Everything you need to know is included in our Bulgaria Property Pack
More and more foreigners are considering investing in Bulgaria's real estate market, drawn by its affordability and potential for growth.
Buying property in this area can be a complex journey though, particularly if you're not a local. There are many potential challenges and surprises to be aware of.
Our community of property buyers and local collaborators have communicated several issues to us. We've listed them all in our Bulgaria Property Pack.
This article will give you a quick overview of some of the potential pitfalls you could face.
Is it safe or risky to invest in real estate in Bulgaria?
In the mid-2000s, there was a surge in interest in Bulgarian properties, primarily fuelled by the country's impending EU membership.
This boom saw many unscrupulous developers and agents entering the market. Some buyers found themselves in situations where properties were sold to multiple individuals simultaneously.
For instance, in areas like Sunny Beach, developments sprang up rapidly, some of which were later found to violate coastal regulations.
The intricacies of Bulgaria's land ownership laws, particularly the restriction against non-EU citizens owning land, has resulted in a common, albeit convoluted, practice of setting up Bulgarian companies to facilitate purchases.
This practice, while customary, introduces another layer of complexity and potential risk, as buyers now also grapple with corporate responsibilities and potential liabilities.
Compared to countries like the UK or Germany, Bulgaria's property buying process is less transparent.
In regions like Plovdiv or Sofia, there have been instances of disputes arising from unclear property boundary demarcations. This has led to situations where new owners find parts of their purchased land claimed by neighbors.
While Bulgaria does uphold property rights, seeking legal redress can be a marathon. A prominent case that caught international attention was of a British couple in 2012, who faced years of legal battles after discovering their purchased property in the village of Loma, near Pleven, was fraudulently sold to them by someone who wasn’t the actual owner.
Beyond the standard checks, it's vital to ensure properties, especially those in rural regions like Vratsa, don’t come with agricultural obligations, which can entail additional costs and responsibilities.
Bulgaria's approach to property and foreign investment is a mix of facilitation and hands-off policies.
While the government has incentivized property transactions with policies like VAT exemptions, its hands-off approach during the mid-2000s boom allowed for many of the aforementioned scams to flourish.
Beyond the statistics and regulations are the lived experiences of foreigners.
Some have reaped profits, especially in burgeoning tourist areas like Bansko.
However, others have cautionary tales, like unexpected maintenance fees or dealing with property rights in heritage zones in cities like Nessebar.
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Avoid these pitfalls when purchasing property in Bulgaria
The concept of "regulated land"
One specific pitfall you should be aware of when buying residential property in Bulgaria, especially as a foreigner, relates to the concept of "regulated land" (регулирана земя).
In Bulgaria, not all land is classified for residential construction, and this classification is crucial for property development.
When you're looking at a property, particularly in rural areas or near the coast, ensure that the land is "regulated." This means it has been officially designated for residential or commercial development. Unregulated land (нерегулирана земя) may not be legally suitable for building a house or other structure, which can be a common oversight among foreigners.
In the context of your property search, you should always verify the land status in the property deed or ask for a recent property survey.
This pitfall is particularly relevant if you're considering buying in less urbanized areas, where unregulated land is more common.
It's a mistake that can lead to significant legal and financial complications, as constructing on unregulated land can be illegal and might result in fines or the requirement to demolish the building.
"Nasledstvo" or inheriting ownership rights
Another unique and less known pitfall when buying property in Bulgaria, particularly for foreigners, is the issue related to inheriting ownership rights, known as "nasledstvo" (наследство).
In Bulgaria, properties often pass down through generations within families, leading to a situation where a property might have multiple part-owners.
This becomes a significant issue when you're buying a property that has not been solely owned by a single individual but has multiple inheritors or part-owners. Each of these inheritors has legal rights to the property, and all must agree to the sale. Sometimes, not all inheritors are known or readily available, which can complicate the sales process significantly.
In this context, you should meticulously verify the ownership history of the property and ensure that all part-owners are identified and have consented to the sale.
This is crucial because any overlooked inheritor can later emerge and contest the sale, leading to legal disputes. Also, this issue is more frequent in rural areas or with properties that have been in families for generations.
It's less common in newer developments or urban properties.
To navigate this, you should work with a knowledgeable local lawyer who can conduct a thorough check on the property's history and ownership status.
