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3. Special cases

IV.3.1. Acquisition of ownership title and limited property rights over marketable state owned real estate properties

 

The ownership title or limited property rights (e.g. construction right, right of use, etc.) over marketable state owned real estate can be acquired through:

•             a sale purchase transaction

•             exchange with other real estate owned by the foreign investor or its Bulgarian subsidiary only in the cases explicitly provided in the law, or

•             an in-kind contribution into the capital of a Bulgarian company.

The sale of marketable state owned real estate with tax valuation over BGN 10,000 (approx. Euro 5,200), shall be performed by the Privatization Agency under the rules of the Privatization and Post-privatization Control Act (“PPCA”). According to the PPCA, in case of sale of marketable state owned real estate with tax valuation over BGN 10,000 to Bulgarian individuals, to Bulgarian legal entities with up to 50% state and/or municipal owned share in the capital or to foreign persons, the procedures under the PPCA shall apply, except for explicitly specified cases (e.g. in case of sale of state owned residential real estates, sale to investors with class certification, etc.).

As per the PPCA the Privatization Agency shall adopt a decision for sale of state owned marketable real estate with tax valuation over BGN 10,000 upon proposal by the competent director of the state administration, to which the management of the real estate was granted, or by the respective Regional Governor (in case the management of the real estate was not granted) , after confirmation procedure with the Minister of Regional Development and the Minister of Finance.  The method of sale (i.e. public tender or  auction) should be determined by the Privatization Agency in a resolution, which is promulgated in the State Gazette, and the sale shall be performed according to the rules provided in the Tenders and Auctions Ordinance.  In case of sale of state owned real estate with tax valuation over BGN 500,000 (approx. Euro 256,000), instead of confirmation procedure, a decision of the Council of Ministers is required, determining the privatization method and conditions, based on which the Privatization Agency shall perform the privatization procedure.  The rights over the sold real estate are transferred by virtue of a written sale agreement (i.e. notary deed is not required) and no fees are due for the registration of the agreement with the Property Registry.

Regarding the sale of marketable state owned real estate with tax valuation up to BGN 10,000 and of state owned residential properties, garages, studios, etc., the State Property Act shall apply.  In general, in this case the competent authority is the respective Regional Governor, who shall perform the tender procedure and conclude the sale-purchase contract.  The contract has to be registered in the Property Registry in order to make the ownership title (or the limited property right) of the acquirer defendable against third parties.

Special rules are provided for power plants, allowing construction right for their development to be established against remuneration, without performing a tender or an auction.

Another exception from the tender rule enables the legitimate acquirer of lawfully constructed building on the said real estate to acquire ownership title over the land without performance of a tender.

General principle provided for in the State Property Act is that an exchange of marketable state owned real estate or of the construction right over such real estate with other real estate owned by individuals or legal entities may not be performed, except  for explicitly defined in the law cases (e.g. termination of co-ownership, fulfillment of international treaty, etc.).

 

An in-kind contribution of marketable state owned real estate is executed on the ground of proposal of the Minister with relevant sector competence and a decision of the Council of Ministers.

As a general rule, the State Property Act provides that, in case of establishment of construction right or right of use up to 10 years over marketable state owned real estate, the respective Regional Governor shall issue the order, perform the tender procedure and conclude the contract.  In case of establishment of limited property rights over marketable state owned real estate with tax valuation over BGN 500,000 (approx. Euro 256,000), a decision of the Council of Ministers is required, based on which the Minister of Regional Development shall perform the tender procedure and conclude the sale-purchase contract

Specific rules are provided in the Agricultural Land Ownership and Use Act for the conditions, and procedure for disposal with state owned agricultural lands.  Regarding the disposal with state owned forestry territories (e.g. forestry lands and forests), there are special rules provided in the Forestry Act, effective as from 9 April 2011.

 

IV.3.2. Acquisition of ownership title and limited property rights over marketable municipality owned real estate properties

 

The PPCA as of 5 March 2010, the PPCA applies in case of sale to Bulgarian individuals, to Bulgarian legal entities with up to 50% state and/or municipality owned share in the capital or to foreign persons, of the following marketable municipality owned real estates: (i) non-residential properties used for business purposes (e.g. shops, warehouses, workshops, etc.), which are not included in the patrimonium of municipality owned legal entities, and (ii) real estate projects under construction, which are not included in the patrimonium of municipaly owned legal entities.  In this case the sale of municipality owned real estates shall be performed by the respective Municipal Council through a tender/auction according to the procedures provided in the Tenders and Auctions Ordinance.

Regarding transactions with marketable municipaly owned real estates outside the scope of the PPCA (e.g. residential properties, properties with non-business purpose, etc.) the Municipal Property Act shall apply.  In this case the Municipal Council of the respective municipality should pass a resolution for performance of a tender/auction procedure, on which basis the Mayor concludes the sale-purchase contract.  The contract has to be registered in the Property Registry in order to make the ownership title (or the limited property right) of the acquirer defendable against third parties.

The ownership title or  limited property rights over marketable municipal real estate may be transferred without tender by the Mayor in the cases explicitly specified by the effective legislation within a procedure determined by an ordinance adopted by the Municipal Council where the property is located.  The establishment of construction right over marketable municipaly owned real estate for development of power plants (like the case of state properties) is executed without performing a tender or an auction.

General principle provided for in the Municipal Property Act is that an exchange of marketable real estate owned by a municipality or of the construction right over such real estate with other real estate or of the construction right thereof owned by individuals or legal entities may not be performed, except for explicitly defined in the law cases (e.g. termination of co-ownership, fulfillment of international treaty, etc.).

Specific rules are provided in the Agricultural Land Ownership and Use Act for the conditions and procedure for disposal with municipal owned agricultural lands, e.g. there are certain additional requirements related to disposal of municipal pastures and grasslands.  The disposal with municipal owned forestry territories (e.g. forests and forestry lands) is regulated by the Municipal Property Act, in compliance with the new Forestry Act, in force as of 9 April 2011.

 

IV.3.3. Sale of real estate properties  without tender/auction under the Encouragement of Investments Act

The Encouragement of Investments Act (EIA) envisages different incentive measures and privileges for local and foreign investors that undertake significant investments in certain economic activities within the territory of Bulgaria.  The aim of these measures, financed by the state, is to promote large investments and improve the business environment in the country.

Investors with certificate for class A or class B investment issued by the Minister of Economy, Energy and Tourism, are entitled without tender/auction to:

•             purchase marketable real estate owned by the state or municipality, or

•             acquire, against remuneration, limited property rights over real estate owned by the state or municipality

Rights over the above real estate properties may be transferred or established at prices lower than the market ones, where the price cannot be lower than the tax evaluation of the real estate property, for priority investment projects, provided that all conditions for implementing the regional investment aid scheme under Regulation (EC) No 800/2008 have been fulfilled.

There are special rules for priority investment projects and for real estates managed by the Ministry of Defense.

The contracts must be registered in the Property Registry in order to make the ownership title (or the limited property right) of the investor defendable against third parties.

Non-implementation of the investment project of the above investor within the implementation term and regarding the amount of the investment is included in the relevant contract as termination grounds.  The contract shall be terminated also in case the work on the implementation of the investment project has not started within two years as of date of signing the respective contract.

The investor may not dispose of the real estate property (or of the limited property rights), acquired according the procedures under the EIA, prior to the expiry of a five-year term as from the date of implementation of the respective investment project, and in case of medium- and small-sized enterprises - within three-year term as from the date of implementation of the respective investment project.