Legal Guide to Buying Property in Bulgaria

Click here to Apply for a Bulgaria Mortgage

Bulgaria is a relatively immature country as far as the overseas property market is concerned and it will continue to evolve as it emerges into a full, free market and potential member of the European Union, of which it is scheduled to join in 2007. We anticipate that the Bulgarian property market will perform well over the next 5-10years, with growth rates of 8-9% anticipated in 2006, followed by up to 10% growth in 2007, perhaps more . As Bulgaria becomes more popular, tourism demand is rising but we may see a temporary oversupply of houses in the market suppressing rental yields in the short term but medium term and long term investors should achieve excellent returns. Buying in Bulgaria is easy and no more or less difficult than buying in any other foreign country, although you do need to pay particular attention to land ownership title.

There is one specific thing that is to be taken into consideration, which is that non-Bulgarian nationals are prohibited from owning land and can only own the buildings and not the land upon which the buildings are built. There is a way around this situation should the investor want to purchase land and that is by forming a Bulgarian limited company. A person buying an apartment does not need to do this because they would only own the apartment and not the land which does not affect their rights to that apartment. Even though the investor does not own the land, this is not a cause for concern, as the investor’s rights continue forever. If you wish to own land as a foreign individual, you can easily register a company in Bulgaria and buy property through that company at a cost of 550 Euros.

A company owned by a foreign person in Bulgaria is considered to be a Bulgarian legal entity and can acquire real estate ownership rights without any restrictions. All the necessary procedures for establishing a limited company can be completed in approximately one month if it is required. The legal situation for purchasing is summarised as follows;

• No land ownership for foreigners in Bulgaria
• Foreigners can own buildings
• Foreigners wishing to own land can do so through incorporating a limited company
• Bulgarian company incorporation costs 550 Euros approx.
• Bulgaria's ownership policy will be harmonised with the EU in the future

The Buying Process

We can recommend an experienced independent UK-based lawyer if you wish to use an independent legal adviser for this process, which we do recommend you consider strongly, particularly if this is your first purchase in Bulgaria. The buying process in Bulgaria follows this format :

If taking out a Bulgarian mortgage we would advise clients to agree a mortgage in principle first, prior to making any payments. This can be done over the phone and usually takes a week.
• Once the reservation contract has been signed, which will secure your interest in the property, there is usually a period of 4 weeks in which to carry out checks before the investor signs the main 'preliminary' contract. The preliminary contract is signed by all parties in which they effectively promise to enter into a final contract to buy and sell the property. After all the necessary details are provided, the contract will be drawn up by the developer’s solicitors and will set out timescales, payment terms, prices and the terms and conditions agreed.
• When the preliminary contract is signed the investor will usually pay a deposit 10% of the price on a resale property or a down payment of perhaps 30% on a new or “off-plan” property. However it is subject to the particular developer’s requirements with a certain level of flexibility.

• The remaining monies are then due prior to build completion and payable in stage payments. The developer is usually flexible when these payments are made so long as the required monies are paid in full before build completion. Your solicitor should be able to advise you whether this is actually the case.

• Once rough construction of the building has been completed you are able to fund the remaining amount via a Bulgarian mortgage. At completion of rough construction (also known as roof level) the bank will take over the payments.
• In most countries, except the UK and other common law jurisdictions, the Notary plays a major part in the process of buying and selling real estate. The notary is a public official who is simply there to ensure that the transaction goes through in a proper legal manner, but it not duty bound to act on behalf of the investor. Once the property has been finished the final contract/Notary Deed is signed transferring the right of ownership to you. At this point it can be put on the public record which will show the official transfer of title to the investor.
• Once this has occurred, the investor will transfer the remainder of the funds and obtain the title deeds in their name. At this point the property is legally completed and the investor becomes the owner!

Bank guarantees

In many countries, a bank guarantee must be in place to ensure that if the developer goes bankrupt, the investor does not lose the money already paid. This is not the case in Bulgaria and bank guarantees are not provided. This is because the banking system is still immature and, for most companies, getting these guarantees is either impossible or very expensive. In the absence of a bank guarantee there are other steps that can be taken to protect your position should the developer not be able to finish the project.

With all the developments Assetz sources, the developers we work with usually raise finance from a bank institution which makes investment in their projects very secure for the prospective buyer and the quality and financial standing of the developers is always thoroughly checked. All companies that we work with are members of, and regulated by, the Bulgarian Chamber of Construction. These companies are medium to large in size with a good track record of providing quality products that are delivered in realistic timescales.