Under the rental contract in Bulgaria the lessor (or the landlord) provides to the lessee (or the tenant) the right to use the property for a specified term, and the lessee – to pay him the agreed rental price.
According to the Bulgarian law, even an oral rental agreement is valid. It is, however, strongly recommended to conclude the rental agreement in writing.
In case of commercial lease contract the verification of signatures by a Notary Public and the registration of the contract with the Property Register are also advisable. The advantage of such registration is that the contract remains valid and binding for the new landlord for the term stated in it in event of transfer of the property.
The only exception to the above is an agricultural lease contract. A written form with certification of signatures by a Notary Public is required for its validity. As well, these contracts must be registered with the Property Register and in the local Agriculture Municipal Office.
Usually, the tenant pays the rent for the first month and a deposit in amount of one month’s rent at the time of the signing of the contract. When the contract expires the deposit must be refunded to the tenant. In case that there are any outstanding obligations of the tenant (i.e. unpaid electricity and water bills for the property), the lessor keeps the deposit and use it to cover these.
The parties can also stipulate a provision for the revision of the rental price (i.e. the changes in the inflation index, changes in the rental market prices, etc.).
The tax on rental income is 10%.
Term of the rental contract
A rental contract in Bulgaria may not be signed for a period longer than 10 years. If the contract is signed for a longer period it has a validity only for 10 years.
In case of commercial lease contract no legal restrictions limiting the maximum term are provided.
The minimum term of an agricultural lease contract is 5 agricultural years. There is no restriction regarding the maximum term.
If after the expiration of the term of the contract the tenant continues to use the property without the objection of the lessor, the rental contract shall be deemed extended for an indefinite term.
If the lessee continues to use the property despite the objection of the lessor he owes compensation and must fulfil all obligations arising from the terminated rental contract.
Rights and Obligations of the parties
The lessor is bound to hand over the property in a state which is appropriate to the use it has been leased for. Otherwise the lessee may claim its repair or a proportional reduction in the lease price, or may avoid the contract of lease, as well claim damages in all cases.
The lessee must use the property as specified in the contract. He shall pay the rental price, as well as the expenses related to the use of the property.
Small repairs related to damages which are caused by conventional use, such as dirty walls in the rooms, corrosion of faucets, door locks, blockage of chimneys etc., are at the expense of the lessee.
The repair of all other damages, if they are not caused through the lessee’s fault, is at the expense of the lessor. If the lessor fails to make these repairs, the lessee may claim its repair or a proportional reduction in the rental price, or may terminate the contract. As well, he may claim damages but only when the repair is due to reasons the lessor is liable for. If the lessee makes the repair himself he may deduct the cost of the repair from the rent.
If not otherwise agreed between the parties, the lessee may sublease the whole or parts of the leased property without the prior consent of the lessor.
Transfer of the property during the rental contract
In case of a transfer of the property the rental contract remains valid for the agreed term with respect to the transferee only if it was registered with the Property Register.
A rental contract concluded in writing with notary certified signatures of the parties, but not registered with the Property Register, remains binding upon the transferee for the term stated in it or for a maximum term of one year from the date of transfer.
Where the rental contact is not notarized and registered with the Property Register but the lessee is in possession of the property, the contract shall be binding upon the transferee as a contract of lease with an indefinite term.
The lessor owes compensation to the lessee if the latter is deprived of the use of the leased property before the expiration of the term of the lease due to the transfer of the property.
Termination of the rental contract
Usually, the rental contract in Bulgaria terminates with the expiry of its term.
As all types of contracts the rental contract may also be terminated:
- by mutual consent of the parties, or
- due to a contractual breach by one of the parties, or
- due to objective impossibility of performance, etc.
If the contract has an indefinite term, each of the parties may terminate it with a one month’s prior notice. But if the lease is daily a one day’s notice is sufficient.
In case of termination of the contract the lessee shall return the property. He owes compensation for the damages caused during the use of the property, except if he proves that it is due to reasons he is not liable for. He also owes compensation for the damages caused by members of his family or by his sub-lessees.