HOW TO BUY IN BULGARIA

CALCULATING YOUR BUDGET

Frequently asked questions about Bulgaria!

Property questions!

When budgeting for buying a property, estate CONSULTING fees also have to be allowed for. This COSULTING includes all the views, surveys and searches of the property.
If you want to buy an apartment `off-plan` then the fees are usually due at the time you sign preliminary contracts rather than on completion, so you need to ensure that you have the essential funds available at this early stage. A municipal tax, which is basically the UK equivalent of stamp duty, is also compulsory. The tax is currently two per cent of the purchase price. When buying an apartment, remember to take into account the additional cost of annual maintenance and management fee. This covers the insurance of the building, plus maintenance of public areas such as communal gardens and swimming pool (if there is one), care taking and security. These costs are normally based on the size of the apartment. When buying a house, in addition to these properties related costs, there is also the cost of setting up a limited company to buy the land. Costs for setting up a company are generally around 1500 Leva. However these costs are negligible and extremely low compared to those in Western Europe.

RESTRICTIONS ON FOREIGNERS

Currently, there are still restrictions on foreigners buying land in Bulgaria, but these restrictions are due to change in the next year or two as Bulgaria works towards complying with EU directives for joining the European Union in 2007. At the moment a foreigner can buy building as an individual but not land. Once the company has been registered, the company buys the property and owns the land and you are the sole owner of the company and therefore of the land.

FINDING A PROPERTY AND VIEWING

There are many areas to consider when buying property but obviously it helps if you can narrow your search. Four main areas to keep in mind are: the Black Sea coast; the ski resorts and mountain regions of the Rila, Rodopi or Pirin Mountains; properties in or around the capital Sofia; property in the unspoiled, rural areas of Bulgaria. Canbul International Investments will arrange everything concerning the viewing of the property.

BUYING A PROPERTY AND OPENING A BANK ACCOUNT

The first thing to organize and establish is a Bulgarian bank account. This must be done when visiting Bulgaria and the consulting agent will accompany you to the bank and help you open a bank account. If a joint account is required, then both parties have to be present at the time to sign all the relevant documentation. Monthly banking charges in Bulgaria are approximately 1E per month. Internet banking is available at some, but not all, Bulgarian banks. Money can be transferred directly from Western banks accounts to Bulgarian banks accounts easily upon return.

SETTING UP A COMPANY AND A COMPANY BANK ACCOUNT

As well as a personal account, a company bank account should also be set up if you are buying a single house, and a minimum of 5,000 leva are required to be deposited (approximately about 2500E). This is the minimum capital required in Bulgarian law to establish a limited company. It is not the cost of setting up the company. This can be used immediately for costs incurred while visiting and used for any deposits that are required. Either an independent lawyer or a lawyer employed by the consulting agent can form a limited company on your behalf. The bank certificate, showing that the minimum amount has been deposited, is presented to the court for registration to be processed, along with other company documents that are drawn up. Consulting agent will accompany you to the local notary office where the notary has to witness your signature on the company documents. The notary will charge for this and the fee is roughly 37 leva, (which is approximately 17E). Two copies of the company documents are produced, one in Bulgarian and one in English. The lawyer should guide you through the contract word by word to explain the detail and also everything connected with the company management after its foundation.

FINDING A LAWYER

If you choose to employ an independent lawyer, you can obtain a list of Bulgarian lawyers from any Embassy, otherwise our company can recommend you some good and experienced lawyers. A simple way to gain a personal recommendation is to join one of the website forums and post a notice of your request or post us an e-mail request. Like any other country, Bulgaria has some lawyers that are better than others, so good personal recommendations are worth their weight in gold if one can be obtained. When a property has been found and the purchase price agreed the lawyer would then draw up a preliminary contract setting out the initial amount of deposit to be paid. This is usually about 10 per cent, whether a brand new apartment or villa being bought or an older property. When the deposit has been paid, this ensures that the property is taken off the market.

