British Expats in Bulgaria: Property Pitfalls Possible in Real Estate Paradise

Special Report |Author: Phil Davies | October 25, 2009, Sunday // 12:55|  views

The dream of an idyllic retreat in Bulgaria may be fraught with pitfalls on the way. Photo by

Whether one was forced to study Latin in school, or not, there’s a simple phrase that everyone should remember: “Caveat emptor!” or “Buyer, beware!”

Variety of the Bulgarian Landscape and Its Attractions for Expats

There are many thousand British expatriates currently resident in Bulgaria. Their numbers have steadily grown over the past several years; there are even “pioneers” here since the 80s and 90s. No-one really knows how many Brits have made Bulgaria their favored short-term destination or permanent residence.

Some are posted here long-term by their company; some take their regular vacations in Bulgaria; many have moved here permanently, whether as retirees, or younger people and families coming here to pursue and develop their career or business.

There are different profiles of British expats across the land of Bulgaria. As one might expect, career professionals are prominent in the larger cities, such as Plovdiv, Varna, Bourgas, Ruse and Stara Zagora. Sofia, as the capital city, has a unique market profile, according to Shtelyan Kalchev, Broker and Manager of RE/MAX Partners.

Bansko, the famous ski and mountain resort, attracts mainly British seasonal holiday-makers or people who have bought properties principally as investments, letting them when they are not themselves on vacation. Pamporovo and Borovets are other favored destinations for this sector of British expat society.

This is also true of the manybeach resorts on the Black Sea, from north to south, large or small, although the picture becomes more mixed, with many British expats settling more permanently in smaller communities and villages within easy reach of the coast.

The city and region of Veliko Tarnovo have a different profile, according to Veselina Koleva, of real estate company RE/MAX Connection; a mixture of older and young people, some settling in the city itself, but with most preferring the surrounding villages. The entire district seems to act as a hub, for a variety of reasons. The region is centrally placed in Bulgaria, 3 hours’ drive from Sofia, and about the same from the coast and its resorts.

It is also an important cultural and historical center – “City of the Tsars”, the capital, of the Second Bulgarian Kingdom, established in 1185. Further, the traditional architecture, a sympathetic blend of wood and stone, set in a dramatic landscape, assists in the preservation of a long-standing culture – as well as being aesthetically attractive to a potential buyer.

The property market across the regions of Bulgaria is therefore complex, despite the relatively small size and population of the country, and, thus, of the expat presence.

General Expat Problems of the Bulgarian Property Market

One can, then, observe a number of distinct sectors of the property market, from short-term rental or investment, to permanent homes bought by expats.

The majority of British expats (happily) succeed in finding a property that suits them without real problems. There is, however, a significant number of buyers and investors who fall foul of a variety of problems – some 30%, according to one estimate (although this remains difficult to gauge accurately).

The Bulgarian national press, and even the British media, regularly report on difficulties and problems for foreign nationals who are engaged in property dealing, whether speculative or for personal, lifestyle reasons.

Several factors come into play, ranging from the global financial crisis and its effects, to the demands of Bulgarian law, right down to the extreme of what might be called common criminality and exploitation.

It is generally acknowledged, by scientific study, and certainly by personal anecdote, that buying or selling a domestic property is one of the most critical stages in terms of stress, for anyone. There can be several elements to this demanding experience.

Even making a move of house in the United Kingdom is difficult for a native Brit. There are so many factors in play: a career move; the family’s welfare; job opportunities; education for the kids; contact with friends and family; relative values of local property markets, and so on. Plus, of course, the rigors of the British legal system that apply to this situation.

The challenges facing those who wish to move to Bulgaria (and any other foreign country) are immediately magnified. One faces the same emotional problems, but the pure logistics become a steep mountain to climb successfully.

Firstly, the language, of course, depending on individual capability. Second, an unfamiliar legal system, with (to the expat) its new set of restrictions and demands. Third, practical and effective professional relations with agents, with developers, and even down to problems with builders and craftsmen.

The Global Crisis as a Bulgarian Factor

Everyone has been affected, in some way, by the so-called global financial crisis. Bulgaria is certainly not immune. However, as a leading Sofia real estate agency commented, continued talk of this crisis only serves to inflate a lack of confidence in the property market. There are also some local factors to be considered.

Over the past few years, Bulgaria has witnessed a huge boom in construction – from shopping malls to hotel complexes, as well as a massive development of domestic accommodation, from protected private estates to new apartment blocks.

