Buying real estate is one of the most important decisions a person can make in their life. Lack of sufficient attention or competent and timely legal assistance when purchasing real estate can lead to years of litigation or significant financial losses.
In this article, we will look at three mistakes that can create danger when buying real estate, explain what the potential consequences are, and suggest ways to avoid them.
Three fatal mistakes when buying real estate
First mistake when buying real estate: not checking for encumbrances
Many buyers trust the information provided by the seller without performing the necessary checks for encumbrances on the property. A title search is a procedure that examines whether there are any encumbrances registered on a property, such as mortgages, liens, claims, rights of use, building rights (superficies), rights of way (easements), and other restrictions that may prevent the transfer of ownership or create restrictions for the buyer if the transfer of ownership takes place despite their existence.
Failure to check for encumbrances can have serious consequences. For example, if there is a mortgage on the property, the mortgage lender may demand that the property be sold to cover the previous owner’s debt, even if you are the new buyer.
How can you avoid this?
Be sure to check the Property Register of the Registry Agency before purchasing real estate. The competent authority is the directorate where the real estate is located. In practice, the Certificate of Encumbrances is usually one of the mandatory documents when executing a transaction for the transfer of ownership of real estate before a notary public.
Since 2018, every Certificate of Encumbrances issued by the Property Register bears a unique 12-digit alphanumeric code. When the code is entered, each user can determine for themselves whether the certificate they are being offered is authentic and identical to the one issued by the Registry Agency. The check can be done by property account, which is the unique identifier (like a personal identification number for real estate) of the property, or by the owner’s name when there’s no info on the property identifier.
There are three options, with the difference being in the period for which the certificate is issued and the state fee payable for its issuance:
– Standard order: up to 7 business days, fee of 5 (five) leva;
– Express order: up to 3 business days, fee of 10 (ten) leva;
– Express order: up to 8 working hours, fee of 25 (twenty-five) leva.
Second mistake when buying real estate: not doing sufficient due diligence on the property
Before concluding a real estate purchase agreement, you must ensure that the seller is the actual owner of the property. A title search is a process that determines whether the seller of a property has the legal right to sell it. It is extremely important in order to avoid risks such as lawsuits from co-owners, loss of the amount paid, or even cancellation of the deal/eviction.
What does the property check include? In addition to the encumbrance check, which was discussed separately, the ownership check preceding the purchase of real estate includes:
А). Verification of ownership documents. It begins with a check of the notarial deed to establish whether it has been issued lawfully and whether it has been registered with the Registry Agency. If the property has been acquired by court decision, its validity, admissibility, and legality should be checked. The check should also establish whether the decision has entered into force and, accordingly, what its legal effect is and whether there is consistency between the decision and the data published in the Property Register.
If the property was acquired through inheritance, the following shall be verified: Certificate of heirs: Establishes the relationship between the heirs and the deceased owner; Will: If the property is bequeathed by will, its validity shall be verified, and here it is important to be taken into account and whether this will can be a32> be contested by anyone of the legal heirs of the testator.
B). Verification of the ownership history: The previous ownership of the property is investigated to determine whether all previous transactions have been carried out in accordance with the law. It is verified whether all formal requirements for the transfer have been met, which should be in accordance with the legislation in force at the time of the transaction. The aim here is to establish continuity of ownership by tracing the chain of transactions and ensuring that there are no contradictions in the data between the deeds.
C). Verification of the identity of the property: The data from the notarial deed is compared with the cadastral map and cadastral registers to see if they are identical in terms of the location of the property, size, and other similar identifying features of the property. It is ensured that there are no discrepancies in the area, boundaries, or purpose of the property, and if there is such a discrepancy, the reason for it is investigated.
D). Verification of restitution claims: It is established whether the property is subject to restitution or legal disputes for restoration of ownership. If the property has been subject to restitution, it is checked whether the restitution process has been completed, and it is also established whether all the requirements of the law on restoration of ownership have been met.
D). Check for co-owners: If the property is owned by more than one person, each co-owner is entitled to a share of the property. The seller must obtain the consent of all co-owners before the sale. Failure to do so may result in the cancellation of the transaction or claims for compensation from the other co-owners because they have what is known as a “right of first refusal.” If they are not offered the property, they can file a lawsuit to buy out the seller’s share.
The danger for the buyer is that they may pay for a property that is not wholly owned by the seller. Always insist on documentary proof of the consent of all co-owners before signing a contract when purchasing part of a jointly owned property.
Third mistake when buying real estate: failure to check the legality of the construction
When purchasing real estate, especially newly constructed properties, it is particularly important to ensure that the construction is legal. This means that the building must have all the necessary construction documents issued, as the absence of even one of these documents may mean that the building is unsafe or does not meet regulatory requirements.
The danger for the buyer is that without these documents, the property may not be entered in the registers and, in some cases, may be subject to demolition. To avoid this, always ask the seller for copies of all permits and certificates.
What is a construction legality check? This check involves determining whether the construction of the building or structure has been carried out in accordance with: the applicable construction and urban planning regulations; and whether the necessary permits and approvals have been obtained from the relevant authorities.
How is the verification of legality carried out? It is necessary to check the construction documentation. Important acts and stages of construction include:
Building permit: It is checked whether it has been issued by the competent authority (the municipality) and whether it covers the entire construction;
Approved construction and architectural plans: Checks are made whether the project has been approved and whether the construction complies with it; It is possible that there may be an unlawful deviation from the approved project during the execution of the construction, as here the risk is that if it becomes necessary to correct the violations or legalize them, this may be expensive and time-consuming, and sometimes it is possible to be and practically impossible.
Act 14: Certifies the completion of the construction of the building;
Act 15: Certifies that the construction has been completed in accordance with the approved design.
Permit for use (Act 16): Establishes that the building has been put into operation and can be used legally. The absence of Act 16 means that the building cannot be used legally for residential or other purposes.
Technical safety documents. If there is no such certificate, there is a risk that there is no evidence that the building has been constructed in accordance with technical safety requirements. This could put the lives and health of users at risk.
Conclusion
Each of the above-mentioned mistakes when purchasing real estate can lead to various adverse legal consequences, such as invalidity of the transaction; financial losses for the buyer; legal disputes with the actual owner or other persons; restrictions on use and inability to use the property for the desired purpose in the absence of certain documents.
If you need a comprehensive study regarding the purchase of real estate and assistance in preparing the necessary documents for the transaction, you can contact us using the following
Contacts
Sole proprietorship law firm “Silvia Petkova”
address: Sofia, 2 Tri Ushi St., tel. 0885 47 77 57
working hours: Monday to Friday from 10:00 to 18:00.
email: sylvia@petkovalegal.com
Silvia Petkova Sole Proprietorship Law Firm has experienced property law attorneys.
Legal consultations are provided on site at the office or by phone after a prior appointment.