Until now, due diligence on assets located in Romania would generally address, among other things, title, restitution claims, zoning and summaries of leases or other contracts, as well as corporate issues.  However, what we are living through now will probably change our lives, our habits and, certainly, the way we conduct due diligence in the context of real estate acquisitions.

Let’s forget for a moment about the travel bans, restrictions on personal movement and work-from-home arrangements and instead focus on the post-COVID-19 era. We would expect a different approach to due diligence. This is because – with antibiotic-resistant bacteria and other super-bugs spreading – this COVID-19 “fire drill” may be merely a harbinger of how quickly and effectively property owners will need to react in years to come.

Future reports could address, among others:

• The impact of COVID-19 pandemic on the target’s business.
• The target’s access to funds and general creditworthiness. 
• New regulatory concerns, including licensing. For example, some producers might have reconfigured their business to address the crisis or even radically changed their sales and production strategy (the luxury industry helping with production of sanitizers, for example). Several months of unprecedented events will have reshaped some industries. 
• Summary of observance of data protection in the context of COVID-19, a topic that is already being debated on the market.
• The deal timetable will have to take into account possible delays in registration with the Trade Registry. This is now a certainty, but after the current crisis, counsel should remember and properly address this point with back-up options. 
• From the technical team: not only classic overlapping or zoning issues but also whether the building has sufficient HVAC and proper filters.
• Legal counsel typically highlights termination clauses, service charges, rent indexation or similar items in leases. Post-COVID-19 though, the focus may be not only on force majeure or hardship but also whether a lease provides for flexibility, allows negotiations and sets out tools to help the parties share risks and overcome a crisis. 
• Moreover, counsel should check whether business interruption insurance and/or loss of rent insurance of the target or similar tools are in place to protect the target’s business or a tenant’s business, if a similar outbreak occurs again post-COVID.
• Additionally, legal counsel would also focus on development items, such as whether the contractor and its subcontractors have proper staffing and are able to finalize the construction works and whether there is a mechanism allowing flexibility in case of delays in getting required permits during a crisis such as the one we are facing today. 

As the law firm of the future, Dentons is uniquely placed to guide clients in anticipating the red flags of the post-COVID era. Please do not hesitate to contact us if you may have any questions or comments.