There are several problems associated with this expansion; but what is relevant here is the surge of over-capacity in domestic property. And, the inevitable consequence – a (relative) drop in housing prices, with the emergence of a strong buyers’ market, if one has the means, along with a collapse of the sellers’ side.

So, basically expressed, it’s still a good time to buy in Bulgaria, whether short- or long-term! But, it’s not a bed of roses, by any means.

Bulgarian Property Problems Hit Brit Expats

There are several factors that make Bulgaria a positive attraction to a Briton: it’s now part of the EU; the comparative cost of living is cheap; there is plenty of property on the national and regional market; the scenery is spectacular; Bulgarians themselves are open, welcoming and so hospitable.

Most of these are basically emotional reasons, however valid; the prosaic truth is that buying property is not easy, in any country, including Bulgaria.

In the UK, everyone is familiar with the concept of owning land – it’s leasehold, or freehold (you rent/lease it, or you own it outright). In Bulgaria, no foreigner can own Bulgarian land – one has to form a Bulgarian company in order to purchase the land that props up one’s dream home.

Almost everyone in the UK has a mortgage (don’t upset yourself by calling it a massive debt!). In Bulgaria, the tradition is different, with most people owning their properties outright (through inheritance or by cash purchase). The banking system of Bulgaria is opening up significantly to the concept of mortgages, but terms and conditions differ significantly from those of the UK.

Another significant difference: the proportion of disposable income taken up by regular mortgage payments is calculated on a very different basis, while the interest rates charged are way above those in UK.

Overall, the legal demands made of the property buyer are, understandably, different – the entire process is unfamiliar. This increases the need for reliable professional support throughout the process of purchasing a new home – even in the UK, almost all buyers use professional agents, rather than “going it alone”, as they are legally entitled to do.

Everyone knows of “a friend of a friend” who bought Bulgarian property on the internet – can one really believe that? Frankly, it’s largely an urban myth – or a potentially complete disaster!

Case Studies of British Buyers in Deep Trouble

It is unfortunate that, at the every least, there have been several cases of – let us call it – fraudulent dealing in property in Bulgaria. If you are not familiar with this, just do an internet search for “Bulgarian Dreams”, a company that “came and went”, as the phrase goes, and is now being investigated by the police in Britain, partly as a result of an in-depth report aired by the BBC in February 2009.

There are several such cases, unfortunately; an interesting point that emerges is that there are so many UK-registered, and UK-based, real estate companies that may well be involved in what one may call “dubious conduct”. And, if you visit Bansko, you will quickly see that many of these agencies, sporting Union Jacks and Brit logos, are – closed, empty, gone.

There was the famous example of several hundred British and Irish people in and around Bansko whose dreams became complete nightmares; they stand to lose up to GBP 6 M between them, if they cannot resolve their problems with developer Bulgarian Development UK at Pirin Park Resort. They have even had to resort to appealing to the EU for help, so far without response or action.

Several organizations and legal businesses have recently opened up in Bulgaria, as a response to these ongoing problems. A Sofia legal company, M. Hristov & Associates, is actively defending a large number of Brit expat cases concerning unfulfilled contracts. The exploitation of many Bankso properties provoked the formation of an organization called Bulgaria Property Action Group (BPAG), to champion a specific problem, that of off-plan deals that have gone awry in the resort. And, there’s the Pirin Park Resort Residents Association, formed to try to solve another issue of expat home ownership in Bankso.

Two Sad Personal Stories

In addition, has encountered at first-hand some of the problems that have affected British expats. Their problems are long-term, and remain largely unresolved today.

Peter described a situation where he stands to lose EURO 25 000 on a partial purchase of property in Bulgaria.

“Unless you pay more money to fulfill the contract we will take you to court, and apply for your UK assets to be seized”, is the latest telephone threat, this week, that Peter received from his Bulgarian builder, who also happens to work for another involved company. This person also won’t commit anything to paper (or email, even).

A couple of years ago, Peter bought his first property in Bulgaria without any difficulty. He then decided to buy a second property, through a different agency called Property Invest, and that’s where it all started going wrong.

Peter went for an apartment in Mladost, a Sofia district.

“I paid him [the agent] his agency fee and throughout a couple of months EUR 25 000 to the building company. After I never heard anything for about 3 months I became concerned. I tried phoning Property Invest but no luck, lines were dead, their Internet site was gone, and I even sent emails to the building company without any response at all. Eventually the builder’s site went down too.”

