The risks of buying property in Bulgaria through a representative

Clients often approach BSLC when their purchase is almost complete. They have found a property and agreed on a price, but the seller is abroad and will act through a representative. The usual question is whether there is any problem if a notarised power of attorney is available. The risks are often underestimated, even though some of the most serious property fraud occurs in precisely these circumstances.

Buying property through an authorised representative is entirely permissible under Bulgarian law, but it calls for particular care. You are negotiating with someone who claims to represent the owner, rather than with the owner personally. Defects in that authority can have serious consequences, including loss of ownership or lengthy litigation.

Timely legal advice and a detailed examination of the power of attorney are essential safeguards for the buyer.

BSLC assists with checking powers of attorney for property transactions, analysing the risks of purchases through representatives, defending disputes over notarised transactions or fraud, legal support and due diligence for purchases, and representation in property fraud proceedings.

What legal requirements must a power of attorney satisfy for a property transaction?

Representation in Bulgarian law is regulated by the Contracts and Obligations Act, known by its Bulgarian abbreviation ZZD. Comparable arrangements exist in continental legal systems, including French and German law, but Bulgarian property transactions are subject to significantly stricter formal requirements.

A power of attorney is a unilateral legal act through which one person grants another authority to represent them. This follows from Articles 36 and 37 of the Act. Disposing of real estate, however, is subject to special requirements.

First, a property sale must be concluded by notarial deed under Article 18 of the Act and the applicable property law. This gives rise to the principle that the power of attorney must satisfy the corresponding level of formality.

In practice, this means that the signature must be notarised. Notarisation of the content is also often required, particularly for dispositions. The document must expressly authorise the sale or purchase of the specific property, identify it by address, cadastral identifier and area, and address the price, payment method and conditions.

Express authority is particularly important. In commercial law, Article 26, paragraph 2 of the Commerce Act expressly requires special authorisation for a representative to dispose of real estate. This principle also applies by analogy in civil relationships.

A general authority to manage assets is not sufficient to sell a property.

Validity at the time of the transaction is another essential issue. The power may have been revoked by the principal, terminated by death or limited to a specified period.

If one of these events has occurred, authority ends and the transaction may be invalid.

What are the main risks when buying through a representative?

These risks are practical realities and among the problems most frequently encountered by property lawyers.

1. A false or forged power of attorney

Document fraud can occur despite apparent notarisation. If the power of attorney is not genuine, the transaction may be void for lack of consent.

2. Exceeding the authority granted

If the representative acts outside the powers given, for example by selling at a lower price or dealing with a different property, it becomes uncertain whether the owner is bound. Such cases often lead to litigation.

3. A revoked or expired power of attorney

The principal may have revoked the authority without the buyer knowing. The law protects good faith, but not in every situation.

4. The principal's death

Death terminates the authority. A transaction made afterwards is invalid even if the buyer did not know of the death.

5. Conflicts of interest and self-dealing

The representative may act to the principal's detriment or participate in sham transactions. A nominee arrangement may also conceal the true acquirer behind an apparent purchaser.

6. Restrictions that are not apparent to third parties

Some restrictions may not be enforceable against a buyer who was unaware of them. Even so, they create uncertainty and potential litigation.

The practical difficulty is that the notary checks the formal validity of the power of attorney but is not responsible for hidden defects outside the documents presented.

The buyer therefore faces a real risk even where everything appears to be in order.

How can a buyer protect themselves?

Protection requires an active approach. Reliance on the notarial procedure alone is insufficient.

1. Examine the power of attorney thoroughly

This includes checking with the notary who certified it, establishing whether it has been revoked, analysing whether it covers the proposed transaction, and verifying its authenticity and date.

2. Verify the representative's identity

Establish that the person is the representative named in the document and is acting within the powers granted.

3. Contact the owner where possible

This is one of the strongest safeguards. Even a brief conversation can prevent serious fraud.

4. Check the property and its encumbrances

Property transactions are entered in the register to make them effective against third parties under Articles 112 and 113 of the Ownership Act. Registration does not, however, cure defects in authority.

5. Include protective contractual provisions

These may provide for deferred payment, confirmation by the owner, warranties and declarations.

6. Obtain advice before the transaction

This is the most effective protection. A property lawyer can identify risks before anything is signed.

If a problem has already arisen, such as fraud or a dispute over the notarial transaction, possible steps include proceedings to establish nullity or annul the transaction, ownership claims, damages claims and a report to the prosecution authorities where there is evidence of a crime.

Prompt action is important because delay can make protection more difficult.

If you are buying through a representative and have concerns, the sensible step is a consultation with a property transaction lawyer before completion, rather than relying on the apparent security of the documents.

What happens if the representative has no authority or exceeds it?

One of the most complex and frequently misunderstood issues is what happens when authority is absent or exceeded. The answer under Bulgarian law is not intuitive, creating significant risks for buyers.

Under the Bulgarian Contracts and Obligations Act, acting without authority constitutes purported representation. The main provision is Article 42. This regime is comparable to section 177 of the German BGB concerning contracts made without authority.

