Overseas - May, 2006

This soon-to-be EU country has everything buyers need.

The natural beauty of Bulgaria is obvious and well documented, there are many ancient historical towns, spas, mountains and beautiful beaches along the stunning Black Sea coast. The whole package for sun, ski, culture and nature holidays make Bulgaria interesting as an all year round tourist destination. However, if you look beneath the obvious advantages of Bulgaria as a holiday or investment location and look at the underlying economics a much more appealing picture develops.

Gareth Clarke, Development Director for KHG Development points out some compelling facts regarding the current state of Bulgaria and the potential for this young property hotspot. Mr. Clarke says, ‘this is a young, democratic economy, growth is flourishing as tourists realise the huge advantages. Tax is low and annual capital growth is at 25 per cent and even up to 50 per cent in desirable areas. Tourist numbers were up hugely in 2004 and 2005 with British tourists increasing by over 40 per cent - and they will continue to return year after year. The EU accession treaty has been signed, Bulgaria will join the EU’.
It is well documented that the property markets exploded in Spain, Portugal and Ireland after they joined the EU, this is excellent news for Bulgaria. Bulgaria is taking a careful path toward integration, there is an ever-improving business environment, the lowest operational costs and tax rates in a European market economy.

Property demand is not restricted to wealthy Western Europeans - domestic demand is growing rapidly, less than 4 years ago there were no mortgages for the local population – compare that to the UK where the mortgage business is a mature industry, access to funds for investment has a massive impact on the economy – this will eventually happen in Bulgaria, and in turn drive up the cost of housing. Now that Bulgarians can borrow money - add to this the investments flowing into the economy from other sources – we will see prices rising from the domestic economy also. The number of mortgages being underwritten is increasing annually well in excess of 100 per cent. Bank credit will continue to grow and will significantly contribute to sustaining the property market growth till western levels are reached.

Ex-Pat Bulgarians are also fuelling the property boom, there are more than one million Ex-Pats working outside of Bulgaria. During the last 4 years property investment from Ex-Pats grew to approximately 10 per cent of the market. This is further increased by money ‘sent home’ from Bulgarians living abroad, sending money back to relatives whom are in turn investing into the growing property market.

The national currency – the Lev - has been pegged to the Euro. The recent governments have been progressive, making fast-moving political and economic reforms aimed at global integration. Bulgaria is a member of NATO and has a highly skilled, multi-lingual workforce working at Europe’s most competitive wage levels.
Having been widely acknowledged as a bona fide holiday hotspot, the latest statistics
show that tourists have definitely taken note of Bulgaria’s attractions. Visitor numbers have already increased by 12  per cent this year and the World Travel and Tourist Council (WTTC) forecast the demand for travel and tourism to Bulgaria will continue rising at 6-7 per cent over the next decade.

Bulgarians have shown themselves (as a people) to be disciplined which has positive and long-term implications. Investment is flowing in and with this comes jobs which will create long-term sustained growth. With the combination of local demand and foreign investment rising steadily we are confident that this is the right time to be buying and investing in Bulgaria.
When a country joins the EU it has to open its markets to foreign companies.
Joining the EU will bring a significant amount of public investment into Bulgaria
of course there is one effect that joining Europe has yet to bring. That is the public sense of confidence and well-being that actual membership will bring. This is the icing on an already ample cake. EU membership will bring many benefits to Bulgaria, most of then however, have already arrived.

Mr. Clarke of KGH Development says ‘this opportunity will not last forever, looking at Bulgaria’s natural attributes and the strong economic position make it a clear favourite for investment in 2006’.

KHG Development Ltd
020 7993 2743
BulgarianLiving.com

A unique, newly launched legal service brings peace of mind to those buying abroad
Traditionally, the process of investing in property abroad has at times been seen to require a certain, shall we say, leap of faith. Culture, language, legal systems – all can be dauntingly different when buying overseas. However, with a newly launched service that upholds the highest standards of professionalism accountability and transparency, there is no need to allow for the unknown.