SURVEYS AND SEARCHES

Canbul International Investments Ltd . will contact the owners to arrange a survey and also complete the research on the property, including checking court records and mortgage records. Normally a visual survey will be arranged and the cost of this is included in the overall fee to your consulting agent. A civil engineer will view the property to inspect the construction in detail. A full construction survey can be arranged if it is a particularly old house or there is some doubt about the land that the building has been built on. This type of survey usually involves a geologist taking soil samples to inspect the condition of the land and the building's foundations.

PRELIMINARY AND FINAL CONTRACTS

There are two contracts: preliminary and final. When buying `off-plan` property, a preliminary contract will include conditions such as deadlines for completion of the shell, roof, and final date for finishing all of the construction work. Also, the details of the construction materials used are set out, together with payment options agreed to. Payments are made in instalments, as the various stages of construction of the new building are completed by agreed dates. A delivery acceptance record (this is called Act 15 and the final record is Act 16) will have to be signed upon completion, to say that you are happy with the standard of construction and finishing. Any defects or problems must be pointed out at this stage to enable the construction agency to rectify them. Preliminary contracts will be sent to your country. The developer will give you an agreed completion date and it is usually written into the preliminary contract that the developer will have to pay penalties if this deadline is not adhered to. If you are visiting Bulgaria, and have found the house, you wish to buy you do not have to remain in the country to sign the preliminary contract because you can give power of attorney to the lawyer to sign it on your behalf. The final contract is then drawn up and then both buyer and seller meet at the public notary office and the final contract signing is witnessed. Again, you do not have to be present if power of attorney is given to the lawyer. The whole purchasing process can usually be completed swiftly, often within a month if required.
When a date for the final completion is agreed upon, it is possible to bring the date forward, but it is not possible to move it back, so it is imperative that finances are (or will be) in place to complete by the agreed date. Any timescales agreed upon must be realistic; failure to complete as agreed will incur large penalties and you could possibly even lose the property. After the deposit on a house has been paid, the remaining balance of the purchase price needed for completion can easily be transferred to a Bulgarian bank account from your country. You should expect to receive the title deeds a couple of weeks after the final completion date. The originals will be written in Bulgarian, but an English translation can be requested, for which a minor fee will be charged. There may be some discrepancy between the actual price paid for the property, and the price on the title deeds. In Bulgaria, there is a “tax estimation price” and a “purchase price”. The tax estimation price is much lower than the actual “purchase price” this is for the purpose of taxation. Most Bulgarian property owners will want the lower “taxation price” written in the title deed, rather than the “actual price” that is being paid for the property.
If the property is occupied, you should not expect the owners to have moved out by the completion date - the usual term for the incumbent owners of the property to move out after completion of the sale is one month. However, this period could be negotiable if the buyers require a shorter term. If this is the case, ask the consultant agent to assist with any negotiations, but do not expect to move in on the day of final completion.

LOCAL TAXES AND UTILITIES

Once you own a property, local annual taxes have to be paid. These are incredibly low in comparison to Western Europe. The annual rate of tax on a house is 0.15 per cent of the purchase price. So, if a house has been purchased for 15 000E the annual tax payable would be 20E. The only other tax you are required to pay is a garbage tax; this varies depending on the location and size of the house. It is generally quite reasonable, ranging from15E to 25E per year. If you buy an apartment, local taxes are still due, together with annual maintenance and management fees that will have been set by the developer or managing agent.

RENOVATION AND RESALE

Building costs are comparatively low in Bulgaria compared to the rest of Europe. An average Bulgarian wage is currently 150E per month. Rates for employing builders differ widely but as a guide, building work costs approximately one third of what it would cost in the Western Europe. If the intention is to build a new property on the plot and demolish the old, then average prices for new building works are between 300E and 400E per square meter. The cost for building work seems to be following the trend in property prices, which are on the increase, as more and more people discover the extremely good value of property and land in Bulgaria. If a property is bought for investment and profit only, there is a capital gains tax if a property is sold again before a five-year term, this is currently 19.5 per cent.