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[size=75:2fludcvg]Sofia echo Fri, Nov 13 2009

Property bank ahead

As of January 1 2010 all transactions on real estate deals in Bulgaria will be conducted via bank transfers, according to an amendment to the Notary Act put forward by the Justice Ministry. If approved by Parliament, the change will ban all real estate payments made in cash.

The amendments aim, first raised a year ago, is to reduce real estate fraud and money laundering. The move is part of the Ministrys policy of adopting legislative amendments to a number of laws as a way of reducing corruption and crime as well as ensuring that all fees and taxes owed to the state are paid.

The highlight of these efforts will be the adoption of a Law on State Depositary Bank which would serve as a guarantee for all payments in the form of the state acting as custodian for deposits. It will not have the functions of a commercial bank, hence it will not appear as their competitor, the draft bill says, according to Bulgarian-language Dnevnik. It will not charge interest but will levy a certain fee on every deal.

The idea is that it would be used by notaries and lawyers irrespective of the deal, whether it be the purchase of real estate or a vehicle or other transfer of ownership or bankruptcy.

The draft bill adopts Frances experience where there is a similar model, Dnevnik said. The main advantage of such a deposit bank is that it would cut down on fraudulent deals and tax evasion.

The risk is that there will be a waiting period during which the money subject to the deal will be blocked at the deposit bank. The French experience shows that this period can be about 25 days during which the seller cannot touch the money. Another setback is that the deposit bank will keep a fee for servicing the transactions. So clients will have to pay yet more money, Dnevnik quoted real estate brokers as saying.

Many people are willing to risk not reporting the real amount of the sum as long as it saves them taxes, Biserka Marinova, owner of real estate agency Lega Real, told Dnevnik. Tax authorities and the National Revenue Agency have worked hard over the past couple of years to curtail this negative practice.

The new regulations will without a doubt complicate matters, she said. One such complication will be the combination of having a bank loan as the means to fund the deal and the waiting period to get them from the depositary bank. And there is the question of the funds required for the setting up of the new state body and its staff.

For now, that idea is at the draft bill stage but judging by the regular pronouncements by Justice Minister Margarita Popova and Finance Minister Simeon Dyankov on the subject, it could become reality by the end of the year.

I can't really see how this will work or indeed how it will stop cash being passed over all that's going to happen is a transfer of part of the cost through the banks and pay the rest in cash? and then under-declaring on the deeds so in reality nothing has changed

Noddy wrote:

I can't really see how this will work or indeed how it will stop cash being passed over all that's going to happen is a transfer of part of the cost through the banks and pay the rest in cash? and then under-declaring on the deeds so in reality nothing has changed

Property buying here in Turkey is just as problematic and many have lost their life savings because of the many scams operating over here. Too much trust is placed with solicitors thinking they do the same property purchase work as they do in the UK. It would certainly help over here if only bank transfers were accepted, but I can see the same problem as you Noddy - cash will be passed under the table during property purchase and will never be recorded.

I can't see anyway around this with the present rules lets face it even in the uk there are all sorts of property fiddles going on its just that they are never published, I'm not sure that the cash changing hands will ever stop? it will only change in as much as it will be hidden from now on.

I wonder how this is going to work on places like ebay there is a big company on there who have the payments made directly into their bank so I can't see how they can stop this?