Real Estate in Bulgaria

Introduction

Bulgarian real estate law is regulated mainly in the Bulgarian Constitution, the Ownership Act and the Agricultural Land Ownership and Use Act. The legislation as a whole regulates certain restrictions on acquisition by foreigners, who are citizens of/registered in countries outside of the European Union. However, in this regard, the law treats Bulgarian and EU citizens in an equal manner.

A register of transactions dealing with real estate is kept in the Property register. The whole variety of deeds and mortgages, which are drafted by and signed before a notary must be kept in the Register. According to the envisage of the legislation, the register is organized by real estates, but currently the old ‘personal system’, that uses the names of the owners of real estates is much more reliable in its data. Costs of real estate transactions /notary’s fees, taxes and other duties/ are approximately up to 4.5 % of the value for a sale, 1% for a mortgage.

Types of Ownership

The ownership in Bulgaria is absolute. The title to a real property is an absolute and entire right, that is comprised of three separate powers: to use the property, to possess the property and to dispose of it.

The absolute entire title to real estate can belong to a single person / legal or natural entity/ or a collection of individual owners, where each of them owns an ideal portion of the whole with no direct and precise right over a specific part of the real estate.

Bulgarian law of estate regulates some types of limited ownership:

• right of use
• right of building
• right of passing

The Property Register

Real property in Bulgaria is registered in special well-organized public Property register.

The changes in the legal status of a parcel (transfers of title, liens, mortgages, etc.) are entered into the Property Register of Bulgaria. This Register is maintained by the Registry Agency, which is a state body with Regional offices throughout the country. The Property Register itself is unified, therefore kept at a national level, and the Agency provides electronic services for citizens, who can simultaneously receive detailed record for all changes in the status of a real estate, regardless of where in the country it is located. However, some services are provided only by the Regional office of the Registry Agency, according to where the property is located, such as: processing the application for obtaining a property (or other changes in it), providing copies of the recorded deeds and issuing of official certificates for existence or lack of limitations on the right of ownership over a property.

Transfer formalities

The transfers of titles, mortgages or other changes in the legal status are only enforceable against third parties as from their registration in the Property register.

The right of ownership of real estate is transferred in the form of a notary deed. The notary deed is a type of contract, which form and content are prescribed by law. In order to be registered with the Property registrer, the deeds, mortgages, etc. must be drafted by and signed in front of 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 title of the transferor, the process of execution of the notary deeds offers considerable security. For all transactions with real estates the signing in front of a notary is compulsory. Some exceptions are provided in the law: orders issued by the administration, mortgages ordered by the court, court resolutions and orders, award decrees, etc.

Payment of the price – since 01.07.2011 there is a new rule in force – payments in real estate transactions of a total amount exceeding BGN 10,000 shall be transferred to a special bank account of the notary public or to a ban account held with a bank chosen by the parties. Also, in any deals with estimated value over 30 000 BGN, the purchaser is required to sign an affidavit, stating the origin of the money.

Upon execution of the notary deed certain taxes, stamp duty and fees are due. A local tax levied upon the price agreed between the parties and included in the deed or the valuation of the property by the tax authorities, whichever is higher, is due. The notary fee is calculated according to rates specified in the law, depending on the price indicated in the title deed. Thirdly, a stamp duty need to be paid to the Registry agency.

Mortgages

A mortgage is established over real property to guarantee financial obligations.

According to the Bulgarian property law, the mortgages are concluded in a formal act – deed.

The mortgages are registered in the Property register.

The mortgage has the following legal effect:

• In case the mortgage is not paid, the holder of a mortgage seizes his debtor’s real property and sells it at auction.
• If the owner of the real estate transfers it to another person, without settling the debt, covered by the mortgage, the mortgage is in force for the new owner and the mortgage holder may seize the real property from the new owner and have it sold at an auction.

Both kind of mortgages, stated below, allow the mortgage holder to act on the mortgage, despite multiple transfers and seize it in the hands of the owner whoever that may be.

• The holder of the mortgage is a preferred creditor, according to the Bulgarian law – this means that the holder has the right to be paid by preference over other creditors. This preference refers to the ordinary creditors and to the creditors, whose rights are registered at a later date.

There are two types of mortgages:

• Contractual mortgage – a debtor agrees by contract to allow the holder of the mortgage to register a mortgage over his property on a deed, signed by a notary.
• Mortgage by operation of law – this type of mortgage is established in absence of debtor’s agreement under certain specific cases, determined in the statute.

