A little over three hours' flying time from the UK, Bulgaria's mountain and beach resorts have become increasingly popular in the last few years, and this trend looks set to continue as, in 2007, Bulgaria joins the European Union.
With beautiful scenery, high mountains with winter ski facilities, and beautiful clean coastlines along the Black sea, the country has a lot to offer. As the price of living is still relatively low, it is easy to see why people are keen to own a Bulgarian holiday home. To protect the locals from the influx of foreign buyers, there is, unofficially, a "one price for locals and one for foreigners" system. However, with foreigners' prices starting at around GBP 5,000 for a two-bedroom apartment, Bulgaria offers great opportunities and investment potential.
Currently, as a non-Bulgarian citizen, you can buy a building, the right to build and other land related rights, but you cannot actually buy the land, unless you register a company in Bulgaria, with yourself as sole director. The company has to be legally registered by a lawyer together with proof of working capital, so there are cost implications. But, your company can buy and own both the house and the land freehold. If you are buying an apartment, then you will not need to set up a company. Once you have settled on a property, you will need to instruct an English speaking lawyer to draw up a Preliminary Contract and pay the deposit. If you do not have an English speaking lawyer, your estate agent should be able to recommend one, alternatively, you can contact the UK law society at www.lawsociety.org.uk. All documentation will be written in Bulgarian, so you should have all documents translated into English. It's important that you choose a reputable company who are experienced in dealing with property law.
Costs vary, depending on the property you are purchasing but, generally, you will be expected to pay a 10% deposit with fees amounting to approximately 5% of the purchase price. It is common practice for the buyer and vendor to split the estate agent's
fees 50/50. However, on occasion, the buyer may be expected to pay the whole fee, so clarify who pays for what before making an offer.
Once the property is withdrawn from the market, the vendors will expect the outstanding balance as soon as possible, therefore it is important to ensure funds are available prior to paying the deposit. Bulgarian vendors are unlikely to wait for extra funds to be transferred or another property to be sold, so you may lose your deposit.
Bulgarian real estate operates a "tax estimation price" and "purchase price" system. The "tax estimation price" is for the purpose of real estate tax and is often much lower than the actual purchase price. Vendors can request that the "tax estimate price" is written into the title deed and not the purchase price, so there may be a discrepancy between the price you pay and the price shown in the title deed.
If you choose to set up a registered company you can expect to pay around GBP 600 including legal fees. You will also be required to deposit the starting capital, approximately GBP 2000, into a temporary bank account. Once the company has been registered, this money can be withdrawn and used towards the purchase of the property. Should you decide to rent out the property as a holiday home, you will be expected to pay 15% tax on the income. Capital Gains Tax on any profit made between purchase and sale is also charged at 15%.
Insurance can be complex at the best of times, but can be overwhelming when the policy documentation is in the local language. Dealing with a UK based company allows you to ensure that all your specific needs are met and any exclusions and limitations are clearly defined.