LAW REGULATING THE TRANSFER IN LIEU OF PAYMENT

Law no. 77/2016 on the transfer in lieu of payment of certain immovable assets in order to pay-off a loan obligation was published in Official Journal no. 330 of April 28, 2016 and will enter into force on May 13, 2016. As expected, this law has already been largely criticized by the banking institutions, according to which this law violates the principle of non-retroactivity of laws, given that it also applies to pending loan contracts. So long as the Constitutional Court has not yet ruled upon the unconstitutionality of this law, it will produce its effects and numerous debtors affected by financial problems already notified the banks on their intention to transfer their property in order to pay-off their debt.

CONDITIONS AND CONSEQUENCES

Please be reminded that transfer in lieu of payment is a means of paying-off an obligation: in order to pay its debt, a debtor transfers to the creditor a different thing from that provided in the contract (article 1243 of the French Civil Code / article 1492 of the Romanian Civil Code).

Law no. 77/2016 applies to relations between consumers (natural persons) and credit institutions, if certain conditions are met:

• the creditor and the consumer are among the categories mentioned at article 1 paragraph 1 of the Law (consumers – natural persons / credit institutions / non-banking financial institutions);


• the value of the loan does not exceed 250,000 Euros;


• the loan was contracted in order to purchase, build, modernize, furnish or restore a building used for housing purposes or, regardless of the purpose for which it was contracted, the loan is guaranteed by a mortgage over building used for housing purposes;


• the consumer was not sentenced under a final ruling for a crime related to the loan.

After performing the transfer of the property in lieu of payment, the consumer’s obligations under the loan contract, including the corresponding interest, are paid-off without any additional cost.

PROCEDURE

In order to benefit from the provisions of Law no. 77/2016, consumers must send a notice letter to the creditor (by bailiff, lawyer or a notary public), informing the latter on his/her decision to transfer the ownership right over the property in exchange of the pay-off of his/her obligations under the loan contract. The notice letter must also state the hours between which the creditor’s legal or conventional representative must appear before the notary public proposed by the debtor, in order to conclude the property transfer deed.

The first day of convening before the notary public cannot be scheduled earlier than 30 days; during this period, any payments to the creditor, as well as any judicial or extrajudicial procedure commenced by the creditor against the consumer are suspended. Notary fees, as well as the bailiff’s fee will be borne by the debtor.

The creditor has 10 days from the date of reception of the notice letter to appeal the debtor’s actions for non-compliance with the admissibility conditions provided by the law. If the appeal is dismissed, the creditor must appear before the notary public appointed by the debtor, in order to conclude the property transfer deed. If the appeal is allowed by a final ruling, the parties will be restored to their previous condition and the notice letter will have no effect.