CHSH Guide to Real Estate & Construction Laws in Austria & CEE

CHSH Austria Belarus Bulgaria Czech Republic Hungary Romania Slovak Republic Media owner and publisher:

CHSH Cerha Hempel Spiegelfeld Hlawati Rechtsanwälte GmbH

A-1010 Vienna, Parkring 2

Tel: +43 1 514 35 0 Email: offi[email protected]

Although this brochure was created with the greatest of care, we nevertheless do not accept any responsibility or liability whatsoever for its content being correct, complete or up to date.

www.chsh.com 1

CONTENT

INTRODUCTION 3

AUSTRIA 5

BELARUS 17

BULGARIA 24

CZECH REPUBLIC 31

HUNGARY 39

ROMANIA 47

SLOVAK REPUBLIC 57

OUR OFFICES 68 CHSH Czech Republic

CHSH Austria

CHSH Slovak Republic

CHSH Hungary

CHSH Bulgaria

CHSH Romania CHSH Belarus 3

All liabilities for damages (direct or in - direct) from the information provided are explicitly excluded. It is recommen - About ded that parties seek professional legal advice prior to any business transactions this involving real property. About CHSH Guide CHSH is one of Austria's leading corpo - rate law firms, with an integrated Central and Eastern European practice. With a This CHSH Guide to Real Estate and team of over 180 lawyers, we offer our Construction Laws in Austria and CEE clients expertise and experience in all shall give the reader a valuable insight areas of real estate and corporate and into real property law in select countries commercial law in Austria and Central of Central and Eastern Europe, where and Eastern Europe. we have offices. We have tried to compile an overview of those legal aspects in the At CHSH, we have a dedicated team of covered jurisdictions, which we think are experienced lawyers specialising in real the most attractive to foreign investors estate and construction in CEE, all of to get a feeling of the respective legal en - whom have in-depth expertise coupled vironment. As such, this Guide is inten - with a detailed understanding of the ded only to provide a summary of the legal and business environments in subject matters covered. which our clients operate. The collective experience of our Real Estate & Con - It is of a general nature, does neither struction team means we are able to an - purport to be comprehensive, conclusive ticipate the needs of our clients and nor up-to-date and must not be relied provide the very highest quality legal ad - upon as giving legal advice. If you would vice. Each client is served by an integrated like to receive specific legal advice please team of specialists chosen specifically for speak to your contact at CHSH or the the transaction in question. key contacts referred to in this Guide.

Introduction 4

The CHSH CEE Real Estate & Con - COVERPAGE struction team handles this multi-faceted On the frontpage of this Guide you can area of law through every phase of a see a photograph (© Harald Eisenberger) project. Beginning with the acquisition of the Albertina Palais, a famous mu - of land, we support our clients in every - seum of arts located in Vienna, Austria. thing from project development, negotia - The origins of the museum date back to ting and drafting financing agreements, the lifetime of Duke Albert of Sachsen- preparing planning and construction Teschen, the son-in-law of Maria There - agreements, to residential and commer - sia. Today, the Albertina houses the cial leases. Our core areas of expertise in - Batliner Collection, one of the largest clude real estate transactions, project and most important collections of Mo - financing, handling landlord-tenant dis - dern Art, and safeguards one of the mos t putes and construction litigation, as well important and extensive assemblages of as assisting with claims management. old master prints and drawings, as well as Austria's most significant Photographic CHSH has built strong relationships Collection. with major market players such as inves - tors, property developers and agents, as CHSH is a proud Sponsor of Albertina well as architects and civil engineers, en - museum and regularly hosts events at abling us to offer our clients project ma - this wonderful Palais. nagement services as well. Vienna, October 2016 This expertise – combined with our ex - tensive experience in Central and Eastern Europe and our Lex Mundi network – ensures that our clients receive high-qua - lity, intellectually rigorous advice, across disciplines and across borders.

Introduction Au sT RiA 6

REAL ESTATE LAW the register and to obtain extracts there - IN AUSTRIA from. Attorneys-at-law, public notaries and other registered users can obtain ex - The Land Register tracts from the Land Register online. The correctness and completeness of all Rights relating to real property, such as rights and obligations registered in the ownership, mortgages, easements, land Land Register with respect to real pro - charge obligations and other rights, are perty may be relied upon by all. All re - recorded in the uniform Land Register gistrations are registered in the Land (Grundbuch ) administered by the District Register in a ranking order (defining the Courts. The folio identified by the Entry priority of rights) on a first come, first Number ( EZ, Einlagezahl ) and registe - served basis. Ranks can also be reserved red with the Land Register in connection for an upcoming transaction, such as an with the number of the Cadastral Mu ni - upcoming transfer of ownership ( Rang - cipality ( KG, Katastral gemeinde ) makes ordnung für die beabsichtigte Veräuße - the respective real property uniquely rung ) or for an upcoming mortgage identifiable in Austria. registration ( Rangordnung für die beab - sichtigte Verpfändung ). A basic principle of the Land Register is the "principle of registration", which ENCUMBRANCES means that the acquisition, transfer, li - The most relevant encumbrances in re - mitation and suspension of rights con - lation to real property are mortgages cerning real property can only be (Hypotheken, Pfandrechte ), easements effected by registration in the Land Re - (Dienstbarkeiten ), land charge obligati - gister. Until the legal transaction is regis - ons ( Reallasten ), rights of first refusal tered in the Land Register, the parties to (Vorkaufsrecht ) and restrictions on sale the contract only have contractual claims and encumbrance ( Veräußerungs- und against one another for performance of Belastungsverbote ), which can be regis - the registration (in particular but not tered in the Land Register and which are limited to transfer of ownership or fixed individualized rights relating to third liability mortgages). party property. Encumbrances are regis - tered in the Land Register in a ranking The Land Register is open to the public, order (defining the priority of rights) on thus everybody has the right to access a first come, first served basis.

Austria 7

MORTGAGES Personal easements are granted to a spe - A mortgage is a right of lien against a cific person. Only this entitled person real property. A right of lien is the right has the right to use a third party pro - granted to the creditor to obtain satisf - perty in the specified manner. action from a specific real property if the debtor does not pay the debt as agreed. The beneficiary of an easement is ob - If the mortgagor does not fulfil its obli - liged to exercise the easement right by gations, the mortgagee has the right to exercising great care with respect to the initiate legal enforcement proceedings servient property. with the competent court and to use the proceeds to cover any outstanding liabi - Easements only place an obligation of lities. Creditors are prohibited from ob - sufferance or forbearance ( Duldung ) taining ownership of the real property (passive obligation) on the owner of the directly on the basis of a mortgage ( lex encumbered real property. commissoria ). Land charge obligations ( Reallasten ) on The same mortgage can be registered on the contrary oblige the owner of the en - several land plots without incurring ad - cumbered property to behave in a certain ditional registration fees. way or to bear certain costs (active obli - gation). EASEMENTS AND LAND CHARGES Easements are understood to mean limi - Acquisition of Property ted, precisely defined rights relating to third party real property. A distinction is Real property can be acquired directly in made between "property easements" the form of an asset deal or indirectly by (Grunddienstbarkeiten ) and "personal ea - acquiring the property owning company sements" ( Personaldienstbarkeiten ). (share deal).

Property easements grant the respective ASSET DEAL owner of the "dominant" property certain Under Austrian property law, the proper rights over the "servient" property. A ty - owner of real property must be registe - pical example would be the right to cross red with the Land Register. Therefore, the servient property to access the domi - the ownership of real property is not ob - nant property (right of way, Wegerecht). tained by signing the purchase contract,

Austria 8 taking possession of the property and Purchase of Land by Foreign Nationals paying the purchase price. Furthermore, According to the land transfer legisla - it is absolutely necessary to register the tion enacted by each Austrian federal transfer of the ownership right in the state ( Bundesländer ), the transfer of real Land Register. The direct acquisition of property to foreign legal entities and in - real property requires the conclusion of dividuals (other than those of EU mem - a notarized contract as well as registration ber states) and in some cases even the of the new owner in the Land Register; transfer of tenancy rights is generally registration of ownership represents the subject to the prior consent of or notifi - "modus" of the acquisition without cation to the respective land transfer aut - which ownership of the real property hority of the relevant federal state. This cannot be obtained. The direct acquisi - restriction generally also applies to indi - tion of real property triggers land trans - rect acquisitions of real property (e.g. by fer taxes (see below). way of a share deal) since the respective state legislation and administrative SHARE DEAL practice refers to the ultimate [beneficial] The acquisition of real property via a owner of legal entities for the purpose of share deal leads to "factual" universal assessing the nationality of the buying succession, which secures for the acqui - entity. As regards the indirect acquisition rer all rights and obligations associated of property via a share deal, local legal with the shares and guarantees a conti - principles vary: in the federal state of nuity of contracts related to the real pro - Tyrol the prior approval of the land perty. Due to the lack of a new owner of transfer authority is mandatory, whereas the real property, no fees for registration in the federal state of Carinthia, such in the Land Register are incurred. Ho - mandatory approval is not explicitly go - wever, if the buyer or a group of compa - verned but needs to be assessed on a case nies within the meaning of Section 9 of by case basis, while in Vienna no appro - the Corporation Tax Act ( Körperschaft - val is needed. However, EU citizens and steuergesetz ) acquires in aggregate 95% entities may not be hindered from acqui - or more of the shares of the company, ring Austrian real property. the duty to pay land transfer tax is trig - gered (see below).

Austria 9

Buildings on dings erected on the building right are Third Party Land transferred to the owner of the third party real property in exchange for com - Following the principle superficies solo pensation amounting to a quarter of the cedit , the owner of a land plot is also the residual value of the building. owner of the building erected thereon (principle of inseparability of ownership SUPERSTRUCTURE (SUPERÄDIFIKAT ) of land and building). But there are two One further exception from the principle exceptions: the Building Right ( Baurecht ) of inseparability of ownership of land and the Superstructure ( Superädifikat ). and buildings is the superstructure ( Su - perädifikat ), which is built on third party BUILDING RIGHT (BAURECHT) real property and not intended to remain The building right is the right to own a there for an indefinite period of time. building on or under the ground surface Prior to the construction of the super - of real property owned by a third party. structure, the developer will typically The building right is established via a se - have to enter into an agreement with the parate unit in the Land Register and is owner of the real property allowing him treated as an independent real property. to own a building on the land for a limi - The counterpart registration represents ted period of time. The superstructure an encumbrance in the Land Register will not be registered in the Land Regis - unit of the third party land. Accordingly, ter; however, the agreement granting the the building right "doubles" the surface right to own the superstructure has to be of the respective land. Any construction filed with the Land Register and a re - or building erected on the building right spective note will be registered in the is connected thereto as a non-indepen - Land Register folio of the real estate on dent part in line with the superficies solo which the superstructure is erected. cedit principle. When transferring ownership to a super - structure, such transfer has to be notified The building right can only be granted to the Land Register to become effective. for a limited period of time, from a mi - nimum of ten to a maximum of 100 years, and is usually granted for a recur - ring consideration. Unless otherwise agreed, at the end of the term any buil -

Austria 10

Lease of Real Estate cern is subject to the lease. Basically, lea - ses of business operations are not subject Austrian law recognizes different types to the Rental Act but depending on the of contracts permitting the use or tenancy circumstances, the border between a of land, business premises and buildings. lease of a business operation and a lease of floor space is fluid. In general, the Tenancy law is governed by the Austrian lease of business operations can be assu - Civil Code (ABGB) and the Austrian med if the lessor has an economic inte - Rental Act ( Mietrechtsgesetz, MRG ). In rest in an ongoing business undertaken general, the Civil Code is applicable for by the lessee also in a wider context (e.g. any type of lease agreement ( Bestandver - if it is expressly agreed that a going con - trag ), whereas the Rental Act is in prin - cern must be handed back over to the ciple strictly applicable to tenancy lessor after the expiry of the lease term agreements for "floor space" ( Mietver - or in case of a shopping center as a busi - träge ) relating to residential and com - ness operation on its own providing a mercial premises. certain range of retailers). With respect to tenancy agreements in However, there are also lease objects that shopping centres for instance, industry fall partly under the Rental Act and partly practice is to conclude leases for business under the Civil Code. Fixed-term lease operations while the Austrian courts tend agreements may also be registered in the to qualify such lease agreements as leases Land Register, representing encumbran - of floor space, thus granting the lessees ces in relation to the real property. protection against termination of the lease without cause under the Rental Act. Ne - While the regime of the Civil Code pro - vertheless, this has to be assessed on a case vides great flexibility for the parties to by case basis. The most important con - agree on any terms and conditions, the sequences of the application of the Rental Rental Act on the other hand is adjusted Act are the landlord’s restricted possibi - to protect the tenant and its mandatory lities to terminate the lease agreement provisions may not be altered. and the imposition of detailed require - ments in respect of the basic features of A specific type of lease agreement is the the lease agreement (e.g. rent calculati - lease of business operations ( Unterneh - ons, operating costs, maintenance and menspachtvertrag ), where a going con - repair, term of the lease agreement, etc.).

