Purchasing real estate is one of the most common transactions in civil law. Through such a transaction, ownership of an immovable property is transferred in exchange for an agreed purchase price. However, in addition to the purchase price itself, buyers should also anticipate several additional costs imposed under Bulgarian law.
These expenses are related to the notarization of the transaction, its registration, applicable taxes, and various administrative procedures. Understanding these costs is essential when purchasing real estate, as it helps avoid unexpected expenses and allows for proper financial planning.
Notary Fee
First and foremost, this type of transaction is subject to a legally prescribed form. Pursuant to Article 18 of the Bulgarian Obligations and Contracts Act, contracts transferring ownership or establishing rights in rem over real estate must be executed in the form of a notarial deed. Without a notarial deed, the transaction is null and void.
The involvement of a notary public is therefore mandatory. The notary verifies the identity and legal capacity of the parties, the seller’s ownership rights, the absence of legal impediments to the transaction, and its compliance with the law.
This gives rise to the first major expense—the notary fee, regulated by the Notaries and Notarial Activities Act and the Tariff on Notarial Fees. The amount depends on the material interest of the transaction, i.e., the value of the property. VAT is also charged on the notary fee, increasing the total amount payable.
Local Property Transfer Tax
The next major expense is the local tax on the acquisition of property for consideration, regulated by Articles 44–49 of the Local Taxes and Fees Act.
This tax arises whenever property is transferred for consideration and constitutes a public obligation payable to the municipality where the property is located. Its rate is determined by the respective municipal council within the statutory limits of 0.1% to 3% of the taxable base.
The taxable base is the higher of the agreed purchase price and the property’s tax valuation. This rule prevents the artificial reduction of the tax by declaring an unrealistically low purchase price.
Under Article 45 of the Local Taxes and Fees Act, this tax is generally paid by the purchaser.
Registration Fee
Another mandatory expense is the fee for registering the notarial deed.
Once signed, the deed must be registered with the Bulgarian Registry Agency. Registration is of significant legal importance, as it provides public notice of the acquisition and makes the ownership rights enforceable against third parties.
The registration fee is established under the Tariff of State Fees collected by the Registry Agency and amounts to 0.1% of the property’s value.
Administrative Costs
In addition to the mandatory fees, buyers should also expect several administrative expenses.
Typically, the following documents are required:
- a tax valuation certificate;
- a cadastral sketch or cadastral scheme of the property;
- an encumbrance certificate showing whether the property is subject to mortgages, liens, or other restrictions.
Each of these documents is issued upon payment of the relevant administrative or state fee. Although these amounts are relatively modest, they should still be taken into account when planning the overall budget for the transaction.
Additional Costs When Using a Mortgage Loan
In practice, additional expenses arise when the purchase is financed through a mortgage loan.
These may include:
- property valuation fees;
- mortgage registration fees;
- notarial fees related to establishing the mortgage;
- bank administrative fees.
Since establishing a mortgage also requires a notarial deed and registration, the total transaction costs increase accordingly.
How Are the Costs Allocated Between the Parties?
The allocation of transaction costs is governed by Article 186 of the Obligations and Contracts Act.
As a general rule, the costs of the sale are shared equally between the parties unless they agree otherwise. The costs of delivering the property are borne by the seller, while the costs associated with taking possession are borne by the buyer.
Conclusion
Purchasing real estate often involves a significantly higher financial commitment than the agreed purchase price alone. Bulgarian legislation imposes several mandatory costs that ensure the legality, transparency, and legal certainty of the transaction.
For this reason, every buyer should consider not only the property’s purchase price but also all related legal, notarial, tax, and administrative expenses that form an integral part of the acquisition process.
If you are planning to purchase real estate and would like to avoid legal risks or unexpected costs, consulting a real estate lawyer before concluding the transaction can save you time, money, and future disputes.
The team at G&P Law provides legal assistance, due diligence and review of transaction documents, and online legal consultations, while ensuring complete confidentiality, attorney-client privilege, and an individual approach tailored to each client’s needs.
Author: Denitsa Krasteva
Images: Canva