There are several main legislative acts that regulate ownership title rights, limited property rights and real estate transfer deals in Bulgaria – these are the Constitution of the Republic of Bulgaria, Property Act, Contracts and Obligations Act, Commercial Act, Agricultural Land Ownership and Use Act, Forestry Act, Water Act, Black Sea Territorial Development Act, Protected Territories Act, State Property Act, Municipal Property Act, Civil Procedures Code, Encouragement of Investments Act, Territorial Development Act and Condominium Management Act.
In Bulgaria all types of transactions regarding establishment or transfer of real property rights related to real estate properties must be in the form of a notary deed. This is one of the general principles of the Bulgarian Property Law. That means that these transactions must be executed in the office of a notary in the respective district where the real estate is located. Such types of transactions could be sale-purchase contract, exchange contract, donation contract, contract for transfer of ownership against reduction of debts and etc. The real rights that could be subjects of these transactions could be the following – ownership title rights and limited property rights over real estate (construction rights, rights of use, servitude rights, easements). The notary deed is not necessary if the legal person conveying the ownership title right or limited property right is the Bulgarian state or respective municipality – in this case the contract must be in writing but the notary form is not necessary.
All real estate transactions involving ownership title or limited property rights must be registered into the Real Estate Register (with the Bulgarian Registry Agency within the Ministry of Justice) in order to make the property rights of the transferee public and defendable against third parties.
Before the execution of each transfer of ownership or property rights over real estate the transferor must have paid all its public tax duties. This rule guarantees the financial interests of the State and the municipality.
Under the Bulgarian notary law, before the execution of the notary deed, the notary must check the ownership title rights of the transferor (the current owner or the seller). If the seller is a company, the notary is also obliged to check all the relevant corporate resolutions regarding the transaction (resolutions of the General Meeting of Shareholders or resolutions of the Board of Directors or other corporate bodies whose resolution is necessary under the law and under the Articles of Association of the company). If some of the parties is represented by a proxy, then the Notary must check the relevant Power-of-Attorney. It is very important to underline that the notary is not obliged to check and review the ownership title history. That means that he is not obliged to check the ownership title rights of the predecessors of the current owner.
It is highly recommended that the acquirer (the buyer) use the legal services of a Bulgarian law firm that will have the assignment of performing the real estate legal due diligence regarding the ownership title over the property. The aim of such a legal review would be to verify that the seller has clean and valid ownership title. The seller and his predecessors should have been the valid owners of the respective real estate rights in order to eliminate the risk of future claims of third parties against the validity of the transaction. The legal due diligence must also verify that there are no liens or encumbrances over the property, no other registered rights in favour of third parties, no court claims, no public debts of the seller.
The statutory costs and expenses related to execution of notary deed are the following:
- Transfer tax. It is defined in an ordinance issued by the respective Municipal Council where the real estate is situated. This tax may vary between 0.1 % and 3 % over the higher of the purchase price agreed between the parties and the tax valuation contained in the tax valuation certificate issued by the competent tax authority before the transaction. The rule is that under the law this transfer tax is due by the transferee (the acquirer). The parties may agree that the tax will be divided between both parties or be paid by the transferor (the seller).
- Registration fee. This is the fee for registration in the Real Estate Register. It is equal to 0.1 % over the higher of the purchase price agreed between the parties and the tax valuation contained in the tax valuation certificate issued by the competent tax authority before the transaction. This fee may be split between the parties or be paid by one of them.
- Notary fee. Its amount is specified in the Notary Tariff, but it cannot be more than 6 000 BGN (approximately 3 100 Euro). This fee may be split between the parties or be paid by one of them.
- Legal fees.
There are special rules governing in-kind contributions of real estate into the capital of companies under the Commercial Act.
When the real estate property is part of the ongoing concern of a business company and this ongoing concern in its capacity of a functioning business is sold as a complex unity of rights, obligations and factual relations of economic value, then there is no need of a notary deed because in this case the contract for the sale of this business must include only the notarized signatures of the seller and the buyer. This contract must also be registered in the Commercial Register and the Real Estate Register.
Special legal norms and procedures regulate special cases related to acquisition of real estate property resulting from foreclosure or insolvency. Other special rules govern the so called in-kind contribution of real estate. The latter usually leads to increase of the company capital. This in-kind contribution of real estate must be registered in the Commercial Register and in the Real Estate Register.
Under the Bulgarian law foreign citizens and foreign companies can directly acquire buildings, independent parts of buildings and limited property rights (construction right, right of use). However the issue related to acquisition of land is more complex.
Under the Accession Treaty between Bulgaria and the European Union (EU) Bulgaria in 2007 became a member of the EU. This fact led to relevant changes in the national legislation (including the Bulgarian Property Act, Forestry Act, Agricultural Land Ownership and Use Act and etc.). Non-Bulgarian EU citizen and non-Bulgarian EU companies may acquire ownership title over land in Bulgaria in accordance with the relevant provisions of the Accession Treaty between Bulgaria and the EU. This treaty provides that Bulgaria can keep the restrictions for land acquisition by citizens and companies from member states till 1 January 2012 - for second residence land, and till 1 January 2014 – for agricultural land and forest land. There is one exception to these restrictions – non-Bulgarian EU citizens who are individually occupied farmers residing permanently in Bulgaria and who are registered in that capacity in the BULSTAT Register with the Bulgarian Registry Agency. They have the right to acquire ownership over agricultural and forestry lands for agricultural purposes in Bulgaria.
Non-EU citizens and non-EU companies may acquire the ownership over land under the provisions of an international treaty ratified in accordance with the requirements of the Bulgarian Constitution, which has been promulgated and entered into legal force.
Foreigners may acquire ownership title over land in Bulgaria in case of inheritance through legal succession. If this inheritance through legal succession refers to agricultural land, forest land, if the foreigners do not comply with the requirements in the Accession Treaty between Bulgaria and the EU, then these foreigners shall be obliged within three years after the inheritance to transfer the ownership title to persons that have the right to acquire such ownership title over land. If these foreigners do not transfer the land within the abovementioned period then the Bulgarian state has the right to buy out the land according to prices defined in an ordinance of the Council of Ministers.
The abovementioned restrictions for land acquisition by foreigners and foreign companies are not a problem for investments in Bulgaria because there are legal ways for achieving the so called indirect acquisition of land. Indirectly, foreigners and foreign companies may acquire any type of real estate, including land, by registering a Bulgarian company that will act as acquirer and will acquire the land. It is possible for such a company to be 100 % owned by the foreign investor. In other words – foreign investors may acquire Bulgarian land through establishing a Bulgarian company that is owned by these foreign investors.
Foreign citizens and foreign companies may also acquire the shares in the capital of a Bulgarian company, which is the owner of the target real estate or land.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.