The crucial point is that the transaction is not automatically void. Instead, it is provisionally ineffective pending ratification. Interpretative Decision No. 5/2014 in Interpretative Case No. 5/2014 of the General Assembly of the Civil and Commercial Colleges of the Supreme Court of Cassation expressly confirms that a contract made without authority has no effect until the represented person ratifies it.

In practice, the owner may confirm the transaction expressly or tacitly, making it fully effective retrospectively. The owner may refuse confirmation, in which case it definitively fails to take effect. Until then, the buyer remains in a position of legal uncertainty.

There is no statutory deadline within which the owner must respond. The buyer may consequently have paid the price without acquiring ownership.

The situation is similar where authority has been exceeded, such as a sale below the permitted price. The principal is bound only if they ratify it.

Article 40 of the Contracts and Obligations Act creates a further risk. If the representative and buyer have agreed to act to the principal's detriment, the transaction has no effect against the principal, even where it formally falls within the power of attorney. The Supreme Court of Cassation emphasises that representation must serve the principal's interests, rather than those of the third party.

For buyers, three practical points follow. An apparently valid power of attorney does not guarantee a valid transaction. Paying the price does not establish ownership. Refusal to ratify remains a real possibility.

Where authority is absent, a buyer who acted in good faith may claim damages from the purported representative under Article 42, paragraph 1. In a property transaction, however, that remedy rarely makes up for the actual loss.

This is why legal assistance before purchasing property is so important. Once the notarial deed has been signed, the available options are considerably more limited.

Can a buyer protect themselves after paying the price?

This is one of the most frequent and difficult scenarios. The transaction has been completed before the notary, payment has been made and a problem with the authority is discovered afterwards.

The first principle is that transfer of real estate requires the owner's valid consent. If that consent is absent, as with a forged power of attorney or lack of authority, ownership does not pass despite registration.

Several remedies may be available, but none offers an easy solution.

1. Recovery of the price through unjust enrichment

If the transaction has no effect, the payment must be returned. This requires establishing invalidity, identifying who received the money and having a realistic prospect of recovering it.

2. Damages against the purported representative

Article 42, paragraph 1 provides this remedy if the buyer acted in good faith. Evidential difficulties may arise, including whether the buyer could have identified the lack of authority.

3. Ownership proceedings

If the buyer registered the deed but the owner disputes the transaction, an ordinary property dispute arises. Registration under Article 112 of the Bulgarian Ownership Act, known as ZS and functionally comparable to publicity systems in continental law, does not protect against absence of consent.

4. Criminal law remedies

Where there is fraud under Article 209 of the Criminal Code or a document offence, a report may be made to the prosecution authorities. This does not automatically restore ownership but may assist the civil claims.

The practical problem is that the money has usually already been transferred, often abroad or to people without assets. Recovery is then difficult even after a successful lawsuit.

The strategic priorities are prompt claims to reduce the risk of further asset transfers, interim protective measures such as attachment of accounts or property, and early collection of evidence.

Clients often underestimate this stage. Once the problem exists, protection is reactive and expensive. An advance consultation with a property transaction lawyer almost always costs less than litigation.

Which hidden legal pitfalls are often overlooked?

Alongside the obvious risks, subtler legal problems frequently escape buyers' attention and lead to lengthy disputes.

1. Self-dealing under Article 38 of the Contracts and Obligations Act

A representative generally cannot contract with themselves or represent both parties without express authorisation. This frequently arises where the representative is connected to the buyer or the transaction involves relatives or controlled companies.

Without express permission, the transaction can be challenged.

2. Sham transactions and nominees

A representative may participate in an apparent transaction concealing the real acquirer. This can result in nullity for lack of genuine intention under Article 26, paragraph 2 of the Act and disputes over the true owner.

3. Restrictions that are not immediately obvious

A power of attorney may contain conditions concerning a minimum price, a specified buyer or a particular payment method. Failure to observe them may call the transaction's effect into question.

4. Legalisation and foreign powers of attorney

Where a document is executed abroad, apostille or consular certification requirements must be satisfied, an official translation is required and its content must meet Bulgarian requirements.

Even a formally valid foreign power of attorney may lack the specificity needed to dispose of property in Bulgaria.

5. Inconsistency between the preliminary and final agreements

The preliminary agreement is often signed by one person while the final deed is executed through a representative. This can create inconsistencies between the terms and disputes over whether valid consent exists at all.

6. Conduct detrimental to the principal

As explained above, Article 40 prevents the transaction from taking effect where the principal is harmed. This may be difficult to prove but poses a serious threat to the stability of the transaction.

Warning signs that should not be ignored include pressure to sign without time for checks, refusal to allow contact with the owner, broadly worded authority, payment to third parties or in cash, and discrepancies in documents or information.

These details may seem minor but can be decisive in litigation.

The legal risk comes from the arrangement's vulnerability to abuse. Checks must therefore consider all plausible scenarios and the substance of the transaction, rather than only the documents presented for signing.