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Country - Bulgaria
Commercial Leases
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A. SOURCES OF LEASE LAW
Applicable legislation
Main applicable acts are the Obligations and Contracts Act, the Commercial Act and the Ownership Act.
Do any specific rules apply to commercial leases?
Commercial leases may benefit from lack of maximum duration restrictions (see below in section B). The company representative of the lessor must be explicitly authorised for signing lease contracts for a term exceeding three years.
Do different regimes apply to leases of commercial premises depending on the use of the premises by the lessee (offices, warehousing, industrial, retail)?
Generally no. Distinctions may be made on a contractual basis.
B. DURATION AND TERMINATION OF LEASES
Is there a minimum or maximum obligatory term?
The minimum lease term is not regulated. The general maximum lease term of 10 years is not applicable to commercial leases (i.e. lease contracts concluded by companies). Thus, a commercial lease may be concluded for unlimited time.
Does the lessee have a right to renew the lease upon expiry of the initial contractual period?
When the lease contract is concluded for a particular term and the lessee continues to use the property after expiration of the lease term with the knowledge of the lessor then the lease contract is considered extended for an indefinite term.
Do lessees enjoy security of tenure (i.e. the right to remain in occupation after their lease expires)?
No.
Do leases involve a lengthy procedure for the effective recovery of possession?
The lessor has to seek a court order for the recovery of possession of the leased premises.
Can government/local authorities require the compulsory termination of a lease?
Yes, authorities have certain rights to acquire property on a compulsory basis, including leased property, for completion of infrastructure projects. However, this may be based only on explicitly legally provided grounds.
Is there a preferential right of acquisition?
Generally no, but such option may be contracted.
C. RENT AND COSTS
Are variable rental agreements common?
Yes, the parties may choose an option for indexing the rental price or to determine percentage rent on the basis of the sales in the leased property. Adjustment is often on a semi-annual or annual basis.
Most common indexation
Indexation clauses in lease agreements are most commonly based on the Bulgarian or European consumer price indexes or inflation.
Who usually pays the common expenses?
Usually the common expenses are paid by the lessee.
Are there any other expenses connected with the lease?
Maintenance of the premises should be paid by the lessor in case it concerns major renovations or repairs of appliances and by the lessee in case it is caused by the everyday use/wear of the premises.
Usually, it is negotiated that the lessee should pay the insurance premium for the property, if any.
Which indirect taxes are applicable?
VAT amounting to 20%.
D. OBLIGATIONS OF LESSOR AND LESSEE
Who is responsible for the different works on the premises?
The lessee should manage and maintain the property with due care and conduct required actions for its preservation, when needed. The lessee should conduct minor activities concerning daily usage of the premises (for example, changing light bulbs).
The lessor should take care of the major repairs in the premises so as to provide a suitable use and conditions therein, as stated in the lease contract.
Can the lessee alter or improve its premises?
The lessee may alter and improve the premises only upon explicit consent by the lessor. The lessee is entitled to receive payment for the increased value of the property.
What restrictions exist on the lessee's right to use the premises?
The lessee may generally use the premises only for the purpose stated in the lease contract, unless explicitly otherwise agreed. The lessee may use the premises for different purposes only after the approval of the lessor.
Is there any right to transfer the lease?
The lease should be registered in the Registry Agency in order to be effective against the new owner in case of transfer of the ownership title over the premises. If the lease is not registered, the lease is considered as a lease for an indefinite period, or if the date on the lease contract is certified by a notary public it is considered valid for a period of one year.
Is there a right to sub-let the premises?
The lessee may sublease the premises: (i) unless it is otherwise agreed in the main lease contract; and (ii) in case it provides fewer or the same rights to the sub-lessee to use the premise as in the main lease contract.
What are the usual guarantees?
Parties may agree on any guarantees applicable for general commercial contracts. Most usually for commercial leases, the lessee provides a cash deposit or a bank guarantee.
E. PARTICULAR TYPES OF LEASE
Do office leases have any particular characteristics?
No.
Do retail leases have any particular characteristics?
No.
Do hotel leases have any particular characteristics?
Hotel leases are not specifically regulated. Hotels are leased as a business, subject to Commercial Act and Obligations and Contracts Act regulations.
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