Guidance for Purchasing Bulgarian Property and Land

Below you will find guidance on the process of purchasing property in Bulgaria. There are some differences in this process depending on whether you are purchasing and off-plan or resale and also if the purchase includes land.

1. Select a property
2. Make a reservation
3. Does the property include land?
4. Preliminary contract of sale and purchase
5. Management contract
6. Phased construction payments
7. Transfer of title and the Notary Act
8. Power of Attorney
9. Other Expenses

Register a Limited Liability Company

Under Bulgarian law, foreigners are not allowed to own land but may own buildings. Generally owners of apartments will not own the land it is built on (as in the UK) and therefore there is no necessity to register a company.

Foreigners can own land by registering a Bulgarian Limited Company to hold the land for them. The formation and registration of a limited company can take anywhere between a few days to a few weeks.

The minimum share capital required is 5000 leva (approx £1800) of which at least 70% (3500 leva) must be deposited at the time of registration. A solicitor will draw up the company's Articles of Incorporation and Memorandum of Appointment of Directors and a bank account will need to be opened in the company’s name into which the share capital should be paid. An application is then submitted to the district court along with the legal documents and proof that at least 70% of the company's share capital has been paid. The court will then add the company’s name to the Commercial Register and the company will then exist. The court then announces the formation of the company in the official paper of Bulgaria (The Bulgarian State Gazette); this completes the process of the company formation.

The company must then be registered with the National Tax Register Authority.

Once the entire share capital has been paid these funds can then be accessed to purchase the property. You should allow between £400 and £600 to cover the solicitors costs and court costs.

Reservation contract

A reservation contract is an agreement between you and the seller, which “reserves” the property

A reservation contract generally applies to the purchase of off-plan properties or other properties where high demand is expected and is similar to paying a reservation fee in the UK for newly built properties.

The contract allows you or your solicitor time to carry out any checks before you legally commit to buying the property.

In most cases this deposit will be non-refundable should you decide not to proceed with the purchase but can be deducted from the first payment on the property should you decide to proceed with the purchase.

Legal checks

Legal checks will include:-

• Obtaining proof of ownership of the property
• Checks that all debts on the property will be settled prior to completion
• Checking the property has all necessary licences and permissions to build
• Checks on the contract

We would advise you to appoint a solicitor conversant with Bulgarian property law to carry out these checks on your behalf. We can provide recommendations of both UK and Bulgarian based lawyers.

Structural Survey

As in the UK there is no legal obligation to arrange for a structural survey on the property, however your mortgage lender may insist on a survey if you are securing the loan on your Bulgarian property.

We will be happy to provide contact information should you wish to carry out a survey.

Preliminary contract

The preliminary contract is the main contract of purchase and once signed you are legally committed to purchase the property unless the seller, for whatever reason, is unable to proceed.

Before signing this contract we would advise that you take independent legal advice from a lawyer who specialises in Bulgarian Property Law. We will be happy to provide contacts both in the UK and Bulgaria.

When you sign the preliminary contract you will be required to pay a deposit (around 10% of the price for resale properties and higher for “off plan” or new build properties).

Stage payments

When purchasing an off plan property the contract will usually require you to make payments at set stages of construction. A typical example would be 30% of the purchase price on signing of the preliminary contract, 30% on completion of the roof and 40% on completion of the property.

We will advise you in good time of estimated dates for these instalments so that you can ensure you have the funds available. We will also provide some form of documentation (e.g. photographs) that the property is at the required stage.

Power of Attorney

If you are unable to attend the Notary Act you can appoint a qualified person to act on your behalf. You will be required to give a “Power of Attorney” to that person who and depending on who you appoint you may have to pay fees.

Notary Act

On completion of the property (or for resale properties when everyone is ready to proceed) the final contract or deed of sale is signed. In Bulgaria this must be done in the presence of a Notary, who is a public official.

The Notary’s role is to put on record that both parties understand the contract they are entering into and to witness the signing of the transfer document. The Notary does not act on either the seller or the purchaser’s behalf. Generally there will be a requirement for a translator, unless of course your Bulgarian is fluent!

Once the Notary Act has been signed you are the legal owner of the property. The Notary will then register the property with the local authority.

Title deeds

You should receive your title deeds from the local authority within approx 10 days of the Notary Act.

“Council tax”

Once you have received your title deeds you must register for council tax with the local authority. We can arrange this for you.

Council tax is currently charged at 0.15% of the value of the property (e.g. for a property valued at 140,000leva council tax of 210 leva (approx £75) would be payable each year).

Bulstat registration

With effect from 11 August 2005 all foreigners purchasing property in Bulgaria must register with the Bulgarian authorities for a Bulstat number. This does not apply to properties purchased via the formation of Bulgarian limited company.

You should register for Bulstat within 7 days of the Notary Act. We can arrange this for you.

Insurance

You should take out insurance on the property (and contents if applicable) on completion. There are numerous organisations both in the UK and Bulgaria who will arrange this for you and we recommend that you obtain 2 or 3 quotes as prices and level of service may vary significantly

We are happy to provide contacts for you.

Furniture package

There are basically two options when it comes to furnishing your property. The first is the “D.I.Y” option where you trawl the furniture shops and arrange the deliveries and installation yourself. Logistically this may be difficult if you do not live in Bulgaria.

The second (and much less stressful) way is to use a specialist furniture company who will supply you with either a standard furniture pack or one tailored to your requirements.

When selecting a furniture company we recommend that you consider not only the price and quality of the package on offer but also, and perhaps more importantly, the level of service the company provides. Consider how easy it is to contact them, do they speak English, what are the delivery times etc. A reputable company should always be happy to provide you with references!

We can provide details of furniture companies who operate in your chosen location.

Electricity, water and refuse collection

You will need to transfer the water, electricity and rubbish collection services into your name, unless these costs are included in your maintenance contract.

If you do not speak Bulgarian we would advise that you use a local person to do this for you or alternatively we can arrange this.

If you have purchased in a managed complex, your complex manager may be willing to settle these costs on you behalf and then recharge you for them.

Maintenance Contracts

If you are purchasing a property in a managed complex you will be required to sign a maintenance contract on an annual basis. Payment is usually made in advance and covers costs such as upkeep and maintenance of common areas (pools, corridors, gardens etc.) and security.

You should usually receive a copy of the Maintenance Contract with the Preliminary Contract but in most cases you will not be asked to sign this until the completion date.

The annual cost of maintenance varies from complex to complex and is dependant on a number of factors (e.g. actual service provided, quality of service, costs included, size of apartment and complex). By way of example a 90sqm apartment in the Watermill, St Vlas cost €300 for 2006.

Rental Contracts

Should you wish to rent out your property there are essentially two routes to go down:-

• Allow one or more of the large tour operators to advertise and manage the lets for you, this is generally done through a local rental management company. The tour operators will obviously charge a premium on the amount they pay you. You should also bear in mind that they will generally want to reserve the whole of the peak season for themselves, although this can sometimes be negotiated.
• Advertise the property yourself via internet sites, newspapers, magazines and online directories etc. You will then need to appoint someone to take care of the “turnaround” – i.e. cleaning, checking for damages, key holding etc. There are many organisations in Bulgaria who now offer these services. We will be able to recommend someone who covers your location.