Preliminary contract and deposit: what to know before you sign

You've found the right property, agreed on the price, and the next step is the preliminary contract. Many buyers and sellers treat it as a formality before the "real" deal at the notary. In fact, it's the preliminary contract that decides what happens if something goes wrong - if the bank turns down the loan, if the seller gets a better offer, or if the buyer changes their mind. In this article we explain what Bulgarian law says about the preliminary contract and the deposit, and what to watch for before you sign and transfer any money.

What a preliminary contract is

With a preliminary contract, the buyer and seller commit to signing the final contract - the notary deed - on agreed terms and by an agreed date. It's important to know that it does not transfer ownership. Until the notary deed is signed, the property still belongs to the seller, and the buyer only has the right to demand that the sale goes ahead.

Under Article 19 of the Obligations and Contracts Act (ЗЗД), a preliminary contract to buy a property must be made in writing. A verbal promise like "we'll hold the apartment for you" gives you no legal protection at all. Having the signatures notarised isn't required, but it's important that every owner of the property signs the contract - in person or through someone holding their power of attorney. An owner who hasn't signed isn't bound by it.

What it should contain

The law requires the preliminary contract to cover the essential terms of the final contract. If they're missing, a court may later refuse to declare the contract final. In practice, check that the contract states:

- **An exact description of the property** - address, cadastral identifier, floor area and any attached spaces (basement storage, attic room, parking space, if there is one). - **The price in euro and how it will be paid** - how much is paid as a deposit, how much at the notary, and whether part of it comes from a bank loan. - **The deadline for signing the notary deed** - a specific date or a clearly defined period. - **Who covers the transaction costs** - the local transfer tax, the notary fee and the registration fee. - **The condition the property is handed over in** - which furniture stays, when the property will be vacated and when the keys are handed over. - **What happens if the bank refuses the loan** - if you're buying with a mortgage, this is one of the most important clauses in the whole contract.

Deposit or advance payment: the difference matters

The deposit (called "задатък" in the law, and commonly "капаро") is governed by Article 93 of the Obligations and Contracts Act. It serves as proof that the contract was concluded and as a guarantee that it will be performed. The law sets no minimum or maximum amount - it's agreed between the parties.

It's important that the contract explicitly describes the sum as a deposit (задатък / капаро). If it's described only as an "advance" or "part of the price", the rules on keeping it or returning it double, described below, don't apply. In that case, if the contract is terminated, the advance has to be refunded, and any losses must be proven separately.

What happens if the buyer backs out

If the buyer who paid the deposit fails to meet their obligations - for example, doesn't show up at the notary or doesn't pay the price on time - the seller can terminate the contract and keep the deposit.

What happens if the seller backs out

If the seller who received the deposit fails to meet their obligations - for example, sells the property to someone else or refuses to sign the notary deed - the buyer can terminate the contract and claim double the deposit.

Example: you've paid a €15,000 deposit and the seller pulls out of the deal. You're entitled to €30,000 - your own €15,000 plus the same amount again. If the seller doesn't pay voluntarily, the amount has to be claimed through the courts.

When you want the property, not the money

Instead of terminating the contract, you can ask for it to be performed. Article 19(3) of the Obligations and Contracts Act allows either party to file a claim for the final contract to be concluded. In practice, the court declares the preliminary contract final, and its judgment takes the place of the notary deed. In that case the deposit isn't returned double, and compensation for any losses is assessed under the general rules.

If you file such a claim as the buyer, there are a few conditions to know about in advance:

- **The claim is entered in the Property Register.** Under Article 114 of the Property Act, rights that third parties acquire in the property after that registration can't be enforced against the buyer. That's why acting quickly matters in a dispute - if the seller sells the property to someone else and that sale is registered before your claim, you'll only be able to seek money, not the property itself. - **The court checks that the seller actually owns the property** and that all the conditions for transferring it by notary deed are met (Article 363 of the Civil Procedure Code). - **You must pay the rest of the price within two weeks** of the judgment becoming final, if the contract says it's due at the notary. If you don't, the court will annul the judgment at the seller's request (Article 362 of the Civil Procedure Code). - **You pay the transfer costs.** The court won't issue a copy of the judgment until you prove that the transfer costs and any taxes and fees owed on the property have been paid (Article 364 of the Civil Procedure Code). - **The judgment must be noted in the Property Register within six months.** After that, the registration of the claim loses its effect (Article 115 of the Property Act).

What to do before you sign

- **Check the property before paying a deposit.** Ask for the seller's notary deed and a certificate of encumbrances from the Registry Agency. Make sure the owners on the documents are the same people signing the contract. - **If the property was acquired during a marriage**, it is usually jointly owned by both spouses, and both need to take part in the sale. It's best for both of them to sign the preliminary contract too. - **Pay the deposit by bank transfer** with a clear payment reference - for example, "deposit under preliminary contract dated [date]". That way you have proof of how much you paid and when. - **Allow a realistic deadline** for the notary deed. When buying with a loan, the bank's approval and valuation take time. Too short a deadline can put you in breach of the contract even though the delay is out of your hands. - **Don't sign under pressure.** Lines like "there's another buyer, we need to sign today" are common. Good properties really do sell fast, but a day spent checking the documents costs far less than a lost deposit.

Conclusion

The preliminary contract is the most important document before the notary deed. It decides whether, if something goes wrong, you lose your deposit, get it back double, or can still acquire the property through the courts. This article sets out the general rules and doesn't replace advice from a lawyer on a specific transaction. If you're buying or selling a property in Sofia, contact us at 0879 826 292 - we'll go through the documents and the contract with you before you pay or receive a deposit. We work with a limited number of clients per month so we can give each one the attention they need.