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Acquisition of Real Estate in Bulgaria


The brief review bellow sums up the procedure for acquisition of property in Bulgaria, including the verifications made and the deal stages. 

 

1.  Opportunity for foreigners to purchase land in Bulgaria

 
In compliance with Article 22, para 2 of the Bulgarian Constitution citizens and legal entities of European Union member states and the European Economic Area countries may acquire ownership of agricultural land as of 01.01.2014. 
 
Foreign nationals who are citizens of third countries, as well as foreign legal entities established pursuant to third-country laws may acquire ownership of agricultural land pursuant to the provisions of an international treaty which has been ratified, duly promulgated, and which has entered into force for the Republic of Bulgaria, as well as by legal succession.
 
Under the Agricultural Land Ownership and Use Act ineligible to acquire and hold right of ownership over agricultural land shall be:
 
1.1. Commercial companies, in which partners and shareholders directly or indirectly are companies, registered in jurisdictions with preferential tax regimes;
 
1.2. Commercial companies, where partners and shareholders are foreigners or foreign legal persons other than those who may acquire right of ownership over agricultural land under the conditions of an international treaty, ratified pursuant to the procedure of Article 22, para 2 of the Bulgarian Constitution, promulgated and entered into force or by legal succession and the EU citizens and legal entities who may acquire right of ownership over agricultural land after the expiry of the term defined in the Treaty of Accession of the Republic of Bulgaria to the European Union – 01.01.2014, as well as solely owned commercial companies, established by such natural or legal persons;
 
1.3. Joint-stock companies that have emitted bearer shares.
 
Eligible to acquire right of ownership over agricultural land shall be natural or legal persons who have been resident or established in the Republic of Bulgaria for more than 5 years. Legal persons with registrations under Bulgarian law of less than 5 years may acquire right of ownership over agricultural lands if the partners in the company, the members of the association or the founders of the joint-stock company meet the requirements under the preceding sentence.
 
Citizens and legal entities of European Union member states and the European Economic Area countries may acquire ownership of wooded areas subject to the provisions of the Forestry Act as of 01.01.2014. 
 
Foreign nationals who are citizens of third countries, as well as foreign legal entities established pursuant to third-country laws may acquire ownership of wooded areas pursuant to the provisions of an international treaty ratified in accordance with the procedure as per Article 22, para 2 of the Bulgarian Constitution, duly promulgated and in force, as well as by legal succession.
 
Where not otherwise provided under an international treaty ratified in accordance with the procedure as per Article 22, para 2 of the Bulgarian Constitution, persons and entities that have acquired ownership of wooded areas by legal succession must transfer the ownership thereof to entities entitled to the acquisition and ownership of such properties within three years from discovery of such inheritance.

 

2.  Verifications 

 
The purchaser has to make several verifications at different authorities in relation to the real estate that is to be purchased. 
 
2.1. One of the initial check-ups is performed at the Registry service – competent for the territory where the given real estate / property is situated. By the name of property’s owner one is able to obtain information whether the vendor is actually an owner of the real estate, as well as if the property is encumbered in any manner. The encumbrances which may appear as laid on the real estate include: law or contract mortgages; interdicts; security measures enforced in connection with court trials or with forced execution procedures; claims; lease contracts; corporate documents of companies in the capital of which contribution in kind has been performed or in relation to which contracts have been registered for transfer of a commercial enterprise having tangible assets (real estates). What may remain unrevealed despite the verifications made is if other preliminary contracts have been concluded for the given estate, as not all the lease contracts are liable to registration. The most reliable source of information related with encumbrance of a real estate is a certificate issued by the Registry service.
 
It is advisable for the purchaser to follow the history of the estate by demanding copies of the notary deeds preceding the one of the current owner /vendor/ of the property. This shall give information if the preceding ownership titles are successive. 
 
2.2. Simultaneously with the verification at the Property register at the Registry agency verification is made at the municipality technical service where the urban development plan is kept, from which one is able to check the purpose of the verified estate, as well as some details as purpose of the land, density of construction, flooring and others. 
 
2.3. In the cases where the vendor is a legal entity a verification has to be made concerning its status – this verification is performed at the Commercial register at the Registry Agency. This check-up includes – organizational form of the entity, representatives, body authorized to pass resolutions for real estate sale, if the company is insolvent, if any applications have been filed for initiation of an insolvency procedure.

 

3. Preliminary contract 

 
If from all the verifications performed it is evident that the vendor is owner of the estate, that the estate is free from any encumbrances, as well as that the specific intentions of the purchaser for the estate are performable – e.g. if the urban development plan allows them, then the parities conclude a preliminary contract. This is an advisable part of the process as some of the check-ups require more time. 
 
3.1. The preliminary contract is concluded in written form. However the parties may want their signatures to be notarized. The preliminary contract in compliance with the Obligations and Contracts Act shall contain provisions concerning the essential terms of the final contract i.e. the subject-matter, the price as well as term for conclusion of the final contract have to be included. 
 
3.2. Either of the parties under a preliminary contract may bring an action for conclusion of the final contract. In this case the contract shall be deemed concluded as of the moment of entry into force of the ruling of the court. This provision of the Obligations and Contracts Act aims to secure the parties under a preliminary contract in the cases where non-performance is at hand, e.g. when one of the parties fails to perform its obligation for conclusion of a final agreement. The court procedure for conclusion of a final agreement is in compliance with the Code of civil procedure. The ruling of the court serves as a final contract and shall contain the essential provisions under the preliminary contract. 

 

4.  Final contract – Notary deed 

 
4.1. Form. In compliance with article 18 of the Obligations and Contracts Act the final contract for sale of a real estate has to be concluded in the form of a notary deed. The latter is compiled by the notary performing the formalities related to the sale. The deed contains all the essential terms – parties, price, subject-matter, liability. If a contract is concluded as final for a given real estate and the form of the notary deed is not observed, then it shall be invalid. The ownership over the estate can be transferred only if the form is observed, otherwise if the parties desire so, the contract may be considered as preliminary. After the deed is signed by the parties and by the notary, it is registered at the Registry service. 
 
4.2. Certain fees are due when a contract for sale of a real estate is concluded. A local tax is due determined by the respective municipality where the real estate is located - generally at the amount of 2.5% of the price of the sold real estate, as well as 0.1% for registration at the Registry service. Except for the mentioned fees, also notary fees are due. They are calculated in accordance with a specific tariff stipulating the fees of the higher amount between the tax and the market evaluation of the estate. In certain cases VAT is due for some deliveries related with buildings or land. The VAT rate in Bulgaria is 20%. 
 
 
   
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