This country-specific Q&A provides an overview to real estate laws and regulations that may occur in Bulgaria.
It will cover the most pertinent issues including ownership structures, restrictions, transfers, taxes and environmental contamination.
This Q&A is part of the global guide to Real Estate. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/real-estate
Bulgarian law recognizes sole and co-ownership over real estate, as well as different types of limited rights in rem. Real estate can be hold by natural and legal persons, private citizens and public entities, the municipality and the state. Local natural and legal persons may acquire all types of property with exception of those, owned exclusively by the state or the municipality as public property and in public interest.
Establishment and transfer of in rem rights are generally effectuated by a notary deed, which is executed by a duly qualified Notary public authorised to act within the area, where the property is located. Other title documents may be administrative acts for property, judicial acts, notarized contracts, etc. All title documents are subject to mandatory entry into the Land register. Any encumbrances, liens and third party rights are also entered into the Land register.
The material norms regulating the real estate regime in Bulgaria are spread out in various legislative acts - Bulgarian Constitution, Property Act, State Property Act, Municipal Property Act, Agricultural Land Ownership and Use Act, Forestry Act, Civil Procedures Code. The regulation also contains a system of different claims, available to owners and holders of in rem rights, for the protection of their interests.
How is ownership of real estate proved?
The establishment and transfers of rights in rem, as well as any changes to them, must be registered in the Land register, set up by the Register Agency to the Ministry of Justice. Registration is not a proof of title.
Ownership and limited property rights in Bulgaria are proved on the basis of the respective title documents as provided for in the law. These are usually notary deeds for the property (land or buildings), but also notarized contracts, administrative acts, and others. The notary deed is executed by a duly qualified Notary public authorised to act within the area, where the property in question is located. The entry into the Land register is an act of a competent judicial body where certain circumstances are recorded in the respective Real Estate File and the documents evidencing such circumstances are filed in special books.
When the property is transferred as part of the commercial enterprise of the seller no notary deed is issued. The transfer is executed in the form of a private contract with notarized signatures of the parties, which as well is subject to entry into the Land register and in the commercial register in the files of the two companies.
Are there any restrictions on who can own real estate?
In Bulgaria real estate may be acquired by individuals, as well as by legal entities. There are legal restrictions on the acquisition of ownership of real estate and other in rem rights by foreigners (i.e. foreign-registered or foreign-controlled entities and foreign individuals). Companies, registered on the territory of Bulgaria however, are considered local legal entities and are often used for indirectly acquiring property by foreigners.
Who can acquire property in Bulgaria depends on two sets of criteria – nationality/residency and the type of property:
3.1. As a result of the accession of Bulgaria to the European Union (“EU”), EU citizens (“resident citizens”) and entities registered in the member states of the EU and the European Economic Area (“EU residents and entities”) are treated in the same manner as Bulgarian citizens and companies and can now freely acquire property on the territory of Bulgaria.
However, if the property is an agricultural land, the law imposes restrictions, requiring acquirers (natural persons or legal entities) to have been resident/ established for at least 5 years on the territory of Bulgaria. Newly established companies may acquire agricultural land if they have not issued bearer shares and all of their shareholders satisfy the 5-year requirement for residency.
3.2. Foreigners, who are not EU citizens or entities registered in the EU and the European Economic Area, may acquire property only in accordance with the terms of an international agreement (if such exists), ratified under the terms provided for in the Constitution of the Republic of Bulgaria, which agreement has been promulgated and has entered into force.
3.3. With respect to agricultural lands and forests foreign citizens are allowed to inherit them by law (and not based on a testament). But if they inherit an agricultural land or forests and unless provided otherwise in an international treaty, they are obliged to transfer any property rights to a third person within 3 years after inheriting them.
What types of proprietary interests in real estate can be created?
The main types of in rem rights over real estate are: ownership (sole ownership, co-ownership and condominium ownership); the right to build; easements (servitudes) and the in rem right to use. All in rem rights need to be registered into the Land register after being established, or transferred, or changed.
Ownership is the right of the owner to possess, use and dispose of his/her/its property. The ownership is not limited by a specific term. The right of ownership may be acquired through legal transaction, through prescription or through other means provided by the law. The right of ownership shall be lost if another person acquires it or if the owner renounces it. An owner of an immovable property shall not perform such acts in its property which create obstacles, greater than the usual, for the use of an adjacent property.
