If you are rural investor in Bulgaria and have bought a house next to a dam, you need to check if your property has been built according to the regulation of building next to water sources. During the past few days the National Directorate for Construction Audit is initiating a check in all properties built next to water.

In case of penalty set by the state authorities, be sure to hire a lawyer who will appeal the penalty. There are two big dams in Varna region - Tzonevo and Ticha dams. In case of penalty set, our lawyers can assist you in dealing with state and municipal authorities.

In our lawyer practice in Varna, we have discovered several ways, used by the property agents and developers to deceive the buyers. You should look for such signs in the preliminary actions of the seller/agent and that should ring the bell for you.

First method

If the agent asks you to open a bank account on your/your company name and require you to transfer the purchase price/installments for the property there. Along with that they ask you to issue a power of attorney to their employee who would have the right to withdraw money from your account.

Reason for doing this: The agent/seller wants to cut the payment trail towards them. If there is no direct payment to their accounts they can claim that they haven't received the money for the purchase and thus keep the money and not transfer the property to the buyer. Of course they will do anything not to issue a receipt to you. If the seller/agent have used that way to scam the buyer, it is difficult to  get the payment trail, but it not impossible. The legal way to recover the payment trail is your lawyer to get information from the bank about the persons, who had the right to withdraw the monies and the apropriate documents as evidence.

Second method

Using the agent as payment intermediary is the second scam method used by sellers in Varna region. The agent asks you to transfer the payment amount to their account and they promise/oblige to re-transfer the monies to the seller upon certain event.

Reason for doing this: Again, the seller/agent wants to cut the payment trail. If you don't have a clear payment trail the it would be difficult to prove payment to the seller. The way to solve the consequences of this action is to summon both agent/seller in to the court hearing and force both of them to testify where are the money currently - is it with the agent or is it with the seller. Again, as in Action one, the lawyer should bear the facts in mind and try to speed up the whole process.

Third method

This is the newest method our Varna lawyers have found that sellers use. As you can imagine, it is also in connection with the payments. The seller provides a bank account to which the purchase price should be sent. However, the account holder of that account is usually an offshore company, which has nothing to do with both Bulgaria and the ownership of the property that is being transfered. The seller is counting on the fact that the buyer wouldn't notice that this is a bank account with different holder.

Reason for doing this: The seller obviously wants to avoid taxation. This is why this method is usually used when selling whole complexes of apartments, but not single units. Usually the seller do transfers the ownership, but there is always a risk about it. The worst thing with this method is that if the buyer is scammed, the lawyer in Varna has very little chance to recover the funds. The main reason is that the court case has different jurisdiction: the case should be heard in the offshore country. Bulgarian lawyers are not entitled to practice in full out of the Bulgarian jurisdiction, especially in offshore zones (except in EU).

As a summary, one should be very careful when buying property. Not all sellers/agents are fraudulent, but you should be careful. To be sure that everything goes right, do hire a Varna lawyer. The benefits of hiring a lawyer or law firm are not only the legal knowledge, but also the experience with dealing with local agents/sellers. The lawyers are aware of the reputation of the local developers/agents.

Varna is one of the last places where the property scam didn't appear until now. The development companies have been looking secure and reliable, until the recent months. Our lawyers in Varna started to receive complains about developers breaching their contracts, failing to provide completed property withing the agreed term, according to the preliminary purchase agreement.

The typical contract breach is the delay in completion of an apartment and ownership transfer. This is where our Varna lawyers come to place. Upon clients request and engagement, our Varna lawyers contact the developer and establish the reasons for the breach and the reason for lack of communication between the buyer and the developer. Usually, the reason is the lack of funds for completion the property. The developers, however, don't explain that in plain English (even don't bother to explain at all) this tot the clients.  They just ignore the communication and hide like criminals. This criminal behavior is due to the fact they can't fulfill their obligations and of course they think since the buyers are living abroad, they will just forget about the money they have spent on the particular investment.

