An off-plan apartment before Act 16: what you own and how it is transferred

The text below is an informational overview of the practice, not legal advice: the specific transaction is always structured with a property lawyer, on the basis of the specific documents.

In brief

Before Act 16, the buyer of an off-plan apartment holds either a right to build over a specific unit (with a notarial deed) or rights under a preliminary contract (without a right in rem). As a rule, both can be transferred: the right to build with a notarial deed, and the rights under the preliminary contract through a transfer, usually with the developer's consent. The form of the transaction and the tax treatment differ by stage and are clarified with a lawyer.

What do you own while the building has no Act 16?

The answer depends on the document you signed. When buying an off-plan apartment there are two main variants, and they confer different rights.

A notarial deed for the right to build

The first variant is a notarial deed for an established or transferred right to build over a specific individual unit. Here you hold a right in rem, registered in the property register - the strongest position before the building is completed.

A preliminary contract

The second variant is a preliminary contract: the developer undertakes to transfer ownership to you at a certain stage, usually after the shell reaches structural completion or after commissioning. Until the final contract, you hold contractual rights - a claim against the developer, not a right in rem over the property.

Which variant applies depends on the developer's practice and the stage at which you buy. What to look for in the offer itself - price, areas, deadlines and the manner of transfer - we covered in the article on reading a developer's offer in central Sofia.

How do the building's stages determine your rights?

The construction acts mark the moments at which the legal regime of the units in the building changes. Under Article 181 of the Spatial Development Act, the right to build over a unit in a building may be the subject of transfer transactions from its establishment until the building reaches structural completion (the shell stage); after this moment, the subject of a transaction is the already-built unit or individual parts of it.

In practice this means three phases - as a guide, not as a precise legal definition:

1.     Before structural completion: the right to build over the future unit is transferred - with a notarial deed.

2.     After certification of structural completion under Article 181 of the Spatial Development Act (a moment associated in practice with Act 14) up to Act 16: the subject of a transaction is the already-built unit or individual parts of it - also with a notarial deed.

3.     After Act 16: the building is commissioned and transactions are an ordinary sale and purchase of a completed property.

What exactly each of the three acts certifies and what checks it allows the buyer is explained in detail in the guide to Act 14, Act 15 and Act 16.

Can you sell an off-plan apartment before Act 16?

Yes - both types of right can be transferred, but by a different route. This matters for anyone buying with an investment aim or allowing for a change in their plans.

Demand for such deals is real: buyers who missed the start of a project they wanted are often willing to pay a premium for a unit at an advanced stage of construction - especially in the central parts of Sofia, where the choice of city-centre apartments in new buildings is chronically small. This is precisely why the right to transfer your position has value in itself, even if you never use it.

Transfer with a notarial deed

If you hold a right to build, or a unit at the shell stage, by notarial deed, the sale is a notarial transaction: a new notarial deed, registration, local transfer tax and fees. An important detail: the relations with the developer under the construction contract do not pass automatically in every case - how the new owner's entry into them is arranged depends on the documents of the specific transaction and is checked in advance with a lawyer.

Transfer of rights under a preliminary contract

If you hold only a preliminary contract, your rights under it can, as a rule, be transferred to a third party. An important clarification: an assignment (cession) in the narrow sense transfers a claim (a right), whereas transferring your entire position under the contract - both the rights and the obligations - requires a separate arrangement and usually the participation or consent of the developer. That is why, in practice, the transaction is structured as a contract for the transfer of rights and obligations, combined with settling the outstanding obligations of all parties towards the developer. In the prevailing practice, the transfer is tied to the developer's consent, and some contracts exclude it or provide for a fee - the specific procedure is entirely in the clauses of your contract.

Such a transfer is not a notarial transaction and is not entered in the property register - which is why the buyer under it carries out a full check of the chain: the original contract, the payments made, the obligations and the construction status. Having the transaction prepared by a lawyer should be treated as standard practice, not as an optional precaution.