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Problems with establishing a Bulgarian company
A unique and often overlooked pitfall in buying residential property in Bulgaria, especially for foreigners, is the requirement to establish a Bulgarian company for the purchase of land.
This is specifically relevant if you're interested in buying a house with a garden or a plot of land for construction.
In Bulgaria, non-residents or foreign nationals are restricted from directly owning land. However, they can own buildings or apartments. To circumvent this, many foreigners establish a Bulgarian limited company (ООД - "Ogranichena Otgovornost Druzhestvo") which then owns the land.
This is a legal workaround that is quite common but also comes with its own set of challenges.
You need to be aware that setting up a company solely for the purpose of property ownership involves additional responsibilities and costs. These include company maintenance costs, accounting requirements, and annual tax filings.
Failing to properly manage these responsibilities can lead to legal and financial complications.
It's crucial to understand that even though the process of setting up a company might seem straightforward, managing it requires ongoing attention.
You should consult with a local legal advisor and an accountant to fully understand the implications, responsibilities, and costs associated with this method of property ownership.
The "Act 16" certification
Another specific pitfall to be aware of when buying residential property in Bulgaria, especially for foreigners, is related to the "Act 16" (Акт 16) certification.
Act 16 is a crucial document in Bulgaria that certifies the legality and habitability of a building. This document confirms that the property is completed in accordance with the approved building plans and is compliant with all Bulgarian construction standards.
The mistake often made, particularly by foreign buyers, is purchasing a property without ensuring that Act 16 has been issued.
Sometimes properties, especially in newer developments, are sold before this certificate is granted.
Buying a property without Act 16 can lead to several problems like legality. Without Act 16, the property might not be legally habitable, which can cause issues with local authorities.
Furthermore, connecting to essential utilities like electricity and water can be problematic without this certification.
The resale and financing part is also crucial. Selling the property or obtaining a mortgage can be challenging without Act 16, as banks and buyers usually require this certification.
To avoid this pitfall, you should always check whether Act 16 has been issued for the property you are interested in. This is especially important if you are buying in a new development or an area undergoing recent construction.
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The risks related to the "cadastre" and "property sketch"
When buying residential property in Bulgaria, a unique pitfall you should be particularly cautious about is related to the "cadastre" and "property sketch" (кадастрална карта и скица).
In Bulgaria, the cadastral map provides detailed information about the property, including its exact boundaries, size, and the location of any buildings or structures on the property.
The pitfall arises when there are discrepancies between the physical property and its representation in the cadastral map. Sometimes, the boundaries of the property on the ground may not align with those in the cadastral records, or there might be structures on the property that are not reflected in the cadastral sketch.
This is a common issue in rural areas or with older properties where official records may not have been updated to reflect changes over time.
As a foreign buyer, you should ensure that a detailed check of the cadastre and property sketch is conducted. This involves comparing the actual property boundaries and structures with those recorded in the cadastral office.
Discrepancies can lead to legal issues, disputes with neighbors over boundaries, and problems in future transactions.
"Right of use" or "право на ползване"
In Bulgaria, as a foreign property buyer, you should be particularly vigilant about "right of use" issues, known locally as "право на ползване" (pravo na polzvane).
This situation often arises in properties that were once part of agricultural cooperatives or state-owned during the communist era. When these properties were privatized, certain rights, like the use of land or gardens, might have remained with individuals who were former members or workers of these cooperatives.
Such rights, if overlooked, can lead to complex legal issues.
For example, you might buy a house thinking you own the entire garden, only to find out that a local resident has a historical right to use part of it. To avoid this, it's crucial to conduct thorough due diligence, including checking the property’s history and land registry for any existing rights of use.
Also, consulting with a local lawyer who has expertise in this area is essential.
They can help ensure that no encumbrances exist on your intended property, allowing for clear and undisputed ownership.
This step is especially important for properties in rural areas or those with ties to Bulgaria's agricultural past.
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Servitude rights or "сервитутни права"
A unique pitfall in the Bulgarian property market, particularly for foreign buyers, involves the complexities surrounding 'servitude rights', known locally as "сервитутни права" (servitutni prava).
These are rights that third parties might have over the property you intend to purchase, often related to access or utility usage.
In Bulgaria, servitude rights can be established over a property for various reasons.
For example, a neighboring property might have the right to use a path through your land, or there could be an agreement allowing utilities like water or electricity lines to pass through the property.
