Changes to Bulgarian legislation.
At the beginning of 2008, the Bulgarian government - in line with other European nations – introduced a central company registration system. This means that anyone who registered a limited liability company in Bulgaria prior to this date had to re-register the company within 3 years.
From 2003 until 2009 there was a huge upsurge in foreign investment into Bulgaria – many Irish and British nationals bought land, old houses and off-plan apartments with common parts*. Investors were obliged to set up a limited liability company (ODD). This was all relatively easy; however the maintenance of such companies has proved to be problematic and or expensive for many investors – particularly those who bought towards the end of the boom who had hoped to ‘turn’ the property for a fast profit.
How this has affected real estate investors.
As the credit crunch started to bite, the foreign inward investment that was funding the new builds dried up. It was common practise for investors to make stage payments thus funding the ongoing building whilst the developers re-mortgaged and bought more land to develop.
The investors that were not lured into a discounted-price-to-pay-ahead have in some cases simply walked away from the deal with the loss of deposit monies paid. As to whether they will be pursued for the balance of purchase monies (as they would be in the UK) is anyone’s business.
We have seen a number of cases where the developers have simply run out of money and struggled to re-finance. This has increased costs thus compounding the problems.
In many cases where the building projects are almost complete developers are working with buyers to solve the problems. Notary Co UK and other MyNotary notaries are working with a specialist Bulgaria-UK based company in re-scheduling debts for builders and developers that have needed to re-finance helping to protect owners’ investments.
The role of the notary in (usually buying!) real estate transactions.
The notarial system in Bulgaria is very different from that in the UK – the notary’s job is to register documents into the local or national registry. If you have ever been to a notary’s office in Bulgaria you will know that it is always full and always manic. This is because they deal with every kind of legal transaction from property purchase to divorce. Unlike in the UK, they can and do act for both sides.
Notary fees are lower in Bulgaria than in the UK. However you do need to remember that the notary is not acting for you but simply recording the transaction. All documentation is if course in Bulgaria Cyrillic script and the notary is obliged to make sure that you understand the content of the documents. Whoever is assisting you in Bulgaria – maybe the seller’s agent as is frequently the case – will arrange for a translator to be in attendance. The translator will read over the documents to you in front of the notary.
Many investors not wishing to travel in person to Bulgaria choose to deal with real estate transactions from the UK by appointing an ‘attorney’. A legally binding document called a Power of Attorney is drawn up, notarised, legalised and sent out to Bulgaria to your Bulgarian lawyer or agent who will go in person to the notary’s office to act on your behalf.
The value of real estate.
The Power of Attorney you sign allows your agent to sign all subsequent documents of your behalf. At Notary Co UK we advise real estate buyers to check over any Preliminary Contract and certainly to check the Notarial Deed. The Notarial Deed records the ‘price’ of the property. Quite often this is NOT the amount paid for the property. Under declaration is common, not strictly legal but no one seems to care – this may change as Bulgaria gets is legal act together!
One reason frequently offered for this practise has to do with VAT. Value Added Tax is 20% - the rules on when it applies in are complex. It seems you can choose whether or not to pay VAT! The consequences of under declaration only become apparent when (property) taxes are due or when selling the property.
If you are buying several properties or apartments we certainly recommend you get specialist advice – we can point you in the right direction.
The role of the Notary in the UK.
Notary Co UK has dealt with a lot of transactions connected to buying real estate in Bulgaria and owning a Bulgarian company. . The whole legal process of buying real estate can be expensive as streams of forms and documents are sent over all needing to be notarised and legalised – usually urgently. Agents, unaware of the cost to the client in the UK often insist on more documents than necessary being legalised. We at notary Co UK are familiar with the various forms and documents that are needed to buy property in Bulgaria and can sometimes save clients money of legalisation fees by using ‘Notarial Cover sheets’
If you own property in Bulgaria….. owners obligations.
In the UK property and land are owned either Freehold or Leasehold; these concepts are not understood In Bulgaria. In the UK apartments or flats are almost always owned ‘leasehold’. In Bulgaria it is usual for buyers to buy a share in the ‘Common Parts’. It is because of this that buyers are usually required to set up a limited liability company.
Once you have set up a limited liability company in Bulgaria you must keep the documentation up to date. Even if the company had not traded it is necessary to submit annual returns. Also annual property taxes are payable – fine are imposed if time limits are not met.
The property boom in Bulgaria is at best is on hold, for many it is over. The world-wide ‘credit crunch’ was late arriving in Bulgaria nevertheless it has arrived. Oversupply and shortage of tenants is one problem. A worst scenario is half built constructions on permanent hold.
Our advice is not to bail out; if you can - hold on. Bulgaria is a low-cost country with a young, educated population eager to see their standard of living rise. And rise it will as millions of pounds is ear-marked for infrastructure improvements. Many international companies are taking advantage of Bulgaria’s low cost base to establish operations there. Just drive around the Sofia ring road to the south and see for yourself! We at Notary Co UK have.
VIP Consult: http://vip-consult.net/en/index.html
• consulting company with more than 6 years of experience
• highly professional services in the sphere of legal and business consulting.
• location in the 2 leading business regions of Bulgaria - Varna and Bansko, providing international reach
• dynamic practice with a view to the new business requirements
• ability to assist clients with property purchases and all necessary legal matters throughout Bulgaria
Rex Consulting Ltd http://www.rexconsulting.com
• Audit and accountancy;
• Tax procedures and tax planning;
• Payroll and social security;
• Working capital management
• Financial, pricing and banking issues;
• Investment appraisal and budgeting;
• Mergers and acquisitions;
• Insolvency and liquidation;
• Company incorporation;
• Civil law
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