The right of ownership may belong jointly to two or more persons - the state, municipalities and other entities and individuals. The shares of the persons shall be deemed equal until proven otherwise. Each joint owner shall participate in the benefits and burdens of the common property in proportion with his share. In case of co-ownership over a real estate one of the co-owners is allowed to transfer her/his title to a third person only after proving that she/he/it has made an offer to the other co-owners to buy it and they have refused to do so.
The owner may cede to another person the right to construct a building on its land, whereby the other person becomes owner of the building (right to build). The owner of the land may also transfer independently from the land the ownership of an already existing building. Ownership of a building independently from the underlying land may also be created through voluntary partition. The owner of a building may use the land to the extent that is necessary for the use of the building according to its purpose, unless the act with which the right is ceded contains another provision. The right to build may be limited by term. If so, after the expiration of said period the ownership of the building shall pass gratuitously to the owner of the land.
The right to use includes the right to use the property in accordance with its purpose and the right to the benefits thereof without causing any essential changes to it. The user cannot transfer his right. The user must pay the expenses related to the use, including taxes and other charges, maintain the property in the state in which it was received, and return the property to the owner after the termination of the right of use.
The easement (servitude) is an in rem right set up in favour of an owner of a property , with respect to another person’s property . The easement right is usually set up with respect to two adjacent properties, although it is not necessarily the rule. The easement right may be limited by term.
Leases, on the other hand, are contractual and not in rem rights. They are usually set up for a finite period of time.
Mortgages are established for securing an obligation (contractual, legal, financial). A creditor whose debt is secured by a mortgage shall be entitled to be satisfied preferentially from the mortgaged property's price, whoever its owner might be. Mortgages are considered by the Bulgarian legal doctrine as a form of security and are initially entered into the Land register for a period of validity of 10 years. After its expiration and if the debt is not paid, the mortgage validity may be repeatedly prolonged upon subsequent entries for another 10 years.
Is ownership of real estate and the buildings on it separate?
Bulgarian law allows for different persons and entities to own the land and separately - the building(s) on it.
The owner may cede to another person the right to construct a building on its land, whereby the other person becomes owner of the building. The owner of the land may also transfer independently from the land the ownership of an already existing building. Ownership of a building independently from the underlying land may also be created through voluntary partition.
The general rule is however that ownership of a land extends over any buildings erected on it. The owner of the land shall be the owner of the buildings and the plants on it, except for the cases when something else has been agreed upon.
In a community of condominium owners, the owners of the flat(s) / other parts of the building may have also joint ownership of a portion of the land, which is a common part of the condominium in this case. In the case, when on the same land there are multiple buildings –each with different owner(s), then all of the building owners may own the land as a community of condominium owners.
What are common ownership structures for ownership of commercial real estate?
In Bulgaria, for commercial purposes, ownership over real estate by legal entities is more common than direct ownership by natural persons. The reason for this is the limited liability of the legal entities and thus, the most preferred forms are the limited liability company (in Bulgarian “ООД”) and the joint stock company (in Bulgarian “АД”). Another reason is the publicity, surrounding the legal entities in Bulgaria. The financial documents, registered pledges and insolvency requests will all be published in the commercial register, thus providing more reliable information about the seller and the buyer, their financial status and potential rights of third parties over their assets.
The annual real estate municipal tax for the property and the land stamp duty tax in case of transfer of real estate are the same for natural and legal persons. The amount of the taxes depends on the location and the designation (legal status) of the real estate and not on the legal nature of the property owner.
In accordance with the Bulgarian tax law, the transfer of land with buildings on it is subject to VAT taxation. Thus, a legal entity being the acquirer will be able to make use of the VAT tax deduction rules.
What is the usual legal due diligence process that is undertaken when acquiring commercial real estate?
Usually the buyer of a real estate located in Bulgaria will commission a lawyer to conduct a thorough due diligence for the property. There is no obligatory form of that due diligence, but it often takes the form of a due diligence report (DDR). The DDR includes the results from the conducted checks in various publically available registers (court register, Land register, registered pledges, commercial register, cadastral map and registry, etc.), and if the seller participates in the process- analysis of his/her contractual obligations towards third parties based on the provided private legal documents.
