CALCULATING YOUR BUDGET
Frequently asked questions about Bulgaria
Property-related questions
If you intend to buy an apartment "off-plan" then the fees are usually due at the time you sign preliminary contracts rather than on completion, so you need to ensure you have the essential funds available at this early stage.
A municipal tax, which is basically the UK equivalent of stamp duty, is also compulsory. The tax is currently three per cent of the purchase price.
When buying an apartment, remember to take into account the additional cost of annual maintenance and management fee. This covers the insurance of the building, plus maintenance of the public areas such as communal gardens and swimming pool (if there is one), caretaking and security. These costs are normally based on the size of the apartment.
When buying a house, in addition to these property- related costs, there is also the cost of setting up a limited liability company through which land can be purchased. Expenses for setting up a company are generally between EUR 500 and EUR 700. However, these costs are negligibly low compared to those in Western Europe.
RESTRICTIONS ON FOREIGNERS
Currently there are still restrictions on foreigners buying land in Bulgaria. At present, a foreigner can purchase a building but not land as an individual. He will need to register a Bulgarian company which is entitled to purchase and own land.
PRELIMINARY AND FINAL CONTRACTS
There are two types of contracts in purchasing a real estate property: preliminary and final.
In the case of an "off-plan" property investment, a preliminary contract is signed, containing and specifying conditions such as completion date of the shell, roof, and the construction work as a whole.
The quality of the construction materials is made explicit and a payment scheme is adopted. Payment is in the form of instalments on the specific dates corresponding to the completion of the construction stages.
A handover protocol is signed upon completion, stating you are satisfied with the standard of construction and finishing works.
Any defects or problems should be pointed out at this stage to enable rectification on the part of the the constructing company.
The Preliminary contract is then sent to your home country, containing the completion date (previously agreed upon) specified by the developer and the amount of the penalties he will owe in case he fails to meet the deadline.
If you make the decision to purchase a property while in Bulgaria and you still have to leave, you can have the preliminary agreement signed by appointing a lawyer to represent you through a power af attorney. The final contract is finally prepared and signed by both buyer and seller at the public notary's office.
You do not have to be present in person provided you have authorized an attorney to represent you. You can allow our employee to represent you on the notarial deal and after that to register your property in the appropriate governmental services (BULSTAT), registration of you property in the Tax Service. Only this service will cost you EUR 200.
The whole purchasing process usually takes a month to be finalized.
Once a date for the final completion is agreed upon, it is possible to realize the deal sooner. Note, however, that you cannot have the date fixed back in time, so it is imperative that finances are available by the stipulated dates. It is wise to keep all time limits realistic since failure to comply with them spells considerable penalties and may even lead to loss of the property.
After the deposit has been paid the remaining amount of the purchase price needed for completion can easily be transferred to a Bulgarian bank account from your country.
You should expect to receive the title deed a couple of weeks after the final completion date.
The originals of the documents are written in Bulgarian, but an English translation is always available on request and the fee charged for it is negligible.
One thing you should be familiar with is the discrepancy between the actual price paid for the property, and the price appearing on the title deeds.
In Bulgaria "tax value" differs from "purchase price" in that tax value is much lower than the actual transaction price for reasons of taxation. Most Bulgarian property owners insist on keeping the tax value written in the title deed to avoid paying heavier taxes on the property transfer.
If you are buying an apartment and it is still occupied by the owners, you should not expect them to move out immediately- it usually takes a month. However, this period is negotiable if the buyer has reasons to require his newly purchased property vacated earlier.
It has always proved useful to refer this matter to your estate agency and be assisted in any negotiations with the seller.
VIEWING AND EXAMINING THE PROPERTY
Once you have made your chioce of a real estate agency and an attractive property, your broker contacts the seller in order to arrange a view of the property at a time convenient for you or your representative.
He/she conducts an extensive research on the property, including checks of court and mortgage records. Normally the cost for viewing the property is included in the estate agency's commission. A detailed inspection of the construction is carried out by a civil engineer and you can order a complete construction survey if you are purchasing a very old property or if there is some doubt about the parameters of the land the building has been erected on.
Transferring the means for your real estate purchase
You are purchasing a real estate property. How do you pay for it?
Your first option is to transfer the money directly from your bank account to the Bulgarian bank account of the seller/ developer in the case of expressed consent on their part.
If you are buying a property off plan, then usually you pay in instalments, in accordance with the payment scheme, adopted in the contract you have signed.
If for some reason you are hesitant and would rather have the safety of using the agency's bank account - this can easliy be arranged after you sign a real estate purchase order with Sunny Home Bulgaria estate agency. You need to sign an annex stating you agree to let the agency operate with the deposited amount in its account at Bulgarian Raiffeisen bank for the purpose of concluding the deal.
If you wish, you can set up a Bulgarian bank account and authorize the agency to act on your behalf.
Bank fees for servicing the account in Bulgaria are approximately EUR 3 per month.
Internet banking is available at some, however not all, Bulgarian banks.
Neither your presence in person, nor the opening of a bank account here is obligatory.
Setting up a company and a company bank account
A company bank account should be set up if you are buying a house, and a minimum of BGN 5,000 is required to be deposited (the equivalent of about EUR 2500) as the minimum capital required under Bulgarian law for the establishment of a limited liability company.
Please, note this amount is not the cost of setting up the company. It can be used immediately either for costs incurred during your visit or for any required deposits.
The real estate agency can form a limited liability company on your behalf.
The bank document certifying the deposition of minimum capital is presented to Court for obtaining a registration, along with other company documents which have to be prepared.
You can fully rely on your estate agent to accompany you to a local notary office (chosen by you or recommended by the agency), where the notary public has to attest your signature on the company documents. The notary charges a fee around BGN 37 (EUR 17).
Two copies of the company documents are produced, one in Bulgarian and one in English. You are guided through the Articles of association word by word in a detailed explanation involving all issues on company management.
LOCAL TAXES
Once you have assumed possession of a property, there are local annual taxes to pay. They are incredibly low in comparison to Western Europe- e.g. the annual rate of tax on a house being 0.15 % of the purchase price.
The only additional tax you are required to pay is garbage tax; this varies depending on the location and the size of the property. The amount of the latter ranges from EUR 15 to EUR 25 per year.
In case you have purchased an apartment, local taxes are still due, together with annual maintenance and management fees fixed by the developer or the managing agent.
RENOVATION AND RESALE
Building costs are comparatively low in Bulgaria against the backgound of European construction.
An average Bulgarian wage is currently EUR 150 per month. Rates for employing builders differ widely but as a guide, building work corresponds approximately to one third of what it would cost in Western Europe.
If your intention as an investor is to demolish the old existing construction and build anew, the average prices for construction works are between EUR 200 and EUR 300/ sq.m.
Construction work cost seems to be following the the increase in property prices, prompted by the discovery of excellent- value Bulgarian properties and land on the part of international investors.
If a property is bought for investment and profit, there is a capital gain tax of 19.5 % if the property is resold before a five-year term.