Austria 11

Basically, lease law is one of the most scope of application of the Rental Act complex fields of law in Austria with a with specific agreement, but again: if highly political touch. such agreement is grossly discriminatory, such agreement might be null and void. OPERATING COSTS The operating costs of a building are the EFFECTS OF A CHANGE OF CONTROL costs associated with the use and enjoy - ment of a building and its facilities. If Lessee the agreement is not governed by the In case of a change of ownership or con - Rental Act, these costs may be passed on trol in the company which is a lessee, the to the tenants based on agreement bet - respective landlord is – only in case the ween the parties, unless such agreement lease agreement is subject to the full is grossly discriminatory. The landlord scope of application of the Rental Act – has to bear such costs in the absence of entitled to increase the rent to an ade - such contractual agreement. If the quate level. agreement falls under the full scope of application of the Rental Act, only spe - Owner cific, exhaustively listed costs in the Ren - In case of a change of ownership in real tal Act may be passed on to the tenant. estate, leases subject to the Rental Act are automatically passed on to the new MAINTENANCE AND REPAIR owner, who is bound by all provisions of Generally, the landlord is obliged to the lease. In case the lease is subject to hand over the leased premises in a con - the less strict Civil Code, the new owner dition fit for use. The duty of mainten - is also bound by the lease, but in parti - ance is not only limited to the leased cular not to its provisions regarding ter - premises, but to the common parts of mination of the lease. This means the the building as well. In case of applica - new owner may terminate the lease in ac - tion of the Rental Act, the costs borne cordance with statutory notice periods. by the owner for the general mainten - In order to avoid this consequence, a ance of the structure of the building and lease agreement has to be registered in the common parts of the building (i.e. the Land Register; in such a case the new external walls, roof, staircase, etc.) may owner is fully bound by all provisions of not be contractually passed on to the te - the lease agreement. nant, while this is possible outside of the

Austria 12

Public Permits (RETT) ( Grunderwerbsteuer ), which is not merely limited to "land", but also in - In order to realise building projects, buil - cludes the buildings erected on it. ding and operational facility permits (Bau- und Betriebsanlagengenehmigung ) In general, the calculation basis for the have to be obtained from the respective RETT is the value of the consideration authorities. In the case of shopping cen - (typically the purchase price) or the real tres, general approval to operate a shop - property value ( Grundstückswert ), whi - ping centre has to be obtained under the chever is higher. The real property value Trade Regulation Act ( Gewerbeordnung ) is assessed as follows: in order to evaluate the impact such a fa -  aggregate of the threefold of the cility might have on the environment. value of the land plus the value of After the facility in general is approved, the building; or each shopkeeper has to obtain a special  value to be derived from a suitable operational facility permit with respect real property price index (eligible in- to the operation of his/her business wit - dices to be determined by authority hin the shopping center. regulation); or  lower fair value of the transferred According to the Environmental Impact real property. Assessment Code ( Umweltverträglich - keitsprüfungsgesetz ), construction pro - The real property value also serves as the jects of a certain size are subject to a calculation basis for real property acqui - unified review process, which covers all sition without remuneration (e.g. by way other administrative requirements (i.e. of donation, transfer by way of reorga - building and operational facility per - nisation of a company ( Umgründung ), mits) in relation to the construction of etc.). The transfer of real property to clos e the envisaged construction project. family members is qualified by law as being conducted without remuneration. Taxes and Fees RETT is also applicable if 95 % of the shares in a company, which owns real ACQUISITION OF property, are acquired by a single pur - LAND AND BUILDINGS chaser or a group of companies within The acquisition of real property in Aus - the meaning of Section 9 of the Corpo - tria is subject to real estate transfer tax ration Tax Act ( Körperschaftsteuergesetz ).

Austria 13

The tax value ( Einheitswert ) of the real change of ownership in the Land Regis - property – a value established by tax aut - ter amounts to 1.1% of the value of the horities for taxation purposes which usu - land, which does not necessarily need to ally lies far below the actual value of the correspond to the purchase price. This real property – serves as the calculation fee only applies in case of an asset deal basis for the RETT in case of the acqui - since the Land Register needs to be up - sition of agricultural real property (i) by dated only in such case. way of reorganisation of businesses Transactions regarding the acquisition (Umgründungen ), (ii) acquisition of at least of real property are exempt from VAT 95% of the shares in a company owning but the parties may opt to add VAT to such agricultural real property, and (iii) the purchase price. This is required in acquisition by close family members. particular if the input tax levied on the The general tax rate amounts to 3.5% of costs of erection, maintenance and other the relevant calculation basis. In case of investments is reduced at a later stage. acquisition without remuneration, the The VAT rate is 20%. tax rate amounts to 0.5% for the first EUR 250,000 of the real property value, OWNING LAND 2% for the next EUR 150,000 and 3.5% Owning land is also subject to the real for any amount over and above this sum. property tax ( Grundsteuer ). The base rate In the case of the transfer of agricultural of the real property tax is ~2‰ of the tax real property to close family members, value ( Einheitswert ) of the land per year RETT will amount to 2% of the appli - (with regard to agricultural land, a tax cable tax value. rate of 1.6‰ up to a tax value of EUR In case of a transfer of non-agricultural 3,650 applies). The real property tax is real property by way of reorganisation levied by the Austrian municipalities, of a business ( Umgründung ) or acquisi - which may increase the base rate by a tion of 95% of all shares in a company maximum of 500%, i.e. the maximum rate owning real property, a privileged tax can be 1% per annum of the tax value. rate of 0.5% of the respective real pro - perty value applies. A respective transfer ENCUMBRANCES of agricultural real property is taxed at The registration fee for registering a a rate of 3.5% of the applicable tax value. mortgage in the Land Register amounts to 1.2% of the secured (maximum) The registration fee for registering the amount stated in the mortgage.

Austria 14

LEASE AGREEMENTS The base for the tax assessment is the According to the Austrian Stamp Duties sales margin (i.e. sales price minus acqui - Act, certain legal transactions are subject sition costs [including lawyer's fees]). to stamp duty ( Rechtsgeschäftsgebüh - ren ), such as any type of lease agree - Real property sales remain exempt from ments. The basis for determination of taxation if (i) the building was used as stamp duty for tenancy or lease agree - the seller’s principal residence for at least ments is calculated in accordance with two years since the acquisition or five the amount of the rent and term of the years within the last 10 years before the tenancy relationship. In the case of a sale, (ii) the building was self-constructed fixed term, the stamp duty amounts to by the seller or (iii) the building was ex - 1% of the gross annual rent multiplied propriated. by the amount of years up to the maxi - mum of 18 years (for commercial leases) Overview or 3 years (for residential leases). In the on fees and taxes: case of an indefinite term, the stamp duty amounts to 1% of the threefold of Taxes and Fees Rate the gross annual rent. In contrast to ten - In principle, 3.5% of ancy agreements, real property purchase RETT consideration or real (real estate transfer tax) property value, whichever agreements do not incur stamp duties. is higher Registration of ownership 1.1% of value of land SALE OF REAL PROPERTY BY PRIVATE INDIVIDUALS VAT (opting-in) 20% of consideration Profits from the sale of real property by Registration individuals will be taxed at a flat rate of of mortgage 1.2% of stated amount 30% if the real estate sold was acquired Real Property Tax 2‰ - 1% of the tax value after 31 March 2002 (new properties) and at a tax rate of 4.2% if the real estate 1% of the gross annual rent, multiplied by the was acquired before 31 March 2002 (old amount of years up to properties). Under special circumstan - the maximum of 18 years Stamp Duty for Lease (for commercial leases) ces, old properties may be subject to a Agreements or 3 years (for residential leases); in case of leases tax rate of 18%. In certain cases real pro - with an indefinite term, perty acquired after 31 March 1997 are 1% of the threefold of the gross annual rent also treated as new real property.

Austria 15

Environmental Liability known or suspected to be contaminated; it should, however, be noted that these In keeping with the “polluter pays prin - databases are not comprehensive and are ciple”, the polluter is liable and subject only indicative. to an obligation to carry out decontami - nation and remediation measures under The information contained in this over - the relevant Austrian regulatory law pro - view represents a condensed overview of visions (in particular, the Austrian Waste certain matters of real property law in Management Act ( Abfallwirtschaftsge - Austria, is of a general nature, does neither setz ) and the Austrian Water Law Act purport to be comprehensive nor con clu - (Wasserrechtsgesetz )). Austrian law also sive and does not constitute legal advice. provides for subsidiary liabilities of (i) CHSH Cerha Hempel Spiegelfeld Hlawati the owner of real property and (ii) the Partnerschaft von Rechtsanwälten does purchaser of the relevant real property. not assume any liability whatsoever for the The owner of the real property is in ge - correctness or completeness of this over - neral liable on condition that he agreed view. It is recommended that parties seek or voluntarily tolerated pollution, dan - professional legal advice prior to any busi - gerous circumstances or measures and ness transactions involving real property. neglected to implement appropriate measures to prevent pollution and/or contamination occurring.

The purchaser of real property may be - come liable if he knew or should have known (but did not due to his own neg - ligence) of the pollution or of the re - spective dangerous facility or measures. The Austrian Environment Agency (Umweltbundesamt ) runs two databases ("Index of Areas with Known Pollution" [Altlastenatlas ] and "Index of Areas Su - spected of being polluted" [ Verdachtflä - chenkataster ]), which contain infor ma- tion on those real properties, which are

Austria 16

For more information please contact

Dr. Peter Vcelouch Head of Real Estate & Construction Partner – Austria [email protected] Tel: +43 1 514 35 ext. 251

Dr. Johannes Aehrenthal Head of CEE Partner – Austria [email protected] Tel: +43 1 514 35 ext. 331

Dr. Manfred Ton Partner – Austria [email protected] Tel: +43 1 514 35 ext. 311

Mag. Mark Krenn Head of CEE Real Estate & Construction Partner – Austria [email protected] Tel: +43 1 514 35 ext. 591

Austria BE LA Rus 18

REAL ESTATE LAW a decision concerning registration of the IN BELARUS transaction if one of the parties has pur - posefully failed to do so. The Land Register The Land Register is open to the public, Rights with respect to real property, such thus everybody has the right of access to as ownership, mortgages, easements, the register and to obtain extracts there - etc., as well as transactions with respect from. The information provided includes to land plots and buildings are recorded not only details regarding a particular in the uniform "State Register of Real object of real estate but also details of Estate, Rights Thereto and Transactions the owner and information about any Therewith" (the "Land Register"), which encumbrances regarding the object as is administered by the State Republican well as information regarding the hol - Research and Production Unitary En - ders of these encumbrances. However, it terprise "National Cadastral Agency". is impossible to obtain a list of all ob - Each real property has its own unique jects of real estate belonging to a parti - cadastral number in the Land Register. cular individual or a company as access to such data is provided only to the title A basic principle of the Land Register is holders, their successors, and govern - the "principle of registration" which ment authorities. All registrations in the means that (i) the creation of real pro - Land Register are made in a ranking perty becomes legally recognized, (ii) order (defining the priority of rights) on transactions in real property come into a first come, first served basis. force and (iii) the acquisition, transfer, li - mitation and suspension of rights con - RESTITUTION cerning real property become effective Restitution of real estate, as a general only upon registration in the Land Re - legal concept, is possible in Belarus. In gister. A transaction regarding real estate particular, it may be applied in a situation is not deemed to have been officially con - when an owner has lost its real estate as cluded between the parties unless it is re - a result of fraud or invalid transaction. gistered in the Land Register. The only At the same time, in Belarus there is no parties’ obligation arising from such an legal basis for restitution of real property unregistered contract is the obligation to lost as a result of seizure by the German register it. A court has the right to issue authorities during World War II or by