Upon executing the notary deed the notary official will check the property rights of the seller based on the presented documents for ownership title and whether these have been duly registered into the Land register. In case of legal persons, the notary will also verify the right of their representatives to dispose of/acquire the real estate in the name of the company.
There are multiple searches that are undertaken by the buyer:
- searches in the Land register, including review of the title history of the property and whether the ownership rights of the seller can be justified based on consecutive transfers between the former predecessors.
- requesting a Sketch/ Cadastral map and Excerpt from the Cadaster register for the property. The Sketch/ Cadastral map and the Excerpt are issued by the Agency of Geodesy, Cartography and Cadastre within 3 or 7 business days and cost between 5 -40 BGN depending on the legal status of the land. The Sketch/ Cadastral map is used to verify the legal status of the property, its designation, and way of use and building parameters. The Excerpt from the Cadaster register shows the registered owners of the property as per their title documents registered in the Land register.
- Requesting a Certificate for entered incumbencies over the property. The Certificate for incumbencies is issued by the Register agency within 8 hours, 3 or 7 business days. Associated costs – 25 BGN, respectively 10 or 5 BGN.
- Requesting a Certificate for registered pledges with respect to the property. This Certificate is issued by the Central Register of the Registered pledges. Associated costs 7-10 BGN per page of the certificate issued.
- Requesting a Certificate for existing restitution claims – issued by the regional administration bodies or the agricultural land commission within 3 or 7 working days. Associated costs – 23 or 15 BGN.
- Requesting a Certificate for the identity of the land– sometimes one and the same land is marked with different numbers in the cadastral parcel and this certificate is need in order to establish which land is subject to sale – issued by the Agency of Geodesy, Cartography and Cadastre, within 7 days; fee - 20 BGN.
- Searches in the court case registers regarding pending proceedings against the seller and his/her property; free of charge.
- Searches in the commercial register regarding the status of the seller, its enterprise, annual accountancy reports, insolvency or liquidation proceedings, registered pledges on its shares etc. – free of charge.
For some of the above described searches and certificates the buyer needs cooperation from the seller, as sometimes only the latter is entitled to receive the information about the property. Further, the seller is asked to provide a tax declaration for the property, from which unpaid property taxes are evident. The seller is also asked to deliver a declaration that he/she/it is paying the purchase price with lawfully obtained funds in compliance with the Measures Against Money Laundering Act.
In the last 10 years, under the influence of foreign legal practices it has become more common for sellers to provide representations and warranties. However, these don’t have any specific legal importance under Bulgarian law, unless tied together with a contractual penalty obligation or with a termination clause. Usually representations and warranties in the meaning of the Anglo-Saxon legal system will be included in the preliminary or final contract and if breached, will trigger a contractual penalty, if such is envisaged.
It should be noted that Bulgarian law explicitly provides for monetary compensation (along with the back payment of the price) to any buyer, who has been forced to leave the property because of eviction ( in case of in rem rights of third persons).
What legal issues (if any) cannot be covered by usual legal due diligence?
To a great extent the legal due diligence is covering all material risks regarding the real estate acquisition.
However, existing lease contracts which have not been entered into the Land register will be binding for the buyer for up to a year. The information for such contracts, if any, shall be requested by the seller.
Further, if a third person has effectively held the property prior to the purchase in a way demonstratively excluding the right of the owner, that third person may claim some rights (even ownership based on the expiration of the statutory prescription period for more than 10 years) and there is no way for the legal due diligence to predict this situation. For this reason it is important for the seller to confirm explicitly that he/she/it has been holding (possessing) its property for the last years and to deliver the factual possession of the property.
It should be noted, that legal due diligence is based primarily on the private documents presented by the seller and the entries into the public registers. Thus, any information that is not contained in those sources or any misrepresentation therein will hardly be taken into account as part of the due diligence report. The possible risks may be prevented by setting forth respective penalties for the cases of misrepresentation and false declarations regarding the relevant circumstances.
What is the usual process for transfer of commercial real estate?
· Preparation of draft sale and purchase agreement;
· Negotiation of sale and purchase agreement with buyer, signing a preliminary contract;
· Due diligence report;
· Review of the title documents and the history of title- who have been the former owners of the property;
· Certificate for the lack of incumbencies, issued by the Register Agency, including information for judicial claims are entered for the property;
· Check in the commercial register regarding the status of the seller, its enterprise, insolvency or liquidation proceedings, registered pledges on its shares etc.
