Typical Problems with bulgarian Title Deeds

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Typical Problems with bulgarian Title Deeds

Postby Admin » Mon Jan 23, 2012 10:51 am

TYPICAL PROBLEMS WITH BULGARIAN TITLE DEEDS


Following the provisions of the Bulgarian law, the Title Deed is a kind of contract, related to the real estate deals. It represents a purchase contract signed between the seller and the buyer, and witnessed by notary public; after that registered at the Land Registry Agency. This contract designed in Bulgarian language, transfers ownership rights from the seller towards the buyer in relation to a concrete property – an apartment, a house, a whole building, a right to build, or a plot of land. It details precisely the parties which concluded it, the property which is subject of a transfer, the purchase price, and many other terms and conditions related to the buyer’s legal standing after the property transfer has been completed – namely because the buyer will hold the legal ownership and possession of the property.
Through the last couple of years we have reached the conclusion that 99% of the property purchases by overseas investors, have been done via representative (a proxy) who has signed the Title Deed on behalf of the buyer, and not been signed by the overseas buyer himself in person. In almost all such cases, the buyer has not been informed for one or another reason, in details about the text of the contract called Title Deed that actually sets up rights and obligations for the buyer. It should be perfectly understandable that a proxy (a representative), once authorized with a letter of authorization (somewhere called also power of attorney, which is misleading name if the authorized person is not a practicing lawyer with a lawyer’s insurance) wherever he signs, it automatically creates rights and obligations directly for the authorizer (this should be the overseas investor), and does not oblige the proxy (this is namely why he is called “proxy”). This is why if you are a foreign property investor, once you have authorized somebody to act on your behalf for signing a Title Deed for property purchase in Bulgaria, before local Bulgarian notary public, it is important to remember that the document they will sign on your behalf and for your account, will create rights and obligations directly for you and you won’t be able to claim the proxy’s liability – simply because you have properly given the authority to the proxy before this event to sign on your behalf and for your account. You say you haven’t given too many rights to the proxy? Well, feel free to consult with a professional Bulgarian lawyer to detail to you the specifics of letters of authorization used in Bulgaria. How to avoid such problems? Just authorize a practicing lawyer and do not authorize different parties, because the lawyer has a professional insurance for damages done to clients, and other parties don’t – agencies or physical individuals who are not lawyers, are not liablle to you with the letter of authorization in any way – this document only creates rights for them, not any obligations towards you. Bear that it is very difficult to terminate legally a signed Title Deed, and you will rarely find a local lawyer who will agree actually to claim termination of the Deed, because of the specifics of this document and the difficulties of proving non-performance of the seller once they have already passed the property to you.
On the base of our practice we have highlighted several problems in Title Deeds for purchases of Bulgarian properties. First of all, these eventual issues are difficult for the buyer to find out because usually the title deed presented to them has not been translated, so actually they have no idea what has been signed on their behalf and for their account. An independent Bulgarian lawyer who forwards to you the title deed they have signed, together with a signed translation at least in English, is a good professional and very likely to have protected your legal and financial rights in your capacity of investor, because you may easily read and understand what they have signed on your behalf and for your account, resp. to confirm if they have followed your initial requests related to the property purchase. If you haven’t got a proper translation of your Bulgarian Title Deed, you better get one to be done by a practicing Bulgarian property lawyer or contact us on support@bulgariandeals.com. So you can check for eventual existence in the Deed of some of the issues as detailed below:
1) The purchase price: Most common financial scheme performed with the trustful participation of the buyer (personally or via their representative) is detailing lower price in the Title Deed for no mentioned reason.
- In off-plan property purchases, this activity is likely to help the developer to hide profit (i.e. Capital gains), and very often could lead to a tax burden of 10% for the buyer if they wish to re-sell in the next 3 years, which is namely the provision of the Bulgarian Tax Law. How to avoid such an issue – please consult with an independent Bulgarian property lawyer before signing the Title Deed. Or alternatively, authorize a practicing lawyer and ask him/her to confirm to you prior to signing the Deed what the detailed price will be. Bear that it is very difficult to terminate legally a signed, witnessed and registered Title Deed, and you will rarely find a local lawyer who will agree actually to claim termination of the Deed.
- If one of the parties is local corporate body, such a practice may lead to direct tax burdens for the company and problems for the company accountancy (i.e. tax liability of the appointed manager of the company). If you are selling a property owned by your company, or if you intend to buy a property in the name of a local corporate body, then please consult with independent Bulgarian property lawyer before concluding the deal. Bear that it is very difficult to terminate legally a signed Title Deed, and you will rarely find a lawyer who will agree actually to claim termination of the Deed.
2) The stage of completion: The second biggest issue in off-plan purchases of Bulgarian properties, is hiding from the buyer the actual fact that the apartment or the house still has not got a Certificate for operation (the Act 16), which document also HAS NOT been detailed in your Title Deed. Most overseas buyers are not familiar with the Bulgarian legislation and they trustfully believe that as the Title Deed for the property transfer is signed, then they own an operational real estate. Well, this is not true, the Bulgarian legislation allows property transfers on rough completion but does not allow using the property before Certificate for exploiation (Act 16 to be issued), and this has been used very well by developers to collect final installments by the buyers quicker (and usually to vanish after the property transfer). The buyer of newly built apartment in Bulgaria should be aware that their Title Deed must include a proper description of the Certificate for exploitation to prove the property is entered by the Authorities into operation, otherwise this property is not legally allowed to be used. And also can not be re-sold – simply because the next buyer or his/her Bulgarian lawyer will read the current deed and will find out that this property does not have Act 16. In other words – owning a property which does not have a Certificate for exploitation, is like owning nothing and wasted money, especially in the current huge competition of properties for sale in Bulgaria on one hand, and lack of buyers on the other. Unfortunately hundreds overseas property buyers who have been misled by overseas estate agents to purchase off-plan apartments in the Orchard, the Windows to Paradise, the Cedar Heights, the White Oaks, the Pearl complex, and many more complexes – have realized this sadly truth. How to avoid such a negative outcome – please consult with an independent Bulgarian property lawyer before you sign the Title Deed so they can amend it to protect better your interests, in order to save a lot of headache for you. Bear that it is very difficult to terminate legally a signed Title Deed, and you will rarely find a lawyer who will agree actually to claim termination of the Deed. Refer to our articles “What is Act 15” - viewtopic.php?f=7&t=100 and “What is Act 16” - viewtopic.php?f=7&t=80 to read useful information as well to clear your view on our preservations.