Belarus 19 the Soviet authorities during the period easements", which grant the respective from 1917 to 1991. owner of the "dominant" property cer - tain rights over the "servient" property. Encumbrances A typical example of an easement (ser - vitude) is the right to cross the servient The most relevant encumbrances in re - property in order to access the dominant lation to real property are mortgages, ea - property (right of way). The easement sements (servitudes) and restrictions on (servitude) is strictly connected to the the sale of historic buildings. real property and is preserved in the event of the transfer of the rights to such MORTGAGES real property to another person. A mortgage is a right of lien against a property. A right of lien is the right gran - Acquisition of property ted to the creditor to obtain satisfaction from a specific property if the debtor The acquisition of property is possible does not pay the debt as agreed. If the in the form of a share deal, by acquiring mortgagor does not fulfil its obligations, the property-owning company, or in the the mortgagee has the right to initiate form of an asset deal, by acquiring the legal enforcement proceedings and to re - concerned property directly. cover the outstanding liabilities from the proceeds. In this case, the property is ASSET DEAL sold in an auction and the creditor reco - The direct acquisition of real property vers the debt from the money received in requires the conclusion of a written con - the course of such sale. Obtaining tract as well as registration of such con - ownership of the real property directly tract and registration of transfer of by the creditor based on a mortgage (lex rights over the land plot in the Land Re - commissoria) is impossible unless the gister. The registration of ownership re - property has not been sold in the course presents the "modus" of the acquisition of two subsequent auctions. without which ownership to the pro - perty cannot be obtained. EASEMENTS (SERVITUDES) Easements (servitudes) limit precisely SHARE DEAL specified rights to third party property. An acquisition of property via a share In Belarus, all easements are "property deal leads to "factual" universal succes -

Belarus 20 sion, which secures for the acquirer all right of permanent use or lease. It is usual rights and duties associated with the sha - to be an owner of a building erected on res and guarantees a continuity of con - state-owned land. tracts related to the property. Due to the As a general rule, the sale of a land plot lack of a new owner of the property, no and a building erected on this land plot fees for registration in the Land Register must be performed simultaneously if are incurred. both the land and the building are owned by the same owner. If the owner LAND PURCHASE of the building and the owner of the land BY FOREIGN NATIONALS plot are different entities/persons, the Belarusian law provides that foreign buyer of the building will obtain the same companies may only lease land in Bela - rights to the land plot as the rights of the rus for a period of up to 99 years. Excep - seller, e.g. the right of permanent/ tempo - tions apply to foreign companies that rary use or the right of lease. In such event , may temporarily use land (different from the relevant rights to the land plot are lease type of land usage right) in accor - obtained by the buyer simultaneously dance with concession agreements (for a upon registration of title to the building. period of up to 99 years). However, Be - larusian companies founded by foreign Lease of Real Estate companies or individuals have equal rights with regular domestic companies As a rule, lease agreements in Belarus with respect to the acquisition of land should be concluded for a limited term, and may freely purchase land through an although lease agreements for an indefi - auction or on the basis of a resolution of nite term are also possible. In general, the President of the Republic of Belarus. Belarusian law provides for protection of lessees. It provides, for example, for limits Buildings on on maximum rent rates with respect to Third Party Land state-owned real estate. A landlord gene - rally cannot terminate a lease agreement In Belarus it is possible (and usual) to until expiration of its term. However, erect buildings on a land plot which is lease agreements, which are concluded not owned by the owner of that buil - for an indefinite period, can be termina - ding. In particular, the land may be used ted by giving relatively short prior notice on the basis of other available rights, e.g. (three months as a default rule).

Belarus 21

Lease agreements, which include an op - ownership over it have to be registered in tion to purchase the object of the lease, the Land Register. are unusual in Belarus; however, the inclu - sion of such an option into a lease agree - Taxes and Fees ment is possible under Belarusian law. LAND TAX As a general rule, a lessee is responsible In Belarus companies and individuals for the leased building, which results in possessing land plots on the basis of right liability to bear all costs for its day-to-day of ownership, right of permanent use, maintenance. On the other hand, a lessor right of temporary use or right of inhe - is responsible for capital repair of the rited estate for life have to pay land tax. leased building. However, parties to a lease agreement are free to agree on any other The tax rate depends on the type of the distribution of costs between them. land (lands for construction, agricultural lands, lands of the cities, etc.) and may In comparison to other relevant contracts, vary from approx. EUR 0.5 per hectare lease contracts are not subject to regis - to EUR 180 per hectare or even more. tration with the Land Register except for the contracts on the lease of a land plot. BUILDING TAX In addition to land tax, domestic com - Public Permits panies should also pay building tax if they own buildings in Belarus. Indivi - In order to realise building projects, per - duals and foreign companies also pay mits for construction from local autho - this tax unless they let the premises rities must be obtained. Moreover, upon under a lease to a domestic company. In receipt of such permit and approval of the latter case, the lessee is obliged to pay design documentation a company should the building tax. The annual tax rate va - also receive a permit allowing it to carry ries from 0.1% (for individuals) to 1% out the intended work from the Depart - (for companies) of a building’s value. ment for Control and Supervision of Construction. Moreover, with respect to buildings, which were not completed within the Upon completion of the construction, term established by the construction per - the newly erected building and right of mit, the tax rate is 2%. In addition, the

Belarus 22 amount of tax rate may be increased up Overview to two and a half times by means of a on fees and taxes: decision issued by the local authorities. Thus, the maximum amount of tax can Taxes and Fees Rate be up to 2% for constructed buildings RETT and 5% for buildings under construction (real estate transfer tax) n/a for companies. For individuals the tax depends on type and legal basis for ownership and rate varies from 0.1% to 0.25%. Fee for registration varies from 0.5 basic of ownership value (approx. EUR 5) to 1 basic value (approx. There is no real estate transfer tax in Be - EUR 10) or more larus. However, VAT at the rate of 20% depends on type and legal basis for ownership and applies if a company sells real property. varies from 0.5 basic VAT At the same time, VAT is not applied if value (approx. EUR 5) to 1 basic value (approx. the real property is sold by an individual. EUR 10) or more

In addition, the parties to an agreement varies from 0.5 basic (sale/purchase contract, mortgage con - Fee for registration value (approx. EUR 5) to of mortgage 1 basic value (approx. tract, etc.) have to pay a fee for registration EUR 10) or more of the relevant agreements and transfer 1% - 5% for companies of rights in the Land Register. The amount Building Tax 0.1% - 0.25% for indivi - duals of the fee depends on the type of regis - tered right or transaction and varies from Land Tax EUR 0.5 -180 per hectare 0.1 basic value (approx. EUR 1) to 1 basic value (approx. EUR 10) or more.

Belarus 23

Environmental Liability dance with plans approved by the Ministry of Natural Resources and Environmental As a general rule, the owner of the land Protection of the Republic of Belarus. shall prevent the pollution of the land Moreover, the landowner should ensure plot he/she is possessing. If a company is that the amount of harmful substances using a land plot and such usage may emitted will not prevent the limits pres - pollute it, the company shall implement cribed by the law. measures preventing pollution in accor -

For more information please contact

Mag. Mark Krenn Head of CEE Real Estate Sergei Makarchuk, LL.M. and Construction Managing Partner – Belarus Partner – Austria [email protected] [email protected] Tel: +375 17 266 34 17 Tel: +43 1 514 35 ext. 591

Belarus BuL GA RiA 25

REAL ESTATE LAW The Land Register is open to the public, IN BULGARIA thus everybody has the right of access to the register and to obtain extracts there - The Land Register from. Everybody may rely on the as - sumption that the Land Register Real property rights, such as ownership, contains accurate and complete infor - limited property rights, mortgages, ease - mation relating to all rights and obliga - ments and other rights, are registered in tions with respect to real property. the Land Register, which is administered by the Registry Agency. According to Registrations are registered in the Land the Cadastre and Land Register Act, the Register in a ranking order (defining the Land Register is interconnected with the priority of rights) on a first come, first Cadastre whereby each real property is served basis. identified through its unique cadastre number (Identificator). Currently the RESTITUTION two registers (property and cadastre) are Under Bulgarian law restitution is resto - not fully integrated, since not all of the ration of real property to the previous territory of Bulgaria is covered by the owners (or their inheritors), from which Cadastre yet. The elaboration and ap - it was expropriated during the former re - proval of cadastre map with respect to gime (1944-1989). The restitution legis - huge parts of the country is still in pro - lation, which was adopted in the early gress, and is expected to be completed se - 1990s, comprise a great number of acts, veral years from now. each of which has a specific scope and particular provisions. Generally, the re - A basic principle of the Land Register is stitution acts introduce two methods of the "principle of registration" which restoration of ownership rights. Accor - means that the acquisition, transfer, li - ding to some of the legislative acts, the mitation, modification and suspension restitution occurs by operation of law of rights concerning real property can (ex lege ) upon the entry-into-force of the only be effected by registration in the respective act. Other restitution acts pro - Land Register. A legal transaction has vide for a specific administrative or court no effect vis-à-vis third parties unless it procedure as a condition for ownership is registered in the Land Register. to be restored.

Bulgaria 26

At present, the restitution process is to a typically used with respect to movables. great extent completed and related risks However, it could also affect real proper - could be deemed considerably mitigated. ties in case the pledge is established over The restitution laws were adopted more a going concern which includes real pro - than twenty years ago and therefore it is perty. The validity of the pledge is five very unlikely that a new, unidentified re - years as of registration in the Commer - stitution claim is submitted for the first cial Register, but it can be renewed be - time at present. Where restitution occurs fore the expiry of this term. by operation of law, claims still pending are typically subject to court proceedings EASEMENTS (the court claims related to real rights are Easements can be either contractual registered in the Land Register and the - (established by the owner of a property refore easily identifiable). Further, the in favour of a third person), or statutory statutory terms for submitting restitu - (existing by operation of law in favour tion claims, provided by many of the re - of certain beneficiaries, e.g. utility com - stitution acts, have expired. panies). Both types of easement create certain obligations of the owner of the Encumbrances encumbered property (serving property) vis-à-vis the holder of the easement. The most important encumbrances in relation to real property are mortgages, INJUNCTIONS injunctions, court claims, pledges and Injunctions are used as a security of re - easements. After their registration in the ceivables under a court claim or enforce - Land Register, encumbrances are bin - ment. Registration of a court claim ding on any third party according to the related to real property rights has a simi - order of registration. lar function.

MORTGAGES AND PLEDGES Acquisition of property Under Bulgarian law, a mortgage is valid for ten years as of the date of registra - ASSET DEAL tion in the Land Register. However, the Any acts transferring ownership rights mortgage can be renewed before the ex - (such as sale and purchase agreements, piry of the above term, at the sole re - exchange, donation, etc.) have to be exe - quest of the creditor. Pledges are cuted in the form of a notarial deed and

Bulgaria 27 registered in the Land Register. Certain Act, during which certain restrictions contracts (such as voluntary partition were applicable, have expired. agreements) must be notarized. The Ownership Act further stipulates SHARE DEAL that foreign citizens and foreign legal en - By acquiring a company (owner of a real tities can acquire ownership of buildings property), the purchaser indirectly acqui - and other limited property rights, unless res its assets. Usually this is more favou - otherwise provided by law. rable from a tax perspective, since no real estate transfer taxes are incurred. This The above rules apply to direct acquisi - scheme is appropriate where the respective tion. With respect to indirect acquisition company (such as an SPV) holds only of property via, for instance, a share deal the target asset and its related contracts. no restrictions are applicable, with the exception of certain limitations in force Property acquisition can also be achieved regarding agricultural and forest land. through some types of corporate trans - According to the Agricultural Land formations (mergers, spin-offs, etc.). Ownership and Use Act, agricultural land cannot be acquired by companies, LAND PURCHASE BY FOREIGN where the shareholders are offshore NATIONALS AND LEGAL ENTITIES companies or foreign individuals/foreign The basic principle laid down in the Bul - legal entities (other than from EU mem - garian Constitution and the Ownership ber states), as well as by joint stock com - Act is that foreign individuals and fo - panies which have issued bearer shares. reign legal entities can acquire owner - Similar restrictions are provided in the ship rights to real property by virtue of Offshore Companies Act in relation to an international treaty ratified by Bulga - forest land. ria, as well as through legal succession. EU citizens and legal entities domiciled Buildings on Third Party in the EU (as well as citizens and entities Land – Limited Property of the European Economic Area Agree - Rights ment) are entitled to acquire title to land under the terms arising from the acces - The most common limited property sion of Bulgaria to the EU. The transi - rights are the right to build (on third tional periods envisaged in the Accession party land) and the right of use.

