2. Verification of title
IV.2.1. Notary verification
According to Bulgarian legislation, prior to the execution of the notary deed, the notary public is obliged to verify the title rights of the current owner (e.g. the seller), to review the corporate resolutions of the parties under the transactions, powers of attorney, etc. Following such verification, the notary public is entitled to execute the notary deed.
When the real estate transaction is related to an in-kind contribution and sale of the commercial enterprise containing real estate properties, the verification is executed by the Registry Agency.
IV.2.2. Title review
(Real estate legal due diligence)
The notary public is not obliged to review the ownership title history, i.e. to review the title rights of the predecessors of the current owner.
As a general legal rule, the ownership title of the current owner depends on the rights of his predecessor while the rights of the predecessor, in turn, depend on the ownership title of the predecessor of the predecessor. Thus, if one of the previous owners did not have a clean and unndisputable ownership title, this will reflect on the current owners, i.e. a third rightful party can claim the property right against the current owner.
The possibility of third party property claims is precluded by the so called prescription period of possession. According to the effective legislation, after the expiration of the prescription period of possession, the current owner of the property is considered the rightful owner, regardless of the rights of their predecessors. The absolute (maximum) prescription period is 10 years.
With this regard, it is recommended before purchasing real estate, the buyer to undertake title review of the targeted real estate, including the title’s history. The purpose of such a review is to verify that there is/are:
• a clean, valid and marketable ownership title held by the seller. The seller has to be, and his predecessors should have been the valid owner of the targeted real estate in order to avoid any risk of termination or annulment of the transaction. Usually, this title review covers the last 10 years since the maximum acquisitive prescription term in Bulgaria is 10 years
• no liens or encumbrances over the property. The buyer should be fully aware as to whether there are any registered liens and/or encumbrances over the targeted real estate, e.g. mortgages, interlocutory injunctions, going-concern pledges, limited property rights established in favor of third parties. A general principle in Bulgarian law is that liens and encumbrances “follow the property”, i.e. the registered liens and encumbrances can be enforced against the new owner
• no other registered rights in favor of third parties – if there are registered rental or lease agreements over the targeted real estate then the buyer shall be bound by them until the expiration of their term
• no court or restitution claims, and
• no public debts of the seller, which could lead to a forcible sale of the real estate by the state authorities.