3) Transfer of a property with still existing mortgage on it: This is very common issue, caused by the fact that there are many local developers who initially obtained mortgage loans for millions of Euros to complete the complexes, and have secured the loans with the apartments. They do not have enough money to remove the existing mortgage on the concrete apartment and they transfer the apartment towards the trustful buyer together with the mortgage, where the buyer or their representative have not checked the legal status of the apartment before signing the Deed. Then at the end of the day, the local bank which holds full rights on the apartment on the base of the registered initially mortgage, although the property owner is the buyer already, is able to bring the mortgaged property to a public auction and there is no legal way to contradict to such an inconvenient outcome. This is why it is a common practice for professional property lawyers to obtain and detail actual certificate for lack of burdens in the Title Deed – if there is no description of such a certificate for lack of burdens in your own Title Deed, then it is advisable to check the current legal status of your property, in order to avoid any inconvenient situations on a later stage. Please consult with an independent Bulgarian property lawyer before you sign the Title Deed so they can amend it to protect better your interests, in order to save a lot of headache for you, r contact us on support@bulgariandeals.com.
4) Obliging the buyer of an apartment within a residential or holdiay complex, with specific clauses implemented in the Title Deed, to pay long-term maintenance fees, and sometimes to be obliged to ensure the next buyer’s agreement on these maintenance clauses. Although there are professional developers who perform good care about the complexes they have built, most of the Title Deeds for property purchases of apartments, situated in holiday complexes, have been designed by the developers to ensure that they will retire with the annual maintenance fees “agreed” with the apartment owners. In the current financial crisis there are many examples where the apartment owners pay unusually high rates of maintenance fees (10-12 Euro per sq.m.) for poor facility services and without any proper vat-receipt for the money they pay. To secure their profit and to tie the hands of the buyers, very often the developers include in the Title Deeds texts, obliging the concrete buyer to pay the annual maintenance fee. Bearing in mind that the Deed is a legal base for debt recovery against the property owned by the debtor (i.e. the buyer who does not pay maintenance) in cases where such clauses have been detailed, it is strongly advisable to consult with an independent Bulgarian property lawyer before you sign the Title Deed. Or if you have already got your signed Title Deed, please get informed about eventual maintenance clauses stipulated in it. Bear that it is very difficult to terminate legally a signed Title Deed, and you will rarely find a local lawyer who will agree actually to claim termination of the Deed. Refer to our article “Maintenance issues” - viewtopic.php?f=7&t=70 to clear your own view on our preservations.
5) Including clauses of the Title Deed to grant giving long-term posssession of the property to a management company which to rent the apartment out on your behalf to thrid parties, i.e. to make profit. If you are about to purchase an apartment into a residential or holiday complex, then you should get informed about eventual clauses in such a direction in your Title Deed. Refer to our article “Management/rental issues” - viewtopic.php?f=7&t=71 to clear your view on our preservations.
6) Detailing another, unknown party in the Deed to be the actual seller, which party appears not the actual seller or developer to whom you have paid the purchase price. In cases where this has not been agreed in advance with the buyer that payment of the purchase price shall be made towards third partis, and bearing in mind that the Title Deed eliminates and previously signed preliminary agreements, this could lead to many issues for the buyer, if something goes wrong later with this purchase – lack of Act 16, lower price detailed as well, etc. How to avoid such an issue – please consult with an independent Bulgarian property lawyer before you sign the Title Deed so they can amend it to protect better your interests, in order to save a lot of headache for you. If you have got a Title Deed with detailed seller whom you have not heard of before – then an investigation of the current legal status of the apartment is advisable to ensure your ownership rights have not been harmed. A professional Bulgarian lawyer may help you. Feel free to contact us as well on support@bulgariandeals.com .
7) The poor and/or unclear description of the property – it is very common issue, related to specifications of the property, the total built up area they are actually buying with the Title Deed, the description of the rooms and furniture, the transfer of the possession – and many, many more clauses that could actually differ from what you have been previously offered, where sometimes you cannot blame your proxy for signing the Deed, because even they have not had an information about the initial promises, given to you by agents, developers, etc. How to avoid such an issue – please consult with an independent Bulgarian property lawyer before you sign the Title Deed so they can amend it to protect better your interests, in order to save a lot of headache for you on a later stage once you wish to re-sell the property.
Our conclusion is: Don’t rely on promises by developers and agents, if you (or your authorized representative) are about to sign a Bulgarian Title Deed, get it translated and seek an independent legal advice by professional property lawyer before you pay the purchase price and before you get the Title Deed signed – this is the way to ensure that you will own a non-problematic real estate which you can re-sell on a later stage without any problems to arise. If you have already got a Bulgarian Title Deed, but you are not sure about its terms and conditions, also consult with a lawyer to save a lot of headache on a later stage.


If you have any questions related to title deeds problems, please write us here or at our e-mail: support@bulgariandeals.com


Bulgariandeals Team

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