Conveyancing Guide to Buyers – Bulgaria13 September 2022
Conveyancing is an umbrella term that refers to the legal and administrative work associated with transferring ownership of a real estate property from one party to another.
For those looking to purchase a property, the conveyancing process can be overwhelming as a series of standard steps need to be made for completion of the transfer. There is a lot to organise and coordinate, including legal matters, financial arrangements and regulations to comply with.
As a Bulgarian law firm, specialised in working with foreign clients looking to buy a property in Bulgaria, NBLO‘s experience, knowledge and solution oriented approach has enabled us to streamline the conveyancing process so that all the above matters are dealt with diligently and quickly.
Conveyancing Steps for Buyers
1. Due diligence
There are things you may not know about the property just from viewing it with estate agents. As part of the conveyancing process, a set of legal property searches is required to ensure there are no other concerning factors you should be aware of. Some searches are recommended for all purchases and others are required by the mortgage lender to protect them from any liabilities that the property may have.
This process involves checks on the:
- identity of the owner;
- status of the property – its ownership and if there are any encumbrances imposed (e.g., mortgages, foreclosures, etc.).
It is recommended for a buyer to research the current ownership of the property, and, if necessary, obtain uncertified transcripts of title deeds and any other documentation by requesting them from the Property Registry.
Additionally, the buyer may ask the Seller to provide the documents establishing ownership (e.g., title deed; preliminary agreements; certificates of entries and encumbrances; etc.) prior to entering into any contractual relation.
2. Preliminary agreement
Once the ownership checks are performed, the continuance of the conveyancing process may involve entering into a preliminary agreement in a written form.
The legal framework of preliminary agreements in Bulgaria is set in s. 19 of the Obligations and Contracts Act (OCA) and sections 362 to 364 of the Civil Procedure Code (CPC).
Entering into a preliminary agreement is not a mandatory step, but usually the parties intend to execute such an agreement as a guarantee that a title deed for sale of the property will eventually be drawn up to transfer the ownership of the property.
The preliminary agreement shall be executed in writing and stipulate the conditions for the future formalities related to the title deed (e.g., identification of the property, purchase price, parties, deadlines for completion). The parties usually agree that part of the sale price will be paid upon entering into the preliminary agreement as a deposit, which in most cases amounts to 10% of the purchase price.
If prepared and executed correctly, the preliminary agreement ensures completion of the title deed, since pursuant to s. 19(3) OCA each party under a valid preliminary agreement may file a claim before the Bulgarian courts to complete the agreement and transfer the ownership, provided that this party has fulfilled its obligations under the preliminary agreement. In this case, the title deed is replaced by enactment of the court’s judgement.
3. Financing the purchase
In order to pay the purchase price buyers may use financing from a credit institution or finance institution, which includes entering into a loan agreement (договор за ипотечен кредит) and execution of contractual or legal mortgage deed (договорна ипотека или законна ипотека).
The mortgage lender, for the purposes of financing the property acquisition, requires the buyer to:
- demonstrate (e.g., by providing a copy of the preliminary agreement) that there is an agreement with the seller to execute the title deed and transfer ownership of the property;
- get a valuation of the property – this is carried out in order to ensure that the property’s value is a sufficient to secure the loan;
- provide a property insurance policy;
- provide sufficient evidence that all enquiries have been made and are sufficient;
- prove that the ownership has been transferred and that the mortgage deed has been filed in the Property Registry (see para 5 below).
4. Prior completion
Before execution of the title deed, the parties have to provide to the notary who will certify the title deed and transfer of the ownership a set of documents necessary for the completion. Such documents include, but are not limited to, the following:
- Original title deed as a proof of ownership;
- Building permits, investment projects and exploitation permits (if a building or an object of a building is being sold);
- Various statutory declarations (e.g., tax declarations, matrimonial status declarations, etc.);
- Sketch of the real estate;
- Tax evaluations;
- Certificate of entries and encumbrances;
- Valuation of the property from an independent valuer;
- Power of attorney (if the buyer decides to authorise a lawyer or any other person to act on its behalf in any step of the process);
- Draft of the title deed – this is usually prepared, provided and reviewed prior to the completion date with the purpose to resolve any outstanding issues between the parties.
For completion of the transaction, once the documents in para 4 are obtained, the buyer and the seller have to schedule a completion date with the notary’s office.
The parties attend at the notary’s office on the completion day to enter into a title deed which is certified by the notary. The notary is obliged to monitor the lawful execution of the title deed and read it to the parties before it is signed.
If the purchase of the property is financed by a mortgage lender, representatives of the lender are also attending the deal and immediately upon execution of the title deed, the buyer, as the new owner of the property, enters into a mortgage deed with the lender. The form of the mortgage deed is identical to the title deed.
Once the title deed, and, eventually, the mortgage deed, are executed, the notary is obliged to enter them in the Property Registry.
6. Post completion
After completion of the sale, the buyer has to take additional steps as:
- receive from the notary the originals of the title deed and the mortgage deed with their entrance numbers from the Property Registry – this serves as a proof that the notary has actually registered the title deeds at the Property Registry and that the transfer of the ownership is completed;
- demand from the seller assistance to enter the property – this may be made prior completion of the sale or post completion. The parties have a wide discretion to decide when the factual possession of the property should be provided.
- for tax purposes – register the transfer of ownership with the municipality where the property is located;
- register the transfer of ownership with the relevant utility companies.
Estimate of Costs
Here are the common conveyancing costs that a buyer should expect to pay:
|Type||Description||How it is calculated|
|Purchase price||The parties have a wide discretion and may negotiate what would be the purchase price and how it is to be paid. The purchase price may be paid prior, on, or after the completion date.||Subject to negotiation|
|Legal lees||This covers the cost of the lawyer’s time and varies depending on the law firm and how the fees are structured. Some lawyers charge by a fixed-fee, although this is becoming rare and others charge on an hourly basis. Charging on an hourly basis is something to be carefully considered as the costs may mount quickly if there are any irregularities. The most common option is based on a sliding scale depending on the purchase price of the property concerned.||Subject to negotiation|
|Disbursements||Disbursements are costs incurred by the lawyer for provision of his assistance. This might include disbursements for translations, certifications, issuance of documents, etc.||n/a|
|State fees||Fees paid to the Property Registry||0,1 % of the purchase price|
|Fees paid pursuant to the Local Taxes and Fees Act||0,1% – 3 %
Depends on the municipality where the property is located
|Notary fees||Notary fees for preparation of documents||Depending on the notary, the documents and as provided in the Notaries Tariff|
Notary fees for certifying the final agreement in the form of title deed – those are calculated on the purchase price pursuant to the Notaries Tariff and the Notaries and Notaries Activities Act. For example:
|Depending on the purchase price and are calculated as a combination of fixed fee and percentage|