Bulgaria 28

THE RIGHT TO BUILD contracts cannot be opposed by subse - The right to build (superficies right) is quent acquirers of the property. Both re - established by the owner of a land plot sidential and commercial leases are in favour of a third person. Under Bul - governed by the Obligations and Con - garian law, this right lapses in favour of tracts Act. A lease contract cannot be the land owner if it is not exercised (i.e. concluded for a term longer than ten the construction erected) within five years. years unless the contract constitutes a The right to build can be established eit - commercial transaction. There is no her for an indefinite period of time or for time limitation in the latter case. a certain period. In the latter case the ownership of the building is automatic - According to the law, the tenant may ally transferred back to the land owner sublease the leased property without the upon expiry of the stipulated period. consent of the landlord, unless other - wise agreed in the contract. THE RIGHT OF USE The right of use is a specific real pro - Most of the provisions in the Obligati - perty right which is limited compared to ons and Contracts Act, related to lease, ownership and wider than a lease right. are not imperative, therefore the parties The right of use is always personal, are allowed to stipulate various arrange - which means that it cannot be further ments regarding operating costs, pro - transferred to subsequent acquirers. The perty modifications, termination, etc. right of use includes the right to use the property in accordance with its purpose Operating costs and costs for mainten - and the right to the benefits thereof. If it ance and repair may be passed on to the is not created for a shorter period, the tenants based on an agreement between right of use created in favour of a legal the parties. In the absence of such an entity is terminated upon its winding-up. agreement, the tenant only has to bear costs related to the normal use of the Lease of Real Property leased premises.

Under Bulgarian law lease agreements Public Permits with respect to real property with a term exceeding one year have to be registered Property development is regulated in de - in the Land Register. Otherwise such tail in the Bulgarian Territory Develop -

Bulgaria 29 ment Act. The basic principle is that A registration fee of 0.1% and notary fees con struction can only be performed in capped at approximately EUR 3,000 are accordance with an effective zoning plan also due upon registration of the transfer approved in relation to the respective land of the real property in the Land Register. plot. Zoning plans specify the property No real estate transfer tax is due in the development options and characteristics event of a share deal or if property is of the allowed construction activities. transferred to a company’s capital as a contribution in kind. The same applies In order to realise a building project, the to acquisitions as a result of corporate investor needs to obtain approved project transformations (merger, spin-off, etc.). designs and a construction permit. The construction permit is issued by the chief Registration of a mortgage is subject to architect of the respective municipality on a 0.1% registration fee and notary fees the basis of the approved project designs. capped at approximately EUR 3,000.

Upon completion of the construction The transfer of urbanized land (regula - works, the investor needs to obtain an ted land plots) and new buildings (60 operation certificate by registering the month or less as from the date of issu - entry of the site into exploitation with ance of the use permit) are subject to the chief architect of the respective mu - VAT. VAT exemption applies to: transfer nicipality. Some types of construction of buildings which are not new, as well sites require a use permit issued by the as transfer of parts of urbanized land construction authorities. which are adjacent to such buildings (the adjacent area is defined as the built-up Taxes and Fees area of the construction and a buffer of three-metres around the building); trans - Direct acquisition of real property, as fer of non-urbanized land; letting of well as of limited property rights, is sub - buildings to individuals for residential ject to real estate transfer tax. The tax purposes. In the above cases the parties rate is individually defined for each mu - have the option to treat the transaction nicipality by the municipal council and as subject to VAT. The VAT rate is 20%. may vary between 0.1 and 3% of the purchase price or the tax value of the property (whichever is higher).

Bulgaria 30

Overview vestment projects are subject to specific on fees and taxes: ecological and/or environmental impact assessments. Further, construction deve - Taxes and Fees Rate lopment in protected areas (such as Na - RETT tura 2000 protected areas, which cover (real estate transfer tax) n/a over 30% of Bulgaria) are also subject to registration 0.1% of consideration ecological compliance assessment. The of ownership or tax value environmental authorities are entitled to VAT 20% of consideration evaluate the investment projects in terms of their potential negative impact on the registration of mortgage 0.1% of consideration relevant natural habitat or species sub - 1% - 5% for companies ject to protection within the respective Building Tax 0.1% - 0.25% for individuals area, and further impose certain res - 0.1‰ - 4.5‰ trictions on the projects. Real Property Tax of the tax value Environmental assessment is usually re - Environmental Liability quired upon transformation of agricul - tural or forestry land to building land The most important Bulgarian laws impo - (which is often the case with develop - sing certain obligations on land owners or ment in mountain/seaside resorts and re - developers are the Environment Pro - newable energy projects). Environmental tection Act and the Waste Management Act. liability and obligation to initiate decon - Environmental and ecological issues tamination measures, related to pollu - often arise with respect to property de - tion, are provided in the Waste Manage- velopment. Certain zoning plans and in - ment Act and the Soils Act.

For more information please contact

Mag. Mark Krenn Head of CEE Real Estate Boyko Guerginov and Construction Managing Partner – Bulgaria Partner – Austria [email protected] [email protected] Tel: +359 2 401 09 99 Tel: +43 1 514 35 ext. 591

Bulgaria CZ E REPUBLIC CH 32

REAL ESTATE LAW the Land Register, should not generally IN THE CZECH REPUBLIC bear the risk of discrepancies between the registered status and the factual legal status of the real property in question. General Overview The advantage for the future may there - fore be seen in the fact that buyers of real Czech private law has recently under - property theoretically do not need to gone a substantial change by virtue of examine the consistency of the factual the New Civil Code and related legisla - legal status and the registered status of tion such as the Business Corporations the real property by means of compre - Act, the Act on Private International hensive due diligence. Law and the Act on the Land Register. More than one hundred statutes were re - On the other hand, current owners pealed by this new legislation, which be - should verify whether their ownership is came effective on 1 January 2014 and properly registered with the Land Regis - brought the biggest legal change in ter in order to avoid future complicati - twenty years. The aim of this overview is ons. Current owners are also protected to take a closer look at some of the most by law since the Land Register is obliged significant aspects of the new legislation to notify them of any change of registe - related to the real property. red details related to their real property and it cannot register the change within The Land Register 20 days of dispatching the notification.

There is a principle in Czech law effective Additionally, a person affected by the since 1 January 2015 under which the change may seek from the Land Register real right registered with the Land Re - the registration of contentiousness wit - gister is effective towards all third parties hin 30 days of the notification (or three and the lack of such registration does years of the registration if the Land Re - not constitute a defence. The real right gister failed to notify such person) in registered with the Land Register is dee - order to break the good faith of the (pu - med to be registered in accordance with tative) buyer. its factual legal status. This means that the buyer, acting in good faith on the basis of the information registered with

Czech Republic 33

Encumbrances A positive change may also be seen in the possibility to use the existing regis - MORTGAGE tration of a mortgagee, managed by the The mortgage is concluded by means of Land Register, which enables the regis - a written agreement and becomes ef - tration of a lien within the same rank for fective as of its registration with the a different debt upon termination of the Land Register. If the real property in lien for a previous debt ( uvoln ná zás - ě question is not registered with the Land tava ). However, there is no ranking order Register, the mortgage agreement must as per the registration. It depends on the be concluded in the form of a notarial contractual basis or the will of the owner, deed. Although the New Civil Code which is why we conclude it is rather an brings with it wider contractual free - exemption from the first come, first ser - dom, the following agreements remain ved basis. prohibited between the contracting par - ties prior to the maturity of the secured EASEMENTS (PASSIVE AND ACTIVE) debt: (i) the debtor or the mortgagor Easements are newly divided into servi - must not pay the collateral (such agree - tudes, consisting of a passive obligation ment to be prohibited also after the ma - to bear something or to refrain from turity of the secured debt); (ii) the something, and real burdens, consisting creditor will not enforce the lien; (iii) the of an active obligation to give something creditor is entitled to realize the collate - or to perform. The New Civil Code ral in an arbitrary manner or he is entit - established a rule that enables the owner led to retain the collateral for an of two land plots to establish an ease - arbitrary price or a price determined in ment between them. However, this rule advance (such agreement being prohibi - only applies to lands. Contracting par - ted also after the maturity of the secured ties may also agree on types. Contracting debt if the debtor is a consumer or a parties may also agree on types of servi - small-sized or a middle-sized entrepre - tudes not expressly provided for in the neur); (iv) the creditor is entitled to take New Civil Code. fruits and benefits from the collateral. The mortgage can newly be agreed in re - ACQUISITION OF REAL PROPERTY spect of a thing that the debtor will Under Czech law, real property can be acquire in the future. acquired either directly or indirectly. Di - rect acquisition means a direct payment

Czech Republic 34 towards the real property owner. Indi - LAND PURCHASE BY FOREIGN rect acquisition is conducted by acqui - NATIONALS AND LEGAL ENTITIES ring the legal entity that owns the subject real property. A completely unique way The acquisition of Land by foreign na - of acquisition of real property is retur - tionals and legal entities is no longer limi - ning ownership by way of restitution. ted, with one exception. This exception applies to agricultural land sold by the ASSET DEAL state, which can only be acquired either Under Czech law, ownership title to real by Czech or EU citizens or by legal enti - property must be registered in the Land ties registered as agricultural entrepre - Register. Without registration in the neurs and residing in the Czech Republic Land Register, the real property would or in the EU while having similar status. still belong to the previous owner. The - refore, ownership of real property is only RESTITUTION obtained as a result of registration in the The publicly known outgoing restitution Land Register. A real property transfer of the church is rather not a considerable agreement has to be notarized. If a fo - threat to commercial real property trans - reign legal entity is involved as a purcha - actions as it only applies to state-owned ser, its existence and the authorisation of real property. Recently the Czech Repu - its representatives must be proved in the blic decided that the compensation will Czech Republic by a certified extract be monetary redemption as opposed to from the applicable register of compa - the plot of lands that had been given to nies. In principle, foreign public docu - the eligible applicants. As of 1 January ments are accepted as evidence, but must 2016, restitution will consist of mone - as a rule be translated into Czech and ve - tary compensation only. rified using a special procedure. Superficies Solo Cedit SHARE DEAL Under Czech law, an acquisition of a Prior to the effectiveness of the new le - company also means a succession of all gislation, Czech civil law, unlike other its rights and duties including ownership European countries, allowed separate title to real property. However, as the ownership of a building and the land actual owner remains the same (the com - plot on which it was built. Hence, the pany), there are no additional fees. acquisition of a building with its land

Czech Republic 35 plot required either two separate trans - instance temporary buildings, do not be - fers from the same owner (i.e. the trans - come part of land plots and remain se - fer of a building and the transfer of a parated real property. Secondly, if the land plot) or two separate agreements in building or the land plot is subject to a the case of two separate owners (i.e. the real right that excludes unification (for agreement with the land owner and the instance lien securing different debts), agreement with the owner of the buil - the building will not become a part of the ding). This inconsistency in ownership land plot as long as such real right exists. made transactions slower and less cost- effective than investors would have liked. Buildings on Third Party Consequently, the removal of separate Land ownership was highly demanded by both laymen and professionals in the field. The right to build means that a benefi - ciary is entitled to erect a building on or The New Civil Code stipulates that a under the land of another person free of building built on a land plot both owned charge or for a consideration. The ob - by the same person becomes part of jective of this real right is to allow the such land and legally they therefore form use of land of another person for con - one real property with a single owner - struction purposes. The right to build it - ship of the land plot. On the other hand, self is deemed to be a real property, it as a rule, the separate ownership existing can therefore be transferred, encumbe - prior to 1 January 2014 does not become red, acquired by prescription and it is a single ownership. If the owners of a also subject to inheritance. A building building and a land are different persons, suitable for the right to build forms a they have a statutory pre-emption right part of such right to build and is trans - towards each other which cannot be ex - ferred within the transfer of the right to cluded or limited by any agreement con - build. However, the right to build is not cluded after 1 January 2014. a part of the land but the beneficiary and the land owner have a statutory pre- Furthermore, there are some exemptions emption right towards each other. The under which ownership remains separa - right to build is a temporary real right ted after 1 January 2014 even though the which may be established for the maxi - building and the land plot belong to the mum of 99 years and it may be acquired same owner. Firstly, some buildings, for by written agreement, prescription or a