· Certificate from the local administrative bodies and the agricultural land commission for lack/existence of restitution claims regarding the land;
· Certificate from the Central register of the Registered Pledges showing lack/existence of registered pledges with respect to the property;
· Requesting a Sketch/ Cadastral map and Excerpt from the Cadastral register from the Agency of Geodesy, Cartography and Cadastre Checks with respect to the property;
· Requesting a Sketch from the local municipality showing plans and zoning provisions with respect to the property (recommendable);
· Drafting and signing a preliminary contracts with conditions to closing;
· The preliminary contract is signed by both parties and can be enforced and transformed into a final contract upon decision of the court;
· A deposit of the purchase price is typically paid on signing the preliminary contract which will be forfeited if the buyer fails to complete sale;
Signing to Closing
· Satisfaction of any conditions to closing;
· Satisfaction of any conditions to closing;
· Arranging the financing of the deal;
· Repayment of any existing debt and discharge of mortgage (if any);
· Execution of transfer agreement;
· Execution of transfer agreement by the parties before a Notary public;
· Payment of purchase price;
· Registration of transfer at Land register with the Register Agency is done by the notary public;
· The registered copies are received by the parties in the office of the Notary public after their registration at the Land register with the Register Agency
· Payment of stamp duty land tax, notary tax and fees for entry of the notary deed into the Land register;
· Maximum notary tax for issuance of the notary deed – 6000 BGN;
· As per the law taxes and fees usually are to be divided between the parties, however it is common the buyer to pays them all;
In order to transfer title over real estate in Bulgaria the parties must execute the deal in the form of the required document for transfer of title – usually a notary deed, which is then entered into the Land register. Notary deeds are signed always in front of a notary public, who has the responsibility to check the ownership documents, presented by the seller. However, the notary public will not review the title history for the property and whether the rights of the seller are acquired from a previous lawful owner of the property. This part of the due diligence process although not obligatory, is often done by lawyers assigned by the buyer.
Very often the parties decide to sign the so called preliminary contract. This is done mainly in case one of the parties or both need more time for preparation before the final transfer of ownership – such as securing funding, cleaning the land, providing additional documents and certificates, etc. The preliminary contract has three important characteristics: 1) if one the parties refuses to sign the notary deed for the final transfer of the property, the other can ask the court to declare the sale contract for final based on this preliminary contract; 2) it stipulates the terms and conditions for closing the deal. The contractual clauses are freely determined by the parties (as far as such clauses do not contradict the law) and their content depends on the specific case; 3) the parties can envisage contractual penalties if certain conditions/obligations/milestones for closing the deal are not met.
Is it common for commercial real estate transfers to be effected by way of share transfer as well as asset transfer?
Sometimes transfer of ownership is effected by way of share transfer or asset transfer (by selling all or part of the commercial enterprise as a combination of assets, obligations and receivables). In this case the acquirer avoids paying taxes for acquiring ownership over the immovable asset (the so called stamp duty land tax).
Despite the tax benefit though, more often parties agree and prefer direct acquisition of property, although in this case the respective stamp duty land taxes arises. The reason for this trend is that selling a company is very different from selling a property. When transferred by way of share or asset transfer, the property is often part of the main commercial enterprise of the seller - along with many other assets, receivable and obligations (SPVs holding separate property rights are rather rare). Thus, in the process the buyer may acquire a range of other assets and liabilities, which can lead to bigger losses. Further, the required due diligence investigation differs significantly and may cause additional costs and concerns. It will be difficult to assess what is the exact amount and nature of the obligations of the sellers, especially if their accounting is not accurate. The contractual protection which the buyer needs also increases and purchase contracts need to be more precise and detailed if the property is acquired indirectly and in combination with other assets.
On the sale of interests in land does the benefit of any occupational leases and income automatically transfer?
If the seller of the property has concluded a lease contract for the property and before its expiration the ownership is transferred, the legal consequences from the sale with respect to the lease depend on the type of the lease contract:
- If the lease contract has been entered into the Land register, it is binding for the buyer of the property for its entire term;
- If the lease contract has a verifiable date (in cases when the date has been certified by a notary official), its terms are binding for the buyer but for no longer than a year as of the transfer of ownership;
- If the date of the lease contract is not verifiable, then each of the parties can terminate it with a one-month notice. If the rent price is stipulated on a daily basis, the termination notice is one business day.