These rights are not always immediately apparent and might not be explicitly mentioned in the property's main documents.
The issue arises when you purchase a property without being aware of these servitude rights. Discovering them post-purchase can be problematic, as it might limit your plans for the property or lead to unexpected inconveniences. For instance, you might find out that neighbors legally have the right to cross your property to reach their own, something you were not aware of when buying.
To safeguard against this, it’s important to conduct a detailed review of the property records. This should include an examination of any registered servitude rights.
Also, consulting with a local real estate attorney can provide insights into these matters.
They can help uncover any such rights attached to the property and advise on their implications.
"Енергиен паспорт" or Energiyen pasport
When buying residential property in Bulgaria, a unique and often overlooked pitfall is related to energy efficiency certificates, known as "Енергиен паспорт" (Energiyen pasport).
In Bulgaria, it's mandatory for properties to have an energy efficiency certificate when being sold. This certificate provides a rating of the property’s energy performance, similar to appliance energy ratings.
The pitfall here is that many properties, especially older ones, may not have this certificate, or they might have very low energy efficiency ratings.
This is a crucial aspect because a low energy efficiency rating can lead to higher utility costs and may require significant investment in improvements to heating, insulation, or other energy-related aspects of the property.
As a foreign buyer, you should ensure that the property you are interested in has a valid energy efficiency certificate and understand what the rating implies.
If the property does not have this certificate, or if it has a low rating, you should consider the potential costs for necessary upgrades.
These costs can be substantial, especially in older buildings.
Neglecting to check the energy efficiency certificate can lead to unexpected expenses post-purchase. It's advisable to address this issue before finalizing the purchase, either by negotiating the price accordingly or by planning for the required improvements.
Consulting with a local expert who can assess the property's energy efficiency and advise on any potential upgrades is also a wise step in this regard.
This ensures that you are fully informed about the property's energy performance and any additional investments you might need to make.
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The issue of "old debts"
In Bulgaria, a specific and often unexpected pitfall for foreign buyers in the residential property market is the issue of 'old debts' associated with the property, particularly in the form of unpaid utility bills or property taxes.
Unlike in some countries, in Bulgaria, debts like these can be legally attached to the property rather than the individual who incurred them.
This means that when you buy a property, any unpaid bills or taxes from the previous owner can become your responsibility.
These debts can include unpaid electricity, water, or heating bills, as well as outstanding property taxes.
The problem is that these debts are not always evident during the initial stages of the property purchase process.
To protect yourself, it’s crucial to conduct a thorough investigation into the property's financial history. This should involve checking for any unpaid utilities or taxes, which can typically be done through local utility companies and the municipal government.
It's advisable to request a statement of account for the property to ensure that all bills are paid up to date.
Additionally, including a clause in the purchase contract that ensures the property is free of any debts at the time of sale can provide an extra layer of protection. This issue underscores the importance of working with a reputable local lawyer who can guide you through these checks and help ensure that you don't inherit unexpected financial liabilities with your new property.
Taking these steps can save you from unforeseen debts and legal complications after your purchase.
Issues in the context of "agricultural status"
Another unique and potentially challenging aspect for foreign buyers in the Bulgarian residential property market is the issue of 'agricultural status' of land.
In Bulgaria, a significant portion of land, particularly in rural and semi-rural areas, is designated as agricultural land.
This designation has specific legal implications for property ownership and usage.
The pitfall here is that agricultural land in Bulgaria comes with certain restrictions. For instance, if you buy a property that includes or is situated on agricultural land, you might face limitations on what you can build or how you can use the land.
Furthermore, foreign buyers may find additional legal hurdles in acquiring agricultural land, as the process can involve more complex bureaucratic procedures compared to non-agricultural land.
To navigate this issue, it's important to check the status of the land before purchasing.
You need to determine whether the land is classified as agricultural and understand what that means for your ownership rights and usage plans.
In some cases, it's possible to change the status of the land from agricultural to non-agricultural, but this process can be lengthy and complex, involving various administrative steps.
Engaging with a local real estate expert or a lawyer familiar with Bulgarian land laws is crucial. They can help you understand the implications of the land's status and guide you through the process of changing it, if necessary.
Being aware of and proactively addressing the agricultural status of land in Bulgaria is key to ensuring that your property purchase aligns with your intentions and is free from legal complications.
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