Often in this case, the only way to get a full refund is to engage a lawyer, practicing in Varna region. We will initiate legal action immediately, having your investment secured in terms of law requirements. You need to know that each individual case is treated separately, depending on the amount of your investment and on the particular developer. Some developers are more cooperative than others.

Having Bulgaria and Romania as members of EU opened new opportunities of business cooperation between the two countries. EU funding stimulated a lot of small and medium enterprises to for trans-border business ventures . The companies are mainly from Varna, Dobrich (Bulgaria) and Constanta (Romania).

Investment climate

Bulgaria attracts investors with its low tax regime (10% flat rate fro corporate tax) - one of the lowest in EU. Furthermore a lot of Romanian companies benefit from Bulgaria's low tax and they register limited companies in the border Bulgarian cities (such as Dobrich and Varna), but their business operates entirely in Romania. Furthermore, foreign investors can benefit both the Bulgarial low tax regime and simultaneously can benefit from both Bulgaria's and Romania's infrastructure, industry facilities, local services. The beauty of EU is that it allows free movement of people and goods. This enables investors to take advantage of both Romania and Bulgaria labour force, tax regime and infrastructure connections.

Big investors also can benefit of the special Bulgarian Investment Promotion Act. Companies/Individuals who invest in hign unemployment regions (there are few in Dobrich/Varna disctrict) the corporate tax for such investors will drop to 0%. Yes, such opportunity exists and several companies in Bulgaria took advantage of it. If you are interested in this opportunity you can contact our law office for further details. No one else can offer you 0% corporate tax in EU. Bulgaria can, especially Varna and Dobrich regions.

The Bulgarian ministry of Economy Energy and Tourism havs provided date of the best industry sectors in the region (information based on 2010 data):

[list2]

• Agriculture
• Mining
• Manufacturing High-technology
• Manufacturing Medium-high-technology
• Manufacturing Medium-low-technology
• Manufacturing Low-technology
• Knowledge-intensive market services
• High-tech knowledge-intensive services
• Knowledge-intensive financial services
• Other knowledge-intensive services
• Less knowledge-intensive market services
• Other less knowledge-intensive services
• Electricity, water, sewerage, recycling
• Construction

[/list2]

So why should a foreign investor consider an investment in Varna/Dobrich/Constanta region? There is no straightforward answer to that question. However you should look to the information below and see how good is th investment climate and what are the benefits of the Varna/Dobrich/Constanta region.

Logistics - Black sea ports

The first and most obvious advantage of the region is the major ports of the Black sea (Varna and Constanta). This boosts the import/export services as well as inland logistics from the region. Black sea ports are strategic for the trade between EU, Russia and Middle east. Varna and Constanta are the logistic water gateways of the European Union for Russia and Middle east. Recently there were couple of projects for building of enormous ligistics facilities (warehouses) which will serve the increased  trade/transportation between Bulgaria (Varna) and the non-EU countries.

You can get more information on Varna port and Constanta port on their websites.

Logistics - International airports

The region develops not only water logistics but also air logistics. Varna Airport is the biggest cargo and passenger airport in the North-East Bulgaria.  Constanta Airport is also main air gateway in the region. The businesses will have direct flight connection to major European cities from those airports. Further connections are available through the states' capitals.

Shipyards - building and ship repair services

Varna is considered as the Black sea capital of Bulgaria. One of the main industries in the city is ship building and repair services. The city has long history and tradition in that services. There are few companies who offer such ship repair and building services. You can find more information HERE. Romanians shipyard services are competitive well enough. Constanta also offers ship building and repair services on the Constanta shipyard.  Along with logistics (ports) the region has a lot to offer in terms of full logistics/repair services to the international trade and logistics companies.