Restrictions on acquisition

Bulgarian legislation used to regulate restrictions on acquisition of real property in Bulgaria by all foreign natural persons and legal entities. However, amendments in the Bulgarian Constitution were adopted, in force as of 01.01.2007, providing that foreign legal and natural entities may acquire land in Bulgaria under the terms, arising from the accession of the Republic of Bulgaria to the European Union. . Therefore, the legislation was gradually changed, and currently Bulgarian and EU citizens/companies may acquire real property under the same conditions.

The only specific is with regards to the acquisition of agricultural land, where the law stipulates that such land may be purchased by natural or legal persons, who have been resident or established in the Republic of Bulgaria for more than 5 years. The European Commission has revised this regulation and has decided that it sets forth an active restriction on buying agricultural land for many EU citizens; therefore, officials from the relevant Ministry have already made an announcement in 2017 that a bill is being prepared for changing the law accordingly.

Next, it should be noted that foreign natural or legal entities from countries, outside of the EU, are not permitted to buy land in Bulgaria, but they can buy buildings without any restrictions. On the other hand, though, Bulgarian legal entities with partners /shareholders, foreign persons or companies are permitted to buy land, with only the exception of agricultural land, and the reality is that through the years a roster of foreign investors made use of this allowance in the legislation and bought land in Bulgaria for the purposes of the business that they established here. . Pre-emptive rights arise in certain cases, provided for in the Bulgarian law of estate

Special Legal Protections for parties

If the buyer considers that the transaction of a real estate is tainted in some way, he may dispute the validity of his purchase in the court. The taint – reason for petition can be, for example:

• an error, concerning the important characteristics of the property misrepresentation: the seller fraudulently misled the buyer about the core clauses of the deal violence /physical or mental / voids a sale
• lack of consent
• contradiction to the law
• breach of the required form

The buyer may claim voidance of the sale if the property is not suitable to be used for the purpose that it was bought for, including when there are legal restrictions, obstructing the full adequate use of the property, such as a prohibition to build on land.

Leases

Leases agreements are frequently concluded in Bulgaria. Real property can be rented under lease agreements.

The Bulgarian Contracts and obligations act regulates residential and commercial leases, providing the maximum lease term of 10 years for non-commercial transactions, as well as setting forth the obligations and rights of the tenants and lessers. It should be noted that even though the parties may conclude the lease contract only to be in force for a specified term, if the lessee continues to use of the property without the objection of the lessor after this term has expired, the contract is extended for an indefinite term.

The notary form is not compulsory for the lease agreement.

Rural leases are regulated generally in the same way, with some conformities due to the specifics of the contractual relations: the lessee acquires any fruit, produced from the land; there is a minimal term for such a contract – 5 crop years (a crop year starts on the 1st of October, instead of the 1st of January); the signatures of the parties must be notarized and the contract – entered into the Property register, etc.

Zoning, building permits, etc.

Every building /residential and commercial/ requires a prior permit, issued by the local municipal and administrative authorities, which ensures that the technical specifics of the building correspond to the detailed land plan, zoning rules and regulations. The land is classified in different categories /for example urban, farmland, forests or protected land/.

The last decade was marked by a series of purposeful actions that lead to the successful zoning and mapping of all the cities and major towns in Bulgaria and the effort to zone and map the entire territory of the country is presently continuing. The reform involves the implementation of a Cadastral map, which includes all land properties with their boundaries, all buildings, technical infrastructure installations, streets, etc., which are individually marked on the map by a unique number (property identification number). On the other hand, the cadastre register contains information on the properties’ most important parameters, such as measures, addresses, neighboring properties and others. The Cadastral map and register are public and on an internet platform, kept by the leading authority in the Cadastral survey the Cadastre agency, providing easy and secure access to the information. The Cadastral map and register, together with the Property register, create a complete picture of the existing properties on the territory, their features and their owners, and it is worth noting that the map and registers are synchronized, which means that information from one source is used to fill the data in the others.

Wills

A will, signed by a foreigner before a notary public in Bulgaria is recognized in Bulgaria. A will, signed abroad, is recognized in Bulgaria if one of the following is met:
1. The will is valid under the law of the country, where the will is executed or
2. The will is valid under the law of the country, which is generally applicable to the person at the moment of the execution of the will or at the moment of his death or
3. The will is valid under the law of the country, where the person has his domicile or permanent abode at the moment of the execution of the will or at the moment of his death;

A foreigner may also choose the applicable law. This shall be done in a separate statement in the will itself provided this statement is signed independently from the will statement.