Following the trends of the real estate market in Bulgaria
in the last five years and the historical development of the
real estate in Bulgaria over the last century, the real estate
investor needs to be well-orientated. Real estate in Bulgaria,
as set forth below, has specifics, which, if underestimated may
result in significant cost and disappointment. Therefore, the
pragmatic and professional approach demands careful
accumulation of knowledge and further in-depth investigation
for any single case.
For the last 50 years the real estate title registration
procedures and title history in Bulgaria have undergone
significant changes, which were generally ill-administrated.
Furthermore, following the changes in the political and
economic regime in Bulgaria in 1989, restitution
(reinstatement) of title of real estate, previously held as
state/cooperatives' property, has been effected pursuant to
various acts and procedures, which often resulted in
long-lasting civil disputes about ownership or claims against
the authorities assigned with the completion of the title
- In the period up to 1950s there was private title over
land and real estate.
- In the period between the 1950s and the end of the 1980s
there was collectivisation and nationalisation –
that is, the title had been moved to quasi-legal entities
controlled by the government (versus the individual
historical title-holders) or directly by the state.
- In the nineties restitution of land title began, when
title was returned to the heirs of the legacy, the individual
title-holders (that is, those prior to the 1950s).
- After the nineties and today, commercial transactions
with land involving restituted title-holders are common and
represent business as usual.
Historically, in view of the legal approach to title over
land, Bulgaria has been close to the ex-Soviet Union and it can
be assumed that some of the developments above were probably
not common to all ex-socialist countries, nowadays referred to
The result of the radical change in title-holding is that a
verification of legal risks concerning title requires
investigation into the legacy transactions, not only at the
level of 4. – that is, performed by and between
private parties – but often back to the level of 1.
– that is, checking on whom the initial title-holder
had been conferred, and whether the restituted owner faces
challenges to the title as a result of a break in inheritance
line or default in the restitution process itself.
Legal disputes between heirs of the legacy title-holder (the
one at the level of 1.) are also common. The restitution
process (at the level of 3.) has itself been carried out by
state bodies, which (as in all legal environments) are not
without omissions in their performance; such omissions or
technical mistakes are typically upheld by private parties to
give a basis for disputes on restitution. This complex bundle
of controversial rights and claims requires a professional
approach and extensive research and analysis.
Very often even local persons interested in real estate find
it difficult not to get confused about the situation, so it is
not surprising that a foreign observer too might be unaware of
all of the above. Unfortunately, it is typical for certain
level local consultants to persuade investors that the title is
evidenced by Notary Deeds and to argue that as long as the
seller has these, the title is valid and irrevocable. Such
representations are misleading to the extent that they are not
complete: the Notary Deed does indeed represent validity of
title, but such validity can be challenged and risks to title
can materialise irrespective of the Notary Deed's
Therefore, an important rule to be followed when stepping
into a real estate transaction is to initiate a real estate due
diligence going back to the generic title-holding: either to a
party that is the restituted owner (at the level of 3. above,
including the acts of the bodies involved in the restitution),
or to a party that can claim irrevocable ownership due to
expiry of the 10-year statutory prescribed period of
In light of the difficulties of establishing the clean title
of a private real estate owner, and having in mind the fact
that the title on attractive real estate is still held by
either the government or municipalities, a newly emerging trend
in the real estate market should be reviewed, involving the
government or municipalities – the public-private
partnership (PPP). This is most relevant to big investors in
real estate, which can explore the utmost limits of the local
resources by entering into direct relationships with the
government and/or municipalities.
Bulgaria's accession to the EU made even more necessary
intense and effective collaboration between public authorities
and private entrepreneurs with the aim of rendering
high-quality public services and products to the population.