The Property Lawyers Abroad Network (PLAN) is a unique community of highly experienced international property lawyers providing independent, unbiased and sound legal advice to UK residents buying property overseas. The aim of the organisation is to provide UK consumers with the same levels of professionalism and reliability when buying property abroad that they would expect when buying domestically.

PLAN acts primarily as a management company, sourcing new member lawyers and carrying out a rigorous and comprehensive vetting procedure to ensure that they satisfy a number of key criteria. Currently PLAN has member lawyers in 30 countries worldwide: Spain, Portugal, Morocco, Channel Islands, France, Cyprus, Turkey, Greece, Croatia, Bulgaria, Hungary, Latvia, Romania, Italy, Canada, USA, Caribbean, Brazil, Dubai, China, Thailand, Singapore, Hong Kong, India, South Africa, India, Poland, Slovenia, Czech Republic and Mexico.
Prospective PLAN lawyers are carefully vetted. They must be English-speaking and have knowledge of the local market, along with extensive conveyancing experience, excellent client references, competitive rates and a UK presence. Members also need to adhere to a strict code of practice and conduct.

PLAN, which is based in the UK, also provides an introductory facility to the consumer who is looking to find a lawyer in a particular country. PLAN initially offers face-to-face meetings with qualified lawyers in the UK who can run the consumer through the legal process before they commit to a property. The consumer will then be put in contact with a member lawyer in the country where they are purchasing a property, and the lawyer will work directly with them to ensure that the purchase process runs smoothly, also providing unbiased, sound legal advice.
Michael Masterson, managing director of PLAN, comments: ‘For many people, buying a property abroad is a dream that so often turns into a nightmare. As well as having to struggle with an unfamiliar language and culture, trying to find a competent lawyer that speaks English and has good local knowledge is often impossible.

‘We set up PLAN because we recognised that there was a real need for a service that took away the burden from the consumer of finding a lawyer that they could rely on and trust. We also appreciated that not only was it important they were English-speaking, but that they also knew the local area and were independent of the agents and developers.’
As well as meeting the stringent criteria set by PLAN, all member lawyers must also be linked up to PLAN Interactive (PLANi), an online transaction tracking service which ensures full transparency during the purchasing process. PLANi allows the purchaser, lawyer and agent to monitor the progress of a transaction anywhere in the world, at any time, via the PLAN website plani.net.

This innovative online case management system also allows the lawyer to send important documents that need to be signed, saving both time and money for the purchaser. It also eliminates one of the most infuriating aspects of purchasing property, whether in the UK or abroad: the feeling that communication has slowed to a trickle or is not taking place at all. An important aspect of PLAN’s case management system is the online message facility, which ensures that all parties involved in the purchase – lawyer, agent, developer and purchaser – are in the loop and responsive. In addition to the standard service, PLAN lawyers can also undertake due diligence on a property developer and provide valuable advice on key questions to ask during an initial visit to a prospective development.
The aspect of overseas property purchase that has the most potential for worry is how the money is handled, and in this area PLAN also comes up trumps. Clients of the PLAN service have the peace of mind of knowing that all money is secure, with escrow held in the UK; similarly, associated lawyers will also benefit from seeing that funds are available and the buyer is genuine. Doubt is removed, transparency rules and a transaction can proceed with minimal worry.

Masterson adds: ‘We are committed to establishing a comprehensive PLAN network of lawyers throughout the world to ensure the legal problems buyers have historically encountered when purchasing property abroad will become a thing of the past.’
To find out more about PLAN call 020 8862 8947 or visit plani.net

Looking to buy in France? First pick an agent. In an excerpt from her latest book, expert Penny Zoldan explains the French estate agency system
Those who are looking to purchase property in France should contact agents for property information and listings. You will soon discover that estate agencies dealing with France work in a very different way to a local UK agency.

Which agency?

First, you have the choice of dealing with either an agency that is based in France or one based in the UK which deals with French property, albeit normally in association with a French agent (agent immobilier).

