Bulgarian Landlord and Tenant Law

Due to the dynamic development of the real estate market in Bulgaria for the last couple of years, one of the most important questions for the property investors in the country are connected with the legal status and the different aspects of the rental relations since buy-to-let is one of the most realistic opportunity for the investors to receive effective income from their property investments. Bulgarian law is trying to find the balance between the rights of the tenant and the owner but maybe it is more likely to be classified as pro-tenant.

RENTS

The rental market in Bulgaria is free and the effective legislation provides just a legal frame inside which the parties are free to determine their rights and obligations as well as all other aspects of the rental contract. This is a logical consequence of one of the main principles of the Bulgarian law - the freedom of the parties to determine the elements of each contract. The applicable statute with regards to the rental relations is the Law and Obligations Act (LOA).

The Bulgarian initial rents are freely determined with an agreement between the owner and the tenant. The parties could stipulate a provision for the revision of the initial rent – i.e. the changes in the inflation index, changes in the rental market prices, etc.

The freedom to increase rents depends on the initial agreement between the parties and the usual situation with the long-term rental contracts is to have a provision according to which the owner to be able to increase the rent once per year in accordance with the changes in the inflation index for the period. Of course the parties are free to determine different options and periods for the revisions of the rent.

Another important aspect is that having a written rental contract is not an obligatory requirement for validity although it is quite recommendable. Even without a written agreement the rental relation is valid and the parties have the rights and the obligations in accordance with the provisions of the LOA. However it would of interest for both parties to have a written agreement and in this regard we have to mark that according to Bulgarian Civil Procedure Code the existence of a contract (including rental contract) with value above 5000 leva (or approx. 2600 euro) could not be proved with witnesses so a written agreement might be required in a Court dispute.

There is an option for official registration of a rental contract for real estate in the Registry Agency provided in the effective Bulgarian legislation. The purpose of such a registration is the possibility to bind the new owner (in case of ownership transfer) with the duration of the rental contract. A pre-requisite requirement for such a registration is the certification of the signatures of the parties by a Notary public.

DEPOSITS

Paying a deposit is not a statutory requirement and it is possible to conclude a contract without the necessity of placing a deposit. However the common situation is when the parties stipulate a deposit as a guarantee for the correct performance of the obligations of the tenant – i.e. to cover the electricity and water bills for the property, to keep the premises in good condition, to return the possession of the property after the end of the contract, etc. There is no maximum limitation for a deposit that could be negotiated. The usual practice in Bulgaria is that the deposit for the rent of real estate is equal to the price of the rent for one month. This deposit is paid in the beginning – with the signing of the contract and must be returned to the tenant in the end of the contractual relation if the tenant has fulfilled correctly all of his obligations. In case that there are any outstanding obligations of the tenant, the owner could keep the deposit and use it to cover these.

Surely, the parties of the contract can negotiate different amounts of the deposit, because this is only a common practice but it hasn’t got the strength of obligatory legal provision.

DURATION OF RENTAL CONTRACT/EVICTION

With regards to the duration of the rental contracts we could mark off two types of contracts – (1) rental contracts for specified term or (2) contracts for an unlimited term. The main difference is that the contract concluded for a defined term is terminated with the expiration of this term and the contract for an unlimited term could be terminated by each of the parties with written notice sent to the opposite party. The usual term for the notice is one month before the termination of the contract but the parties are free to stipulate different term for the notice.

Article 229 of LOA limits the maximum duration of the rental contract up to 10 years.

There is an exception from this rule which is considerably new (since 2007) – the duration of the rental contract could be longer (more than 10 years) if such contract is a commercial transaction. According to the Bulgarian law (Article 286, The Commerce Act) “Commercial transaction is a contract, concluded by a merchant , related to the occupation exercised by him”.

The persons who have the right to perform only activities of simple management are not allowed to conclude contracts of lease for a period longer than 3 years.

If such contract is concluded for longer period it has validity only for 10, respectively 3 years.

Another specific provision from the LOA is the text of article 236 saying that after the expiration of the term of the contract, if the tenant proceeds to use the hired object with the knowledge of the owner and the last one does not oppose to, the contract continues its strength for indefinite period.

It is possible, the contract to be concluded without determinate period of validity. In this case each of the parties to the contract will have the opportunity to terminate it with a notification of one month. In case, that the term of the contract is determined of day, the notification, which is necessary, is one day only. The regulation of this issue is in article 238 of LOA. Each party of the contract could unilaterally terminate the rental contract with giving the necessary warning term. Of course the parties are free to specify provisions in the rental contract derogating this rule and determining the requirements for the termination of the contract according to their needs and purposes.

THE EFFECTIVENESS OF THE LEGAL SYSTEM

The court system is effective although it is a bit slow and there are number of claims which the parties to the rental agreement could use in order to protect their rights and achieve the desired results. Of course the questions regarding the terms are difficult because the Civil Procedure Code does not binds the judges with certain terms to finish a court case with a decision and there are many other factors that could influence the length of a legal proceeding in these matters – i.e. the complexity of each specific case, the amount of evidences, the claims of the parties, etc. Usually the procedures are long.

In conclusion here it is very important to say that there are no strict terms and it depends on each particular case and all relevant circumstances how long it would take to resolve the dispute through the court.

LEGISLATION

Some of the most important statutes in the Bulgarian law that regulates the owner and tenant relations and the legal framework of a rental agreement are as follows:

• 1. Obligations and Contracts Act, (Promulgated, State Gazette №275 from 22.11.1950 in effect since 01.01.1951);
• 2. Civil Procedures Code, (Promulgated, State Gazette № 59 from 20.07.2007 in effect since 01.03.2008);
• 3. Commerce Act, (Promulgated, State Gazette № 48 from 18.06.1991, in effect since 01.07.1991);

In conclusion it should be noted that the rental relations, especially the long term business commitments, will require careful consideration of the provisions of the rental agreement as well as a detailed check on the status of the object (property) in order to identify the right of the landlord to validly rent out the property and also the potential risks of future actions (future sale or enforcement proceedings over the object). As the Bulgarian law provides wide range of options which could be included in a rental agreement by the sole discretion of the parties, it is recommendable to be advised by independent lawyer or independent business consultant before you conclude the rental contract.