The social and the political conditions in the country together
with its steady economic growth favour long-term collaborations
between public authorities and private business under the new
and more sophisticated form of the PPP. The current Bulgarian
legislation also provides for conditions that encourage,
facilitate and expand such collaborations, irrespective of the
fact that no specific PPP codification has been adopted
At a glance
The PPP represents a long-term contractual engagement
between a public authority (ministry, agency or public company)
and a private company for offering a service or a product
designed for public use. The main idea of establishing a PPP is
to provide more efficient and quality certified products and
services for satisfying long-term public needs, using the
methods, the experience and the management skills of the
The contractual relation might be established in the form of
a joint venture, concession agreement, or a company
(incorporated and owned jointly by public and private parties)
or any other relevant contractual instrument. The share of the
risk between the parties in a PPP is symmetric to the profit
Start-up capital is necessary for the acquisition of the
respective assets for the establishment of the PPP and for
supporting the early stages of its activity. The assets (real
estates, buildings, equipment) comprise all material means,
necessary for the activity of the PPP. Floating capital is
necessary for financing various operations of the economic
activity of the PPP (salaries, investments for equipment). The
main scope of PPP is related to rendering a certain service or
elaboration of a certain product. Income is received for the
service of the product used.
In the case of a Design-construction-finance-management
(DCFM) PPP, a public authority contracts a private company for
the design, construction, financing and management of an asset
that will be used for the rendering of a certain public
service. The type of service to be rendered is defined by the
public authority and the private company designs and constructs
a certain asset dedicated to the performance of the respective
service. Consequently, the private company finances and manages
the asset and provides the service as agreed with the public
authority. Thus, a private company is involved in the whole
process of rendering a service – it creates the asset
necessary for rendering the service and then renders the
- Construction and management: a public authority finances
a certain project and assigns a private company to design,
construct and manage it for a definite period of time.
- Adjoining construction: a private company finances the
adjoining construction of an already existing public asset
and manages it for a period sufficient to recover its
investment and gain profit.
- Purchase (/lease)-development manage-ment: a private
company purchases (leases) a public asset and renovates and
manages it for a certain period of time.
- Construction-transfer management – a public
authority assigns a private company for financing and
constructing an asset. After the asset is constructed the
private company transfers the ownership title to the public
authority and is granted the right-of-use of the asset for a
period sufficient to recover its investments and gain
- Construction-ownership management: a private company
constructs and finances an asset and renders the respective
service for the contractual term or up to the statutory term
provided by law, whereas the public authority has a
regulatory function in the process of rendering a
In the case of the Management PPP, a public authority
transfers the right-of-use of a certain public asset or the
right to perform a certain public service to a private company.
The private company, on its behalf, has the obligation to
manage the assets, and perform the respective services.
PPP areas of business in Bulgaria:
- Construction and management of infrastructural objects
– highways; airports; river and sea ports, city and
municipal road networks; water supply and sewage.
- Development of telecommunication technologies.
- Management of power resources.
- Extraction of earth minerals.
- Construction and management of sport, medical and
Though one of the first assets ever occupied by man, real
estate remains a complicated and challenging business. The real
estate investor needs to be aware of potential pitfalls when
considering real estate as an area of interest.
Ivan V Vulchev
Ivan V Vulchev is a managing associate in the Sofia
office of PI Partners. He graduated from Sofia
University St Kliment Ohridski, and earned his Master
of Law degree from the same university in 1998. He has
participated in complex negotiations on various matters
(intellectual property licensing, information
technology supplies, consultancy services agreements,
chattels deliveries, real estate transactions and
letting, shares and equity acquisition, labour
disputes, distribution arrangements and financing
transactions) and has led teams in due diligence
Ivan has an information technology and intellectual
property law practice. He has substantial experience in
the protection and exploitation of intellectual
property rights in many industries, including music,
publishing and film. Ivan's experience in M&A
comprises full-scope advisory services on local
entrepreneurs' transactions and work on big
multinational transactions. Real estate is another area
of particular interest. He has worked extensively with
both local business and large international investors.
Before joining the firm in 2007, he worked for IBM in
the Middle East, Africa, and Central and Eastern
Europe, and with a number of Bulgarian film and music
licensees from top movie and music firms, as their
Mladen Mladenov's main areas of practice as part of
PI Partners are real estate, contract law, company and
commercial law and intellectual property law. Before
joining the firm, Mladen received an LLM in European
Law from Julius-Maximilian's University in Wurzburg,
Germany. He received his Master's degree in law from
Plovdiv University Paisii Hilendarski in 2005.