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Preliminary agreement for purchase of property

This type of contract has been singed by almost 80% of all Britons and Irish who have bought properties(mainly apartments) 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 fulfil 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 transferred upon signing the preliminary agreement. On the contrary, often there is nothing to be transferred 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 transferred. 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 moneys, but haven’t got the deeds transferred 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:

1. Original of the preliminary purchase agreement, signed by both parties
2. 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,m which you otherwise need to show to the notary, namely:

1. Tax evaluation certificate of the property. This can be obtained by tje local municipality, where the property is located
2. 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

One of the key documents that must be presented in front of the notary is the skitsa . The drawing is issued by the competent authority, which may be different for the different regions and types of Bulgarian properties – the Agricultural Commission (Municipality Department for Agriculture and Forestry) issues the skitsa for agricultural land;
the municipality orthe Cadastral Department issues the skitsa for all other properties.

The skitsa needs to be an original document (not a photocopy) in the name of the owner, and is valid for six months from the date of issue. It shows how the property looks as per the local plan and the size of the plot.The skitsa is required to be presented in front of the notary and the original stays with the notary.The new owner receives the notary act and may receive a copy of the skitsa (but not always). The skitsa can always be obtained from the local municipality in the name of the new owner.

3. 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.
4. 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 time-scale 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 transferred 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.

It was a while back now but if I remember the Skitsa is a complete plan of the property showing all boarders and if I remember correctly your not allowed to build too close to your boarder.

The "
skitsa"
(literally, plan, drawing) is held at the local municipality administration for all of plots located at the territory of municipality. Every plot in Bulgaria has (or should have) its own "
skitsa"
showing the plot location, relative to other plots, size, border measurements and immediate neighbours. They have a functional life of about 6 months so yes Sally your completely right but I'm sure someone with greater knowledge will give you more of an insight to it.

Admin wrote:

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Preliminary agreement for purchase of property

This type of contract has been singed by almost 80% of all Britons and Irish who have bought properties(mainly apartments) 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 fulfil 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 transferred upon signing the preliminary agreement. On the contrary, often there is nothing to be transferred 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 transferred. 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 moneys, but haven’t got the deeds transferred 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:

1. Original of the preliminary purchase agreement, signed by both parties
2. 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,m which you otherwise need to show to the notary, namely:

1. Tax evaluation certificate of the property. This can be obtained by tje local municipality, where the property is located
2. 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

One of the key documents that must be presented in front of the notary is the skitsa . The drawing is issued by the competent authority, which may be different for the different regions and types of Bulgarian properties – the Agricultural Commission (Municipality Department for Agriculture and Forestry) issues the skitsa for agricultural land;
the municipality orthe Cadastral Department issues the skitsa for all other properties.

The skitsa needs to be an original document (not a photocopy) in the name of the owner, and is valid for six months from the date of issue. It shows how the property looks as per the local plan and the size of the plot.The skitsa is required to be presented in front of the notary and the original stays with the notary.The new owner receives the notary act and may receive a copy of the skitsa (but not always). The skitsa can always be obtained from the local municipality in the name of the new owner.

3. 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.
4. 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 time-scale 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 transferred 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.

Many thanks for this important piece of information Ashley we have signed a Preliminary Agreement and I will be checking that all proceedings from therein follow along the lines mentioned in your post. Buying property in any country is different to the UK and information like this is useful to all of us when we basically haven't got a clue how to undertake a purchase in the correct manner which at the end of the day is legal and binding on all parties and we can all sleep happily at night!!

We have paid a deposit on a property and both parties have copies of the Preliminary contract. With the advent of the new law coming into effect next year which disposes of the company system of buying properties by foreigners, we have delayed the final payment to clear down on the purchase until the law comes into effect.

I have two concerns: we are having various works done on the property which run into a few thousand pounds - can the seller pull out from the sale although he has signed a Preliminary contract. In essence we are having building works done on a property which we have not completed a sale on. Are we concerned for no reason??

yes, the seller can pull out of the contract even though he has signed the contract, there is a financial penalty of double the deposit you have paid the seller.

if the seller is in breach of the contract, then a court will decide the outcome.