Trade Register not working in crucial moment

The deadline for announcing the company financial reports on the Trade Register reports will be over in 3 days. As usual, the Registry Agency is not prepared for the massive load of application that will follow. Not that they didn't expect it. It's the third year of the obligation for announcing the company annual financial reports, so the Agency apparently has a real short memory not to remember the bad experience from last year and the year before.

As expected, the website doesn't work! Hundreds of accountants and solicitors are not able to submit the accounts because the agency didn't bother to upgrade the servers and the broadband internet connection. Or may be they just don't care? I still don't understand how such important website can be out of service, even when it expects hundreds of submissions.

The alternative of offline submission is not acceptable too since the long queues take forever to pass through the Agency front desk. Usually one person holds applications for a dozen companies. Moreover, the submission system is so twisted, that the front desk gets the papers and enters them into the same web system that doesn't work for the clients directly. Isn't that going back to 19 century? And the newly elected president talks about e-government? How Bulgaria can do that with such ignorant administration?

Buying Bulgarian property on Ebay

Bulgarian property on Ebay is cheap

Yes, this is why Britons buy Bulgarian rural properties on Ebay - because is insanely cheap. One can get a rural house with 2000-3000 sq.m. land for about GBP 2000. Of course the latter would require huge renovation, as it is often a mud brick house in the middle of nowhere.

These properties are preferred by either retired couples who want to spend their retirement years where their state pension will be enough to have a normal life, or by entrepreneurs who buy wrecks, renovate them and sell them for double or triple the initial purchase price.

Which is the governing law when you buy Bulgarian property on Ebay

As the Real Estate part of Ebay, clearly stated in their Real Estate Policy Ebay is just a platform for advertisement of the properties. Due to the difference in property purchase/sale governance, ebay can only act as advertising agent, nothing more. In Bulgaria, in particular all deals involving properties are under governance of the Bulgarian law. The so called lex loci rei sitae principle is in effect. This means that no matter whether you have won a bid on Ebay property auction, this is a non-binding auction. This is set in the ebay Real estate policy too. You need to contact the seller and negotiate the final deal. This also means that the seller can not keep your bid if you haven't purchased the property on the auction, which you have won. That would be against the Ebay Real Estate policy and against the law governing the property purchase (in that case Bulgarian law)

What to do after you have won a real estate property auction

There are a couple of things you need to do. Firstly, contact the seller and request more photos of the property. Remember that Ebay has a limit for uploading photos, so normally sellers upload about 2-3 photos. The property which you like may not be in the status you have thought it is. If you still want to buy the property, you need to make some property checks:

  • whether there are any encumbrances (mortgages, liens, injunctions etc.)
  • whether the seller is the real owner of the property
  • if the seller is just an agent and if they have proper authorisation to sell on the actual owner's behalf.
  • will you need to register a limited company in order to be able to buy the property or you can buy it directly on your name.

The above checks can be done if you hire a Bulgarian solicitor. The solicitor will make sure your purchase goes as it should be and there will be no bad surprises. The solicitor will also do the conveyancing and can act on your behalf, so that you don't need to come personally to Bulgaria to have the property transferred on your name. the process can be done by certified power of attorney. You would be required only to send the original by registered post to Bulgaria. We are specialising in conveyancing for ebay property purchases, so that you don't need to book costly flights for a simple signature in Bulgaria. The original deed will be posted back to your UK address.

Condominium General Meetings in Aparthotels

One of the hottest topics in all Bulgarian ski and sea resorts is the problem of maintenance and management of the condominium. At the time the apartment complexes were build, marketed and sold, no one told the buyers how would their condominium investment be managed and maintained actually. Many were mislead.

The Specifics of Condominium

The truth is that the complexes consist of separate buildings, which according to Condominium Ownership Management Act (COMA), need to be managed and maintained separately. This leaves the question as of how those complexes will operate as a one single unit? there is no straightforward answer to this question.

Article 8 of COMA, provides that only separate entrances in one building can establish separate condominium and therefore be run separately:

(2) Where a building has more than one entrance, management may be implemented separately in each entrance.

The only article that brings a ray of light on this problem is Art. 18 COMA:

Article 18. (1) Where the need arises to resolve a matter related to the common areas of two or more condominiums, a joint General Assembly may be held in which the condominiums shall nominate an equal number of representatives for participation. (2) The joint General Assembly shall be convened at the initiative of the Managing Council (Manager) of one of the condominiums and shall be held under the general rules for conducting a General Assembly set out in this Act. (3) The decisions shall be adopted by a two-thirds majority of persons present.

