How to successfully pass the public auction “test” when you want to buy / lease / rent land which is part of the private property of the Romanian state? Unfortunately at the moment the practice regarding public auction is not uniform or clear, often leading to contradictory solutions. The set of legal provisions that governs public auction procedure establishes certain sine qua non conditions to success in fulfilling your public auction procedure.
When you are interested in buying, leasing or concessioning of a land which is part of the private domain of the State, as a diligent investor, you should consult the legal provisions on the procedure to be followed in such cases. Law 215/2001 on local public authority refers to how “the local and county councils decide that goods belonging to the […] private domain of the State can be given in administration, for concession or rented. They decide on buying, selling or renting the goods belonging to the private domain, under the law. The sale, lease and concession are made by public auction, organized under the law.” So, it is clear that the land which is part of the private domain of the State can be sold, leased or rented only through public auction, this being a requirement, which has to be done “under the law”. But, what does “under the law” mean, given that Law 215/1991 does not provide any regulation on the procedure to be followed?
We can turn our attention to the provisions of Law 50/1991 regulating
the authorization of execution of construction works, where the procedure to be followed in case of land concession for construction can be found.
For example, land owned by the state or local government units, for construction purposes, can be sold, leased or rented through public auction according to the law and the legal provisions regarding town planning documentation of landscaping.
The statutory provisions of law 50/1991 permit and regulate certain exceptions, listing the cases where building land can be leased without auction, and these cases represent the exception to the rule.
The identification details of the land which makes the object of the auction shall be published by the mayors of the territorial administrative units where they are located, through notices displayed at their offices and published in at least two newspapers of national circulation at least 20 days before the auction date. The published information concerning the auction will include the date and place of the land, the surface and destination set by the planning documentation and the minimum annual royalty fee.
A pre-feasibility or a feasibility study will accompany the offer, as appropriate, including the mandatory technical elements necessary to describe the building functionality and capacity, the occupancy rate of the land, and the other elements of the certificate of urban planning. Offers will not be accepted only on the basis that they correspond to the provisions of the urban planning documentation, approved by law. Obviously, this information is not sufficient.
The auction is organized in accordance with the legal provisions which the commission has established for this purpose on the basis of the decision of the local Council or, if the case may be, on the basis of the decision of the General Council of Bucharest, in accordance with the powers of authorization set out by the law. The commissions operate at the local council related to the location of the land.
There is a minimum limit of the concession price which is established by the decision of the local council or the General Council of Bucharest, in order to ensure the recovery in 25 years of the sale price of the land, under market conditions, plus the cost of the works regarding the infrastructure.
Based on the minutes of the award of tender or the decision of the local council or of the General Council of Bucharest the concession agreement is concluded, and will be recorded by the concessionaire in the real estate advertising records, within 10 days from the awarding date or from the date the decision was issued.
The conditions for the concession of land are provided in accordance with the law, the duration of which being determined by the local and county councils, respectively the General Council of Bucharest, according to the provisions of the town planning documentation and the nature of construction.
Natural and legal persons receiving land under the above mentioned conditions are required to apply for a building permit and begin the construction within one year from the date the act of leasing was issued. If these conditions are not met, the contract becomes invalid and consequently stops to produce any effects.
The question that normally comes in everybody’s mind is what happens if the conditions for undertaking the public auction procedure are not all observed? In this case, the risk might be significant and the consequences might go to even have the entire procedure cancelled. This situation involves besides the loss of money invested in fees, training materials and all the costs needed in order to prepare the bidding offer, the fact that if you still want to buy, lease or rent the land you will have to take from the very first start, the long and heavy procedure of the public tender.
Therefore, the biggest disadvantage when it comes to start all over again with the public auction, are not necessarily all the money spent, which are not few, but mostly the time lost, and when we talk about investments and project development, loosing time might destroy any business.