Legal services

Our lawyers can offer comprehensive overview of your investment plan. We can advise you on the details and also can introduce you to the local business, so you are aware of some specific Varna/Dobrich/Constanta local business details. We can also assist you with the projects and EU funding for your business venture. As a member of EU Bulgaria is entitled to participate in up to 90% funding for business projects (mainly production industries), which means  that your investment in the region will be with the quickest possible return in EU.  In short, zero percent corporate tax ,  up to 90% EU funding, free trade zone (EU) could boost your business expansion in EU to enormous scale.

Yesterday the official amendment of the law was promulgated and subsequently entered in force. Now the new deadline for re-registration of companies in Bulgaria is 31 December 2011. This amendment came by surprise preceding the actual bill of amendment of the Commercial register Act.

This extension is actually done by amending the Trade Act, rather than amending the Commercial Register Act itself. This is rather unusual way of the parliament to do it as it confuses the people who expect the actual law which regulated the re-registration process to be amended. In the end, this amendment will cause the actual bill for amendment of Commercial Register Act to be amended to match the new re-registration term. Once again we can see the legal ignorance of the ruling party's members.

It was quite interesting to observe, at least in Varna, how the Registry Agency was trying to convince people of the deadline extension, when the actual promulgation of the extension was not done. This was quite risky as there was a chance the new deadline not to be adopted as an amendment to the law. Lawyers know that a law enters in force after it has been adopted by the parliament AND promulgated in the State Gazette. Sometimes people forget that the president has a right to "veto" the bill. Hopefully this didn't happen with the re-registration deadline extension.

The Bulgarian parliament has extended the deadline for company re-registration. The new deadline is 30 June 2011. The bill for extension is not yet voted on the second hearing and not yet promulgated in State Gazette . However it is a matter of time this to be done.

This is good news to all companies that hasn't been re-registered yet. However it is not a good idea for company owners to wait to the end of the new deadline.  Ask your lawyers to prepare all necessary documents and re-register your companies. In our practice we face various obstacles for re-registration like missing documents, deceased shareholders, shareholders' disputes etc. So generally it is a good idea to start the re-registration as soon as possible, because you never know if the process will go as smooth as you thought.

We are pleased to announce that MH Legal has won a milestone case on behalf of our clients against Museum House Ltd., the developer of Museum House residential building, Sofia. The apartments in that building were sold through Bulgarian Dreams. The former owner of  Museum House Ltd. was Maria Georgieva,  also a co-founder of Bulgarian Dreams. Our clients have been awarded with about EUR 14,500 by the court.

The bill for extension of company re-registration deadline is still pending. The parliament website bill section (English Google translation) shows that the bill is still in discussion stage with the Legal commission of the Parliament. The Bill was submitted to the Parliament on 18 October 2010.

Normally Bill discussions take more than 2 months, however this Bill needs to be voted as soon as possible since a lot of companies will be liquidated because they will fail to re-register.

Lawyers in Bulgaria are keen this Bill to be accepted as there will be benefits for the clients. When the Bill is voted the clients won't lose their state fees if their company applications are rejected. This was a very bad practice by the Commercial register, but was punished by several Supreme Court resolutions, defining the register's practice as illegal.

The Ministry of Justice have drafted a bill for amendment of the Commercial Register Act, proposing extension of the deadline for reregistration of the Bulgarian companies. The new proposed deadline for reregistration is 30 June 2011. Along with the deadline extension, the other major amendment is that the applicants don't lose the state fee if they have made mistakes in the application or in the enclosed documents. The current practice of the Commercial Register was to withhold the fees if the applicant has made mistakes to the documents. This was considered by the Bulgarian court as illegal and ripoff of the local business. In spite of  the court practice, the Commercial Register continued to withhold the state fees. Hopefully, the new amendments to the Commercial Register Act will make the register follow the logic, court practice and the law.

The above mentioned bill will be passed to the Parliament for approval. Only after that it will enter into force.

Here are some pictures of The Orchard development in Bansko taken one week ago. As you can see, there is not much difference since January 2009 - almost two years later. All investors need to decide for themselves if the promises given by the developer will ever come true.

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