When I started my practicing 10 years ago as a conveyance solicitor, it was the peak of off-plan property purchases in Bulgaria. Property investors from different countries – the UK, Ireland, Russia, Greece, Spain, Italy, Norway, etc., were attracted by the projects for new developments, advertised by foreign and local real estate agencies, very often supported with offers for rental income. As a result, many residential and holiday complexes have been constructed through the years and put in operation – amounting totally to several hundred thousand newly built apartments, most of them – sold to foreign buyers.
These days are gone already and the real estate boom here is over. The developments that were completed and sold could not generate any more fresh cash for the developers who constructed them. So obviously in the last couple of years they had to find another way for generating continuous income since they could not start new building projects due to the crisis that occurred.
The first option for making more money out of it was via renting out the newly built apartments on behalf of the individual buyers/owners, against giving them percentage of the generated rental income. In most cases this has been the main idea prior selling the concrete project off-plan. As I detailed above, many foreign buyers were attracted by promises for 7-8-9% annual rental income if they agree to purchase an apartment. But this option faced many difficulties, like the overload rental market with too many apartments for rent in the same area (because too many complexes were built in the same time) which fact, together with the necessary expenses that had to be invested for furnishing the apartment and for managing the rental initiative, could not allow achieving of such huge income – neither for the apartment owner nor the developer. Also the Bulgarian resorts depend strongly of the season so good occupation is usually possible for 2-3 months roughly through the year.
The alternative option, that was easier and preferable by many local developers, was to provide maintenance services in the complex and respectively to charge the apartment owners with maintenance fee. In the past I’ve experienced many cases where off-plan buyers in holiday complexes were asked to sign a maintenance contract together with the preliminary (private purchase) contract. Here the outcome was also not very positive, because most of the companies-developers bankrupted through the years and could not deliver maintenance. In some situations where possible, the maintenance activities then were engaged to officially or non-officially related daughter companies (which usually receive as an asset also any apartments that could not be sold yet). One shortcoming of the direct relations between apartment owner and maintenance companies I’ve experienced in my practice was that although the maintenance in its legal nature relates only to the external and internal common parts of particular building (like stairs, elevator, lighting of common parts, outside walls, roof, etc.), a standard trick used by developers was to relate the maintenance fee with other objects – outdoor pools, gardens, parking lots or common security of whole complex area, etc. This has been done usually to defend the asked amount of the maintenance fee, although the mentioned above subjects usually were owned solely by the developers.
Then in 2009 the Condominium Act has been accepted by the local Parliament, to improve regulation of the maintenance relations among the apartment owners, and to create legal status of entities formed by them in relation to dealing with the maintenance and repairs in the building. The Bulgarian Condominium Law enables establishing of Condominium (also known as “General meetings of apartment owners”) and forming an entity which to deal with maintenance of the common parts of the building, instead of signing direct maintenance contracts with Maintenance Company.
This legal option has been often used since 2009 and in most cases it substituted the previously signed maintenance contracts between buyers and developers. Although this is a step forward in the development of the Condominium regulations, a problem that occurs particularly in residential or holiday complex is that where the developers still have unsold apartments in their names, they usually attempt to control the formed Condominium, and respectively its decisions – including voting for Manager and these establishing the amount of and the way of payment of the maintenance fees. This applies particularly in situations where most apartments within the complex are sold to foreign buyers. In a concrete case I just had recently, I saw unfair goals pursued – to manage collecting the maintenance fees by the apartment owners, and the (non)payment of maintenance fee for their own apartments. I’ve seen e-mails sent by the developers to the individual apartment owners, with the following content: “Be informed that the General Meeting has taken a decision about the maintenance fee, so you got to pay it”.
According to the local court practice through the last years there have been many examples of defective or invalid decisions of the Condominium usually related to the amount and collecting of maintenance fee, and very often including attempts for forcible collecting of the fee through the local courts. This is why very often apartment owners use to dispute such decisions in court. There are numerous cases already where such decisions have been proclaimed void by the court due to shortcomings or defects in the decisions or in the procedure for organizing and performance of General Meeting. I’ve seen examples where General Meetings have been organized in very short deadlines and on holidays (like on Boxing day!) namely to avoid any possibility for the foreign apartment owners to travel and attend the meetings.
Considering that recently I’ve read also decisions voted on General Meeting for forcible collecting of maintenance fee against apartment owners who do not pay (although they usually do not reside more than 30 days per year in the apartment and should be released from payment of maintenance fee), I can conclude that the Condominium Law should create more effective options for control of these decisions, to avoid situations where writ of execution could be obtained against an apartment owner who resides abroad and obviously has not been informed at all about the performed General Meeting and the taken decisions that may harm his/her interests and rights.