Buying a mortgaged property in Bulgaria: coordinating payment and cancellation

A mortgaged property can be sold. The important issue is how the buyer receives the agreed rights and the seller receives the price, without leaving an unresolved risk between payment and release of the security.

Under Article 173 of the Obligations and Contracts Act, a mortgage creditor may seek satisfaction from the property regardless of its owner. A promise to repay the loan from the sale proceeds must therefore become a specific, verifiable arrangement.

Establish the complete registration position

Check which mortgages and other relevant registrations affect the property. There may be more than one creditor or a restriction that payment to the known lender will not remove. The amount stated in the mortgage deed is not necessarily the current loan balance.

Obtain the creditor's current written conditions for the specific property: the amount, receiving account, validity date and requirements for consent to cancellation. Where security covers a larger development or several assets, establish whether the proposed payment releases precisely the property being bought.

Allocate the price by recipient and condition

One possible arrangement is direct payment of part of the price to the creditor and the balance to the seller. This is not a universal model. The order depends on the documents, funding, lenders' requirements and parties' agreement.

The contract should specify that the agreed payment to the creditor counts towards the purchase price. It should also address any shortfall if the debt is higher than expected and identify who pays cancellation costs.

If the buyer uses mortgage finance, their lender may impose requirements concerning registration priority and drawdown documents. A verbal assurance that the banks will coordinate is insufficient when committing to contractual deadlines.

Loan repayment is not completed cancellation

Article 179 provides for cancellation on the basis of the creditor's notarised consent or a final court judgment. In an ordinary agreed sale, establish who obtains the consent, who submits the documents and how completed cancellation will be checked.

The payment confirmation should not be the final verification document. Check the registrations after the agreed steps have been performed.

Four questions before signing

1. Which specific registrations must be cancelled?
2. Are the creditor's written conditions valid for the intended payment date?
3. What happens if the buyer's funding is delayed or release conditions are not met?
4. When is possession handed over, and how is each stage documented?

This preparation also protects the seller. It helps avoid promising a deadline or payment arrangement that their lender cannot accommodate.