Before selling their real estate to another natural or legal person, it is important that each owner checks whether the state or municipality has the right of first offer.
The legal basis for this stems from Article 199, paragraph 1 of the Bulgarian Territory Development Act (TDA), which stipulates that the state and the municipality have the right of first offer to purchase real estate when, in accordance with the detailed development plan, the real estate is envisaged for construction of a work constituting public State or public municipal ownership.
Respectively, this right of the state or the municipality is secured by a corresponding obligation on the part of the owners (private persons). They may sell their real estate or parts thereof to a third party only after offering the real estate for purchase to the state or the municipality, depending on the provisions of the detailed development plan and after submitting a written refusal by the state or municipality to a notary. The refusal must indicate the conditions under which the purchase was offered.
Article 199 of the Territory Development Act is aimed at avoiding a forced expropriation of private property when it is intended for the construction of works over which the state or municipality has ownership. Hence, the provision of Article 199 of the TDA provides an opportunity for the state or municipality to replace the buyer in an upcoming purchase on conditions already agreed between the seller and the potential purchaser. This is a form of restriction of the interference of the public authority in relations of private law nature, respectively a rule, which guarantees the principle of inviolability of private property enshrined in the Bulgarian Constitution(1).
The recognised right of first offer of the state or municipality can only be exercised if there are both a proposal and acceptance between subjects with equal rights within the meaning of civil law. Therefore, the right to dispose of property subject to expropriation is to be exercised in a manner similar to the general order within the meaning of civil law, in which the municipality or the state does not exercise sovereign powers, but enters into a civil law transaction or assists in the conclusion of one between third parties. Therefore, both the acceptance and the refusal to purchase the real estate on the part of the state or municipality in the hypothesis of Article 199 of the TDA, are not an expression of the administrative activity which is usually carried out by them. Moreover, the obligation of the indicated subjects to present written refusal to purchase in case they do not agree with the proposed parameters of the transaction derives from an imperative rule within the law, which has no administrative nature.
Thus, the courts find that the refusal of the state or municipality to purchase real estate pursuant to Article 199 of the TDA cannot be appealed under the administrative legal order as it does not represent an administrative legal act. In fact, the refusal to purchase the real estate on the part of the state or municipality does not entail negative consequences for the owner of the real estate - as a result, they acquire the right to sell it to third parties. However, in order to do so, they are required to present the refusal to a notary in accordance with Article 199, paragraph 2 of the Territory Development Act.
Although in theory, the rule of Article 199 of the TDA seems consistent, its application is associated with a number of practical issues:
1. It is not indisputable whether the right of first offer arises for the state or the municipality when not the entirety of the real estate for sale but only a part thereof is envisaged for expropriation.
2. It is not specified whether the envisagement in the detailed development plan refers to public state or public municipal ownership.
3. There is no obligation for the state or the municipality to provide a written response to the person who made the offer, nor is there a time limit within which the response must be given.
4. There is no sanction for the state or municipal body whatsoever if they do not provide a response when requested. Additionally, it is not specified whether compensation for damages can be claimed from the respective state or municipal body when such could arise from their inaction.
5. There is no explicit consequence of violating the provision of Article 199 of the TDA, in the cases where it is applicable. This, along with everything else, enables notaries to perform or refuse a requested sale (until the requirements of Article 199 of the TDA are met) at their discretion in each specific case.
It can be speculated that the answer to some of the abovementioned issues is given by analogy with Article 49, paragraph 1, item 2 of the Territory Development Act (regarding the term for response) or with the imperative character of the provision of Article 199 of the TDA. However, this in no way gives grounds to assume that the current legislation or the case law contains specific comprehensive solutions to these issues.
The above leads to the conclusion that there is no single approach which is followed in the application of Article 199 of the TDA. Therefore, even when there is the slightest doubt whether the procedure under Article 199 of the TDA is indeed applicable, it is advisable that sellers carry it out anyway. The opposite would lead to a situation in which a transaction carried out without conducting the procedure under Article 199 of the TDA is challenged and in the worst-case – declared null and void.
(1) Article 17, paragraph 3 of the Constitution of the Republic of Bulgaria