French-based French agencies

To own an estate agency in France, you must have a carte professionnelle; to obtain this you must have either ten years’ experience of working in an agency or a law degree. Each agency must be registered with the local town hall, hold a carte professionnelle and have a bank guarantee. You will often see a certificate hanging on an agency’s walls confirming this, and you are at liberty at any time to ask to see their carte professionnelle number – don’t be afraid to ask if they have one, or to see details of their charges.
Without a carte professionnelle an estate agent does not have the right to hold a ‘mandate’ to sell a property or to take clients to view properties. It is a necessity, and should there be any questions you need answered or problems with your purchase, only a registered agent will be in a position to sort these things out for you. Do not be tempted by someone offering to show you a few properties that ‘friends’ have for sale – if they are acting as an agent and do not hold a carte professionnelle, they are acting illegally.
Bear in mind that French estate agents are not used to sending out property descriptions by post as we have come to expect in the UK, so do not hold your breath if you have phoned or emailed to ask for details – they might never arrive. Also, French agencies have to accompany their clients to view properties; they can’t just send them along or give them a set of keys.
The FNAIM is a regulatory organization in France similar to the NAEA (National Association of Estate Agents) in the UK. Although it is not essential that an estate agent is a member, knowing that your agent is a member of a regulatory body is an additional comfort for a buyer.

Agency fees

A fixed list (barème) of an agency’s commission is often displayed on the wall of their office. Agency fees in France are higher than those in the UK as their role differs greatly (more on this below). You can expect the agency fees to amount to between five and ten per cent of the purchase price of a property; normally, the higher the property price the lower the percentage charged. This percentage includes TVA (VAT) at 19.6 per cent which the agent has to pay to the authorities. The total amount is normally included in the quoted price, but do check!

Sole, multiple and shared agencies

French agencies have to have a signed mandate to sell each property they carry on their books. Each vendor giving an agency a property to sell will be asked to sign a document confirming their instructions to sell, the price and the commission, etc. In some cases the agents may have a sole agency, i.e. no other agent is instructed – it is a good idea to ask about this if you see a property you like and need some time to think it over. If other estate agencies have been instructed they could be showing their clients the property and your agent will have no idea that they are proceeding until informed that it has been sold. It is quite usual for French agencies to share their properties with other local agencies to give you a wider choice. They will then share the commission and it will not cost you any more.

Purchasing procedure

French agents are permitted to draw up the first contract (compromis) and hold deposits in their client’s account. If you require further information on a specific property that you are prepared to purchase with regard to extending or changing it in any way, the agent will go to the mairie (town hall) for you or with you to find out the possibilities.
During the purchase procedure, the agent will liaise between you and the notaire if you wish and is always in attendance at the notaire’s office for the final signing and transfer of the property – sometimes even acting in the capacity of translator. Bear in mind that the agent is based close to your property and they have probably lived nearby all their life; they have a reputation to uphold and can fill you in on all the information you need on the area.
They will want to make sure that you are pleased with their service as there is every likelihood that they will be bumping into you in the future at the local shops and restaurants – estate agents are respected members of society in France. Some French agents employ British staff, which can be very useful as they can give you information regarding making the move and buying as a foreigner, etc. However, do check that they are working legally for the agency.

UK-based French agents

The role of an agent based in the UK and dealing solely with French property is to smooth the way for prospective purchasers. These agents will normally work in partnership with French-based agencies, and whereas some will specialize in a certain area of France, while others will cover most of the areas.
They may be members of regulatory bodies such as FOPDAC and NAEA and will have to have proved themselves to be members of these associations. The advantage of dealing with an agent who is based in the UK and covers most of France is that they can give you a good overview of the differences between areas, i.e. house prices, types of property, weather and accessibility. When you are trying to decide between different areas, this information
can be extremely helpful. There is also the fact that they can send you details of comparably priced properties in the areas you are considering. They will also be able to advise you on journey times from one area to another as they will be accustomed to travelling in France on a regular basis.

