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Business Setup and Support in Bulgaria VERIFICATION OR DUE DILIGENCE OF PROPERTY IN BULGARIA

Taras Miroshnychenko

Head of International Corporate Law and Fintech Practice

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miroshnychenko@prikhodko.com.ua

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Expert in fintech, crypto, and international corporate law with over 20 years of experience. Specializes in crypto licensing (VASP/CASP), iGaming business support, and international structuring, asset protection, and OSINT analytics for risk assessment and due diligence.

VERIFICATION OR DUE DILIGENCE OF PROPERTY IN BULGARIA

Bulgaria remains one of the most attractive destinations for real estate investments among Ukrainian citizens.

However, along with the obvious advantages, there are certain risks and pitfalls that can turn a profitable investment into a serious problem.

That is why conducting a comprehensive inspection of the property, known as Due Diligence, is a critically important stage of any purchase and sale transaction in Bulgaria.

The essence and importance of Due Diligence in real estate

Due Diligence is a comprehensive study of the legal, technical and financial status of a real estate object. It is a procedure that allows a potential buyer to get a complete picture of the property they plan to purchase, including its entire history from the moment of creation to its current state.

In the context of the Bulgarian real estate market, such an inspection takes on particular importance due to the specifics of local legislation and business practices.

The specifics of Bulgarian real estate legislation have their own characteristics that are not always clear to foreign investors. The system of registration of property rights, the procedure for carrying out construction works, requirements for document flow and many other aspects may differ significantly from Ukrainian realities.

That is why the professional assistance of experienced lawyers, such as the “Prikhodko & Partners” team, becomes indispensable for the successful completion of the transaction.

Comprehensive analysis of the legal status of the object

Checking the legal status of a real estate object begins with examining the very foundations of its existence.

It is necessary to find out exactly how the object arose, on what legal basis was its construction carried out, and how was ownership of it formed throughout its history.
Particular attention is paid to checking whether the previous owner or developer had the right to carry out the construction. Bulgaria has a clear system of building permits, and violating this system can have serious consequences for the future owner.
It is necessary to check the availability of all necessary permits, starting from the construction permit and ending with the act of commissioning.
Origin of the land plot, on which the object is located also requires careful inspection. It is important to find out whether the land was properly withdrawn from state or municipal property, whether there were any violations during its privatization, whether there are any claims from third parties. This is especially true for land plots in resort areas, where the land has a high value and often becomes the subject of disputes.

Documents and registers for verification

The Bulgarian Real Estate Register is the main source of information about properties.

It stores information about:

Property rights
Encumbrances (mortgage, arrests, pledges)
Debts for utility payments

The Agency organizes, coordinates and directs the activities of registration services.

It:

Creates and maintains a land cadastre
Provides a connection between the land cadastre and other registers
Creates a central electronic archive for real estate

To obtain a certificate of no encumbrances, you must:

Submit a written application according to the sample to the Records Registration Service at the Records Registration Agency
Pay the state fee: 10 leva for issuance within 7 working days or 30 leva for issuance within 3 working days
Add a document about the paid state duty

Specific risks of the Bulgarian real estate market

One of the most common risks when buying real estate in Bulgaria is this is unsettled property. Sometimes it may turn out that the property is encumbered by encumbrances, such as mortgages, lawsuits, or inheritance claims.
Buyers often face a situation where when a property is built without the necessary permits or without obtaining Act 16 (permit to put into operation). Such properties can cause problems when subsequently sold.
“Tolerance” status means, that the building or parts of it were built without proper permits, but the authorities have not taken steps to demolish them. This applies to structures erected without approved designs or in violation of building codes.
When buying real estate from a private individual, there is a risk of hidden defects in the property that the seller may not be aware of. These may include structural flaws, leaks, and other hidden damage.

It will also be useful: LEGAL SUPPORT FOR BUSINESS (FIRM) IN BULGARIA

Tax aspects for foreign investors

The tax system of Bulgaria has its own characteristics, which foreign investors need to consider.

Property tax is paid annually and is calculated based on the property’s tax assessment. Tax rates may vary depending on the type of property and its location.

When selling real estate, you may be subject to income tax. The amount of this tax depends on the period of ownership of the property and the amount of profit received. Different tax rates may apply to residents and non-residents.

Double taxation agreements between Bulgaria and other countries may affect the investor’s overall tax burden.

It is important to consult with tax advisors in advance to optimize tax liabilities.

Notarial procedures

Notarization of real estate transactions in Bulgaria is mandatory and has its own characteristics. The notary not only certifies the signatures of the parties to the transaction, but is also responsible for verifying the competence of the parties and the legality of the transaction.

This creates an additional layer of protection for the parties to the agreement.

Preparing for notarization requires gathering a significant package of documents. It is necessary to prepare all the necessary documents in advance and translate them into Bulgarian, if necessary.

Any errors or shortcomings in the documents may lead to a delay in the transaction.

Practical tips for buyers

Don’t just trust the seller’s words

Check the documents carefully. On the day of notarization, go to the website icadastre.bg and personally check the property for any encumbrances.

Use the services of qualified specialists

It is better to contact a competent lawyer who will check everything, or a reliable real estate agency that cooperates with proven sellers.

Check the documents before signing the preliminary contract

You cannot sign a contract without seeing the real estate documents and making sure they are authentic. The seller must provide documentary evidence that he is the owner of the property.

The role of professional consultants

The complexity of Bulgarian legislation and the specifics of the local real estate market make professional legal support not just desirable, but critically necessary for the successful completion of the transaction.

Experienced lawyers of “Prikhodko & Partners” have in-depth knowledge of local legislation and practical experience working with foreign clients.

Is a corporate account required for a company in Bulgaria?

Yes, an account is an important stage in launching a company. First, an account is opened to deposit the share capital, and after business registration — the main corporate account for operational activities. The bank may verify the ownership structure, source of funds, business model, and future operations of the company.

Is it possible to register a company in Bulgaria remotely?

In many cases, the process can be organized remotely or with minimal personal involvement of the owner. Everything depends on the company structure, bank, identification requirements, signing of documents, and subsequent actions after registration.

What is more difficult: registering a company or opening an account?

For foreign owners, opening a corporate account is often a more sensitive stage than the company registration itself. The bank may check the source of funds, ownership structure, field of activity, counterparties, and countries where the business operates. Therefore, it is important to prepare the company for bank verification even before submitting an application.

What needs to be done after registering a company in Bulgaria?

After registering a business, it is usually necessary to organize a corporate account, accounting support, tax model, VAT or EORI if needed, an electronic signature, contracts with counterparties, and internal corporate documents. These are the exact steps that turn a registered company into a ready-to-work business.

Successful cases on the topic: