Does the bank have the right to "take the property" because there is no Act 16?

In the recent years, the purchase of an “off-plan property” became something very common in the real estate market.

In practice, this means that a contract should be signed for the construction of the real estate, and the right of ownership is then transferred to the Buyer. In this case, the obligation of the trader is to build the site until it is ready for exploitation, ie. until obtaining a Certificate for commissioning, respectively Permit of use depending on the category of the construction.

What is “Act 16”?

Act template 16, or in short "Act 16", is the last act that is issued during construction and certifies the completion of the site.

Based on this document and all other acts during the construction process, a Permit of use or a Commissioning certificate is issued, depending on the category of the construction according to the Spatial Development Act (or as short in Bulgarian “ЗУТ“).

Both the Commissioning certificate and the Permit of Use give the right the construction to be used legally, as there is a legal prohibition to use constructions or parts of them, that have not been put into operation by the relevant competent authority.

In the preliminary contract the two parties agree on the deadline by which the Seller must have provided the building with a Commissioning certificate and to have transferred ownership of the property to the Buyer with a notarial deed.

The notarial confession of the specific site - apartment is carried out upon reaching the stage of “rough construction”, which is ascertained by Act template 14.

It is the signing of Act template 14 for the building that certifies that the construction has reached the stage of "rough construction", ie. that the building has already been built, which should be photographed and registered in the cadastre. This is also important for the crediting of the real estate, because this is the earliest stage at which banks agree to lend to a real estate deal.

How to avoid the risk of the bank taking ownership of your property?

For this purpose, before the notarization of the deal, on the day of the deal, the Seller should provide to the Buyer an up-to-date Certificate issued by the Registry Office. It should be evident from it, that on the property and the land on which the building is build and where the property is located, there are no registered real encumbrances, contrary to the Buyer, for example:

• Rental agreement;
• Mortgage;
• Restrictions;
• Claims;

At the time of the deal, the Buyer must explicitly ask the notary to make an on-screen reference for the property that the buyer is buying and for the land on which the building is built. Access to the database of the Property Register at the Registry Agency requires registration and depositing of an account, and as in general anyone who do these steps can make such inquiries.

From these reports is visible the history of the property - deeds and registered encumbrances such as mortgages, restrictions, their deletion or lack of deletion. In other words - this is the most reliable way to determine the condition and state of the property at the time of the deal.

When does a bank-creditor decides to do a collateral when giving a loan?

This happens when the debtor is delaying, i.e. he has stopped covering the loan installments. It is an opportunity for the bank to satisfy its receivable through the provided collateral. In this case we are talking about a property, therefore this happens through the sale of the property.

If the Buyer purchase a property from a Seller-builder, who by the day of the transaction has not repaid the required amount, to delete a mortgage registered in favor of the financing bank on a property acquired by the Buyer, this means that if the Seller stops paying its credit installments, for the Buyer there will be two options:

• To repay the required amounts on behalf of the Seller and to keep his property;
• Or give up the apartment that the bank will sell.

Therefore, each buyer must be very careful before signing the deed and it is desirable to have a lawyer to prepare the deal and inspect the property.

Why the investor's credit loan is actually a good sign?

Nowadays, it is a common practice for the investors to use bank loans for the construction of larger sites. In fact, this is a good sign for a very simple reason: each bank has a number of financial analysts and experts who will not allow lending to an unstable investor.

Therefore, a construction done with the support of a bank loan should speak to Buyers about a number of positive things regarding the investor company, namely that:

• The company is a loyal partner in the ideas of the banking institutions;
• The investor has a good history with the bank, because without a good history it would not be willing to grant the respective loan for the construction process. 
• The spending of the construction funds is subject to a strict monitoring by the banking institution.

According to the approved practices, after any amount that has entered under a preliminary contract of sale, the bank initially agrees to clear off the mortgage, after this the investor can use the funds.

In some countries, the latest trend is that the “off-plan property” buyers choose to purchase a property only if the project involves a bank from which the investor is lending. In this case, the bank is the guarantor for the Buyer that the building will be completed: precisely because the bank itself will strictly monitor the spending of the funds specifically for the construction project.

However, what happens in cases where the seller has not yet repaid the loan before the notarial deal? Then, the buyer can ask the bank which services the seller's loan, for an Official Letter-certificate. It certifies what amount is needed to pay off the  mortgage for the respective property, and that the amount that will be paid by the buyer will go for the repayment of the respective mortgage.

After a few days, after a payment has been done to the seller's bank account, the bank submits to the relevant Registry Office at the Registry Agency an application - consent to cancel the mortgage on the property purchased by the buyer. The buyer can request an up-to-date Certificate of no encumbrances from the Registry Office before the deal, which will show that the registered mortgage on the property has been paid off.

It becomes more complicated when the Buyer also has a loan from another bank. Then its bank will have to take part in the negotiations with the builder.

Security and transparency with “Atlantis Bulgaria Holding”

Every complication when buying a property carries a certain risk, especially if the client is not familiar with all the details around the project and the conditions of its implementation. Therefore, the construction and investment company “Atlantis Bulgaria Holding” guarantee to its clients and partners two main advantages.

The first one - this is the observance of all best practices during the construction process and the sale of the real estate, regardless of the method of lending and the construction phase in which the transaction is done.

The second advantage is the full transparency and the unconditional customer support. All of our friends, partners and potential buyers can benefit from professional consultations with specialists: lawyers, accountants and financial advisers. We will answer all of your questions, clear your doubts, and even help you choose the most reliable bank lender that accompanies with our high standards in customer service.

Because you can count on the fact that finalizing a safe and secure deal is not only a priority for you, but also for us too!