Tuesday, 5 January 2010
important property update
Bulgaria Delays Outlawing of Property Cash Buys
New rules that envisage that all property transactions in Bulgaria must be carried out via bank transfer will come into force in the summer and not as of January 2010 as originally planned.
The delay is due to the parliament's failure to approve before the end of the year amendments to the country's Notary Act, which are still in the pipeline.
“The best case scenario is for the bill to be approved by the parliament at second reading at the end of January,” Iskra Fidosova, head of the judicial commission in the National Assembly, commented. “Most probably the law will start to be implemented not earlier than May or June,” she added.
There is hope that the new rules will help to reduce property fraud and money laundering, as well as ensuring that all fees and taxes owing to the state are paid.
Whilst the change to buying and selling was first mentioned a year ago as part of a bigger plan to reduce corruption in the property sector, it is only now starting to come to fruition.
As well as reducing corruption, it also aims to ensure that all fees and taxes owed to the state are paid, through the creation of a State Depositary Bank which would serve as a guarantee for all payments in the form of the state acting as custodian for deposits.
The legislative changes will require that both the vendor and the buyer specify their bank accounts for conducting a property deal. Alternatively, they could use the account of their notary public.
The conditions for depositing money into bank accounts as part of the deal will be specified by the respective sides in written agreements.
These legislative changes are seen as the first step to an all-out regulation of payment in purchase deals through a special law to be called Deposit Account Act.
There is also hope that the new laws may inspire more confidence from overseas property buyers.
But, there are risks to this new system, as sellers and buyers may want to avoid the new fee charged by the bank for servicing the transactions.
Thus, they may agree a lower price for the official transaction and then do a cash deal privately. This is common in France where the new system planned for Bulgaria is already in use.