In any case, if the lease contract is terminated prior to the term it has been concluded for, the lessor (the former owner) is liable for any damages to the lessee. Contractual clauses may envisage additional legal consequences with respect to the sale.
As to the question, who shall receive the rent price – the previous or the new owner, this is not expressly settled in the law and thus the parties need to agree on it explicitly in the purchase contract and inform the lessee.
As far as an agricultural land is concerned, there is a special act which regulates the leasing relations in agriculture. If it is agreed in the contract, the legatees, respectively the legal successors of the lessee shall substitute him/her/it as party to the leasing contract. They shall be obliged to inform immediately the lessor about the substitution and to name their representative. The acquirer of the leased subject of the contract shall substitute the lessor as party to the leasing contract, if he has been registered, even if the property has not yet been transferred. If the contract has not been registered it shall have effect regarding the acquirer for a period of two economic years after the year of acquiring.
What common rights, interests and burdens can be created or attach over real estate and how are these protected?
The main types of in rem rights over land are: ownership (sole ownership, co-ownership and condominium ownership); the right to build; easements and the in rem right to use.
The right to build grants the right to erect a building on a third-party property. The building right is a transferrable right which may be limited by term. Its beneficiary has to construct the building within 5 years as of signing the contact with which it has been established (or as of acquiring the necessary access to build), otherwise the right to build shall be extinguished.
The in rem right to use the property includes the right to use the property in accordance with its purpose and the right to the benefits thereof without causing any essential changes to it. The user cannot transfer his right. The user must pay the expenses related to the use, including taxes and other charges, maintain the property in the state in which it was received, and return the property to the owner after the termination of the right of use.
The easement (servitude) is an in rem right set up in favour of an owner of a property, with respect to another person’s property. Easements frequently arise among owners of adjoining parcels of land, when one land cannot be effectively used unless its owner has a form of limited in rem right over the adjoining land. Traditionally, easement rights provide for the right to trespass, rights of way and rights related to infrastructure facilities. Easements rights are established voluntarily by contract or when specifically provided for in the law (for example in Electricity Act; Waters Act etc., with an administrative act).
All in rem rights are created on the basis of a notary deed or another title document, envisaged in the law and entered in the Land register with the Register Agency. Mandatory easement rights (upon prescription by the law) besides a notary deed may be established by an administrative order from the competent administrative body.
Leases are contractual rights and are created in contracts, which do not need to be notarized. There is no limitation as to the duration of commercial lease contracts (unlike in the case of non-commercial leases, where the time limit is 10 years). The terms and conditions of real estate lease contracts if entered into the Land register are obligatory for any subsequent acquirer of the land.
A form of burden over a property is the mortgage, which is created with a notary deed for an initial period of 10 years, subject to entry into the Land register. The mortgage gives a form of privilege to its beneficiary to receive the amount of the debt from the price of the property, with priority before other creditors respecting the order of the registered mortgages.
Another form of security is the registered pledge with subject - an immovable property of the debtor (as a part of enterprise of the entity). The contract for the registered pledge must be entered into the Special register for registered pledges. The creditor, who is a beneficiary of the registered pledge, is entitled to receive with priority the price of the pledged asset or the compensation for it. The established pledge shall be opposable to third persons from the moment of its registration. Enforcement proceedings include a simplified out-of-court procedure for sale the property.
As an interim measure the creditor may seek to impose an attachment over the immovable property of the debtor. For this purpose the creditor must obtain a preservation order from the court enter the measure into the Land register. The attachment prevents the owner of the property from lawfully disposing of it and entitles the creditor to receive amount of the debt form the price collected from the public sale of the property even if the property has been subsequently (after registration of the attachment in the Land register) transferred to a third person, who is not initially liable for the obligations of the debtor.
Bulgarian law regulates several claims aimed at protecting property rights and interests against infringements. The rightful owner, who does not hold possession over the property, may seek protection from the court against any third person, who is in possession of the property. The owner may request termination of any act of any third person creating obstacles for exercising of his/her/its right without lawful grounds. Further, any person, who has been in possession of the property for at least 6 months, may seek judicial protection against third parties infringing his/her rights. The publicity of the Land register and the mandatory registration also ensure protection against actions and transfers done in bad faith.
Are split of legal and beneficial ownership of real estate (ie Trust structures) recognised?
