Preliminary agreement for purchase of property in Bulgaria

Advice on agreements


This type of contract has been singed by most Britons and Irish who have bought properties in Bulgaria. Many of them think that once they have signed such agreement, they own the property. This is a common misunderstanding among the foreign property investors in Bulgaria. The preliminary contract is regulated by only one article in the entire  Bulgarian legislation (Art 19 of Obligations and Contracts Act):
Art 19. A preliminary contract preceding the conclusion of a final contract for which a notarial deed or notarial certification is required shall be concluded in writing.
A preliminary contract shall contain provisions concerning the material terms of the final contract.
Either party to a preliminary contract may bring an action for conclusion of the final contract. In this case the contract shall be deemed concluded as of the moment of entry into force of the ruling of the court.
As you can see, and as the judicial theory defines, this type of contract is “just a promise to conclude a final contract”. It binds the parties, but as every contract it can be breached i.e. one of the parties may decide not to fulfill its obligations. Applied to the property purchase, this means that the builder promises to transfer the ownership of the property to the buyer within a certain term. It doesn’t mean that the ownership has been transfered upon signing the preliminary agreement. On the contrary, often there is nothing to be transfered at that point since the property doesn’t exists at that time. Even if the purchase price has been paid in full, this doesn’t mean the buyer is an owner. In the latter case, the buyer becomes a creditor and the seller becomes a debtor, until the full ownership has been transfered. i.e. the title deed for ownership transfer has been signed.
Many buyers of apartments and houses in Bulgaria are in dead-end position: they have paid all moneis, but haven’t got the deeds transfered to them. In this case, it is very difficult to make the seller sign the deed willingly.  As lawyers, we advice those people to take advantage of para 3 of art 19 above i.e. to announce the preliminary agreement as final one. Applied to the case of buying a property, this is done by initiating a court procedure.
In order to get everything right, you should provide all relevant information to your solicitor, namely:
Original of the preliminary purchase agreement, signed by both parties
Evidence that the purchase price has been paid in full: this could be bank statements, receipts, signed by the seller etc.
In addition to the above, the judge will need to see all other documents, which you otherwise need to show to the notary, namely:
Tax evaluation certificate of the property. This can be obtained by tje local municipality, where the property is located
Plan of the property or the so called “skitsa“. This documents shows the plans of the property, the area, the neighbouring properties. Again this can be obtained by the local municipality.
Proof that you have paid the local tax. This is a special local tax, that is paid just once, upon buying a property. The rate varies between 1.5% and 3% of the purchase price and depends on the municipality.
You need to be ready to pay the transfer fees i.e. the notary fees. Again, this should be calculated for you by your solicitor
When you get idea of all of the above, ask your solicitor to prepare the claim application and submit it to the court. Generally the timescale of the proceedings depend on the court. Different courts in Bulgaria have different workload. The typical term for closing the proceedings is 3-4 months.
The result of the court case proceedings is that you will have the ownership of the property transfered to your name i.e. the same as signing before a notary. This is a way to force the ownership transfer if the seller rejects your requests.