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Purchase procedure

Buying a house in Bulgaria step by step

Purchase procedure

This article details the purchase procedure for buying a home in Bulgaria, which is slightly different from that in most Western countries. Although relatively straightforward, the procedure isn’t without potential problems and it’s therefore highly advisable to engage a lawyer who’s familiar with it before paying any money or signing a contract.

Once you’ve found a home you plan to buy and agreed the selling price, you will need to take the following steps:

  1. If the property has land (i.e. is anything other than an apartment), form a limited company.

  2. Sign a preliminary contract and pay a deposit.

  3. Sign the notary act and make the final payment.

The buying process is generally straightforward and is often completed within a month.

Forming a company

If you’re purchasing a property that has no land attached (i.e. an apartment or flat) you don’t have to form a limited company; otherwise, you must do so. Bulgarian law currently forbids foreigners from owning land in Bulgaria and the only way around this is to form a company, registered in Bulgaria. This is not illegal or a ‘tax dodge’ but an accepted and recognised practice.

The requirement will change once Bulgaria joins the EU, which is scheduled for 2007. According to the latest government information, citizens of EU countries and citizens of non-EU countries that have reciprocal agreements with Bulgaria on land ownership will be allowed to buy land without restriction. Other foreigners will have to wait at least another five years (i.e. until at least 2012) before the requirement to form a company will be lifted.

Normally, you must go to a notary public’s office to sign the requisite documents, but most estate agents can organise company registration for you or you can use the services of a local lawyer, although this requires you to set up a power of attorney (see below).

Payable fees & requirements

The process of registering a limited company can take a single day or several weeks but normally takes between three and four weeks, so you should allow at least this amount of time between signing the preliminary contract and completion. The cost of registration currently varies between regions, ranging from around €500 to around €750.

The minimum amount of capital required to set up a company is 5,000 lev (€2,500), although you usually need to deposit only 70 per cent of this amount, i.e. 3,500 lev (€1,750). This isn’t the cost of setting up a company but the amount that must be deposited into a bank account in order to set up a company. Once the company has been formed, you can access the money.

You must give your company a name (which will have the suffix ‘OOD’, equivalent to Ltd in the UK or Inc. in the US), determine a registered office address and appoint directors/shareholders. These are normally the buyers themselves, e.g. a husband and wife, although you should check the tax, inheritance and other implications of your choice of shareholders.

If you’re a non-EU citizen, your company must employ at least ten Bulgarians, although this can be on a part-time or occasional basis. Following protests by the EU, this requirement was dropped for EU citizens.

Your company must be registered with the National Insurance Institute (NOI) within seven days of its formation and with the local tax authority within 14 days. You will receive confirmation of the company’s registration, a tax registration card (with the company’s tax numbers on it) and a stamp to be used on all official documents.

At the end of the financial year (March) you will need to file an annual tax return for your company. In almost every case your account will be ‘zero’ (i.e. no trading for the entire year). Nevertheless, unless you can read and write in Bulgarian and are familiar with the Bulgarian tax system, you will need a lawyer to ensure that your tax return is filled out correctly; he shouldn’t charge more than 100 lev (€50).

Power of attorney

Many people are unable to be in Bulgaria for the whole of the purchase process, particularly those buying a holiday home or investment property. If this is your case, you can give power of attorney to your lawyer or estate agent to handle the formation of a limited company and/or the purchase of a property. If you need to provide power of attorney to anyone, it’s essential that you know exactly what it authorises.

Power of attorney can allow unscrupulous people to withdraw money from your bank account without your permission, buy and sell property without your knowledge and commit you to unfavourable contracts.

You can prevent such eventualities by stating exactly what your power of attorney permits and forbids and by setting a time limit for its applicability.

Usually power of attorney allows your lawyer to establish a limited company for you and deposit the initial capital in the account, then pay any fees and withdraw money for the final payment. You can also provide power of attorney to your estate agent to withdraw money from your account to pay a deposit on the property.

You may be sent documents for the provision of power of attorney by your lawyer or an estate agent in your home country. For these to be binding legal documents, you must normally sign them in front of a witness (usually a notary public or lawyer) and pay a fee.

SURVIVAL TIP If you plan to retire to Bulgaria , it’s often wise to provide power of attorney to a member of your family or trusted friend to look after your financial affairs if you’re no longer able to do so.

Preliminary Contract

The first stage in buying a home in Bulgaria is the signing of a preliminary contract. Your lawyer is responsible for ensuring that this is drawn up correctly and you shouldn’t rely on an estate agent to do so.

While some agents or developers will provide a properly-drawn up contract, some won’t – and unless you’re a Bulgarian-speaking lawyer you won’t be able to tell which is which! For peace of mind it’s recommended that you have the contract drawn up or at least checked by a Bulgarian lawyer.

There are a number of types of preliminary contract, depending on whether you’re buying an existing (built) property or a new property off plan (i.e. yet to be built or under construction).

Signing the Notary Act

Signing the notary act (sometimes referred to as the notary deed, purchase contract or final contract, which is equivalent to a title deed) is the final step in taking ownership of your property. If you’re unable to be present at the signing, you can have your agent or lawyer sign it on your behalf if you’ve given him power of attorney.

SURVIVAL TIP You should always sign the notary act in person if you’re buying a brand new or off-plan property, to make sure that all the requirements of the preliminary contract have been met.

The signing of the notary act takes place in front of a notary public, who first checks that all the conditions contained in the preliminary contract have been fulfilled. It’s normal for all parties concerned to be present when the final contract is read, signed and witnessed by the notary, including the estate agent, developer (for new or off-plan property), your lawyer and your translator.

Either party (buyer or seller) can give a representative power of attorney. In the case of an off-plan purchase, the final contract isn’t signed until building is complete.

Payment

To make payment of the final amount to the seller it’s preferable to have a bank account in Bulgaria. That way you can transfer the money from your home country to your Bulgarian currency (or local euro) account and withdraw it when you’re in Bulgaria. It isn’t advisable to carry large amounts of cash into Bulgaria (or anywhere for that matter!) and you must declare any amount over 8,000 lev (€4,000) in cash or its equivalent.

Most sellers will be unwilling to accept a payment from your home bank account, as they will usually have to pay a fee for receiving a foreign currency and may be at the mercy of foreign exchange rates. Some sellers will ask for the final payment in cash (usually for smaller amounts), but most will accept payment in the form of a bank transfer, telegraphic transfer or bank draft from a Bulgarian account.

If you cannot be present at the signing of the final contract, you can authorise your lawyer or another agent to transfer the money on your behalf (see Power of Attorney above). In the case of an off-plan purchase, payment is made in stages.

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