Bulgarian law does not recognise the split legal and beneficial ownership of real estate (i.e. trust structures).
What are the main taxes associated with commercial real estate ownership and transfer of commercial real estate?
Owners and persons, having limited in rem rights over real estate have to pay an annual real estate municipal tax, the amount of which is determined by the municipality based on the size, location and the tax assessment of the property.
Owners and users of real estate also owe a waste tax, the amount of which is determined by the municipality based on the number of people using the real estate or the quantity of the waste produced (the choice is left to the municipality).
In case of direct acquisition of real estate the acquirer shall pay stamp duty land tax, amounting to up to 3,5 % (determined by each municipality) from the value of the transaction or the tax assessment of the property – whichever value is higher. The parties usually agree to share the costs for notary official’s fee (determined in accordance with the state tariff) and fees for entry of the notary deed into the Land register (amounting to 0.1 % of the transaction value).
In case of indirect acquisition of real estate (executed through the sale of shares or of the commercial enterprise), no obligation for payment of stamp duty land tax arises.
What are common terms of commercial leases and are there regulatory controls on the terms of leases?
The Bulgarian law does not prescribe an obligatory form of the lease contact, but parties almost always execute it in writing. In order to guarantee his/her/its rights in case of transfer of ownership the lessee should enter the lease contact into the Land register. In case of transfer of ownership and if the lease contract is duly entered into the Land register, its terms and conditions will be binding for the acquirer.
Parties are free to negotiate the rental price for the property, and no restrictions apply. Rent for office space is usually determined as a fixed amount. The rent for commercial space is usually a combination of a fixed amount and turnover rent. Sometimes the rental price may be subjected to annual adjustment on the basis of commonly used price indexes (like LIBOR and others).
Unless stipulated otherwise, the law generally allows for subletting real estate without the consent of the lessor (the lessee is responsible for any damage caused by the subtenant). However, parties often agree otherwise.
Commercial leases are executed either for a fixed term or with a clause, stipulating repetitive renewal unless one of the parties sends a termination notice within the specified time limits. Agents of the lessor who are authorized only for managing the property, can represent the lessor and sign a lease contract for a period no longer than 3 years. For longer lease contracts these representatives will need additional authorization.
The costs associated with the ordinary use and depreciation of the real estate are payable by the lessee. However, all other material costs and damages of the property are to be borne by the lessor, unless they have been intentionally caused by the lessee. If the lessor refuses to undertake the necessary reparations, the lessee is entitled to undertake them and to receive a compensation from the lessor.
How are use, planning and zoning restrictions on real estate regulated?
The regulation of use, planning and zoning restrictions for real estate is effectuated with two types of regulation plans:
- General regulation plans (GRP, in Bulgarian „Общ устройствен план“), which set out the general guidelines of use and regulation and main construction parameters for the territory.
- Detailed regulation plans (DRP, in Bulgarian “Подробен устройствен план”), which determine in greater details the status and designation of city areas and lands, their borders and way of usage, location of infrastructure elements, and prescribe the permissible construction parameters (such as building height, lines, distance, location, green space zones and others). The prescriptions of the DRP are always within the regulation parameters, provided for in the GRP.
Buildings on regulated lands may be erected only in accordance with the detailed regulation plans, which have entered into force. In addition, special regimes for land use and construction may be created, which are in deviation of the prescriptions of the DRP, for territories, subject to special territorial protection (cultural properties, sport facilities and others specified in law). The regulation of the sea side, military zones, areas/objects with national and regional importance and others are subject to a special set of rules.
The GRP and DRP are adopted by municipal administrative bodies. Before entering in force, GRP are subject to mandatory consultations with the public, whereas DRP are subject to announcement and publication and only interested parties (for example affected private land owners and investors) may submit objections against the proposed DRP. Both types of regulation plans may be subsequently amended, by way of exception, in specific cases numbered in law.
For the construction of each permanent building the owner of the land or the investor must obtain a construction permit. New buildings may be used only after verification and review of the construction permit and the other related documents by the competent administrative bodies.
In order to establish the regulatory regime for a certain land, the investor/owner needs to check in the local municipality the provision for its plot under the GRP and the DRP. These plans contain the information regarding permissible construction parameters, way of usage and borders of the property.
Who can be liable for environmental contamination on real estate?
