10 Most Popular Frauds In The Field Of Property Law In Bulgaria

The purchase of a real property in Bulgaria is probably one of the best ways to invest your money as it is a lifetime investment. But on the other hand this might be risky. That is why you must be very careful and spend a short time in investigating the property prior to entering a contract instead of trying to solve the problems afterwards.


Here are some typical frauds in property deals in Bulgaria you should consider prior to making your investment.



1. The building under sale has not been granted Act 15 or Act 16


According to current legislation all buildings in Bulgaria have to be in line with the construction and earthquake-proof regulations and official plans. Therefore the buyer should check whether the building has been built in line with those requirements. In other words, the purchaser should ask the vendor to provide the “Usage Permit” or “Habitation Certificate” (also known as Act 16) which is issued by the local municipal authorities or the National Construction Control Directorate.


Act 15 is the last step prior to Act 16 and a lot of developers sell properties which have only Act 15 with the promise that act 16 will follow very soon. But even if Act 15 is in place it is possible Act 16 never to be granted and without this certificate the property cannot be either used or rented legally and the owner cannot subscribe to the utility companies.



2. Cash payment is requested


Cash payment is still not illegal but is rather risky.


It is very difficult to prove such payment – while if the payment is made via bank transfer, it can be easily traced because banks are obliged to keep record of all payments.


The risk remains even in the event you have a receipt for the cash payment signed by the vendor. If the receipt is not drawn up properly, for example a date or another reference is missing or simply the one who has signed it does not have the capacity to do so, that may prevent you from proving that you have actually paid the amount in question.



3. The vendor refuses to sign a preliminary contract for sale-purchase of the property


If the vendor refuses or is reluctant to sign a preliminary contract, that could be a sign that there is something wrong. The lack of a preliminary contract is risky especially in cases when advance payment is agreed. In case an advance payment or a deposit is made without a preliminary contract, it will be almost impossible to prove what the deposit or the advance payment has been paid for. The lack of a written agreement relieves the vendor of any responsibility – for example the vendor could not be held responsible in the event of any burdening or mortgages on the property or in case the vendor delays transferring of title.



4. The vendor insists that a lower price is put on the title deed


That almost certainly means that the vendor is trying to evade tax payment.


At first glimpse this offer sounds tempting to buyers as in most cases buyers pay notary fees and transfer tax which are calculated as percentage of the price put on the title deed. The lower the price stated on the deed, the lower the expenses for the buyer. However, in case the contract is broken (for example due to encumbrances) the vendee shall be obliged to give back the property to the vendor but the vendor shall be obliged to give back the price as per title deed. If there is a difference between the price put on the deed and the actual price paid the vendor cannot be chased to give back the balance.


Last but not least, if a lower price is included in the deed and the vendee decides to resale the property shortly afterwards, there will be a large capital gains tax due.



5. The vendor recommends a conveyance solicitor to handle the deal


This is a potentially dangerous situation. Unfortunately, it is quite possible the recommended solicitor, no matter how respectable looking he might be, to act against your best interest and to overlook some important information.


Therefore an independent solicitor is always recommended in property deals.



6. There is a discrepancy in the papers presented to you but you are reassured that this is an insignificant typo that will not affect the deal


In some documents the change of a single digit or letter can be fatal and can lead to a number of problems afterwards. For example all properties have identification numbers and one different digit may mean a different property, in other words, it may turn out that the buyer has purchased a totally different property of what he was thinking he was buying. For example suddenly you may find out that you have become the owner of the apartment next door to the one you have initially viewed, liked and paid a deposit for. Sometimes such mistakes are due to typos and negligence but there are cases when such frauds have been made deliberately by developers. In any case it is always recommended any discrepancies to be clarified before the transfer of title even though it may take a few days or even weeks.



7. The property is shown to the buyer only on photographs or plans but the image is actually of a different property


That is a very common property fraud. And it is only after the purchase that the vendee realizes that he has been mislead and has bought something totally different of what he expected. But since the title deed has already been signed it will be almost impossible to cancel the deal. Therefore, it is recommended either the property to be viewed in advance by the buyer himself or at least to be acknowledged that the documents describe exactly what the buyer has seen on the photographs.



8. At the time of the transfer of ownership there are defects in the property which the seller promises to be rectified after the sale


In this case it is necessary to bind this agreement in writing; otherwise the seller may simply take the money from the buyer and then leave him to deal with all defects at his own expense. The legal binding in writing is not enough; all stipulations should include effective mechanisms for the fulfillment of the obligations of the seller. For example, in case there are no penalties stipulated or in case the expenses for the repairs exceed the amount of the penalties provided under the contract, it is very likely for the seller to choose deliberately not to fulfill his contractual obligations. In case of any outstanding defects in the property the best option will be part of the purchase price to be withheld and kept by a third party which will hand the amount to the seller only after the latter has fulfilled his obligations to rectify the defects.



9. The vendor refuses to provide a Certificate of Encumbrance


In this case it is very likely that the property is mortgaged or burdened. Actually it will be better and safer if the vendee checks the property and whether there are any encumbrances related to it himself as it is possible the seller to provide an invalid certificate of encumbrance. In case a burdened property has been sold, for example one mortgaged with a bank, the bank has the legal grounds to sell the property and to keep the money.



10. The vendor presents fake documentation


A very common property fraud is the vendor to use fake papers, most commonly fake powers of attorney which vitiate the sale purchase contract. The contract is proclaimed null and void and the buyer may find himself in a situation where he stands with no property and no money.

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