Property Ownership
 Bulgaria real estate prices are by far lower than other destinations in Europe but the estimated acceptance of Bulgaria in the European Union provides unprecedented growth potential that will certainly boost the prices of the Bulgaria real estate in the near future. Bulgarian market or real estate is still unexplored and undeveloped to a certain extent, which makes it very attractive and profitable. But there are also some peculiarities regarding the property ownership in Bulgaria. Bulgarian lawThe acquisition of real estate under Bulgarian law is regulated mainly by the Constitution of the Republic of Bulgaria, the Ownership Act, the Ownership and Use of Agricultural Land Act and the Civil Procedure Code. The tax, charges and fees payable upon acquisition are laid down in the Local Taxes and Charges Act, the Tariff for Notary Fees to the Notaries and Notary Activities Act, the Tariff No 1 to the State Tariffs Act and other tax legislation.According to the Constitution the right of ownership is guaranteed and protected by law and private property is inviolable. Compulsory alienation of the right of ownership for state or municipal needs is possible only under an Act, under the condition that these needs cannot be satisfied in another way and only after prior and equal value compensation. Law restriction for foreign personalsAccording to the Bulgarian law, embodied in the Constitution of the Republic of Bulgaria and the Property Act foreign physical persons cannot acquire the ownership of land in the country.Under Bulgarian law a person can acquire a right of ownership over a building separately from the underlying land. If the building is an existing one the previous owner need merely to transfer the right of ownership over the building. Under the heading limited ownership rights the Bulgarian law understands the rights of use (usus), the right to build a house on a piece of land (superficie) and the servitudes (e.g., the right of access to the street through another person's piece of land). It is possible for an owner of a land to transfer the right to build upon it, which is a real right, and after the completion of the construction the holder of the right to build will become the owner of that building. If the owner of a building does not own the underlying land he may use the land but only as far as it is necessary for the use of the building, according to its designation, unless otherwise stated in the deed transferring the right of ownership over the building or the right to build. According to case law the owner of the building may use the land only to gain access to the entrance and to the area around the building in order to maintain it in a normal and fit for use condition. Practical implications of this restriction could be to prevent the parking of a car on the land or use of the garden. The restriction on land ownership on foreigners is now publicly discussed and is likely to be modified or lifted in the accession to the EU. Land ownershipThe limitation to acquire ownership of land does not exist for local judicial persons ? such are all the judicial persons registered in Bulgaria no matter the size of foreign participation. If foreign individuals or legal persons would like to own land in Bulgaria they can do this by establishing a company there.Preliminary ContractThe buyer may sign a preliminary contract for the purchase of the property and pay to the owner or the agency a down payment of 10% of the total purchase price. Usually those contracts are signed in order for the real estate agents and owners to prepare themselves with the necessary documents for the signing of the Title Deed before a Notary Public.There are different opinions in Bulgarian legal circles about the efficacy of a preliminary contract. What is clear enough is that under Bulgarian law a contract for the sale and purchase of real estate has no legal effect until it has been executed (signed) before a notary and converted to a notary act. The resort to preliminary contracts is useful - and much loved by real estate agents - because it normally takes time to set up the session with the notary. But a so-called "preliminary" contract does not itself operate to validly transfer the ownership of the property. However, a court order can have the effect of the notary act. So, if you renege on the preliminary contract and are sued for that reason by the seller, the court could decide to hold you to the contract and order the sale/purchase to be completed. The uncertainty lies in the question whether and in what circumstances a court will make such a decision. This may well depend on the content of the preliminary contract - there are certain basic requirements which must be satisfied. There is no set format for a preliminary contract and in a given case it may be that there are grounds for the contract not to be given effect. Preliminary Contract ChangesThe preliminary contract can be change only if the both site are signing the additional agreement. If you walk away from the deal you will loose the deposit you have paid. You must decide which way will be better for you.Notary publicAfter certain period of time the buyer pays the remaining of the purchase price and obtains a Title Deed for the ownership over the property.All dealings with real estates in Bulgaria must be done before a notary public. A notary public (sometimes called a notary or a public notary) is an individual authorized by state or local government to officially witness signatures on legal documents, collect sworn statements and administer oaths. A notary public uses an embossing tool to verify his or her presence at the time the documents were signed. You will require independent legal representation and a legally authorised translator with you to ensure that transfer of ownership takes place. If required, a ?Power of Attorney? can be granted enabling another person (usually your solicitor) to attend and sign on your behalf. Notary ActThe right of ownership of real estate is transferred in the form of notary deed (equivalent to the Title Deed). The notary deed is a type of contract whose form and content are prescribed by law. It is executed by a notary within whose region the real estate is located. As the notary is under obligation to check the identity of the parties, their capacity, the authority of the representatives and the good title of the transferor, the process of execution of the notary deed offers considerable security. In the case of off-plan developments, the final Notary Act is not signed until the building is completed.Once the Notary Act and the Final Legal Contract is signed, ownership is transferred and the title deeds will be sent from the local authority within the following 10 days. In many cases apartments also come with some proportional ownership (co-ownership) over the land on which the building is erected, which has its own complications. According to the Bulgarian Law, the husband or wife of the person named in the deeds immediately assumes 50% of ownership of that property, whether their names appear on the deeds or not. Notary FeeA notary fee depending on the price of the property ? again agreed price or tax valuation, whichever is higher, is payable. For instance, for properties between BGN 50,000 and 100,000 the notary fee is BGN 318.5 plus 0.2 per cent on the excess above BGN 50,000. Thirdly, a charge for the registration of the notary deed by the registry judge need be paid, amounting to 0.1 per cent of the price.Land RegistryAfter the deed is executed it is registered by a registry judge upon request of the notary.Land registry is process of registration of the new ownership at the local court. Upon execution of the notary deed certain taxes, charges and fees are due. A 2% local tax levied upon the price agreed between the parties, or the valuation of the property by the tax authorities, whichever is higher, is due. Things to be aware of:It is quite likely that the property seller will not want to declare the real price of the property on the Deed of Transfer. This is done for the owner to avoid paying capital gains tax (which would be approx. 30% of the real purchase price). You might end up in a situation where the owner proposes that either you pay the market value BUT get an official document (Title Deed) stating far lower price or you do not have a deal. Usually, we recommend that this should be explicitly agreed in writing before the signing of any document, but if your situation comes to such a dead-end, you should know that having a Title Deed with lower price does not invalidate your deal. However, such situation has its financial consequences, such as not having official documents for the money spent and higher taxes if you decide to sell the property afterwards on its real value. Please, consult with your broker/lawyer every aspect of the deal for to avoid any misrepresentation and misunderstanding at a later stage.General warning:When the search for good root to title is carried out in the Land Register, there are 3-5 blank days, immediately before the search, for which your attorney would not be able to give you any data ? i.e. there is a possibility that the owner of the estate might have put a lien on it, etc. This does not happen on an everyday basis, but buyers should be aware of it, as there may be unscrupulous owners who take advantage of this opportunity. Therefore, we would recommend that the deal be guaranteed by an escrow account set up either by the Notary or by a Bank.Legalization:Legalization of the documents simply means confirming that a signature, seal or stamp appearing on a document is genuine.The signatures or seals of British Public officials (such as solicitors, notaries public, registrars) on certain documents from the United Kingdom have to be confirmed before those documents can be accepted overseas. To legalize a document we attach a legalization certificate to it. Legal Disclaimer The above represents a general overview of the legal regime of acquisition and taxation of real estate in Bulgaria as of August 2004. It does not constitute legal advice and cannot be relied upon as such. The author does not accept any responsibility for liabilities arising as a result of reliance upon the information given. Please contact a lawyer for professional advice for your particular circumstances. |
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