Find and compare about rental issues

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Find and compare about rental issues

Postby Admin » Mon Mar 05, 2012 10:54 am

Dear apartment owners,

During their practice, many independent and professional Bulgarian lawyers have beared the fact that most foreign investors have initially purchased Bulgarian properties with the intention to make profit out of it. It should be perfectly clear that the better the local investment climate is, the bigger is the profit that everybody makes. The most attractive way to make profit via buying off-plan or completed apatment or villa in Bulgaria, the last couple years has been successfully advertised to be the rental income in its various forms, incl. the very popular “guaranteed rental income”, which has been converted nowadays to be actually a “flexible rental income” - the last one is misleading name for a contract which imaginary should bring profit to the Bulgarian apartment owner. There have been huge soap bubbles spread around by former agents and developers (mostly related to off-plan property purchases and “valid” only till you sign the preliminary contract and deposit 50% of the purchase price) about huge income, beating even the interest on deposits in foreign and local banks. At the end of the day, there are many local apartment owners who face small rental income that is very strangely related always with the contra-payment of the maintenance fees, or even no income, where at the same time the holiday complex where they have bought in, is advertised and booked as “full” for the whole holiday season. Below we will outline to you couple danger spots in managing the renting of apartments and will try to clear your view about how your own property should be managed or rented out. You can also help yourself via valuable opinions – how much they are giving you as a rental income, is there any increase in the income, are you using reserved terms of usage of your own property during the holiday season, if so – how much time is agreed between you and the rental company; are they properly paying towards the Government the 10% Capital Gains chargable at the source of the income, etc.
How to secure a proper rental income? With direct words – via designing and signing a proper rental contract, which per the provisions of the Bulgarian real estate law and in the sphere of the Bulgarian agreements represents a lease contract between a landowner (this will be you) and a tenant (this will be the management/rental company). First of all, this is something that a professional property lawyer may advise you in detail. But certainly to begin, first you need to hold your Title Deed in order to be able to rent your apartment out. A proper Title Deed will secure your rights as a property owner. Refer to our article “Typical problems with Title Deeds” - viewtopic.php?f=37&t=532 to get more information on the matter. Secondly, your apartment should be legally allowed to be used via Certificate for exploitation (Act 16). There cannot be any management and renting out of apartments within a Building which has not been entered legally into operation. Please refer to our article “What is Act 16” – viewtopic.php?f=7&t=80 to get more information on the matter. Thirdly - there should be proper management company, which to be interested in renting your apartment – usually together with apartments of other owners within the same complex. Per the provisions of the Bulgarian contract law they are the actual tenants who should rent the apartment directly from you, via signing a lease contract with you. You should not be connected with their prospective activities (renting it to third parties), in other words – you should not allow being involved in the trade risk of occupancy during the winter season, i.e. securing the manager’s profit.
We are talking about securing the real rental income from your own apartment. This is why on the other hand the management of your apartment should not be connected with any maintenance of the common parts of the building, where you could give the manager legal instruments to reduce your income (i.e. to rise their profit) via charging you fees for cable TV in the guardian’s kiosk, for example. Please refer to our article “How to maintain a complex” - viewtopic.php?f=7&t=70 to get more information.
Also it is important to know that proper management and renting out of your apartment means direct charge of 10% Capital Gains which a proper management company should pay on your behalf directly to the local Tax Authorities, because they are obliged to do it per the provisions of the Bulgarian Tax Law. Very often rental companies state to you that they charge you these 10%, but actually do not pay it to the tax authorities – an activity which does not benefit either you or the Bulgarian government. Please ask the management company to present to you the payment orders for the paid 10% Capital Gains on your behalf. Not doing it means something is wrong with the management of your apartment, respectively you should expect troubles on a later stage, or the most common case – simply you have been robbed because of your non-understanding of the local legislation. This is why it is advisable to hire a professional and independent Bulgarian lawyer to secure your legal and financial matters in relation to renting your apartment out.
As detailed above, another red light should turn to you If somehow the rental contract has been related with the payment by you of the annual maintenance fees, usually due towards a completely different company.
There are lot more legal points that have to be covered, and on the base of the above you should consider carefully the renting out of your apartment where to choose the most appropriate option for you, in order to ensure the real income which you will receive (yes, the local tourists are also inportant part of the market). This is why contacting trusted local Bulgarian lawyer or solicitor in advance is advisable – to ensure all agreements are in writing, to secure the obligations by the management company and to achieve actual cash income for you - i.e to design the best rental contract from you, also to prevent you from putting you head in the bag via signing long-term management contracts which may lead to no profit for you but only to continuous expenses. A good rental contract would secure your investment on the matter. Feel free to contact us on support@bulgariandeals.com for more information and guidance.
Here you can compare and discuss the rental income you are receiving from your property in Bulgaria, to clear your view in which area it is more useful to invest, to exchange opinions about methods to increase the rental income which you are receiving (incl. to reduce the maintenance fees connected with it), etc.


Bulgariandeals Team

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