Direct foreign ownership of real estate is provided for in a diversified manner.

Citizens of EU Member States legally residing at the territory of Bulgaria and legal entities registered in EU Member States are allowed to own land and buildings in accordance with the requirements laid down in law in compliance with the EU Accession Treaty of Bulgaria. Bulgaria may restrict, for a period of up to five years, the acquisition of land for second residences by individuals or legal entities that do not permanently reside at its territory. Notwithstanding the aforesaid, a restriction is in place for a period of seven years as of the accession date (1 January 2007) in respect of acquisition of agricultural land, woods and woodland by citizens of another Member State, or citizens of states party to the Agreement for the European Economic Area (the “EEA”). Said restriction however does not apply to independent farmers from such countries who legally reside in Bulgaria.

Currently, the Constitution precludes foreign individuals and legal entities who are not citizens of, respectively registered in, EU or EEA Member States, from owning land unless otherwise provided for in an international treaty to which Bulgaria is a party.  However, such foreign individuals and legal entities may become owners of buildings without owning the land on which the respective building has been constructed.  Foreign persons may also acquire the "right to use" land or buildings, which is similar to leasehold, for a limited term or as long as the "user" exists as an individual or entity. Such a leasehold, however, is non-transferable and does not entitle its beneficiary to develop the property. A foreign person may also acquire the right to develop land and thus become the owner of buildings constructed in exercise of its right, without acquiring title to the underlying land.  The right to develop land and the ownership right over a building constructed by exercising the right to develop is transferable.

Even though currently foreign individuals and legal entities who are not citizens of, respectively registered in, EU or EEA Member States, are not entitled to own land, said restriction does not apply with respect to legal entities registered in Bulgaria the capital of which is owned by foreign persons.  A foreign person may become the sole, majority or minority owner of a locally registered company and such a company is not in any way restricted to acquire and dispose of land or buildings or rights to use or develop real estate.  Thus, no permissions are needed for a local company owned by foreigners in order for it to engage in real estate transactions.

Under Bulgarian law ownership in real estate may be transferred or granted contractually only by way of a notary deed, except for cases where the State or a municipality acts as the transferor of title, as further explained below. A notary deed is a form of contract where, in addition to the parties to the contract, a notary public plays a role in the final execution of the contract. The procedure for execution of the contract requires, among others, the parties, or their duly authorised representtaives to be present in the notary public’s office for the signing of the notary deed and the notary public to sign the notary deed alongside with the parties. The title transfer effect of a notary deed occurs with the signing of the deed by the parties and the notary. However, failure to register the deed might result even in a loss of the right acquired by way of the deed: should a fraudulent seller execute another deed with another party for the sale of the same property and should such party register its notary deed in the Real Estate Registry prior to the registration of the notary deed of the first purchaser, the rights of the second purchaser shall prevail. The notary deed has special evidentiary strength: until proven wrong, it constitutes evidence of the transactions and actions implemented by the parties, as reflected in the notary deed. However, such a notary deed does not constitute evidence of the fact that the acquirer really acquired the rights, which were subject to the transaction. This is why a title check of the transferor and its predecessors in title ought to be performed.

According to the provisions of Article 18 of the Law on Property and Article 36, Paragraph 4 of the RILPUAL, there is a major exception to the “notary deed rule” described above. Where the transferor of ownership or limited in rem rights in real estate is the State or a municipality, there is no requirement for a contract to be executed in the form of a notary deed. In this case a simple written contract is sufficient to accomplish a title transfer effect.

Bulgarian law also requires registration of title transfer documents with the relevant Real Estate Registry. The Real Estate Registry is a registry of events affecting legal rights (i.e., agreements, encumbrances, statements of claim, etc.) but not a registry of legal rights. There is no rule in Bulgaria that the latest registered transferee of a piece of real estate is considered the owner of the allegedly transferred real estate. To ascertain the legal rights of a registered transferee, one must follow the chain of registered transactions/events back in time, until one comes to a fact/circumstance, which would be of a nature to confirm that the latest transferee acquired title as a result of the registered transfer.

Registration of title transfer agreement with the Real Estate Registry ensures the perfection of the title vis-à-vis third parties.  The effect of registration of events affecting legal rights is based on the principle that the event to be first registered in the Real Estate Registry shall take precedence over any such event, which is registered subsequently. Therefore, any party, which purchases a piece of real estate and registers its purchase after the registration of another event (such as the grant of a superficies, the grant of a mortgage, the registration of an attachment, or a statement of claim over the purchased property), shall take title subject to the rights previously registered. Registrations of events affecting legal rights enjoy public faith. Thus, even if a registrable event existed, but was not registered, third parties would be protected if they relied on the fact of absence of registration and entered into a transaction, which they registered.

It must be noted that Bulgarian law also provides for registration in the Real Estate Registry of purely evidentiary documents (i.e., documents different from those which affect legal rights), such as “notary deeds evidencing ownership rights”. However, the registration of such documents has no effect similar to the effect of registration of events affecting legal rights. It just serves the purpose of putting third parties on notice as to the fact that a certain person has been recognised as holder of certain rights in-rem in an evidentiary document. Registration or failure to register such evidentiary document might not have an impact on the title analysis done on the basis of registered events affecting legal rights.