The polluter-pays principle is a guiding principle at European and national levels. Bulgarian law provides for an obligation for all owners, lessees or other users to keep the property clean and in good condition. Responsible for any pollution of real estate will be the person, who has caused or contributed to it. However, under the general tort law the owner of an object is always liable for any damages to third parties or their property caused by the object, thus the owner may be jointly liable with the polluter to third parties, whose rights have been infringed.
Is expropriation of real estate possible?
In general, real estate may only be expropriated by the state or municipality if a significant public interest exists (e.g. construction of infrastructure, creation of green space, public parks, etc.), this interest cannot be satisfied with other means and only after a preliminary payment of a just compensation. A specific case of expropriation is envisaged for the purposes of regulation of lands with unapplied initial land regulation or out of regulation. The municipality is allowed to dedicate up to 25 % of the property owned by citizens for social or technical infrastructure by adopting a new Detailed regulatory plan. In this case the municipality is obliged to compensate the former owners with lands with similar characteristics (location, construction parameters, etc.).
Is it possible to create mortgages over real estate and how are these protected and enforced?
Creating mortgages as security for a legal (contractual) obligation of the owner of the property is quite common in Bulgaria. The law also allows subject to mortgage the property of a third person, who has no obligations towards the mortgage creditor, subject to that third person’s explicitly consent.
The mortgage shall be created through registration in the Property Register on the grounds of a contract or by operation of law. The contract for the creation of the mortgage must be executed in the form of a notary deed, having the content prescribed by the law and must be entered into the Land register. The notary and registration fees are determined on the basis of the value of the debt, secured with the mortgage.
The initial period of validity of the mortgage is 10 years, which can be renewed for new 10-year terms by re-entries into the register. If the re-entry is conducted prior to the expiration of the initial/previous period of validity, the mortgage and thus the rights of the creditor will have a turn as of the date of the initial entry into the register.
The first-rank mortgage creditor is entitled to collect its debt from the price received by a public sale of the property, conducted by a private or state bailiff. The mortgage creditor must have a lawful ground for receiving the price (such as a judicial decision in his/her favor) and may receive no more than the sum, written down in the notary deed for the creation of the mortgage. If there are other creditors with higher ranks (i.e. older mortgages), the creditor is entitled to receive what is left after the claims of the other privileged creditors are satisfied.
The enforcement is a relatively straightforward process involving usually a court ruling and private bailiff actions. It follows the rules envisaged in the Civil procedure code for public sale of immovable property.
Important for the protection of the mortgage creditor is the rule, that the mortgage is transferred together with the transfer of title over the property to the new owner.
Are there material costs associated with the creation of mortgages over real estate?
Costs for the creation of a mortgage over real estate are as follows:
- administrative fees for assembling the full set of documents needed for creating the mortgage (notarized copies of notary deeds, excerpts from cadastral maps and sketches of the property, different certificates issued by the Register agency or other regulatory bodies) – depending on the specific case these costs can amount to up to 100 BGN.
- Fees of the notary official for executing the notary deed – determined in the Ordinance for the notary fees, dependent on the type of the real estate and the debt value, secured with the mortgage. In case of a debt of 100 000 BGN – ca. 6000 BGN notary fee.
- Fee for entry into the Land register, payable to the Register agency – 0,1 % of the debt value, for which the mortgage is created, but not less than 5 BGN.
Upon renewal of the mortgage (after the expiration of each 10-year period) the notary official’s fee are half of those collected for the establishment of the mortgage, whereas the Land register fees remain the same.
Is it possible to create a trust structure for mortgage security over real estate?
No trust structures for mortgage security over real estate are regulated or recognized under Bulgarian property law.
What is the main legislation relating to commercial real estate ownership?
The major legislative acts governing the real estate and real estate transactions in Bulgaria are the Bulgarian Constitution, Property Act, State Property Act, Municipal Property Act, Privatization and Post-privatization Control Act, Agricultural Land Ownership and Use Act, Forestry Act, Commercial Act, Encouragement of Investments Act, Territorial Planning Act, Law on Contracts and Obligations and Condominium Ownership Management Act Civil, Agricultural Lease Act, Civil Procedural Code etc. Certain aspects of real estate are also governed by other specific laws and regulations. The proceedings regarding registration in the Land register are governed by the Cadastre and Land Register Law and the Regulation on Registration in the Land register.