Quest Bulgaria Property Magazine

Over the last few years, the property market in Bulgaria has seen a growing trend, with more people buying a home with family or friends. If you're dying to get your own home, buying a property together allows you to purchase a nicer place and save on costs. Is splitting your Bulgarian property with your friends or family a great idea or will it end in tears?

According to recent research more than one in ten first time buyers are purchasing property with their friends or family members. One of the reasons for this is because of the length of time it takes them to save for a deposit. Combining financial muscle increases the deposit available and subsequently reduces the amount of mortgage required, no bad thing these days. The other costs, such as legal fees, estate agents commission and survey fees are also shared. It also allows you to get on the first rung of the property ladder sooner.

However, whilst you may enjoy spending time with your friends and family, you need to be realistic as to whether you can actually live with them. It's surprising how little foibles and habits can soon get on your nerves; cleaning up after someone else can become depressing. You may all have a jolly time down the pub but don't forget that these will be people you'll be seeing over breakfast every day. As friends, you will also need more space than a couple would. A second living room and separate bathrooms will make all the difference, so you'll probably need to buy somewhere fairly roomy.

Money usually causes arguments! If your friends have financial troubles, they can become yours too.

To avoid potential pitfalls, here are some key pointers:

 

Talk

Have a completely open and frank conversation before you decide to go ahead. Discuss finances and be sure you understand what each person will bring to the table. Make sure you talk about everyone's credit situation - current and historic.

It may sound awful to check up on your friends, even worse on your family, but do get credit reports - if just one of you has a bad credit rating, it may make getting a mortgage difficult or even impossible. One unpaid loan or outstanding debt could later be used as a lien against your property.

 

Get a lawyer

You must make written legally binding agreements between you all. One should relate to the property and the other to cohabitation.

If you are buying a property with land in Bulgaria, you will need to set up a company, so all of you will become shareholders in that company. Agree the percentage or number of shares. If you are buying an apartment, then you need to ensure the names are on the deed and the mortgage. A property agreement should state who has paid what towards the deposit and who is paying what towards the mortgage. This agreement should also include what happens to any capital appreciation - how it is shared.

You need to be clear about inheritance law in Bulgaria when buying with others (and Bulgarian company law if buying property with land). It may well be very different from that of your home country! More details on inheritance can be found in the Quest Bulgaria Legal and Financial Section. There is a useful in-depth look at the risks of joint purchases in the Member Area. (See Related Articles below)

 

Write it down

At the outset write down your agreed intentions. Friendship can quickly become war! Is the aim long term to keep the property or to buy and sell quickly? Joint ownership can flounder if you don't agree on the basics.

All should purchase life insurance, naming the other(s) as beneficiary. Make sure that in the event of death the life insurance pays the mortgage off.

Living together

You may be best mates now - but what happens if you can't stick living together and want to break up. The cohabitation agreement should cover this - maybe giving three months notice, getting an independent valuation of the property, giving each person first option to buy out the other's interest, etc..


Related articles:

Laws of Inheritance

Risks of Joint Property Purchases