As well as having valuable local knowledge about a range of areas, they will be in a position to make appointments for you with long-established and very knowledgeable French agencies which have been vetted by the UK company. These will be agents who have elected to work with the UK market, who enjoy doing so and are prepared for the extra workload that is usually entailed in dealing with ‘foreigners’ who are buying properties in France.
Excerpted from Buying Property in France by Penny Zoldan, published by Collins, priced at £8.99

France is understandably popular with investment buyers. However, says Jeremy Licence of Furley Page Solicitors, it pays to do your homework before even considering a purchase

Spring is a popular time for people to decide to purchase property in France. Some are just back from the ski slopes, having enjoyed a relaxing break are thinking how nice it would be to own a property close to the slopes; others are planning their summer holiday and are unpleasantly surprised by the high rental rates for holiday gites in popular areas. So it is natural to start thinking about owning their own cottage instead.
More British people are buying off-plan than ever before – that is, purchasing apartments and houses which have not yet been built. In France, as opposed to Spain for example, the majority of these are in the mountains close to resorts which have year-round appeal.
An off-plan purchase – or en l’etat future achèvement – are an almost entirely different from purchases of rural or existing properties. One characteristic of such purchases is that in most cases people only seek independent advice once a reservation contract has already been signed and the deposit handed over.
The legal impact of reservation contracts should not be underestimated: the English translation is somewhat of a misnomer since it can give the impression that a reservation does not give rise to a legally binding contract and that the purchaser can walk away without penalty.
Much of the law surrounding off-plan purchases is contained in the French building code and such transactions should therefore follow a defined process. There are variations but generally speaking the process is as follows:

1. Once the purchaser has seen a property specification he likes, he may sign a reservation contract and pay a deposit to the developer, typically five per cent. In fact, the law prescribes that this initial deposit cannot exceed five per cent.
 
2.Signing the reservation contract may take place at any stage in the build – it could even be before the developer owns the land or has put a spade in the ground. At some stage after paying a deposit, however, the developer’s notaire will send a draft transfer deed to the purchaser, who then has only 30 days in which to decide whether or not to proceed with a purchase. The transfer deed must be signed within 40 days. Failing this, in most cases, the seller is entitled to resell the property.
 
3. One aspect frequently misunderstood is that the price for the property stated in the initial reservation contract is subject to variation (which almost exclusively means increase) in line with increases in the National Cost of Building Index. This means that if significant time elapses between signing the reservation contract and completing the purchase, the price can increase materially.
 
4. Thereafter, the remainder of the purchase price is paid as each stage of the build is completed and the developer will send payment demands to the purchaser supported by architect certificates.
 
5. It is important to remember that the purchaser will be the owner of the land and the works as they are completed, from the date of the legal transfer – even though at the point of legal completion there may only be a hole in the ground.
 
6. The final stage is the remise des clefs (release of keys). This is the point at which the building is signed off as being completed and the purchaser takes possession on payment of the balance of five per cent of the price.

Probably the most important document in the whole process is the original building contract or building specification. Unless this has been clearly agreed in the first place, the question of whether or not a property has been completed is open to debate. The consequence of this is that if the property has been completed and the purchaser fails to pay over the final payment, then the seller can refuse to hand over the keys.
Having the building contract translated into English is highly recommended for obvious reasons, but some people do not even bother. Such is the desire to own a home in the first place that many buyers sign the reservation contract without much regard for the legality of the arrangement or the prospect of future disagreements about aspects of construction.
A purchaser who pays the final balance before having the property looked over by his own surveyor does so at his peril, since the scope for bringing any claims for defective works after the handover is very limited.

It is not all bad news, however. Unlike in England, French law imposes certain guarantees for the benefit of the buyer of any newly developed property; these are automatic in every case.
It should just be mentioned that slightly different rules and processes apply if plans for the building are supplied by the purchaser.

The importance of obtaining reliable legal advice from an English solicitor or at least an independent English-speaking notaire cannot be overstated. Even when these transactions are at the lower end of the price range (for example, for studios or small apartments) the process described above is a minefield for the uninitiated and can lead to misunderstandings and unnecessary disputes.

If you are planning a purchase off-plan this summer, remember that there are reputable firms of English lawyers who can provide assistance and that, if at all possible, their advice should be sought before the reservation contract is signed.
Visit furleypage.co.uk