Re:Reservation Contract and Preliminary Contract

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bent
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Re:Reservation Contract and Preliminary Contract

Postby bent » Sun Nov 20, 2005 10:04 pm

Hi,

Can anyone help me out? Iv been scrooling through different posts on this issue but am still wondering for definite one thing...if I am not happy with something on the Preliminary and want to back out of the sale...am i now in a position to do so or am i stuck with it as is?

I would appreciate any help given

Thanks in advance,

Ben

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Postby balkankiwi » Mon Nov 21, 2005 7:31 am

There are different opinions in Bulgarian legal circles about the efficacy of a preliminary contract. What is clear enough is that under Bulgarian law a contract for the sale and purchase of real estate has no legal effect until it has been executed (signed) before a notary and converted to a "notarial act". The resort to preliminary contracts is useful - and much loved by real estate agents - because it normally takes time to set up the session with the notary and it has the effect of making both seller and buyer think they have committed to the deal. But a so-called "preliminary" contract does not itself operate to validly transfer the ownership of the property.

However, a court order can have the effect of the notarial act. So, if you renege on the preliminary contract and are sued for that reason by the seller, the court could decide to hold you to the contract and order the sale/purchase to be completed.

The uncertainty lies in the question whether and in what circumstances a court will make such a decision. This may well depend on the content of the preliminary contract - there are certain basic requirements which must be satisfied. There is no set format for a preliminary contract and in a given case it may be that there are grounds for the contract not to be given effect.

Also, there is the practical question whether the seller is going to have the incentive to bring a court case against a foreigner who - let's assume - has no connection with or presence in Bulgaria other than the preliminary contract. If you're not physically/legally in the country - and have no intention of coming again - it'll be a waste of time and money going to court against you.

Having said all that, when you put your moniker on a contract - in Bulgaria or anywhere else - you should be prepared to honour it. Just as you'd expect the Bulgarian seller to see it through ...

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bent
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Postby bent » Mon Nov 21, 2005 12:55 pm

Hi, thank you so much for your help advice.

I have only signed the reservation receipt and handed 1000 deposit so far..but I could not see the preliminary until a week after I had signed this.
Upon inspection of this, I have been asked to underdeclare, I had also been told Vat was inclusive which is was not and hence the asking price of the property has increased by several thousand which is out of my initial budget for this particular property.


There are a few other things such as variences in the plan etc...
More than likely I will lose this deposit if i fail to commit at this stage

:( Oh well, live and learn,

Thanks again

Ben

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BJ
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Postby BJ » Mon Nov 21, 2005 2:08 pm

bent,

If you decide to pull out, have a look at these web sites:
1. the developer will show you the pre-liminary contract first if you ask.
2. the developers prices on the pre-liminary contract include VAT (DDC).
3. The developer will complete at the "FULL" price shown on the contract.

www.bulanglia.co.uk and www.barrassfordand bird.com.
BJ

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Postby balkankiwi » Mon Nov 21, 2005 2:34 pm

bent wrote:Hi, thank you so much for your help advice.

I have only signed the reservation receipt and handed 1000 deposit so far..but I could not see the preliminary until a week after I had signed this.
Upon inspection of this, I have been asked to underdeclare, I had also been told Vat was inclusive which is was not and hence the asking price of the property has increased by several thousand which is out of my initial budget for this particular property.


There are a few other things such as variences in the plan etc...
More than likely I will lose this deposit if i fail to commit at this stage

:( Oh well, live and learn,

Thanks again

Ben


Well Ben, it seems to me that you have legitimate grounds to unilaterally terminate the contractual relationship and demand back your deposit.

(1) The vendor's insistence on an under-declaration of the purchase price calls for you to participate in a criminal act in Bulgaria - fraud on the revenue. A Bulgarian court is hardly likely to uphold this. (And it also cheats the notary out of his/her maximum fee - and the notaries and judges tend to be good mates in most Bulgarian cities.)

(2) The addition of VAT to the quoted selling price is not justifiable if the seller (or its agent) didn't make clear at the time you paid the holding deposit that the quoted price was exclusive of VAT. There is a common misconception - in Bulgaria and elsewhere (eg UK) - that VAT is a tax payable by the buyer which the seller collects on behalf of the state and adds to the purchase price. But this is not the case. VAT is a tax payable by the seller as a percentage of the sale price of the taxable goods. If the seller fails to stipulate that a quoted price is exclusive of its VAT liability, then it shouldn't be able to ramp up the purchase price - so as to recover the payable VAT - after a contract has been formed. Its just - or should be - tough titty for the seller - it has to pay the VAT out of the agreed sale price.

So in your case, failure to disclose that the quoted price was ex-VAT is - or should be - a ground for cancelling the contract. But as I mentioned, sellers in Bg, especially the commercial ones like developers, deliberately foster the idea that VAT is a tax payable by the buyer on top of the purchase price.

(3) Misdescription of the property being sold compared with what is then put in the preliminary contract is potentially another ground for cancellation. Ok, if its only some minor points (eg, a colour scheme) perhaps not but misdescription of, eg, the available floor area of an apartment should be.

Where you have made life difficult for yourself is in handing over a deposit before even seeing the preliminary contract, let alone signing it. It will be your word against the seller/agent's whether these items differ from what had been verbally agreed before you paid the deposit.

Having said that, have you signed any form of agreement at all? Or did you just get a receipt for the deposit? If there was an agreement, did it specifically state that the deposit was non-refundable in all circumstances? It may be that the seller/agent has no legal grounds for refusing to return your deposit where it was accepted before signing of the preliminary contract.

I wouldn't give up so easily :)

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bent
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Postby bent » Mon Nov 21, 2005 5:46 pm

Hi all, thank you all again for your valued advice, no I have written on my reservation receipt that my deposit is refundable upon inspection of the preliminary contract.

I will find out where the developers stands with regards floor plan variations etc on Wednesday...

Will post the outcome as soon as I find out more

Hopefully I'l be have something positive to report..

Kind regards,

Ben

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Postby u34rb » Mon Nov 21, 2005 5:53 pm

bent wrote:I have written on my reservation receipt that my deposit is refundable upon inspection of the preliminary contract.

Well that's all right then. Tell them what you want changed, and if they don't do it then ask for your money back. Problem sorted.


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