After the expiry of a 5-years’ time period as of the date of the accession of Bulgaria in the European Union (EU), and namely as of January 1, 2013, the nationals of the Member States or the States which are a party to the European Economic Area Agreement (EEAA) may acquire non-agricultural land notwithstanding they are residents or non-residents in Bulgaria. Non-agricultural land may be acquired freely as well by the Bulgarian companies, established by the above mentioned foreign nationals and by the legal persons formed in accordance with the laws of another Member State or of an EEAA State.
However, the legal rules for acquisition of agricultural land are different from the above. As per the Treaty on the Functioning of the EU (“TFEU”) Bulgaria has an obligation to lift the restrictions on the acquisition of agricultural land by nationals and legal persons of another Member States or EEAA States within 7 years as of the date of the Bulgarian accession in the EU. Notwithstanding the expiry of this 7-years period on January 1, 2014, with amendment in the national legislature (Art. 3c of the Ownership and Usage of Agricultural Land Act /OUALA/) in the same 2014 was adopted a mandatory requirement for a 5-years’ residence of the persons who/ which acquire agricultural land by way of an asset deal. As per the strict interpretation of the above provision any person, notwithstanding whether such a person is a Bulgarian national or a national of another Member State or an EEAA State, for being entitled to acquire agricultural land by way of a deal should have lived in Bulgaria for at least 5 years before the date of such a deal. A legal person, acquiring agricultural land in Bulgaria, should have been registered by the laws of Bulgaria at least 5 years before the date of the acquisition deal. In case such legal person does not meet the said requirement, its shareholders, resp. members or founders should have resided in Bulgaria at least 5 years before the acquisition date. In the event of an eventual challenging of the acquisition on such grounds the deal may be declared invalid by court if the acquiring person does not manage to prove the observance of the mandatory 5-years’ period of residence/ establishment required by law.
The above legislative solution of the sensitive issue of agricultural land ownership is considered a violation of Art. 49 and Art. 63 of the TFEU (establishing freedom of residence and movement of capital) and in March 2015 an infringement procedure against Bulgaria was started by the European Commission. Currently the bill for repeal of Art. 3c is not yet adopted by the Bulgarian National Assembly.
The mandatory residence requirement shall not apply in cases of inheritance by operation of the law. I. e., a person from a Member State or an EEAA State may inherit agricultural land by law and is not required to transfer the property upon the inherited land within a certain time-period provided for by the law.
Unlike the EU and EEAA State persons, the nationals and legal persons from third countries may acquire ownership on land (either agricultural or non-agricultural one) only by virtue of an international treaty that has been ratified, promulgated and entered into force in accordance with Art. 22, Para 1 and 2 of the Bulgarian Constitution. Currently no such a treaty has been signed with a third country. However, the nationals and legal persons from third countries may acquire ownership over landed property through inheritance by operation of the law. In case of inheritance of agricultural landed property such persons are required to transfer the property within 3 years as of the acquisition of ownership (Art. 3b of the OUALA).
There is an explicit prohibition for ownership over agricultural land by Bulgarian trading companies, which shareholders are third country nationals or are companies formed in accordance with the law of third countries or of countries having preferential taxation regime (Art. 2, Para 7, Points 1 and 2 of the OUALA). Such a prohibition is imposed as well upon the Bulgarian joint-stock companies which have issued bearer shares (Art. 2, Para 7, Point 3 of the OUALA). The above prohibition provisions have been adopted in 2014 and subsequently the amount of the penalty payment for violation of the said provisions has been legally determined (Art. 40a of the OUALA). I. e., if any trading company of those specified in Art. 2, Para 7 of the OUALA has acquired an agricultural landed property before the entry into force of the said provisions, such a company has to transfer the acquired property for meeting the new legal requirements. Thus the company would avoid the penalty payment sanction provided for by the law. The deals for acquisition of agricultural landed property concluded by such companies after the entry into force of Art. 2, Para 7 of the OUALA should be considered invalid due to violation of law.
It should be taken into consideration that the statutory prohibition for acquisition of landed property by foreign persons is not applied in cases of acquisition of built-up plots of land. The said prohibition should not be applied if the landed property constitutes a belonging part (condominium property within the meaning of Art. 38, Para 1 of the Property Act) to individual objects of property constructed on the plot. This is the case whether the subject of the transaction deal is a separate building/ individually owned part of a building and the ideal parts of the landed property are acquired as a belonging part to the transacted property. Therefore the transaction of the landed property is considered ancillary and follows the property upon the building/ individually owned part of the building. According to the case law in such cases the prohibition for acquisition of landed property by foreign persons should not be applied (Judgement No 222/ 22.06.2010, civil procedure № 569/2009 of the Supreme Court of Cassation and Judgement No 394/25.05.2009, civil procedure No 298/2008 of the Supreme Court of Cassation).
lawyer Katerina Slavkova
This text is based on the applicable legislature at April 1, 2019. It does not constitute a legal advice and you should consult a lawyer for for legal assistance concerning your specific case.