When is a resale before completion worthwhile?

A resale before Act 16 is worthwhile when the property's price has risen enough over the construction period to cover the transaction costs and the tax on the gain. In projects in strong locations, the gap between the "off-plan" price and the price of a completed building has historically been noticeable - and it is exactly this that is the early buyer's profit.

In central Sofia this mechanism works more distinctly than in the periphery: the supply of new construction in central Sofia is structurally limited, while demand for completed homes there is constant. Plots for new buildings in the central parts can be counted on one hand, and every completed building absorbs demand accumulated over years. For the early-stage buyer, this means the risk of the construction period is offset by a position in a market with chronically limited supply - a profile that simply does not exist in the peripheral neighbourhoods with dozens of competing projects. Which projects are coming and how to compare their stages we set out in the review of upcoming developments in central Sofia.

The counter-calculation: a resale before completion takes place on a narrower market. Buyers of an off-plan property are fewer than buyers of a finished home and look for a discount in return for the risk they take on. If the deadlines are not pressing you, waiting for Act 16 usually brings a better price.

What taxes and costs come with a resale?

Tax on the gain

The sale of a right in rem or the transfer of contractual rights may give rise to taxable income. The tax base and the possible exemptions depend on the type of right acquired and transferred, the documents for the acquisition price and the specific regime under the Personal Income Tax Act. Work out the consequences in advance with an accountant or tax adviser - there is no universal conclusion here.

Transaction costs

Add the costs of the transaction itself: in a notarial form - the local transfer tax, notarial and registration fees; on a transfer of contractual rights - a possible developer's fee and a fee for the legal review. The full picture of the costs when buying in the centre we covered in the article on the real cost of an apartment in central Sofia.

What risks should you check before an off-plan transaction?

The check on an off-plan property has two levels: the project and the seller. Both are mandatory, whether you buy from the developer or from a previous buyer.

•     The legal status of the plot and the building: ownership, an established right to build, a construction permit in force.

•     Encumbrances: mortgages on the plot or the unit, attachments, registered claims. How the check is done we showed in the article on encumbrances and restitution risks for a property in the centre.

•     On a transfer of the rights under the preliminary contract: the whole chain from the original contract to the latest annex, the payments made against documents, and the developer's consent.

•     The match between what was promised and the design: areas, orientation, parking space, common parts - per the approved designs, not the brochure.

•     The developer's history: completed buildings, deadlines met, quality after years of use.

The rule from practice: the earlier the stage and the more complex the chain of transfers, the more thorough the check must be.

Which mistakes cost the most in off-plan transactions?

Mistakes in off-plan transactions share a common trait: they look like saving time or money at the start and are paid for many times over later. Here are the most common from practice:

•     Payments with no document and no link to the contract: every instalment must be against a document and per the agreed schedule - on a future transfer or dispute, undocumented payments effectively do not exist.

•     Signing a "standard contract" without review: the developer's preliminary contract protects the developer first, and that is normal - your lawyer restores the balance with a few key amendments.

•     A missing transfer clause: you discover that the contract does not allow a transfer of your rights, exactly when you need it - and then you are entirely dependent on the developer's goodwill.

•     Buying "on paper" without checking the site: the promised unit must exist in an approved design with a construction permit in force, not in a brochure.

•     Ignoring the other side's schedule: on a transfer the new buyer also takes on the remaining instalments - a mismatch between their financing and the developer's schedule wrecks deals at the last moment.

The common denominator: when buying an apartment off-plan, the documents do the work that a viewing does for a finished property. Skimping on the legal review here is the most expensive possible saving.

Building stage and form of the transaction: a summary

The table is an indicative framework - the specific transaction always requires a lawyer's review of the documents.

