SECURITIES
There are 3 distinct periods when one purchases a real estate in Bulgaria:
— until the Preliminary contract is signed
— between the Preliminary and the Final contract (also known as Title deed or Notarial act)
— after the Final deed is signed.
Of these 3 periods the second only is potentially risky for the buyer. The first is not risky because no money is yet paid. The last is not risky because the buyer is already the owner. It is during the second period that money is already paid but the ownership is still not transferred.
Now what's the difference between probable and certain when one buys a real estate? If a buyer signs a preliminary contract without security, he probably will become owner of the apartment. If a buyer signs a preliminary contract with security, he will certainly become owner. Buying without security in almost all cases works. Let me explain it in this way. What would you think about an air carrier whose plains don't fall from the sky most of the times? I would never use such a carrier. Even if just one of a thousand flights would end in disaster, I would not risk using it however inexpensive it is.
There are 4 types of securities, the mortgage being one of these and the letter of credit being another. None of these is widely used but they are governed by the Bulgarian legislation. Each of these 4 alone gives a 100 % certainty once a preliminary contract is concluded. Using a security makes the conclusion of a preliminary contract likely, but not certain. On the other hand, using a security makes the conclusion of the title deed certain, not just likely. So through securities one trades the uncertainty in the period after money is paid, for uncertainty in the period before any money is paid. In other words, through securities one trades uncertainty in the period when there's risk for the buyer, for uncertainty when there's risk for the agent, because the agent does not get paid before a preliminary contract is concluded.
Obviously there's a conflict of interests here because the very thing that's risky for the buyer is safe for the agent and vice versa. That's why the Better-safe-than-sorry proverb doesn't work for an agent although he will assert otherwise. For an agent a probable outcome is good enough.
A typical agent has made, say, a hundred sells. During that time no client of his has lost his money. Therefore, for the real estate agent doing business without a security is o. k. He has been an agent for two years or so. He had no time to encounter all the risks that a lawyer with – say – 10 years of experience has encountered. What's more, the agent relies on his experience only whereas a lawyer reads much case-law and the case-law consist of practices gone wrong. Plus some lawyers have been in the courtroom as well so they could extrapolate what word in the contract means what in practice. Besides this a typical agent has studied anything but law and therefore he could not possible foresee the dangers when dealing with real estates.
Worse still the agent has not much to lose from a deal gone bad. A typical agent has made several hundred thousand Euro for a period of several years. If disaster strikes, he is not responsible on paper and to be responsible on paper is the only responsibility there is. Not be responsible is to say that the agent may not be sued successfully by the buyer. So even if this disaster is the end of the agent's business because he is discredited, the agent is left a wealthy man.
The lawyer however is not. And he is about to become poorer. For the same period the lawyer has made merely 50 thousand Euro and now he has to pay the deceived buyer 70 thousand Euro. This way even if the lawyer is not discredited, he has worked for nothing for years. And now, on top of this, he has lost money. This is the key difference between the attitude of an agent and of a lawyer. A lawyer is no more ethical than an agent. But a lawyer has a lot more to lose from a deal gone bad. That's why a probable outcome is not good enough for a lawyer. A lawyer likes certainty. However probability is o. k. for an agent and that's why these two don't make a good team. It's in the interest of the buyer that they don't!
What's the outcome of this dependence of the lawyer on the agent? The typical buyer trusts the agent, he neither knows the lawyer, nor is interested in the lawyer's work. The only thing that the buyer knows is that he pays good money (up to 10 percent of the cost of the estate) to the agent so that the buying is facilitated and he expects to be saved the trouble to go deep into the work of the lawyer. In fact there are clients who imagine that the lawyer is employee of the agent! The buyer would think: “the agent has been paid well to save me all the thinking”. This concept is convenient for the agent because it leaves him to control the lawyer. At the end of the day the agent has selected the most careless lawyer there is, the one who is most obedient to him and who has studied law not in a prestigious university, but God knows where, if at all! Yes, in my experience an agent does not even check if the person he recommends to the buyer is indeed a lawyer. He does not check whether the name of this lawyer has been published in the State Gazette, nor does an agent know that lawyers are published there. And never one has asked me for my Bar association membership card. Do they know that such cards exist? And if they do, do they care to check it? The only thing that the agent is interested in is whether this lawyer would be loyal personally to him or – as he puts it – whether he could work with this lawyer. In fact I do know of a particular case (this happened in the town of Borovets) when an agent sent an economics student to represent a client of his!
What if your attorney is posing as a lawyer but actually isn't one?
- Under Article 50 of the Bar association act awyers in Bulgaria are insured against errors that resulted in injury to their clients. Thus the insurer pays the buyer for the lawyer's errors. This is not the case if he is represented by an economics student.
- A lawyer is trained to conclude contracts, an economics student is not.
- According to Article 20, paragraph 1 of the Civil Procedural Code only children, parents, spouses and lawyers may represent somebody in front of a notary. An economics student is none of these.
