Property Investment Bulgaria - Investment Property | Buying Property in Bulgaria
Golf and Ski Property in Bansko - Black Sea - Bulgaria

Fair Deal Property Investments Bulgaria

Investment property in Bulgaria is one of the first emerging property markets of Eastern Europe.

The current boom in Bulgarian property consists mainly new developments in both the ski & golf resorts around Bansko and other seaside resorts along the Black Sea Coast. Property in Bulgaria caters for all tastes, whether in terms of location or property style, and offers unbeatable prices.

Bulgaria Property Hotspots:
Apartments in the ski resorts of Blagoevgrad are currently selling very quickly.

Properties in Bansko and elsewhere on the Black Sea Coast are still very popular for home buyers as well as investors looking to tap into the holiday rental market.

Buying Property in Bulgaria

The process of buying property in Bulgaria has three main steps, the first being the reservation of the property. The second step that rules the relationship between Vendor and Purchaser is the private purchase contract, while the third and final step occurs at the signing of the title deeds on completion.

The Bulgarian legal system uses the figures of the Public Notary and of the Land Registry as a must in order to obtain a secure ownership of a property.

Although the purchase of flats or apartments in Bulgaria is perfectly possible, it is important to undersigned the it is currently forbidden for a foreign purchaser to acquire land in Bulgaria. In the meantime, foreign purchasers wishing to purchase land in the country must set up a Bulgarian limited company.

Reservation of the property
Once the purchaser finds the desired Bulgarian property, it must be taken off the market. In order to do so, a holding deposit shall be made payable to the Owner, who shall sign a document in which the purchaser is given the option to purchase the property.

After this first step, all the necessary searches and investigations on the property have to be carried out by the solicitors so to ensure that the property object of purchase is in the adequate legal condition, thus free of any charges, debts or encumbrances. In case of purchasing off-plan, your solicitor shall ensure to the best of his capabilities that the constructors are reputable and solvent.
 
In the event of finding any abnormalities on the conveyance of the property, the holding deposit will be refunded to the purchaser before the signing of the private purchase contract occurs.

Once it is confirmed that the Bulgarian property is in perfect legal situation the purchaser can then proceed with the next step and the holding deposit will form part of the purchase price and therefore deducted from it.

Private Purchase Contract
A private purchase contract is a legally binding document that rules the relationship between owner and purchaser. It shall be drafted and explained by your solicitor and shall be signed by both parties involved in the purchase.

This private contract shall set out the details of the agreement, as well as it shall establish the payment scheme to follow and the completion date.

At the signing of the private purchase contract the purchaser shall put down a non-refundable deposit. As opposed to what is legally required in Spain or France, in Bulgaria there is no bank guarantee issued by a first line bank to cover the amounts that are handed over to the Vendor before the signature of the title deed or the finalization of the construction. Therefore, it is essential both to work with reputable developers as well as to obtain the proper legal advice in order to minimize any risk.

Completion
Once the works on the property have been carried out, completion shall take place in the presence of a Bulgarian Notary. A title deed is signed before the notary so to legalize the previously signed private purchase contract, thus now granting the Purchaser the ownership of the property. Additionally, the Notary is an official of the State, being among his duties to advise the parties as well of their tax obligations.

Generally speaking, only those titles granted in front of a notary can be registered into the Land Registry Office, thus giving the purchaser full protection of the ownership of the property.

Expenses
As a guideline, a purchaser in Bulgaria shall have to bear the following expenses:

1. Value Added Tax (VAT): 20% of the purchase price, which usually is included in the purchase price.
2. Municipality Tax: 2% of the purchase price.
3. Public Notary Fee: Aprox. 1 % of the purchase price, with a limit of 1.500 €  plus VAT.
4. Registration fee of the title deed: 0,1% of the purchase price.
5. Mortgage expenses, if applicable.
6. Legal fees for solicitor services.

Utilities
Utilities of the property in Bulgaria (electricity, water, etc.) to be registered in your name and for the bills to be direct-debited from your Bulgarian bank account.

The bank account for non-residents shall be a convertible account of Euros/Levas. With this type of account only matter will be that you will only be able to deposit Euros that will be converted automatically into Bulgarian Levas.

Mortgages
A mortgage is a loan secured on your property in Bulgaria, so the property acts as a guarantee for the repayment of the loan.

The terms for repayment can be agreed between parties (borrower and bank) depending on the amount of the transaction and on the qualification of the client, which shall be studied on a case by case basis.

How much I could borrow?
The maximum amount that a non-resident could borrow is up to 70% of the purchase price of the Bulgarin property. This loan will depend on the qualification of the client.

Types of mortgages

1. Fixed interest rate loans. The advantage of this loan is that the monthly repayment amount is not affected whether the rates increase or decrease, therefore, the borrower will always pay the same monthly amount.
2. Variable interest rate loans. The monthly repayment instalment is affected by the interest rate change of the market.

Tax Summary
The main taxes that a purchaser in Bulgaria will face are the following:

1. Value Added Tax: Adding up to 20%, VAT is usually included in the purchase price.
2. Income Tax: Applicable only for residents, it has its pick on a 24%
3. Capital Gains Tax: Since January 2007, properties are exempt from paying Capital Gains Tax, independently from when these properties were purchased. This exemption is only valid in case of selling one property per year. If a Purchaser sells more than one property in a year, he will then be liable for a 9% CGT. However, if a Purchaser owning more than one property sells his properties at a ratio of one property per year, he will be waived of paying any CGT at all. 
4. Inheritance Tax: Not applicable between close relatives, such as spouses and children. In case of free disposal there is a 1,25% of the value over values of 125.000 Euros.

Maintenance expenses
Maintenance and management fees for the common areas and providing the common services. This expense will vary depending of the complex where the property is and the services provided on the resort.

Summary     
Benefits in terms of taxation and still low prices may sound very attractive for potential investors thinking of purchasing real estate in an European Union member state.

Receiving proper legal advice and working with well reputed developers shall also be a must so to undertake a smooth purchase in Bulgaria.

The above article has been written by Pablo Rodríguez-Contreras

Martínez-Echevarría, Pérez & Ferrero Abogados
Centro de Negocios Puerta de Banús, Edf. D, 1ª Planta
C.N. 340, Km 175 - 29660 Nueva Andalucía,
Marbella - Málaga - Spain
www.legal-independence.com

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