Properties on plan vs Future properties on plan
Purchases of properties on plan should be distinguished from purchases of future properties on plan. The former relate to the purchases of actual properties between buyer and sellers, whereas the latter relate to transactions between real estate development companies and buyers in which the real estate development companies promise to sell properties when they are built. Below, we discuss these two types of transactions in more detail.
Buying a property on plan
Bulgarian law allows buyers to buy properties on plan. The ownership of the property purchased on plan and the associated risks pass to the buyer at the time of concluding the sale transaction. However, the obligation to pay the purchase price is postponed partially or entirely for later dates. The purchase price due by the buyer to the seller after the conclusion of the transaction needs to be specifically mentioned in the notarial act. Usually, the so-called “contractual mortgage” will apply to the property until the purchase price is fully paid.
Buying a future property on plan
The purchase of a future property on plan may also require payments of the purchase price in advance. The property development company uses the advanced payments to finance the construction of the property concerned. The ownership of the future property usually passes to the buyer after the buyer makes a full payment of the purchase price.
However, it is also possible for the buyer and the real estate development company to agree that a part of the purchase price will be paid after the ownership of the future property passes to the buyer. In such cases, the real estate development company may require the buyer to fund the remaining purchase price in an escrow account or transfer it to a notarial bank account.
To avoid any issues associated with the purchase of a future property on plan, it is highly recommended for the buyer to check the financial condition of the real estate development company and the legal status of the land on which the new property will be built.
Irrespective of whether one buys a property or a future property on plan, it is necessary to pay attention on the contractual formalities associated with the transaction. We would be glad to check these formalities for you and provide you with any other real estate-related services.