Unfortunately for many people Bulgaria has been something of a difficult property market over the last few years. While there is no doubt there has been a general property boom in the country it would appear that a number of people have fallen foul of development issues, fraud and deception. There is a post on the property community forum entitled “Difficulties off plan Bansko” which highlights a number of issues one particular forum member has had with regards to a number of properties in the region.
Setting the scene
It looks as though the person in question has acquired a number of properties in Bansko, Bulgaira which are split between two different developments. However, it appears that the developers have hit financial trouble and while the first apartment in question is complete the complex itself is far from finished with the lobby, bars, restaurants, pools, spas etc all missing at this moment in time.
The investor in question has approached the developer, who is in charge of both complexes, and suggested using the money paid for the second development (which is still very much a shell) to cover costs associated with the first development to ensure completion. He has been told that the two developments are legally separate, his suggestion is not feasible and he will have to pay a further €20,000 to speed up the development of complex one. He was also advised that if he takes any legal action against the company he has no chance of recovering any money whatsoever.
In line with property development regulations in Bulgaria the investor has asked for a return of 20% of the purchase price, as he has paid 50% on each of the developments, plus compensation for the delay and ongoing issues. He appears to have been advised by a “lawyer” that he has no chance of getting any money back and legal action would be expensive and effectively worthless.
What options are open for the investor at this moment in time?
There are many different procedures which can be utilised in these circumstances, some of which should have been reviewed prior to the investment and others which can be implemented retrospectively, and we hereby cover some of the more useful actions which can be taken below:-
Legal advice
It is not clear from the original thread whether the lawyer who has advised the investor that “legal action is a waste of time” is working on behalf of the developer or is in fact independent. Either way, it is well-known that a number of legal firms in the area have been highly successful in obtaining compensation for some circumstances in the past. It’s vital that you do not depend upon legal advice given by anyone connected to the developer and you do in fact choose your own legal representative. How do you know that any representative recommended by the property developer would work in your best interest alone?
Contract
In tandem with your legal representative is vital that you revisit the original purchase contract and see what is hidden away in the small print, what you are entitled to and what you may have missed initially. As we suggested above, this is one of the actions that should have been taken prior to investing funds into any development but very often a detailed review of a contract is only carried out as and when problems occur. Again, it is vital that your legal representative is totally unconnected to the property developer themselves as this could cause a conflict of interests.
Talk to your property developer
While initial communication with your property developer may prove fruitless when problems occur, it is worthwhile keeping open the communication lines as ultimately the vast majority of property developers will not want the bad press of complaints nor will they welcome a day in court. Unfortunately, in many circumstances you may have to meet your developer “halfway” but very often it is worthwhile trying to get something out of the development rather than push for everything only to find a developer goes bust or disappears.
Alternative actions not recommended
There is a rather bizarre conversation on the thread which seems to recommend physical violence and intimidation when dealing with some property developers in Bulgaria. There is also a suggestion that the vast majority of lawyers in the country are untrustworthy which would appear to be a case of one bad apple spoiling the lot.
The truth is that the more high-profile legal cases which see investors lose money the more negative the public and investor opinion of the property sector and the legal profession. In reality this is a very unfair situation because the vast majority of property developers and the vast majority of the legal profession in Bulgaria are very good at their jobs and have good track records. There can be no situation whatsoever where physical violence or intimidation can be condoned because not only is this illegal, and could see legal action, but it is also highly unethical.
Bulgarian property market
While there is no doubt that the Bulgarian property market was for some time one of the favourites amongst UK and European investors, a number of high-profile spats between property developers and property investors has clouded the water somewhat. The ongoing worldwide recession is seeing more and more investors take their money out of the area and property prices falling accordingly. This has also led to significant financial distress for many property developers in a region which has increased the conflict between property developers and property investors with further negative headlines.
There is no doubt that once the worldwide economy, and in particular the Bulgarian economy, improves we will see investors return to Bulgaria although whether they will return in the numbers we have seen in the recent past remains to be seen. There is a belief that the regulatory environment within Bulgaria needs to be tightened and updated to ensure that investors feel both comfortable investing in the country and specifically investing in Bulgarian property.
Conclusion
There is no doubt that Bulgaria has had its problems with regards to property developers, scams and fraudulent activity in the past but in defence of some of those feeling the financial pinch at the moment, the worldwide recession appears to have increased these occurrences. As property investors continue to pull their money out of foreign markets the financial pressure on property developers around the world is set to increase in the short to medium term.
Even though it is evident that some investors have lost trust in the Bulgarian property market and those participating in the sector there will in due course be a period of recovery. Whether the market grew too quickly prior to the worldwide economic crisis or whether regulators “took their eye off the ball” and were too slow to respond to changes in the market is debatable. However, Bulgarian property will one day attract the attention of significant numbers of overseas property investors but it looks as though there will need to be changes in the short to medium term to rebuild the trust factor which has obviously been affected.