Buying Guide for Bulgaria

 

 

On all parties signing the Notary Act, the property is now Yours, Congratulations

 

Buying Guide

One of the many reasons that buying property in Bulgaria is so popular is that the buying process is extremely simple. Selecting the property, reservation, staged payments and transfer of ownership are essentially the main stages of a purchase process that thousands of people have already undertaken and many more have yet to do so.

Selecting The Right Property

The first stage in the purchase process is finding a property specific to the buyer's requirements. Consideration needs to be given to the reason for purchase; every purchaser is an investor to varying degrees and want to experience capital growth in the property but consideration needs to be given to any requirement for a monthly income through a guaranteed rental scheme or if personal use is overriding factor that determines property choice.

Putting in order the three main factors -

Capital Growth

Rental Income (Guaranteed or Not)

Personal Use

will narrow down the wide choice of property that is on offer.

Viewing Property

Together with our associates in Bulgaria we can assist in making your arrangements to travel to Bulgaria to view property if required. Getting to Bulgaria is covered in a different section but booking hotels, arranging transfers or simply assisting with knowledge of distances between locations are areas in which we provide a service. If you have already planned a holiday in Bulgaria and wish to meet a representative whilst you are there this can also be arranged but it would be wise to give consideration to the selection of properties that are to be viewed prior to travelling.

Owning Land

For all properties that are purchased with land a limited company needs to be formed by the property investor as currently it is not permitted for a foreigner to own land in Bulgaria . This rule is set to change now that Bulgaria has joined the EU however in reality the situation is unlikely to change within the next few years after joining. Forming a company is not a complicated or expensive process and should not deter purchase.

Freehold or Leasehold ?

The property is neither freehold, nor leasehold; both of these terms are unknown in Bulgarian law. What you are purchasing is superfica meaning ‘above the land surface’ rights. This is the right to posses a building or part thereof. (i.e. apartments). For practical purposes it is comparable to the freehold. By holding this right you will have full ownership of the apartment for an indefinite period and will owe nothing to the landowner. Unlike the freehold in common law that is expected to be touching the ground, you may have your unit on the fifth floor and still owe nothing to the landowner (or to the owners of the apartments beneath you).

The landowner in Bulgarian law is not like the freehold owner under common law, as the latter is entitled to payments under a long lease, while the former is not. By transferring the ownership of the units in the building, the landowner (i.e. the developer) actually disposes completely of his rights over the respective parts of the building and has no claims against the unit buyers whatsoever. Unlike the leaseholder in common law the owner of a building, or a unit owes nothing to the landowner; he is the full owner of the apartment. Most importantly, unlike a leasehold owner, the rights of the Buyers over their units never expire.

Reservation and Preliminary Contract

Upon finding the property the first stage of the process is to pay a reservation fee, this is payable upon committing to purchase and is normally non-refundable. Payment of this fee removes the property from the market for a period of up to 30 days (or longer by agreement) in order for the legal checks to be completed.

Following reservation a preliminary contract is issued by the developer either directly to the client or through the agent. The Preliminary Contract is your contract to purchase the property and the sellers contract to sell the property. This is the legal document that details all aspects of the purchase and accompanies the purchase from reservation through to transfer of property ownership from the seller to the buyer and issue of the Final Contract.

At this point it is advisable to appoint an English speaking Bulgarian lawyer to conduct the legal checks concerning the purchase on your behalf. These checks include

If the land is owned by the developer and / or if there is a charge on the land

If permissions have already been granted for the property to be built and

If the architectural plans have been approved

Staged Payments

Following reservation and satisfactory completion of the legal checks, the property is normally purchased through staged payments. These are percentage payments of the final buying price that become due either when certain stages of the build are completed or at pre-determined dates that are stipulated in the preliminary contract.

Typically payments are due in the following amounts and stages

1,000 Euros Reservation Fee

30% on signing of the Preliminary Contract

20% on completion of foundation work

30% on completion of roofing work

20% on completion of build and at property transfer

Transfer of Ownership

Once the property is completed then ownership becomes due to be transferred from the seller to the buyer. At this time the Notary Act (Contract to Purchase) needs to be signed by all parties on front of the Bulgarian Public Notary and the final payment is made. At this time a variety of taxes become due which amount to approximately 3-3.5% of either the purchase price or the tax valuation price. The tax valuation price is a lower price determined under Bulgarian law which is declared on the title deeds of the property.

The individual elements of the total tax figure are :

Transfer tax – 2% (stamp duty)

Notary fee (approx) – 0.5 %

Registration fee – 0.1 %

POA & Admin Charge - 0.6%