In the most cases Preliminary Contract for construction and transfer of ownership of the real estate includes two independent civil contracts implemented in one agreement and regulated under the Bulgarian Law on obligations and contracts - a Preliminary contracts for transfer of ownership and contract for construction. In this respect the agreed purchase price includes as the price for transfer for ownership as the price for construction and completion the property.
The first one (Preliminary Contract for transfer of title) is usually concluded when the parties are not ready to sign the final contract for transfer of ownership in the form of Notary Deed because at the moment of its signing the property is still in process of construction or in cases when the Buyer has no financial resources to pay for acquiring the ownership and needs time for organizing the payment of the purchase price. The Preliminary contract for transfer of Title shall contain provisions concerning the material terms of the final contract –the detailed description of the property, subject of the future transfer as well as the exact amount of the purchase price. The purchase price is a substantial element of the Preliminary contract as it is a regular sale – purchase contract which is always contract requiring a payment against acquiring of an ownership.
The second contract, namely the Contract for construction of the real estate, is a variety of the Contract of a manufacture regulated under Art. 258 – 269 of the Law on obligations and contracts. Under the contract of manufacture the contractor shall be liable at his own risk to manufacture something in accordance with the other party's order, and the latter - to pay a remuneration. Under the terms of the contract for building of the property, the builder shall be liable at his own risk to construct the property in accordance with the project and the building documentation approved by the municipal authorities of the Republic of Bulgaria. The said contract for construction of the property is also requiring remuneration against building and delivering of the property.
So, the parties are signing Preliminary contracts because of the lack of preconditions for signing of final contract in the form of notarial act at the moment of negotiations between the Buyer and the
The total price agreed in the Preliminary contract includes not only the purchase price for transfer of the Title over the property but also the remuneration for construction and transfer of ownership of the real estate. Afterwards, the same total amount should be specified in the Notary Deed for sale-purchase and it serves as a basis for calculating the tax fee and the notarial fees. In principle it depends on the free will of the parties what purchase price they will decide to be included in the Notary Deed.
This article was created by “Valova&Angelova“ law firm.