Czech Republic 36 decision of a public authority. It is estab - nants as deemed to be weaker parties to lished upon its registration in the Land lease agreements. That means that te - Register in the case of the contractual nants have certain mandatory rights. For right to build and the statutory right to such reasons, the lease agreement must build. If the right to build expires, the be concluded in written form and may owner of the land must pay half of the be terminated for particular reasons sti - market value of the building to the buil - pulated by law only. For the same rea - ding owner, the day the right to build son, the parties to a lease agreement ceases to exist, unless otherwise agreed cannot agree on a contractual penalty to between the parties. be paid by the tenant. Considering the possible costs connected Lease of Real Property with the residential lease, in general, it is possible to stipulate contractually that BUSINESS LEASE the tenant is obliged to bear the opera - The subject of the business lease can be ting costs. To avoid future disputes, the any premises or area that is predomi - practice is to evaluate particular seg - nantly used for business purposes. It is ments of the operating costs and subse - also possible to let premises or an area quently stipulate the obligation of the that will be constructed in the future. tenant to pay such amount each month The lease may be registered with the jointly with the rent. To transfer the ob - Land Register, which brings a higher ligation to pay for maintenance and re - level of certainty for the lessee as after a pair is contractually possible however it sale of the real property the new owner is not a custom in the Czech Republic. is only entitled to terminate the lease if Provisions of residential lease are gene - it did not reasonably expect that the real rally applicable to business lease as well. property in question is let. Especially for the possibility to con - tractually transfer the burden to pay the RESIDENTIAL LEASE operating costs. Residential lease is governed by the Lease agreements can also be registered Czech Civil Code. The regime of the in the Land Register; however, as this is Civil Code provides substantial flexibi - a new rule, such a practice has yet to be - lity to both parties to agree on provisions come common practice. that best suit their needs. However, the As for the termination of the residential Civil Code provides protection to the te - lease, the termination period for the in -

Czech Republic 37 definite lease was extended to six months is required for calculation of the tax base. but it may be shortened to three months The sale of real property is generally if there is good cause for it. A party to VAT exempt. The transfer of buildings whom the termination notice has been is only subject to VAT (generally at the served is entitled to object to the notice rate of 21%) if it is completed within three in writing within one month of the deli - years of the granting of the first use per - very of the notice. Otherwise its right to mit. A transfer of land that qualifies as review the legitimacy of the termination a building plot within the meaning of notice will expire. the VAT Act is subject to VAT, generally at the rate of 21%. Public Permits The ownership of real property is sub - ject to the real property tax. Real pro - In order to realize a building project, the perty tax differs depending on the builder must obtain a building and ope - ownership of plots of land and buildings rational facility permit from the re - registered in the cadastre of the Czech spective authorities. Republic. Tax paid from plots of land has several specifics depending on the Taxes and Fees kind of land. There are differing tax amounts for building plots and agricul - The sale of real property is subject to the tural plots. The tax amount is calculated real estate transfer tax (RETT) that from the size of the property expressed amounts to 4% of the acquisition value in square meters multiplied by the ave - reduced by deductible expenses. By law rage square meter price for land in the the seller is liable for payment of the real area where the plot of land is located estate transfer tax. On Novemer 1st 2016 and a coefficient, which depends on the comes into action the amendment of the population density – the higher the den - Legislative Measure of the Senate No. 340/ sity the higher the coefficient (highest 2013 Coll., on Tax acquisition of real possible coefficient is 5). The tax is paid estate, which establishes that the payer of only for the part of land where no buil - the tax is always the buyer. The acquisition ding is erected that means that the payer value is usually the purchase price agreed will not pay the amount twice. A very si - by the contracting parties and the new milar principle applies to the build-up legislation accordingly limits the number area of the plot of land. Similarly to tax of situations in which an expert opinion regarding plots of land the law differs

Czech Republic 38 between buildings from the point of use. Environmental Liability The tax is significantly higher for buil - dings that are utilized for business pur - The legal liability of an owner of real poses. The tax in both cases is generally property in the Czech jurisdiction is paid by the owner, under certain condi - mainly governed by the Czech Civil Code tions, when the property is owned by the and various other statutory provisions. state and rented to a third person, the Criminal or offense liability is not refer - third person is payer of the tax. red too commonly in this situation.

The extent of liability depends on the Overview type of land in question. However, the on fees and taxes: liability is mainly covered by the polluter Taxes and Fees Rate pays principle. RETT (real estate transfer tax) 4% of acquisition value

Fee for registration of ownership CZK 1,000

VAT (opting-in) 21%

Fee for Registration of mortgage CZK 1,000

Individual, depends on Real property tax the property type

Stamp duty for lease agreements CZK 1,000

For more information please contact

Mag. Mark Krenn Head of CEE Real Estate JUDr. Pavel Široký and Construction Partner – Czech Republic Partner – Austria [email protected] [email protected] Tel: +420 221 111 711 Tel: +43 1 514 35 ext. 591

Czech Republic Hu NGA RY 40

REAL ESTATE LAW is entered in the Land Register, no per - IN HUNGARY son or entity may claim that he/she/it was not aware of such rights or informa - tion and use this as a defence. The prin - The Land Register ciple of authenticity is closely related to the other fundamental principle, i.e. pu - The land register ( ingatlan-nyilvántartás ) blic accessibility ( nyilvánosság elve ). is a system that includes the statutory de - Anyone can access title deeds and title tails of every real property in every loca - plans, make notes of them and request lity in Hungary, as well as the rights and certified copies of them. However, the other legally relevant information asso - documents that serve as the basis for a ciated with each real property. It also in - register entry can only be accessed if the cludes the names and personal details of applicant confirms that he/she/it has a the persons who have their residence in rightful interest in such access. a given real property, and, in the case of The entries are registered in the Land legal entities, it indicates the address of Register in a ranking order on a first the property as their registered address come, first served basis, i.e. the position and includes their registered number. of an entry in the land register is deter - mined by its filing date. The land register is managed by local or - ganisations known as land offices. A RESTITUTION land office will only make entries in the As the issue of restitution was regulated land register on the basis of documents in the early 1990s, there is now no consi - which comply with all the statutory for - derable threat to real property transac - malities and on the basis of resolutions tions with respect to restitution claims. issued by government agencies or courts. Currently, the restitution of real pro - perty is regulated by the Hungarian Re - Real estate registration has two funda - stitution Act and 104/1991. Govt. Order mental principles in Hungarian law. One (VIII. 3.). In order to successfully en - is that the Land Register is guaranteed force a restitution claim, the claimant’s to be authentic ( közhitelesség elve ), i.e. respective entitlement must be evi - one may rely on the information and denced. Said proof is subject to the ful - rights registered as being valid and accu - filment of strict conditions, which rate. Therefore, if a right or information further limits restitution threats.

Hungary 41

ENCUMBRANCES Due to the accessory nature of a mort - The most important encumbrances on gage, it reflects what happens to the real property include mortgages, perso - claim it secures, and therefore the mort - nal and land-related easements, prohibi - gage applies to damages or indemnifica - tions of sale and encumbrance, and land tion received with respect to the use rights. These encumbrances are dee - mortgaged assets and claims for the med to exist from the date when they are same, as well as to assets that might re - recorded in the Land Register. place the mortgaged asset.

MORTGAGES PERSONAL EASEMENTS: Mortgages ( jelzálogjog ) are the most USUFRUCT AND USE common form of security for bank loans . An easement ( szolgalom ) is a limited right in rem that allows a person or entity The Hungarian Civil Code ( Ptk. ) allows to use a property owned by someone else the mortgagee (typically a financial in - for a specific purpose. There are two ca - stitution) to enforce the mortgage by tegories of easements: personal and way of judicial enforcement or by other land-related. Personal easements may means. In order to recover a debt that benefit natural persons and legal entities the mortgagor did not duly pay, mort - alike. An easement can only exist for a li - gage agreements usually include a clause mited time in both cases: up to the death enabling the mortgagee to sell the real of a natural person and for up to 50 property directly, without the involve - years in the case of a legal entity. ment of a court. A mortgage is not marketable in itself, Usufruct is a personal easement where but when the secured asset is sold, the the beneficiary of the usufruct (the usu - mortgage transfers to the new owner. fructuary) may possess, use and enjoy the benefits of another person’s property, A mortgage is created in two steps. but must return it to the owner without Firstly a mortgage agreement is requi - any damage to it once the usufruct cea - red, and secondly the registration of the ses to exist. The owner may possess, use mortgage. A mortgage agreement requi - and enjoy the benefits of the property to res a written form in order to be valid, the extent the beneficiary does not take and it must specify the claim secured by advantage of usufructuary rights. Usu - the mortgage and the mortgaged asset. fructuary rights are transferable.

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The holder of a right of use may use the Usually an agreement on the acquisition relevant property to the extent of its/his/ of ownership must be concluded (e.g. her needs and the needs of any family contract on sale and purchase or dona - members and enjoy its benefits. A right tion). The transfer must be recorded in of use may not be transferred. the Land Register; otherwise, with a few exceptions, the transfer will not be dee - LAND-RELATED EASEMENTS med to have taken place. Such excepti - On the basis of a land-related easement, ons include, for example, acquisition on the owner of the dominant estate may the basis of a regulatory order and cases use the servient estate for a specific pur - of usucapio (or acquisitive prescription). pose. Such easements include access ea - sements, which allow the owner of a SHARE DEAL piece of land without access to a public The acquisition of real property via a road to travel across neighbouring lands share deal leads to "factual" universal to get to such road. succession, which secures for the acqui - rer all rights and duties associated with PROHIBITION OF SALE the shares and guarantees a continuity AND ENCUMBRANCE of contracts related to the real property. The prohibition of sale and encum - Due to the lack of a new owner of the brance ( elidegenítési és terhelési tilalom ) real property, no fees for registration in limits ownerships rights, i.e. the owner the Land Register are incurred. If the may not sell or mortgage the relevant buyer acquires 75% or more of the sha - property while the prohibition is in res of the company, the duty to pay land place. It is also possible to register only transfer tax is, however, still triggered a prohibition of sale, and in that case the (see below). property may be encumbered.

Acquisition of ownership SALE OF AGRICULTURAL AND FORESTRY LAND ASSET DEAL Under the recently adopted Act on Land The acquisition of ownership requires (Földtörvény ), Hungarian nationals and the existence of several conditions at the nationals of other EU Member States same time. may acquire agricultural land ( termöf - öld ) in Hungary; nationals of third

Hungary 43 countries and (with some exceptions) the building has the right to use the land legal entities may not. (or a part of it) as long as the building stands. The land may be used to the ex - Hungarian and EU nationals may only tent necessary in order to use the buil - acquire land plots of one hectare or less ding for the intended purpose. if none of the statutory beneficiaries (e.g. the Hungarian state) exercise their right Lease of Real Property of first refusal and the competent agri - cultural authority approves the acquisi - TYPES OF LEASES tion. Land plots larger than one hectare Hungarian law recognizes different types may only be acquired by farmers (per - of contracts permitting the use or ten - sons who hold a degree in agriculture or ancy of land ( földbérlet ) and the tenancy have cultivated land for a living for at of residential properties ( lakásbérlet ) least three years) and a farmer may own and other premises ( helyiségbérlet ). a maximum of 300 hectares of land. Tenancy law is governed by the Hunga - There is a land use register ( földhaszná - rian Civil Code ( Polgári Törvénykönyv ), lati nyilvántartás ) indicating information mainly by general provisions and the on the purposes for which each piece of Hungarian Home and Premises Act ( La - land is used. It qualifies as an authentic kástörvény ), which includes more specific public record. rules. Lease agreements cannot be regis - tered in the Land Register. There are also special formalities concer - ning contracts on agricultural land in LEASE TERM, TERMINATION order to prevent “pocket” (or concealed) Parties are free to conclude a fixed-term contracts. lease or an open-term lease. In the case of fixed-term leases where the tenant Buildings on continues to use the real property after Third Party Land the end of the fixed term and the land - lord does not challenge such continued A land use right ( földhasználati jog) use within 15 days from the end of the exists when a piece of land and a buil - term, the contract turns into an open- ding erected on it are not owned by the ended contract. same person or entity, and the owner of

