Nowadays, more and more people in Bulgaria are choosing to buy separate objects (apartments, studios, offices, garages) in buildings that are not fully constructed yet or although they are constructed – are not entered into exploitation (commissioned). The reason? The price of such properties is significantly lower than that of objects located in completed and commissioned buildings.
Although the lower price may seem tempting, it is associated with taking serious risks, which should be familiar to anyone wishing to purchase such a property.
What does it mean for a building to be “commissioned”?
In general terms, commissioning is the official finding by a state authority that a building has been constructed in accordance with the investment projects and construction documents and meets all legal requirements for safe usage/occupancy.
Depending on the category of the building (especially its total built-up area), buildings are commissioned either by issuing a Certificate for entering into exploitation or by issuing Act 16 and a Usage permit.
What the terms Act 14 and Act 15 mean?
Act 14 and Act 15 are construction documents preceding the commissioning of a building. They are drawn up and signed by the investor himself and by the persons employed by him in the construction process (designers, builders, supervisors, etc.). No public/state authorities are included in the preparation of these two documents.
In simple terms, when Act 14 is issued, the rough construction of the building is complete, but the construction process is not fully complete yet.
When there is Act 15 issued, the construction of the building is complete and the commissioning is upcoming.
To summarize: when there is Act 14, the construction of the building is not finished and the building is not yet commissioned; where there is Act 15, the main construction is finished but the building is not yet commissioned.
What are the risks of buying a property at Act 14 / Act 15 phase?
There are two main risks when buying a property on Act 14 phase: the construction of the building may not be completed at all; the building may not be commissioned.
There is one main risk when buying a property on Act 15 phase: the building may not be commissioned.
What negative consequences may follow the purchase of a property at Act 14 / Act 15 phase?
Buying a property in a building that has not been commissioned could carry a number of negatives, the main ones of which will be described below.
Impossibility for occupancy.
Firstly, you should be aware that objects in buildings that are not commissioned cannot be occupied.
The law specifically prohibits occupying objects in buildings that are not commissioned. This includes buildings with issued Act 14 as well as buildings with issued Act 15. And while in the case of those with Act 15 the prohibition is only formal (having in mind that many families in Bulgaria actually move and live in such buildings), the occupation of a building with Act 14 is not only illegal, but also practically impossible (since, as mentioned above in the article, in these buildings the construction process has not been fully completed yet).
Impossibility to carry out an address registration.
According to the law, it is not allowed to carry out an address registration in a property located in a building that is not commissioned. If you try to change your address on your ID card, a refusal will be issued by the administrative authorities.
Payment of industrial electricity.
Properties located in buildings that are not commissioned cannot technically have legal individual electricity and water lots. This is the reason that in such buildings, owners cannot use “residential” electricity. They have to pay for “industrial” electricity, the price per kWh of which is significantly higher than that of the residential electricity.
Payment of local tax and household waste charge.
Generally, local taxes and household waste charge are only payable in respect of properties that are commissioned. Considering the increasing number of cases of buildings being “abandoned” by investors on Act 15 or even on Act 14, legal amendments have been made for in the Bulgarian Tax Law, according to which, if a building is not commissioned within 2 years from the issuance of Act 14 or within 1 year from the issuance of Act 15, local taxes and household waste charge are due from the owners of objects in the building. Thus, practically you may find yourself in a situation where you occupy an illegal (non-commissioned) apartment, but you are still liable to pay taxes and household waste charge for it.
Difficulties in case of subsequent sale of the property.
If you are owner of a property in a building that has not been commissioned, you should be aware that making a subsequent sale of the property to a third party would be extremely difficult, having in mind all the negatives that this circumstance entails. Even if you succeed to find a buyer who agrees to purchase your property, the price they will offer you will certainly be significantly lower than the price of a similar property in an commissioned building.
If you are considering buying an unfinished real estate (on Act 14 or on Act 15 phase), Atty. Dilyan Kolev would be able to assist you in order to guarantee your rights and interests to the maximum extent and to minimize the above-mentioned risks by including certain protective clauses and compensatory mechanisms in the purchase-sale contracts.