Shady dealings and corruption lie in wait for the unwary
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By Pilvikki Kause in Varna
In the village of Rakitnika just south of Varna, a blue and white flag has fluttered in front of a small rundown shack, as a sign of the successful land dealings of a consortium of five Finnish families. Any day now, the shack will be flattened and work will begin on building a shared summer home on the site.
The families initially dreamed of a seafront villa in Croatia, but prices on the Adriatic Coast had already gone ballistic. After some surfing on the Net, they came up with Bulgaria.
"We were lamenting the fact that we had not got into buying a summer place in Estonia when the time was right. For all of us, Bulgaria was a complete blank on the map. We wondered if there was even the slightest bit of sense in what we were doing, or alternatively whether we would kick ourselves later for lack of courage", says Kari Suutari from Lahti, one of the group.
The shareholders in the venture set out some ground-rules on paper: nobody was to grumble or blame the others if each family's intended initial stake of EUR 5,000 went straight down the drain.
Now, two years later, the dream of an old vineyard with views over the sea has morphed into an investment commitment of at least EUR 100,000 between them.
The group made their first visit to these parts in late autumn 2005. The weather was wet and grim, and the rural surroundings of Varna were deep in mud.
They learned quickly that in Bulgaria anybody can sell anything, largely regardless of whom it belongs to. The property does not even have to be up for sale, or it may already have been sold, or there is no information on who actually owns it.
"We pretty soon came up with a motto: ‘In the Bulgarian real estate market, a picture lies more than a thousand words'", laughs Kari Suutari.
They were also a little concerned as to whether the elderly people living alone in some of the houses being sold actually realised just what huge sums their place was going for, relative to the local standard of living.
A pension in Bulgaria can be as little as EUR 30.00 a month.
"We were not able to communicate with the old people since we did not speak the language. It was unclear just how big a slice of the money was going to the realtor in these deals."
While they were out searching, the group used as their base a guest house in Rakitnika run by a British couple. Through the two Brits, they got to meet the local "fixer", a man who had built a few houses in the neighbourhood.
"After our second trip to Bulgaria, we decided that there was no sense in our trying to spread the net too wide, and we found a piece of land from the same village with the help of this same guy. He is also going to build our house."
Foreigners cannot own land in Bulgaria, so the common housing project had to establish its own Bulgarian company for the purpose. This is all organised through a local law office.
Foreigners have also found that when it comes to building or repair costs, they often have to pay more than the going rate for the locals.
Bulgaria's accession into the European Union at the beginning of this year was pretty much on a knife-edge for a while, owing to the country's alleged corruption and organised crime, including money laundering. There are grey zones, too, in the property development, building, and real estate sales businesses.
"Officials can demand that they are paid under the table something like 20 per cent of the cost of the construction contract. And if palms are not adequately greased, all the building permits magically fail to appear", warns one Finn who has been observing the branch locally.
Ambassador Kauko Jämsén from the Finnish Embassy in Sofia also offers the reminder that the summers in Bulgaria may not be quite as long and unending as the realtors would have you believe, and that property values may not be rising at the steep rate promised.
Jämsén advises that buyers should take part of any loans they take out from a local Bulgarian bank. This way, local knowhow on the Bulgarian housing market is brought into play.
"The zoning and the regional planning is not always fully thought through, and the buyer does not always know exactly what sort of buildings are going to appear next door. Another thing is to make sure that the ownership arrangements are completely watertight - it would be unfortunate to have an heir to the former owners from America ringing your doorbell to say the place is half theirs", adds Jämsén.
There are also some illegally built time-share developments along the Black Sea coast, which the government has threatened to have dismantled, much to the horror of the new owners.
To their relief, the government in Sofia announced last week that it would not be carrying out the demolition order, but stated that from now on there would be appreciably tighter laws on new construction.
All the Black Sea shoreline, up to a certain distance from the sea front, will remain in public ownership, but ten-year rental agreements will be granted.
Apropos of desirable shorefront properties, some of the sandy limestone cliffs that are popular with builders in the Varna region are also highly susceptible to subsidence and landslides. For example, leaking drainage conduits can be enough to set things moving, and cliff erosion has left one or two desirable residences in very undesirable teetering positions, as the photograph shows.
Helsingin Sanomat / First published in print 6.5.2007
More on this subject:
 "Wanted: desirable holiday property in Bulgaria - must have sea view"
Links:
Five Finnish families in search of a second house in Bulgaria (in Finnish)
PILVIKKI KAUSE / Helsingin Sanomat
pilvikki@wp.pl
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