Hungary 44

In general, either party is entitled to end the property in accordance with its in - an open-ended lease agreement at will. tended purpose or which poses a danger A fixed-term lease agreement cannot be to life or structure of the building. Ho - terminated at will; early termination re - wever, the Civil Code does not prescribe quires cause. an explicit allocation of costs for main - As regards termination for cause, the te - tenance and repair between the parties. nant is entitled to terminate the lease Therefore, the parties may also agree on agreement if the landlord does not gua - a different cost sharing method. rantee that the real property will be suit - able for use. The landlord is entitled to The tenant must inform the landlord if termination for cause, for instance, if the the property is in danger of being dama - tenant fails to pay the rent or does not ged or if works, for which the landlord stop inappropriate/non-contractual use is responsible, should be carried out. If of the real property even following no - the landlord fails to repair existing de - tice from the landlord. fects, the tenant is entitled to carry out the repairs at the landlord’s expense. In OPERATING COSTS other, less imminent cases, the landlord The operating costs are paid in conside - is required to carry out the repairs at the ration for use of a building or facility. time when the building is otherwise The tenant bears the operating costs, but being renovated. the parties are free to decide on the amount of the operating costs. The landlord has a pledge over the te - nant’s assets located in the property to MAINTENANCE AND REPAIR the extent of the rent and the expenses The costs associated with the repair and payable by the tenant. While this rule maintenance of real property are shared only used to apply to residential pro perty between the parties in such a way that in the past, recently passed legislation ex - the tenant is liable for small expenses tended it to all real properties in general. concerning the maintenance of the pro - perty while the landlord must assure that EFFECTS OF CHANGE OF CONTROL the leased premises are in a condition If the company which is a lessee experiences which is appropriate for use. Therefore, a change of ownership or control, the lease the landlord is responsible for repairing agreement continues to exist. In case of a any defect that materially hinders use of change of ownership in real estate, leases are

Hungary 45 automatically passed on to the new owner, of the tax base, and 2% fo r the amount ex - who is bound by all provisions of the ceeding the HUF 1 billion limit. The lease unless the Parties agree otherwise. total amount of the RETT is capped at HUF 200 million. The RETT falls due Public Permits when a property is acquired.

Construction works are subject to a prior Ownership of real property must be re - building permit ( építési engedély ) issued gistered in the Land Register, which is by the building authority in almost all subject to a registration fee in the amount cases, and the authority may determine of HUF 6,600 (approximately EUR 21). conditions that must be met so that the Except for new real properties (i.e. buil - permit can be issued. Under the regula - ding plots or real properties which have tions, hefty fines may be imposed if a re - never been occupied before), transac - quest for a permit is not submitted, i.e. tions regarding the acquisition of real construction starts without a permit. property are generally exempt from VAT The building authority may also carry but the parties may opt to charge VAT out site inspections to check compliance on the purchase price. This is required in with professional and technical stan - particular if later on an input tax de - dards and specifications. For the use of a duction is made on the costs of erection, building, an occupancy permit ( haszná - maintenance and other investments. The latbavételi engedély ) must be obtained. VAT rate is 27%.

Taxes and Fees OWNING LAND Real properties are also subject to real ACQUISITION OF property tax ( ingatlanadó ), which can be LAND AND BUILDINGS building tax for buildings and plot tax The acquisition of real property and any for land plots. Such tax is payable to building erected on such property is sub - local councils and they are free to deter - ject to Real Estate Transfer Tax (RETT, mine the tax rate. ingatlan vagyonszerzési illeték ). The tax base of the RETT is the market value of ENCUMBRANCES the real property (including the buil - The fee for registering a mortgage or a ding), excluding any encumbrances. The change in the mortgage is HUF 12,600 rate is 4% up to the first HUF 1 billion (EUR 40) per real estate property.

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SALE OF PROPERTY the Act on the General Rules of Envi - BY PRIVATE INDIVIDUALS ronmental Protection regulates the legal If the seller of a real property is a private liability and obligations regarding envi - individual, the sale is subject to personal ronmental pollution on real properties, income tax (at a rate of 15%). such as damage to surface waters, the sub - soil, subsurface waters and natural reserves. Under Hungarian law, there are three Overview main aspects of liability connected to en - on fees and taxes: vironmental pollution. Criminal liability is Taxes and Fees Rate borne by the person causing the pollution.

4% (up to HUF 1 billion) and 2% (above the The parties to a property sale and pur - RETT amount of HUF 1 bil - (real estate transfer tax) chase agreement are entitled to exclude lion) of consideration or tax value but capped at their liability for environmental pollu - HUF 200 million). tion under civil law. However, under the registration HUF 6,600 of ownership (app. EUR 21) terms of administrative liability, if the

27% of consideration competent environmental agency deter - VAT (opting-in) or tax value mines that pollution has occurred, it is HUF 12.600 registration of mortgage entitled to impose a fine on the person (app. EUR 40) or entity who/which owns the property at the time when the fine is imposed, ir - respective of whether the pollution has Environmental Liability been caused by such owner or by a pre - With respect to environmental liability, vious one.

For more information please contact

Mag. Mark Krenn Head of CEE Real Estate Dr. Wilhelm Stettner and Construction Partner – Hungary Partner – Austria [email protected] [email protected] Tel: +36 1 457 80 40 Tel: +43 1 514 35 ext. 591

Hungary RO MA NiA 48

REAL ESTATE LAW has the right of access to the register and IN ROMANIA to obtain excerpts of Land Books. Every person or entity may rely on the assump - The Land Register tion that the Land Register contains ac - curately and completely all rights and ob - Rights with respect to real property, such ligations with respect to the real property. as ownership rights, mortgages, ease - ments, land charge obligations, litigations Encumbrances and others, are registered in the Land Register ( Carte Funciara ), which is ad - The most relevant encumbrances in re - ministered by the National Agency for lation to real property are mortgages, ea - Cadastre and Land Registration (at a sements, land charge obligations and centralized level) and by the subordinate restrictions on sale and encumbrances, County Offices of Cadastre and Land which can be registered in the land regis - Registration (at a county level). In each ter and are individualized rights to third county there are several local Offices of party property. Encumbrances are regis - Cadastre and Land Registration, directly tered in the land register in a ranking subordinated to County Office. Each order (defining the priority of rights) on land plot is identified by a unique cadas - a first come, first served basis. ter number and is registered into a uni - que Land Register (or Land Book – MORTGAGES Carte Funciara ). A mortgage is a right of lien against a The new Civil Code of Romania (NCC) property. A right of lien is the right gran - institutes the "principle of registration" ted to the creditor to obtain satisfaction which means that the acquisition, trans - from a specific property if the debtor fer, limitation and suspension of rights does not pay the debt as agreed. If the concerning real property can only be ef - mortgagor does not fulfil its obligations, fected by registration in the Land Regis - the mortgagee has the right to legally ini - ter. As long as the legal transaction is not tiate enforcement proceedings in order registered in the Land Register, it is not to cover the outstanding liabilities. The opposable by third parties and the par - mortgagee has also the option to take ties to the contract only have contractual over the property in the account of the claims against each other. debt (only within an enforcement proce - The Land Register is public and everyone dure), becoming the rightful owner of

Romania 49 the real property and being registered as An acquisition of property via a share such in the Land Register. deal leads to "factual" universal succes - sion, which secures for the acquirer all EASEMENTS AND LAND CHARGES rights and duties associated with the sha - Easements are limited, precisely specified res and guarantees a continuity of con - rights (considered encumbrances of the tracts related to the property. Due to the real property) to the use or utility of third lack of a new owner of the property, no party real property. fees for entry in the land register are in - Property easements grant the respective curred. A share deal will be registered owner of the "dominant" property cer - with the corresponding Trade Registry tain rights over the "servient" property. only after the fulfilment of all procedu - A typical example of an easement is the res and legal provisions including the right to cross the servient property in payment of Trade Registry taxes. This order to access the dominant property type of transfer may under certain con - (right of way). ditions also trigger land transfer taxes. The NCC organizes easements into ap - parent or unapparent, continuous or ASSET DEAL non- continuous and positive or negative The direct acquisition of property requi - easements. res the conclusion of a notarized con - The beneficiary of an easement is ob - tract as well as registration of the new liged to exercise the easement right by owner in the land register; registration of exercising great care in respect of the ser - ownership represents the "modus" of the vient property and has the obligation not acquisition without which ownership to to aggravate the "servient" property due the property cannot be obtained. Prior to the use of the easement. to the transfer of the property right, the seller is obliged to obtain a certificate Acquisition of property from the Tax Department of the City Hall where the property is located, which The acquisition of property is possible must confirm that all taxes related to the in the form of a share deal, by acquiring real property in question have been paid. the property owning company, or in the The transfer of the ownership right can - form of an asset deal, by acquiring the not be performed without the land taxes property concerned directly. being fully paid. The direct acquisition SHARE DEAL of property triggers land transfer taxes.

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LAND PURCHASE BY period for which a Superstructure right FOREIGN NATIONALS can be granted is 99 years. After expira - As of 1 January 2014 foreign companies tion of this period, the right can be ex - and foreign nationals, belonging to tended. Prior to the construction of the members of the European Union and superstructure the developer will typi - European Economic Area (Iceland, cally enter into an agreement with the Liechtenstein and Norway) may acquire owner of the land allowing him to own real property (including agricultural a building on the third party land plot. land, forests and forestry land) without In case such agreement does not exist, any additional prerequisites, subject ho - the right can be obtained by usucaption wever to reciprocity. (acquisitive prescription) and is limited Regarding foreigners from third coun - strictly to the surface under the building. tries, the acquisition of land in Romania by acts inter vivos is possible only on the Lease of Real Property basis of reciprocity with the home state (in case treaties have been signed bet - Romanian law permits different types of ween Romania and the corresponding contracts for the tenancy of land, busi - third country). ness premises and buildings. Tenancy law is governed by the new Ro - Buildings on Third Party manian Civil Code which provides the Land general rules, conditions and limitations for such contracts. The lease agreements Following the principle superficies solo may also be registered in the Land Re - cedit, the owner of a land plot is also the gister, representing encumbrances in re - owner of the building erected thereon. lation to the real property. In general, two main types of lease agree - SUPERSTRUCTURE (SUPERFICIE) ments can be distinguished under Ro - One exception from the principle of in - manian law: (i) land and/or building separability of ownership to land and lease and (ii) lease of agricultural goods building is the Superstructure (Superfi - (Arendare ). cie), where a building is built on third party land and is not intended to remain The lease of agricultural goods is treated there for an indefinite period of time. as a specific type of lease agreement, According to the NCC, the maximum with particular rules and applies only to

Romania 51 the agricultural sector. This type of con - made available to the lessee for the tract is mainly used to lease land and use of a building. buildings such as farms, silos, storage fa - cilities, exploitation roads, plantations, With regard to the agricultural lease platforms and such. Animals and machi - contract, in case the parties do not indi - nery can also be leased based on this cate the period or it is concluded over an type of contract. indefinite period, it is considered that the In addition to the standard lease con - agricultural lease contract was conclu - tract, the lease of agricultural goods has ded for the time necessary for harvesting the following particularities: the fruits that the agricultural goods will (i) it must be registered with the local ad - produce in the agricultural year in which ministrative authority (City Hall); the contract was concluded. (ii) the registered agricultural lease con - Land lease agreements registered with tract constitutes an enforceable title. the fiscal authorities (for natural per - sons) or notarized (for natural persons The maximum duration of the lease is 49 and juridical persons) constitute enfor - years. If the parties stipulate a longer pe - ceable titles with regard to the due rent riod, it is reduced to 49 years. If under and penalties. the contract (i) the parties have not indi - cated the lease duration; (ii) have not in - OPERATING COSTS dicated that they wish to contract for an The operating costs of a building are the indefinite period and (iii) no common or costs associated with the use and enjoy - relevant local practices exist, the lease is ment of a building and its facilities. Usu - considered to be concluded for the follo - ally those costs are borne by the tenant wing terms: but the parties can agree otherwise. a) a term of one year with respect to unfurnished houses or space for the MAINTENANCE AND REPAIR exercise of a professional activity; or The costs related to maintenance and re - b) for the corresponding term for which pair are borne by the landlord, unless the the rent was calculated, in case of parties agree otherwise. The landlord is movable property or in case of fur- usually obliged to maintain the leased nished rooms or apartments; or immovable according to the purpose for c) for the duration of the lease of the which it was rented and in good working immovable, in case of movable goods order.