After several months of inaction, with Peter becoming increasingly perturbed, he was contacted by one of the agency partners, only to be told that “the next payment was due for the apartment! This after many months of nothing, I was very suspicious especially as he was using a private email account, and not a company one.”

Peter believes he is within all his legal obligations in this contract and has been told professionally that “between the building company and Property Invest they have failed on some points of the contract we have, and as such I have instructed a Barrister in Sofia to take legal actions against them for this failure in the contract”.

Two days ago, Peter updated he confirmed he is going to take legal action in Sofia, “and I sincerely hope to recoup the 25,000 Euros from them, but I am not holding my breath as it could be a long time indeed, and if and when I do get anything, it will probably be eaten in legal fees.”

He adds, despondently: “I really get the impression that it’s not unusual what’s happening, but I am pretty disgusted.”

Mary has a different, but equally inexplicable problem. She successfully bought an apartment in a large Sunny Beach (Black Sea coastal resort) complex, and says that she enjoyed her vacations there in 2007 and 2008.

Then, early this year, came the problems: she discovered there were no basic services, such as water, gas, electricity, and contracted security – all cut off!; and she, like other neighbors, was barred from even entering her own property!

She has spent the past several months trying to find a solution to the problems. She even had to re-schedule a holiday visit because of the situation, at considerable personal expense and inconvenience.

Her update to arrived this week: “The European Consumer Center in Sofia intervened in April. Utilities were restored in May. We also engaged a very competent BG lawyer. Euro Build 4 resumed managing and maintaining the complex.

"September 7th., heavy rain fell in Sunny Beach. In my apartment I now have 3 separate leaks from the roof and window. In spite of the repeated assurances of the manager, Ms. Stancheva, Euro Build 4 have not repaired the leaks. They now say it will not be done till spring!!!”

Mary’s ongoing conclusion is surprisingly balanced, considering all she has suffered: “Suffice to say that if I knew then (2006) what I know now (2009) I would not have invested in Bulgaria, although I still love the country & the ordinary Bulgarians one meets on a daily basis, but not the developers/builders or those one does business with!” cites at some length only these two unfortunate cases, while being familiar with other, similar personal “episodes”. These examples are all too familiar and credible, for the unfortunate minority (let us stress) of buyers who have entered the Bulgarian market.

The Bulgarian Solution

Without making any judgment on the cases cited above, there are general safeguards that any prospective would-be expat can, and should, make in Bulgaria, as they might in Britain or elsewhere.

Firstly, one should dispel all romantic notions about a nice, incredibly cheap house or apartment, wherever one wishes to settle in Bulgaria – of course, they still exist, but they need thorough investigation. The market has developed hugely in the past few years, as local citizens and professional developers alike realize the potential worth of marketable properties for the expat.

The most important safeguard is, as most do in the UK, to find a reliable and professional agent and lawyer to assist and move along the phases of purchase in Bulgaria. It’s difficult enough to completely understand a legal document in UK, let alone one that has unfamiliar demands, written in a foreign language (what about the “small print” in UK legal documents), and with different procedures.

Some Steps to Avoid Disaster and Misery

As mentioned earlier, one needs to put in motion a realistic and strategic personal or family plan.

It’s best to find local, professional expertise for support through the entire process of purchase.

Of course, local specialist companies exist, and, as always, one needs to consider carefully which company to choose.

To assist with this, there are Bulgarian companies who belong to independent bodies such as the Independent Association of Professional Property Professionals (AIPP), and other Bulgarian-based companies who have begun to specialize in dealing with expats.

Additionally, there are many wholly reputable real estate agents, often with national coverage, who can provide a comprehensive and trustworthy service.

But even they admit that there are still problems in the expat market. Vesey Crichton, of Cleves Ltd, recently told that he did not consider that Brits necessarily got full value for money in Bulgaria. Speculative investors have been particularly hard hit as a result of the pound falling against the Euro, and the “bubble” of the past few years has burst.

One can conclude by reviewing several important factors. The would-be buyer needs to proceed in a realistic, hard-headed way; to employ trustworthy experts and interpreters; to be vigilant to the obscure terms and conditions of single contracts and the different demands of Bulgarian property law. By remaining vigilant, there is every possibility of concluding a satisfactory deal, as the majority of expats happily experience.

Certainly, we should all remember that old Latin phrase, but – be wise, bold and daring, too!

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Tags: mortgage, british, Briton, expat, property, real estate, investor, letting, residence, BBC, RE/MAX, Cleves Ltd


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