Managing Joint Condominium

Ok, at first glance that would solve our problem, but not exactly. The article reads about "a matter related to the common areas of two or more condominiums". This refers to common facilities like electricity systems, water systems etc. You can't rely on this article for individual building's common parts such as the staircase in the respective building. If you do, all decisions on this joint GM could be successfully challenged by any owner's solicitor in the local court.

A possible solution is that the Management Committees (or Managers) of the separate buildings to work in harmony so that the visitors of the complex don't realise that there is a separation in the maintenance services.

The truth is that COMA was not intended to serve apartment buildings in the resorts. It was intended to serve residential buildings in the cities, where closed complexes are a rare.

Liquidation of the unreregistered companies. What's the hurry?

Once again, the Ministry of Justice proves to be existing in some other legal realm. So are the Bulgarian Courts. As you probably already know, the companies which have not re-registered by 31 Dec 2011 are subject to compulsory liquidation. The proceedings of this liquidation have been "patched" to the Trade Register Act just before the deadline was in effect. Naturally, as everything done in the last minute, this seems to be an unfinished work.

Paragraph 5, point 4 of the Supplementary provisions of the Trade Register Act:

(4) The co-operations and trader's last registration court prepares and sends by 1st October 2012 to the Agency a list of unreregistered sole traders and foreign companies branches, for which no re-registration has been requested in the term of  § 4, point 1 as well as a list of all companies and co-operations for which a re-registration have not been requested in the same term. The list contains the number of the company file, the trade name and business address, the legal representative and Bulstat code, provided to the court, by the Agency.
So far so good. The text says "by 1st Oct 2012", which means that the courts should be ready even before that date. After all they have 10 months to prepare a list. How difficult that could be? Thanks to the state owned company Information Services PLC they have already this data digitised. Even more, some courts use it for issuing Certificates for Good Standing of the companies. Again, how difficult that can be?

Having spoken to a couple of judges, chiefs of Commercial Departments in two different courts, I was notified that the courts don't know what to do, as there is no internal regulation of this procedure. Apparently, "prepare a list" is not enough for them. Where is the self-regulation of the court if they cannot create a simple internal procedure to prepare a single list? Obviously they are waiting for the Ministry of Justice to do the work for them.

This affects ate a huge scale all companies that failed to re-register. Most of them want to initiate voluntary liquidation in order to avoid further costs. The only obstacle now is the list.  You may say that they've waited 3 years and can wait few more months and you may be right. However, think of the UK and Irish owners who have registered these companies as "holding" tools and didn't know that such huge reform in the Commercial Register will happen. that's why they've missed the deadline. Delaying of these lists will cause more ambiguity and concerns.

Changed construction plans for already sold offplan property

I don't know what the builders are thinking when they change the construction plans and don't update all off-plan purchase agreements?

Imagine the following situation. You have bought a relatively cheap apartment in an off-plan development.The estate agent have shown you some fancy 3D graphics of how the building would look like. Nice gardening around, happy people walking on nice alleys.

The reality is slightly different. Builder didn't have any experience, hasn't done any legal/technical research but have started selling off-plan. He had applied for construction permission, but the chief architect required changes to be made to the initial construction plans. The builder needed to change building plans. Some real examples: cutting off whole floor, changing roof shapes by creating sloping ceiling on top floor apartments, cutting off each apartment's area, so they can fit within the architect's requirements.

So far so good. But what about the off-plan buyers? They are completely ignored. Of course, they still need to pay the outstanding 50%+ of the apartment price. If they knew the truth they wouldn't continue with the purchase or would require deduction because of non compliance with the preliminary agreement clauses. Even worse - they could sue!

The builder decides to remain silent to the end. No preliminary agreements are amended, no buyer is aware of the changes...until it's time to sign the title deed. Now the truth is obvious. How the buyer feels? Bad! How the builder feels? Happy! He has got the cash already, so why should he care?

A true story...

Farmland: the new trap set by the government

New amendments were introduced to the Ownership and Use of Agricultural Land Act on 27 March 2012. All agricultural land owners or lessees are now obliged by 31 July each year to submit declarations to the local offices of the Agriculture Municipal Service. The declarations need to point out how the farmland they own or use will be used.