Romania 52

EFFECTS OF CHANGE OF CONTROL Transaction and registration fees are com - In case of a change of ownership of the posed mainly of land register fees for ob - real property, the lease contract is binding taining the initial Land Register excerpts the new owner. The parties can agree (EUR 9/parcel), notary fee (0.5 - 1% within the lease agreement that the lease from the transaction value), land register is terminated in case of ownership trans - fees for the registration of the ownership fer. The notice period in such case is the right in the Land Register (0.15% of the two-fold of the initial notice period. contract value for natural persons and religious cults and 0.5% of the contract Public Permits value for legal entities).

In order to construct buildings and aut - INCOME REAL ESTATE TAX horise specific types of buildings, permits For the seller, the asset deal implies the need to be obtained from the correspon - payment of the tax on real estate trans - ding authority. actions, between 1% and 3% from the Depending on the location, type and amount of the contract value. scope of the building, the number of permits vary and may include permits The income tax on real property trans - from the environmental authority, de - actions is calculated as follows: fence ministry, cultural authority, fire  for immovable assets acquired in a protection authority, sanitary authority etc. time frame under 3 years (inclusive) In addition to the permits required for before the sale: the building, the operations/businesses (i) 3% from the contract value up to performed in those buildings must obtain RON 200.000; specific permits in accordance to the acti - (ii) over RON 200.000, 6.000 lei + 2% vity planned to be performed. at the value exceeding RON 200.000;  for immovable assets acquired in a Taxes and Fees time frame over 3 years: (i) 2% from the contract value up to ACQUISITION OF RON 200.000; LAND AND BUILDINGS (ii) over RON 200.000, RON 4.000 The acquisition of real property in Ro - + 1% calculated from the value mania is subject to registration fees, tax exceeding RON 200.000 on real estate transactions and VAT.

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VAT modifications, when the cost of such 20% VAT will apply to the value of the transformations, except the value- immovable if the seller is registered with added tax, is exceeding 50% of the VAT purposes in Romania, unless the market price of the respective building, Seller is: exclusive the value of the land, after  subject to a reduced rate; or the transformation); However, for  is exempt from VAT. such constructions reverse charge is applied. The reduced VAT rate of 5% is applicable  building land/parcels; However, for for the sale of houses and apartments to - such parcels, reverse charge is applied. gether with the land on which they are built , as part of the social policy. Parts of the SHARE DEAL social policy are buildings intended for: In case of a share deal where the subject  homes for the elderly and retired; company is the owner of the real property  orphanages and recovery and reha- in Romania, which represents more than bilitation centres for children with 50% of its entire assets (directly or via disabilities; further participations), income tax of 16%  housings with a usable area under from the capital gain of the transaction 120 sqm, excluding annexes, with a applies. The acquirer has the obligation under RON 450,000 (net), acqui- to calculate, retain (from the purchase red by any unmarried person or family. price) and transfer the tax at the closing of the transaction. Exemption from VAT applies to the sale of: The taxable base is calculated as follows:  constructions/parts of construction sales price minus acquisition costs (in - and the land on which the constructi- cluding any commissions, taxes or other ons are built; costs associated with the acquisition of  for any other kind of land plots. the titles/shares). VAT does not apply to the transfer of The exemption does not apply to: shares.  new constructions and parts of new constructions (New buildings are any OWNING LAND constructions transformed so that its structure, nature or destination are Building tax modified or, in the absence of these Building tax is payable on an annual

Romania 54 basis and is calculated by applying tax has not been valued in the last 3 years rates on the taxable value of buildings. preceding the reference fiscal year 2015, In case of a legal entity, the building tax the land tax rate and the tax on buildings is calculated based on the book value of is 5% applied to the book value of the the building respectively the purchase building. Fiscal year of reference is con - price of the building. This value can be: ventionally the calendar year. If the buil -  acquisition cost for buildings dings have a touristic destination and are purchased; closed in a calendar year, the tax rate is  production cost for buildings built; 20% applicable to the value of its inven -  value resulting from the revaluation tory. Exempted are structures which are report for the buildings revalued in a building permit validity period, if under a statutory provision; the construction works began within 3  Legal entities are subject to a local months from the date of issuance of the building tax rate established by local building permit, in which case the tax councils in a range of 0.25% - 1.5%. rate is 1.5%. The tax is applied to the taxable In case of individuals, the tax rate is value of the building; the tax rate 0.08% from the taxable value of the re - may be considerably increased by the sidential building, whereby the taxable local authorities if the buildings be- value is determined either by the pur - longing to legal entity are not peri- chase price of the real property or the odically valued by a professional ap- last valuation report value. For non-re - praiser. If a building has not been re- sidential buildings owned by individuals valuated, the tax rate is set as follows: the building tax is calculated by applying  5% for buildings not valued in the a quota of 0.2% - 1.3% on the value that last 3 years prior the reference year. may be: a) Value from a valuation report. Any modernisation of the construction b) Final value of the construction must be declared in order to recalculate works for buildings made in the last the tax and the tax base. 5 years. In case of buildings, the value of which c) The value of the building according was entirely written-off, the tax rate is to the agreement by which the pro- 1.5% applied to the book value of the perty right is transferred for buil- building after its last valuation and the dings acquired in the last 5 years tax base is reduced by 15%. If a building prior the reference year

Romania 55

For non-residential buildings used in the e) for buildings from a financial agriculture field the applied quota is leasing, the value derives from the 0.4% from the imposable value of the valuation report; building. In the case in which the value f) in the case of buildings for which of the building cannot be calculated a the tax is owned, the value from the 2% quota will be applied on the deter - bookkeeping of the landlord and mined imposable value. communicated to the leaseholder, te- nant, the holder of the administra- For residential buildings owned by com - tion right or of usage. panies the applied quota is 0.08%-0.2% from the imposable value of the building. Land tax For non-residential buildings owned by The land tax is determined taking into companies the tax is calculated by a account the number of square meters of quota of 0.2%-1.3% of the imposable land, the rank of the locality where it is value of the building. located and the area/land use category of the land plot according to the classi - For non-residential buildings owned by fication made by the Local Council. companies that are used in the agricul - ture field, the applied quota is 0.4% of Further, with respect to legal entities, the the imposable value of the building. land tax varies depending on the loca - The imposable value is determined on tion and category of the land plot and the basis of: with respect to individuals the amount a) the last registered value according of the land tax is decided by the Local to the bookkeeping of the fiscal Council of each administrative region. authority; The tax rate is established annually by b) the value resulting from a valua- the Local Council in correlation with the tion report; budget previsions for the year in matter. c) the final value of the construction works in the fiscal year; ENCUMBRANCES d) the value of the buildings resul- The registration fee for registering a ting from the agreement on which mortgage in the Land Register amounts the property right is transferred in to EUR 25 per Land Register object + the case of buildings acquired during 0.1% of the amount stated in the mort - the fiscal year; gage.

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Overview Environmental Liability on fees and taxes: Romanian environmental liability is go - Taxes and Fees Rate verned by several laws and ordinances fixed fee + between 1% and no unitary act exists which combi - and 3% of the contract value, depending on the nes all environmental obligations. All per - Tax on real estate value and time passed transactions sons (natural or juridical) in Romania between the acquisition date and the transaction must comply with environmental obliga - date. tions and environmental permits are re - 0.15% of the contract value for individuals and quired for obtaining building permits registration religious cults and 0.5% of ownership and performing various changes to the of the contract value for legal entities zonal urban planning. Moreover, envi - usually 20%, reduced rate ronmental permits are required for per - VAT if applicable of 5%, reverse charge or exemption forming commercial activities which EUR 25/Land Register imply a potential pollution hazard. object + 0.1% of the registration of mortgage amount stated in the The main authority responsible for envi - mortgage ronmental control is the National Agency for buildings, it heavily varies depending on the for Environmental Protection. However, Real Property Tax case and varies between there are several other agencies who exer - 0.25% to 1.5% cise an environmental control over a spe - cific field (water, land/soil), agencies which issue permits required for building projects or performing specific commer - cial activities.

For more information please contact

Mag. Mark Krenn Head of CEE Real Estate Sebastian Bolda and Construction Attorney-at-law – Romania Partner – Austria [email protected] [email protected] Tel: +40 21 311 12 13 Tel: +43 1 514 35 ext. 591

Romania sLO VA

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REAL ESTATE LAW IN led to access and to obtain excerpts the - THE SLOVAK REPUBLIC reof. According to the principle of ma - terial publicity the assumption applies The Land Register that data registered with the Land Regis - ter are reliable and binding, unless the In Slovakia, the Land Register is a uni - opposite was established. The principle form register which contains all rights of legality confers on the competent aut - with respect to real property, such as hority an obligation to examine whether ownership, mortgages, easements, rights the conditions for a valid registration have of first refusal, tenancy rights to land been met. According to the principle of lasting more than 5 years and others. In priority, rights with respect to the same addition, it also contains the description real property are registered in a ranking of real property as well as its geometric order on a first come, first served basis. determination. The Land Register is ad - ministered by the cadastre department at RESTITUTION each district office, which is generally the In Slovakia the restitution of real property office where the real property is situated. still constitutes a considerable threat to real property transactions and has to be The Slovak Land Register is based on se - taken into account in every transaction veral principles, the most important of such type, in particular due diligence being the principle of registration, the reviews. Restitution claims are directed principle of formal and material publi - against the state in order to get back real city, the principle of legality and the property or adequate compensation. Re - principle of priority. stitution proceedings are very long las - ting and with uncertain results due to According to the principle of registra - political reasons, therefore out of court tion ownership as well as other rights settlements are recommended. with respect to real property come into existence, change or cease to exist only Acquisition of upon registration with the Land Regis - Real Property ter, unless the Slovak Civil Code or other regulations in exceptional cases deter - In general, ownership of real property mine otherwise. The Land Register is a may be acquired on the basis of purchase, public register, which everybody is entit - donation or other agreements, intestacy

Slovak Republic 59 or succession, decision of a state autho - case the transfer of property rights is ef - rity or based on other circumstances de - fected only by the registration with the termined by the law. Generally, real Land Register and not only by the mere property may be acquired by natural as conclusion of the contract on sale of the well as legal entities. enterprise. The motion to the registra - tion has to be submitted to the Land Re - ASSET DEAL gister by the acquirer. As far as the contractual acquisition of real property is concerned, the law sets SHARE DEAL forth two main conditions for a materially Real property may also be acquired in effective transfer of the ownership rights. the form of a share deal, by acquiring First, a written contract is required as the the shares of a company which owns the legal basis for the transfer of the owner - property. The acquisition of real pro - ship to the real property and second, the perty via a share deal leads to universal transfer of the ownership right has to be succession, which secures for the acqui - registered with the Land Register. rer all rights and duties associated with Hence, the written contract constitutes the shares and guarantees a continuity the “title”, while the registration with the of contracts related to the real property. Land Register constitutes the “modus”. Due to the lack of a new owner of the Normally, the registration procedure real property, there is no need to register with the Land Register takes 30 calendar the ownership within the Land Register. days, yet the parties are given an option to apply for a reduced procedure, which Adverse Possession - Usucapion takes 15 calendar days. The legally bin - Unlike in other European countries, in ding resolution on the permission of the Slovakia the acquisition of real property registration constitutes the independent by way of usucapion is not uncommon. legal fact causing the acquisition of the One of the main reasons may be the re - ownership rights to real property. latively short usucapion period which amounts to only ten years. The period Furthermore, real property may also be within which the real property was in the acquired in the form of contract pertai - possession of a qualified legal predecessor ning to the sale of the entire enterprise of the current possessor counts against (not composed as a legal entity) which the above mentioned ten years period. owns the property. However, in such a Another condition for the acquisition of

