In case you want to arrange the donation of the property or to receive a donation and you do not know exactly how this procedure should be performed, what documents are required and what risks may arise because of such a deal, you may contact our law office for legal assistance. Below you will find more about donation of property, services that we provide and potential problems that may be encountered.
DONATION OF A REAL ESTATE
The legal definition of a donation is given in art. 225 par. 1 of the Obligations and Contracts Act according to which the donor immediately and gratuitously transfers the item/property to the donee who accepts it.
The present article will examine only the subject of donation of a real estate. The legislature does not put limits to the properties that can be donated, i.e. all kind of real estates /agricultural land, regulated plots, buildings, apartments and other/can be donated. Except the real estates themselves, limited property rights over real estates also can be donated /such as the right to build, the right of passage, the right to build additional levels and other/.
Like the sale and purchase deal the donation is also executed via a notarized title deed with presence and agreement of both sides – the donor and the donee. But the idea that lies in the basis of the donation is the gratuitously transfer of the ownership right over the real estate. The person who donates the property does not do it in order to receive some benefit but with a clear realization of the fact that he immediately transfers the ownership right over the donated property as the counterparty does not due payment of any amounts or fulfilment of any other financial obligation. In case the donated property has any encumbrances the later will follow the property even after the change of the owner, i.e. acquisition of an encumbered property via donation will not delete this encumbrance. The important question is who can be a donor. The presumption is that then donor is a capable private person, the owner of a real estate. A company also can donate a real estate as we would like to pay your attention to the fact that depending on what and to whom will be donated this may create financial complications and problems. Under certain conditions there is no problem the donor to be represented by a proxy. The donee can be any person including a minor under condition that he is properly represented.
What is important is that according to the art. 226 of the Obligations and Contracts Act a promise to make a donation has no effect and donation of a future real estate is null and void. The donation is also null and void when it, or the single motive for which it was made, contravene the law or good morals, and also when the conditions or burdens are impossible.
Regarding the notary proceedings the rules that are applied and documents that are required for execution of a donation are the same as rules and documents for the sale of a real estate /generally the documents are – a document that legitimize the donor as the owner, a scheme and a tax evaluation of the property, declarations/. After signing of the title deed for the donation this deed is registered at the relevant Registry Agency after which the donee becomes the new owner of the real estate.
Fees and taxes that are due in regards with donation are usually paid by the donee as those fees and taxes are:
The notary fee that is calculated according to the Notary Tariff on the basis of the tax evaluation. Additional notary fee for the work and drafting may be calculated in case the Notary public has prepared the draft of the title deed.
The local tax that is calculated according to the Ordinance of the relevant Municipality as the percentage is:
– 0% in case of donation between spouses or linear relatives /parents, children, grandchildren/;
– From 0.4% to 0.8% in case of donation between brothers and sisters and their children;
– From 3.3% to 6.6% in case of donation between other persons /except those mentioned above/.
The registration fee to the amount of 0.1% of the tax evaluation but not less than 10 BGN that is collected by the Registry Agency.
It is important the parties of a donation to be aware that a real estate acquired via donation during the marriage becomes the personal property of a spouse who acquired it.
Everything said above means that the idea of the donation is to donate your property to somebody only with good feelings without expecting some benefit from it. Nevertheless very often parties choose the procedure of donation with the only purpose of avoiding fees and taxes in regards with the purchase of the real estate and because the lack of information and because of the fact that they were not promptly consulted they face a lot of problems lately.
PROBLEMS AND RISKS:
1. The general grounds for termination of the deal for donation are the same as in case of sale and purchase /see the article about sale and purchase of the property/;
2. There are additional grounds for termination of the donation as according to the art. 227 of the Obligations and Contracts Act the donation can be repealed if the donee:
a) Has intentionally murdered or attempted to murder the donor, his wife or his child, or is an accomplice in such a crime, except if the act was committed under circumstances that exclude culpability;
b) Has slanderously accused the donor of committing a criminal act which is punishable with at least three years imprisonment, except if the slanderous accusation has to be prosecuted upon a complaint of the victim and no such complaint has been lodged, and
c) Has refused to provide the donor with the support which the latter needs.
The hypothesis of the art. 227 letter “c” means that after the donation the donee becomes dependant from the donor and in case of need must pay the donor the amount for support. With regards to this hypothesis it should be remembered that possibility of the donee to provide such support must be considered in each specific case as those possibilities should be evaluated having in mind the cost of the donated property, i.e. the donor can not demand payment that exceeds the value of what was donated.
Another important point is the evaluation of the donor’s need. During determination of this need the environment in which the donor lives, his personal needs, should be taken into the account of course, having in mind the average standard of living. Such claim can be submitted within one year term from the date when the ground or grounds became known to the donor.
3. If the donation harms a compulsory share of the donor’s heirs, then after the donor’s death his heirs have the right to start a court case for recovery of their obligatory share in accordance with art. 30 of the Family Code. I.e. property acquired through donation, may be lost /alienated/ after the death of the donor. Article 28 par. 1 of the Inheritance Act says that if the testator has descending heirs, parents or spouse, he can not reduce what is their obligatory share of the inheritance by will orders or donation. In other words, the donation may be terminated on the basis of the claim sent to the court within 5 years from establishment of the inheritance.
4. Unlike the will according to which the transfer of ownership takes place after the death of the testator, in case of donation the property is transferred immediately upon signing the title deed for donation. More importantly, while the testator may eventually change his will and his orders, in case of a donation the donor can not change his decision regarding the transfer of property rights and respectively regarding the recipient of the donation.
5. Fees and taxes for registration of donation between third parties are higher than fees and taxes for registration of sale.
6. The donor may decide to keep the right of use which will limit the rights of the donee.
7. In case there are any encumbrances over the property, they will follow the real estate and will be transfered to the new owner.
We, the solicitors of ID Law office, really believe that for the good of the donor and the donee both parties must consult with a competent experienced attorney in order to avoid the risks and possible adverse future consequences of such deal.
The present article is not a legal consultation but presents a summarized theoretical development of a certain legal sphere. ID Law Office is not liable in the event of a misunderstanding of the information contained in this article.
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