Art 37b. (1) Each owner shall submit a declaration form in the local Agricultural Municipality Service, where the land is located. The Form shall state the possession type and the type of long term usage of the land...
Normally that is not a problem, but it's yet another administrative burden. The real problem may occur to owners who don't use their farmland or foreigners who have bought farmland though a limited company and haven't leased it to a local farmer.

The arguable text of Art. 37c para 3 says:

When there is no consent between the users in terms of the agreement pursuant para 1 as well as for all land that is out of the scope of the agreement, the Commission drafts a plan for distribution of usage of the land, by plots by 15 September each year, in the following way:...

Note that "all land that is out of the scope of the agreement" refers to the farm land that no declaration is submitted for. This means that if you miss to declare the type of usage of your farmland, the government considers it as abandoned and may grant its usage to a third party without your consent or approval. Legally speaking this is private property interference and creates a huge corruption base as well as a base for legal disputes.

The government idea is to make use of all farmland, which is not used right now. The amount of such land is huge since after privatisation in 1990 each farmland plot was returned to 10+ heirs. Some of them live abroad, others because of legal disputes can't cultivate their land. There are also simply non-interested parties so the farm land is not cultivated.

Forging distribution of common areas in apartment complexes

We have been warning apartment owners that developers use incorrect calculation of common parts, in order to gain majority in the condominium General Meetings. Thus they set their own decisions about which will be the maintenance company and how much that maintenance company will be paid. It's out of question that they form their own maintenance companies and get the maintenance fees.

For the past year we have been fighting such developer in Bansko. He had built three apartment blocks and have used only the initial common areas calculations for selling the apartments and consequently defining how big is the voting right of each apartment owner. The problem was that the plans of the building were changed 2 times during the construction. This inevitably changes the distribution of the common areas percentage and the subsequent voting rights. However that was never written in the table of common areas. This enabled the developer to "blackmail" the rest of the owners and outvote all General Meeting decision which were not in his own favour.

Hopefully the owners were wise enough to challenge the GM decision in the court. The court expert found the incorrect data and all GM votes counting. The court ruled that the GM decisions were illegal due to incorrect voting rights calculations.

If you are owner in a complex, whether it is in Sea or Mountain resort, be sure to check whether the same scheme is not applied to your property. If you are a victim of the same rip-off, be sure to challenge the GM resolutions in the court. Remember that the challenge need to happen within 7 days, as from the moment the GM has been attended or 1 month if the GM was attended by the apartment owner.

Speeding tickets for less than 50 levs

If you drive across Bulgaria and you are stopped by the Traffic Police for speeding, you'll probably get a ticket for BGN 50 or less. There's a chance that the police office will tell you that "you cannot appeal the fine, because its a minor offence and minor offences couldn't be appealed before court." Well...not any more. Art. 189, para 13 from the Road Traffic Act has been declared as unconstitutional by the Constitution Court with Decision #1 on case # 10/2011. Traffic offence fines above BGN 10 can now be appealed.

Buying regulated land in Bulgaria 2012

Because of the speculations, I decided to write this small post. I will try to clear out whether an EU citizen can buy regulated land directly in Bulgaria as from January 2012.

A common misunderstanding is that foreigners cannot buy regulated land directly if they own primary home in their native country. This was valid until 2012, but not any more. The legal grounds are Art. 29a of the Ownership Act:

Entities in Art. 29 para 2, who do not reside permanently in Republic of Bulgaria, can acquire land for secondary home property after expiration of the term, set forth by the conditions of the Treaty for Accession of Bulgaria to the European Union
The above articles was introduced in 2007, the year when Bulgaria joined EU. As I have written last year the prohibition term was 5 years since Bulgaria's accession. As from January 2012, the prohibition term has expired, so pursuant Art. 29a Ownership Act, foreigners can buy regulated land directly, no matter if it is primary or secondary home property.

The speculation still exists, but I think this is supported by property agents who lose business. Just imagine how many companies will be liquidated and how many annual accounts and tax declaration will not have to be submitted. Property agents need to move on and stop spreading disinformation.

Full text of the Condominium Management Act

Many people wanted to see the full text of the Condominium Management Act 2011 in English. This is particularly useful for all foreigners who have bought holiday apartments in Bansko, Pamporovo, Borovetz and the Black Sea resorts. The Act can be downloaded from here [PDF 178kb].