Slovak Republic 60 real property by way of usucapion is that Encumbrances possession was undisturbed during this ten year period. The possessor might be In Slovakia, the most commonly used a natural person but also legal entity. In the encumbrances concerning the real estate interest of legal certainty, the usucapion are mortgages and easements. According of real property has to be publicly estab - to the above mentioned principle of re - lished, attested and declared. Therefore, gistration, easements and mortgages can a notary has to attest the possessor’s de - only be effected by the registration with claration of the usucapion . The attest is the Land Register, while in accordance issued in the form of a notarial deed. with the principle of priority the re - The notarial deed is subsequently for - spective easement or mortgage will be re - warded to the Land Register that performs gistered on a first come, first serve basis. the registration of the acquisition of the real property by usucapion . In case that MORTGAGES the prior owner objects the veracity of Similarly to other European countries, the notarial need in connection with ful- Slovak legal order understands mort - filment of conditions for the real property gage as a type of lien against a real pro - acquisition by usucapion such disputes perty. If a mortgage is established by need to be solved by the competent court. means of a contract (besides other types of the mortgage establishment), the law ACQUISITION OF REAL requires written form for the contract. PROPERTY BY FOREIGNERS According to the principle of registra - Since the accession of Slovakia to the tion, the contract itself is, however, not European Union, the strict restrictions sufficient for the establishment of the on acquisition of real property by foreig - mortgage, but the mortgage has to be re - ners have been substantially relaxed. gistered with the Land Register in order Foreigners are nowadays allowed to to be effective. Under the Slovak law the acquire real property without any limi - mortgage shall be effective against every tations except for requirements for the further owner of real estate if the agree - acquisition of the agricultural land which ment on the establishment of the lien or apply to inhabitants of the Slovak Repu - a special act does not stipulate otherwise. blic as well. A mortgage may also be established in relation to a real property which will come into existence only in the future or

Slovak Republic 61 the existence of which depends on the party. Generally, two types of easements fulfilment of any conditions or to the may be distinguished, the so called in rem real property that the person in question and in personam easements. shall acquire in the future. The person of the mortgagor and the An in rem easement is connected with debtor may be different. the ownership of a real property. Such in rem easement binds the respective real The purpose of the mortgage is to offer property owner and is always transferred the mortgagee a security in case the together onto the acquirer of the re - mortgagor is unable to fulfil his/her ob - spective real property. For instance the ligations towards the mortgagee. In such right of passage through foreign real pro - a case, the mortgagee is entitled to en - perty or the drawing of water from a well force the mortgage and cover the out - located on nearby land constitutes in standing receivables out of the proceeds. rem easements. On the other hand, the In other words, if the mortgagor does in personam easements are granted to a not fulfil its obligations, the mortgagee specific person and are not transferred has the right to initiate legal enforcement onto its legal successor. An in personam proceedings by written notification ad - easement is for example the right of a dressed to the debtor and the respective person of lifelong usage of an apartment Land Register. Obtaining ownership of in a family house. the real property directly by the creditor based on a mortgage ( lex commissoria ) According to the Slovak Civil Code ea - is strictly prohibited. The most common sements may be established by law, by a manners of enforcement of the mortgage decision of a competent authority, by are voluntary auction or freehand sale; contract as well as on the basis of a last however other manners are allowed to will or an agreement between the heirs be agreed directly in agreement on estab - or by usucapion . In case an easement is lishment of the mortgage in question. established on the basis of a contract, the law requires written form. EASEMENTS Easements are understood as legal rela - tionships based on which an owner of real property is obliged to tolerate, act or refrain from acting in favor of a third

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Buildings on Third tions whether the building is connected Party Land with the ground as requested by the Slo - vak Civil Code otherwise such building PECULIARITIES CONCERNING shall not be considered as a real property OWNERSHIP RIGHTS TO BUILDINGS but as a movable asset. Unlike in other countries of continental Europe, the Slovak Civil Code does not Lease of Real Property follow the Latin principle of superficies solo cedit . Thus, the land and the buil - RESIDENTIAL PREMISES ding situated on it are considered two se - The Slovak Civil Code sets forth a gene - parate objects, each subject to (different) ral regulatory regime with respect to ob - ownership. Accordingly, the owner of jects that may be the subject to lease. the building and the owner of the land Additionally, it also contains specific where the building is situated on may be provisions that apply to the lease of re - two different persons. In contrast to land sidential premises. These provisions are which is always considered as immovable specifically adjusted to protect tenants property, the Slovak Civil Code does not of apartments, are mostly mandatory define all buildings as immovable pro - and therefore cannot be derogated by the perty, but only those buildings which are contractual parties. Thus the provisions firmly connected to the ground. on lease of apartments set forth specific requirements of the lease agreement as But the Slovak Civil Code does not con - well as restrictions on termination of the tain any definition of what a building is. lease agreement. Unless the parties reach Buildings are defined in certain ground an agreement, the lease agreement may planning and building regulations. These be terminated only for the reasons deter - regulations consider different characte - mined by the law. ristics, such as the purpose, duration and structural engineering of the con - Furthermore, the provisions on the lease struction concerned. However, it should of residential premises also set forth the be noted that these regulations examine, obligations of the landlord to hand over whether an object is a building or not, ir - the apartment in a condition for proper respective of its connection with the use and provide the tenant with full and ground. For that reason it has to be ca - undisturbed enforcement of rights rela - refully examined in real estate transac - ted to the use of the apartment. Small re -

Slovak Republic 63 pairs in the apartment related to its use Code as well as a specific Act on Lease and costs related to common mainten - and Sublease of Non-Residential Premi - ance are borne by the tenant, unless ot - ses. Based on the nature of the con - herwise agreed in the lease agreement. In tracting parties, e.g. if both contacting addition, the Act on Lease and Sublease parties are legal entities, certain aspects of Non-Residential Premises governs all of the contract, such as damage com - other leases of space. Non-residential pensations, contractual penalties or sta - premises are defined as rooms or a set of tutory limitations might be governed by rooms designed for non-residential pur - the regime of the Commercial Code. poses according to the determination of Non-residential premises are defined as the building authority or apartments rooms or a set of rooms designed for which may be used as non-residential non-residential purposes according to premises based on consents granted by the determination of the building autho - the relevant authority. In accordance rity or apartments, which may be used as with the said Act, non-residential premi - non-residential premises based on per - ses may be leased only for the purposes mits granted by the relevant authority. In they have been built for. accordance with the said Act, non-resi - dential premises may be let only for the Similarly to the specific provisions on the purposes they have been built for. lease of residential premises contained in the Slovak Civil Code, the Act on Lease The Act on Lease and Sublease of Non- and Sublease of Non-Residential Premi - Residential Premises sets forth for the ses sets forth mandatory provisions on most part mandatory provisions on the the requirements with respect to basic requirements with respect to basic featu - features of the lease agreement which res of the lease agreement, which cannot cannot be derogated from, otherwise the be deviated from, otherwise the contract contract is deemed invalid. Limitations would be deemed invalid. A non-resi - on termination of the lease agreement dential lease agreement may be conclu - are also included. ded for a fixed as well as an indefinite term. The duration of the lease agree - BUSINESS PREMISES ment influences also the termination of Similarly to the lease of residential pre - the agreement. mises, the lease and sublease of non-re - sidential premises is governed by Civil

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If a lease agreement was concluded for element of a lease agreement. Since this an indefinite term, both the landlord as is very rigidly interpreted, a lease agree - well as the lessee are entitled to terminate ment, which lacks payment conditions the agreement without stating any rea - (via bank transfer or in cash) lacks one son, unless otherwise provided in the lease of its constituent elements and is, there - agreement. Unless otherwise agreed, the fore, considered null and void. The same notice period is three months. applies also in cases, where the parties On the other hand, if a lease agreement agree on a lump sum rent (rent which in - was concluded “only” for a fixed term, it cludes also fees for electricity, water, gas may be terminated for the causes as set etc.). Such agreements are not conside - forth in the said Act. Whether these cau - red as valid agreements on rent and the ses might be changed or altered by agree - entire lease agreement is considered null ment of the contracting parties or not and void, as well. Therefore, when con - cannot be clearly inferred from the wor - cluding a lease agreement due regard ding of the provision. Yet, jurisprudence should be paid to contractual drafting. exists that these causes are mandatory and cannot be deviated from. MAINTENANCE AND REPAIR Unless otherwise provided in the lease OPERATING COSTS AND RENT agreement, the landlord is obliged to Neither the Civil Code nor the Act on hand over the leased premises in such a Lease and Sublease of Non-Residential condition as contractually agreed or in Premises contain provisions regulating such condition that the premises are fit the duty to bear operating costs or under for the usual usage. According to the Act which conditions these costs should be on Lease and Sublease of Non-Resi - borne by the landlord and under which dential Premises, the landlord is also ob - by the lessee. Therefore this topic should liged to maintain the leased premises in be subject to contractual agreement bet - such condition, which renders them fit ween the parties. for usual usage during the term, as well as to ensure that all services, whose pro - In this context it is worth pointing out vision is related to their usage are duly that according to the Act on Lease and provided. The landlord also has to bear Sublease of Non-Residential Premises all costs related to the above stated obli - an agreement on rent, its maturity and gations, unless otherwise agreed. payment conditions form a constituent

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On the other hand the lessee is obliged Public Permits to bear all costs related to ordinary maintenance of the leased premises. In Slovakia, in order to realize a building project of any kind, irrespective of its EFFECTS OF CHANGE OF CONTROL structural engineering, purpose and du - ration of existence, a construction permit Lessee needs to be obtained from the respective Neither the Civil Code nor the Act on authority. A permit is also required in Lease and Sublease of Non-Residential case of changes to a building, particu - Premises regulate the question of change larly in the case of annexes, extensions of control in the company which is the and adaptations. The permit is valid for lessee and its influence of the lease agree - two years from the day of its effective - ment. Without a contractual agreement, ness, unless in justified cases the respective thus, a change of ownership of the lessee authority determines longer validity for does not have any effects on the lease the permit. Thus, the holder of the per - and its terms. mit has to commence with construction works within two years from the date of Owner the permit, otherwise the permit beco - In cases of a change of the ownership, mes invalid and a new permit needs to the new owner enters into the legal rela - be finished in compliance with the con - tionship on the side of the landlord and struction permit. Subsequently also a thus is bound by all rights and duties ari - use permit has to be obtained in order to sing out of the lease agreement. On the the building be operated. other hand, the lessee is granted a termi - nation right in case of a change of owner - Taxes and fees ship of the landlord. While in practice this extraordinary termination right is usu - Real estate taxes in Slovakia are divided ally excluded, it is not clear, whether such into three types, i.e. land tax, building tax an exclusion of the termination right is and residential/non-residential premises legally permissible. tax in residential houses. There is no real estate transfer tax in Slovakia anymore.

Real estate taxes concern solely to acqui - rers of real estate based on various modi

Slovak Republic 66 of acquisition. The taxes in question are Overview paid on an annual basis, whereas the cal - on fees and taxes: culation of tax is annually determined by the generally binding decree of the Taxes and Fees Rate municipality. However, the tax rate can - Real Estate Transfer Tax N.A. not exceed certain maximum rates set forth by the relevant legal regulations. registration of ownership EUR 66 or EUR 266 Additionally to its location, the particu - VAT (in case of lar amount of tax differs also based on VAT taxpayers) 20% of consideration the nature and value of the real estate. Hence, different rates apply to agricultural registration of mortgage EUR 66 or EUR 266 estates, estates determined for building EUR 1.8845 per m 2 purposes, residential premises, non-resi - (average tax rate in 2015 applicable to business dential premises, business premises etc. premises)

EUR 0.2910 per m 2 Gains on real estate transactions are (average tax rate in 2015 subject to income tax on the side of the Real Property Tax applicable to land plots (depending on the nature, for building purposes) seller. The income tax rate for indivi - location and value of the real property) 0,2293 EUR/m 2 duals is 19% or 22% and for legal entities (average tax rate in 2015 25%. The most significant exemption applicable to apartments) from taxation applies to real estate in the -0,0019 EUR/m 2 ownership of the seller for a period lon - (average tax rate in 2015 applicable to agricultural ger than 5 years, in which case the sales land) margin is not subject to taxes.

Both for the registration of ownership as well as for a mortgage the same registra - tion fee for the Land Registry applies. The registration fee amounts to EUR 66 for cases of ordinary procedure and EUR 266 in case of speed up procedure.

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Environmental Liability otherwise Slovak law provides for subsi - diary liabilities of the owner, administra - The relevant Slovakian regulatory pro - tor or lessee of real property who are in visions (e.g. Waste Act) primarily pro - general liable under the condition that he vide for a liability of the polluter (e.g. voluntarily tolerated pollution, has the possessor of waste) if such polluter is benefit from the pollution or neglected duly established in the course of the pro - to implement appropriate measures ceeding performed by the state authority against pollution.

For more information please contact

Mag. Mark Krenn Head of CEE Real Estate JUDr. Ľudmila Dohnalová and Construction Attorney-at-law –Slovak Republic Partner – Austria [email protected] [email protected] Tel: +421 2 2064 8580 Tel: +43 1 514 35 ext. 591

Slovak Republic

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