How to buy property in Bulgaria
Foreign nationals, Legal Status, Legislative Framework and General Rules
The current Bulgarian legal system is dynamic, constantly improving, adopting the modern patterns which reflect the economic progress, the globalization and the directions of the political development.
The legal status of foreign nationals in Bulgaria is governed by the Constitution of the Republic of Bulgaria, the Foreign Nationals Act (effective 1998), the Regulation on the Application of the Foreign Nationals Act and the Ordinance on Issuing Visas.
Generally, the Bulgarian legislation concerning foreign citizens is in compliance with the EU aquis communautaire related to immigration policy. The Constitution of the Republic of Bulgaria provides for foreign nationals in Bulgaria to have all the rights and obligations accorded under Bulgarian law and international agreements ratified by Bulgaria, except in respect of those rights and obligations, for which Bulgarian citizenship is required.
Ownership rights: Foreign citizens have the right to acquire ownership over land through registration of legal entity.
General legal Information
Set up a company
The types of commercial companies are exhaustively provided for in the Commerce Act and an investor may only choose from this list. In particular, the types of commercial companies are:
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Registration Procedures
Under Bulgarian law commercial companies are incorporated by way of registration into the commercial register with the respective district court according to the place where the company’s seat is to be located. The registration procedure takes normally one to two weeks following the date of filing of the required documents.
Limited Liability Company (OOD)
This type of company organisation is the most widely used among investors because of the minimum capital requirements, the simplicity of the corporate governance system and the less administrative procedures of its operation. However, there are statutory required qualified majorities or unanimity for transfer of shares, acceptance of new shareholders and capital increase or decrease, which may decrease the flexibility of the company’s operations.
Two or more shareholders, or only one in the case of sole owner limited liability company (EOOD), may establish a limited liability company, or a sole owner limited liability company respectively. Shareholders in an OOD may be Bulgarian or foreign individuals or legal entities. The minimum content of the articles of association is provided for in the Commerce Act.
The bodies of corporate governance in an OOD are the general meeting of the shareholders and the manager(s). The manager is empowered by law to manage and represent the company before third parties, if more than one manager is appointed, the managers shall manage and represent the company individually, unless the articles of association provide otherwise. In an EOOD, the sole owner of the capital exercises the powers of the general meeting of the shareholders and manages and represents the company before third parties, unless a manager is subsequently appointed.
The minimum required capital for a limited liability company is BGN 5,000 (five thousand). It must be divided into shares of value not less than BGN 10 (ten), as any higher value must be divisible by 100. Shares are not materialized and are not tradable instruments. They may be transferred and succeeded, as transfer between shareholders is free, while transfer of shares to third parties requires a resolution of the general meeting of the shareholders. As a condition precedent to court registration, the company must have adopted its articles of association, the manager must have been appointed and at least 70% (seventy percent) of the capital must have been paid in. The payment of the remaining part may be deferred in time, but not longer than two years as of the registration date of the company.
Ownership of Real Estate
In accordance with our Civil law a foreigner or a foreign company can possess ownership of a building and own limited rights to land in Bulgaria. This applies also to the case when a foreigner or a foreign company inherit land as a legacy. In conformity with the Bulgarian law of succession he/she has to transfer the ownership over the land to a Bulgarian citizen no later than 3 years after inheriting the legacy. Therefore, the easy way for a a foreigner to be in possession of land in Bulgaria is to establish a company. A Bulgarian company can possess any kind of land. But attention must be paid to the most important fact that this land is not allowed to be agricultural. If the statute of the land is for agricultural needs, it has to be changed.
The transaction
The general rule under Bulgarian law is that transactions involving real estate (e.g. a purchase, exchange, etc.) should be executed by
a notary deed performed before a registered notary in the region where the real estate is located. After execution of the deed the notary is obliged, by law, to register the transaction in the Real Estate Registry in order to make the ownership title of the acquirer defendable against third parties.
Statutory costs and expenses
1. Transfer tax – 2% of the purchasing price.
2. Fee for registration in the Real Estate Register of 0.1% of the purchasing price.
3. Notary fee – according to the statutory Notary Tariff not more than BGN 3,000 (approx. Euro 1,550) per transaction. The tax may be shared between the parties or be just borne by one of them.
Direct acquisition of real estate in Bulgaria by a foreign company
In Bulgaria foreign companies can directly acquire buildings, premises within a building and limited property rights (e.g. a construction right, right of use), but not property on land.
Indirect acquisition of real estate in Bulgaria by a foreign company
Indirectly, foreign companies can acquire any type of real estate, including land, by registering a Bulgarian company to act as acquirer.
It is possible for such a company to be 100% owned by the foreign investor.
Title review (Real estate legal due diligence)
Before purchasing real estate it is recommended that the buyer ensures verification of the ownership status of the targeted real estate, includingthat there is/are:
1) a clean, valid and marketable ownership title held by seller.
2) no lien or encumbrances over the property.
The buyer should be fully aware as to whether there are any registered liens and/or encumbrances over the targeted real estate, e.g.,
mortgages
3) no other registered rights in favour of third parties – if there are registered rental or lease agreements over the targeted real estate, then the buyer shall be bound by them until the expiration of their term;
4) no court or restitution claims
5) preliminary research and investigation
Visa
Prior to commencing any works, the investor may require that preliminary research and investigation be made in order to determine the most appropriate location and to estimate the legal admissibility and the expedience of the project.
Though not a mandatory phase of the process, it is often necessary and useful for the investor to obtain in advance data on the site specifics (e.g. geological, seismic, hydrological, climatic and other conditions, existing structures and networks in and around the site), on the specific technical and zoning requirements affecting the project, etc. The scope of such preliminary research and the person(s) to whom it is assigned will vary depending on the type of project and the investor’s requirements.
Visa (or PUP)
The Developer must, before commencing the design of the project, obtain from the respective administrative body an excerpt from the detailed zoning plan covering the plot and the surrounding properties (visa = PUP), which marks the existing structures, the permitted boundaries, height, density, intensity and any other requirements to construction in the plot; the visa should be issued within 7-14 days of being requested.
Project design
Phases of designing - Project designs can be prepared in 3 steps (phases) with a different level of detail.