OWNERSHIP OF REAL ESTATE

 

 

LEGISLATIVE FRAMEWORK AND GENERAL RULES

 

 

Legislative framework

 

 

The major legislative acts governing the real estate and real estate transactions in Bulgaria are the Bulgarian
Constitution, Law on property, Law on state property, Law on municipal property, Civil procedures code, Law onpromotion of investment, Law on territorial development and Law on contracts and obligations.
Direct acquisition of real estate in Bulgaria by a foreign companyIn 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 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 Bulgariancompany to act as acquirer. It is possible for such a company to be 100% owned by the foreign investor.

 

The transaction

 

 

The general rule under Bulgarian law is that transactions involving real estate (e.g. a purchase, exchange, etc.)
should be executed with a notary deed 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.A notary deed is not required for the sale of state or municipal property or in privatization transactions where the
simple written form is sufficient for a valid title transfer. There are also special rules and procedures governingthe acquisition of real estate arising from enforcement, insolvency and similar procedures, and for in-kind
contributions of real estate.

 

 

The price

 

 

The purchase price is freely negotiable and may be stipulated and paid in BGN or in any other currency.Legitimacy of the buyer
Direct acquisitionWhere a foreign company acquires directly buildings, premises or limited property rights it should ensure that at
least the following documents are presented:Resolution of the competent corporate body approving the acquisition of the targeted real estate. The resolution
has to be notarized and apostilled in the respective country and translated in Bulgaria by a certified translatorCertificate for Good Standing – apostilled in the respective country and translated in Bulgaria by a certified
translator, andPower-of-attorney, signed before a notary and apostilled in the respective country and translated in Bulgaria by a
certified translator, for the person who will represent the foreign investor before the Bulgarian notary.Indirect acquisition
Where a foreign company indirectly acquires real estate in Bulgaria through a Bulgarian subsidiary company itshould ensure that at least the following documents are presented:
Resolution of the competent corporate body of the Bulgarian subsidiary approving the acquisition of thetargeted real estate
Certificate for Good Standing of the Bulgarian subsidiary –original or a certified copyPower-of-attorney signed before a notary for the person (if this is not the person referred to in the Certificate
for Good Standing as the person representing and binding the Bulgarian subsidiary) who will representthe Bulgarian subsidiary before the Bulgarian notary handling the transaction
Certificate for tax registration for the local subsidiary – the original and a copy for the notary, andBULSTAT (statistics) registration card of the Bulgarian subsidiary – the original and a copy for the notary.

 

 

STATUTORY COSTS AND EXPENSES

 

 

Transfer tax – 2% of the higher of the purchase price agreed between the parties, or the tax valuation made by
the tax office prior to the transaction. The tax may be shared between the parties or be just born by oneof them
Fee for registration in the Real Estate Register – 0.1% of the higher of the purchase price agreed between theparties, or the tax valuation made by the tax office prior to the transaction. The fee may be shared
between the parties or be borne by just one of them, andNotary fee – according to the statutory Notary Tariff not more than BGN 3,000 (approx. Euro 1,550) per
transaction. The fee may be shared between the parties or be borne by just one of them.

 

 

TITLE REVIEW (Real estate legal due diligence)

 

 

Before purchasing real estate it is recommended that the buyer ensure verification of the ownership status of the
targeted real estate, including that there is/are:· a clean, valid and marketable ownership title held by the seller. The seller has to be, and his predecessors
should have been the valid owner of the targeted real estate in order to avoid any risk of rescinding orannulment of the transaction. Usually, this title review covers the last 10 years since the maximum
acquisitive prescription term in Bulgaria is 10 years· no liens 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, interlocutoryinjunctions, going-concern pledges, limited property rights established in favor of third parties. A general
principle in Bulgarian law is that liens and encumbrances “follow the property”, i.e., the registered liensand encumbrances can be enforced against the new owner
· no other registered rights in favor of third parties – if there are registered rental or lease agreements overthe targeted real estate then the buyer shall be bound by them until the expiration of their term, and
· no court or restitution claims.

 

 

SPECIAL CASES

 

 

