous conditions than those contained in the offer), sellers have full freedom to select the preemptor.

10. An impossibility to conclude a sale contract with the selected preemptor at a price or under terms other than those contained in a sale offer (which are deemed to be essential elements of the contract) results implicitly from the law (even though an express provision would have been necessary, not to leave room to interpretations contrary to the law rationale). However, we believe that such prohibition does not prevent the parties to negotiate, following completion of the proceeding related to the exercise of the preemption right, the secondary elements of their contract (representations and warranties, liability, limitation of liability, contract termination etc.) based on Article 1182 para. 2 of the New Civil Code. However, the absence of a provision referring to such possibility in the content of Law no. 17/2014 generates risks in practice.

It is recommendable to continue debates on the normative content of Law no. 17/2014 and on how this legal norm will operate in practice. There is no doubt, diverse viewpoints and the flagging of other problematic aspects can be nothing but beneficial to the legal community and would ensure the execution of legal documents protected from risks, disputes and unjustified costs.

[1] Article 4 para. 3 “solicitarea și utilizarea certificatului de carte funciară în contractele translative de proprietate privind bunurile imobile și alte drepturi reale fac pe deplin dovada bunei-credințe atât a părților din contract, cât și pentru profesionistul instrumentator, cu privire la calitatea de proprietar a vânzătorului asupra imobilului supus vânzării conform descrierii din cartea funciară”.

15 iulie 2014 | Horațiu Dan DUMITRU, Claudiu ȚÂMPĂU