How the transfer of rights and contractual position works: step by step

Transferring the rights under a preliminary contract follows a similar procedure in most cases when it is done properly. The order that works in practice:

1.     Review of the preliminary contract by a lawyer: transfer clauses, the consent required, fees and restrictions.

2.     Notifying the developer and obtaining its consent in writing - before any settlement between the parties.

3.     A full check by the new buyer: payments made against documents, the schedule of the remaining payments, the construction status by act.

4.     Signing the transfer agreement and clearly recording all outstanding obligations: what has been paid, what remains due and which party owes each amount to the developer.

5.     A three-party confirmation: the developer recognises the new buyer as a party to the contract, usually by an annex or a fresh signing of the preliminary contract.

The settlement between the old and the new buyer is best made through an escrow account or another protected arrangement - the transfer is not entered in the property register and the parties' protection is entirely contractual.

How to prepare the exit at the time of purchase?

The possibility of a transfer is secured on the day of signing, not on the day of sale. If you allow that your plans may change, do three things at the purchase itself.

First, negotiate the transfer clause: the right to transfer the contract with reasonable notice, a clear procedure for the developer's consent and a predictable fee, if any. Reputable developers have no problem with such a clause - it is standard practice.

Second, keep a complete file: every annex, every payment slip, every piece of correspondence about changes to the unit. On a future transfer, your buyer will want the whole chain of documents - a missing payment slip from two years ago can block a deal.

Third, choose a unit with a broad secondary market: a functional layout, good orientation, a parking space. With city-centre apartments liquidity is structurally high, but even in a strong location the specific unit decides how quickly and at what price you exit.

Why does the choice of developer settle half the questions?

With an off-plan property you buy both a future apartment and a contractual relationship with the developer for years ahead - from the payments to the warranty periods. A developer with a record of completed buildings, clear contracts and a transparent, properly documented transfer process removes most of the risks described above.

Pirotska Residence is being built by Unistroy - a builder with over 30 years of experience in residential construction in Sofia. Buyers get apartments from a developer without a commission, with a transparent staged payment scheme and contracts in which the procedure for transferring rights is settled expressly. Review the available apartments in Pirotska Residence with current prices and layouts.

Common questions on off-plan transactions

What do I own if I have signed only a preliminary contract?

You hold contractual rights - a claim against the developer to transfer ownership to you on the agreed terms. This is not a right in rem over the property and is not entered in the property register. Your position is determined entirely by the clauses of the contract, which is why they are read carefully before signing.

Can I transfer an off-plan apartment to another buyer?

As a rule, yes. With a notarial deed for the right to build or a unit at the shell stage - with a new notarial transaction. With a preliminary contract - through a transfer of the rights under it, which in the prevailing practice requires the developer's consent. Check the transfer clauses in your contract before you plan a sale.

When does the building become "individual units" sold as properties?

After structural completion, certified by Act 14, the units in the building exist as individual objects and ownership over them is transferred by notarial deed. Before this stage, the subject of a transaction is the right to build over the future unit.

Do I owe tax if I sell before Act 16 at a profit?

As a rule, yes - the gain on the transfer of a property or of rights is taxed under the Personal Income Tax Act, and the exemptions for long-term ownership require periods that on an off-plan resale are rarely met. The specific treatment depends on the case - consult an accountant before the transaction.

Can the developer refuse consent to the transfer?

Yes, if the contract does not oblige it otherwise - which is why the transfer clause is negotiated at the purchase, not when you need it. Reputable developers usually give consent for a buyer whose payments and contractual obligations are in order, sometimes for an administrative fee. Whether a specific refusal amounts to a breach of contract is a matter for a lawyer to assess on the specific clauses.

Is it riskier to buy from a previous buyer than from the developer?

Yes, by one degree: besides the project you also check the whole chain of the transfer - the original contract, the payments made, the developer's consent. With a complete and consistent document trail, the transaction can be completed successfully and may sometimes offer a better price. The legal review here is not a recommendation but a mandatory condition.