Acquisition of marketable state owned real estate
Marketable state owned real estate can be acquired through:a sale purchase transaction
exchange with other real estate owned by the foreign investor or its Bulgarian subsidiary, oran in kind contribution into the capital of a Bulgarian company
The person authorized to dispose of marketable state owned real estate is the Regional Governor of theadministrative region where the property is located.
Currently the sale of marketable state owned real estate has to be performed through a tender. The RegionalGovernor determines the tender procedure with an administrative order. After the issuance of a further
administrative order announcing the winner of the tender, a sale-purchase contract is concluded. The contract hasto be registered in the Real Estate Registry in order to make the ownership title of the acquirer defendable against
third parties.An exchange of marketable state owned real estate is performed without a tender. The Regional Governor issues
an administrative order, which has to be approved by the Minister of Regional Development. Based on this order acontract is concluded. The contract has to be registered in the Real Estate Registry in order to make the ownership
title of the acquirer defendable against third parties.Where the value of the property is over BGN 550,000 the sale or the exchange can only be performed after a
decision of the Council of Ministers that has been initiated upon the proposal of the Minister of RegionalDevelopment. In such circumstances the Minister of Regional Development issues an administrative order and
then concludes the contract for the sale or exchange.Acquisition of marketable municipality owned real estate
The person entitled to conclude a contract for the sale or exchange of marketable municipal real estate is theMayor of the municipality in which the property is located.
Currently the sale of marketable municipal real estate has to be performed through either a tender or an auction.The said Municipality should pass a resolution for the sale on the basis of which the tender/auction is initiated.
Once the result of the tender/auction is determined the Mayor issues an order and concludes a formal contract.The contract has to be registered in the Real Estate Registry in order to make the ownership title of the acquirer
defendable against third parties.Currently an exchange of marketable municipal real estate is performed without a tender or an auction. The
Municipal Council passes a resolution to effect the exchange. On the basis of the said resolution, the Mayor issuesan order and concludes a formal contract. The contract has to be registered in the Real Estate Registry in order to
make the ownership title of the acquirer defendable against third parties.

 

INCENTIVES

 

General

 

Upon the request of an investor whose investment is certified by the InvestBulgaria Agency (“IBA”) as a “first
class investment” – an investment at the amount over BGN 70 million – the BIA shall propose to the competentstate or municipal body that they:
transfer to the investor, without remuneration, the ownership title over marketable real estate owned by thestate or municipality
sell to the investor marketable real estate owned by the state or municipality without tender/auctionestablish, without remuneration, limited property rights in favor of the investor over private real estate owned
by the state or municipality, orestablish, against remuneration, limited property rights in favor of the investor over private real estate owned
by the state or municipality, without tender/auctionTransfer of the ownership title over real estate owned by the state without remuneration
The transfer of ownership over marketable state owned real estate to an investor without remuneration should beinitiated by BIA, which has to send a formal proposal to the Ministry of Regional Development. In turn, the
Ministry of Regional Development has to send a formal proposal to the Council of Ministers. If the Council ofMinisters accepts the proposal it will issue a resolution allowing the transfer of the said real estate. On the basis of
the resolution of the Council of Ministers, the Regional Governor of the region, where the real estate is located,concludes a formal contract with the investor. The contract has to be registered in the Real Estate Registry in
order to make the ownership title of the acquirer defendable against third parties.Sale of marketable real estate owned by the state without a tender/auction
The sale of marketable real estate owned by the state without a tender/auction is started by the preparation of anevaluation by an independent certified evaluator. The Minister of Regional Development and the Minister of
Economy and Energy provide a written opinion on the sale of the real estate and on the evaluation. The relevantRegional Governor can then issue an administrative order and conclude the sale contract.
Sale of marketable real estate owned by the municipality without tender/auctionThe sale of marketable real estate owned by a municipality without a tender/auction is started by the preparation of
an evaluation by an independent certified evaluator. The Municipal Council then passes a resolution with anadministrative order issued by the Mayor of the region where the real estate is located. On the basis of the said
resolution the Mayor can conclude a formal contract with the investor.Establishment of limited property rights over marketable real estate owned by the state without
remunerationThe establishment of limited property rights over marketable real estate owned by the state without remuneration
should be initiated by BIA, which has to send a formal proposal to the Council of Ministers. If the Council ofMinisters accepts the proposal, it should issue a resolution allowing the establishment of limited property rights
over the said real estate. On the basis of the resolution, the relevant Regional Governor then concludes a formalcontract with the investor.
Establishment of limited property rights over marketable real estate owned by a municipality withoutremuneration
The establishment of limited property rights over marketable real estate owned by a municipality withoutremuneration is initiated by BIA, which has to send a formal proposal to the Municipal Council. If the Municipal
Council accepts the proposal it will issue a resolution with an administrative order of the Mayor, allowing theestablishment of limited property rights over the said real estate.
Establishment of limited property rights over marketable real estate owned by the state without atender/auction
The establishment of limited property rights over marketable real estate owned by the state without atender/auction is started by the preparation of an evaluation by an independent certified evaluator. The Minister of
Regional Development and the Minister of Economy and Energy provide a written opinion on the sale of the realestate and on the evaluation. The relevant Regional Governor can then issue an administrative order and conclude
the sale contract.Establishment of limited property rights over marketable real estate owned by a municipality without a
tender/auctionThe establishment of limited property rights over marketable real estate owned by a municipality without a
tender/auction is started by the preparation of an evaluation by an independent certified evaluator. The MunicipalCouncil should pass a resolution and the Mayor should issue an administrative order. On the basis of the said
resolution the Mayor can conclude a formal contract with the investor.