You own a plot in town and a developer offers to put up a residential building, with several of the apartments going to you. In Bulgaria this is one of the most common land deals, known as a building right against compensation (обезщетение срещу право на строеж). It can be very profitable, but the landowner takes on real risk: you grant your right at the start and receive your units only years later.

The legal structure

Under Art. 63 of the Property Act (ЗС) a landowner may grant another person the right to build on their land. In practice the developer receives a building right only for its own units (flats, garages, shops). The units kept by the owner remain the owner's through accession under Art. 92 of the Property Act. You become their owner as they are built, without buying them.

Form: the grant must be made by notarial deed (Art. 18 of the Obligations and Contracts Act, ЗЗД). Otherwise it is void.
Registration: the deed is entered in the Property Register (Art. 112 of the Property Act). Until it is registered, it cannot be relied on against third parties who registered rights earlier (Art. 113).
One notarial deed usually covers both the grant of the building right and the developer's obligation to build the owner's units at its own cost.

How the compensation is agreed

Compensation is usually a share of the gross built-up area (РЗП) or a list of specific units. The share depends on the location, the plot's planning parameters and the market. Compare two or three offers rather than relying on "typical percentages".

Whatever the share, the contract must be specific:

What the contract should contain	Why
Number, floor, area and orientation of each of your units under the approved design	Otherwise the "which flats are mine" dispute surfaces years later
Your ideal shares in the common parts and in the land	They define your real stake in the building
The level of finish on handover, with materials described	"Finished" with no description means something different to each side
Deadlines by stage: design, building permit, rough construction, Act 15, Act 16	They give clear grounds for penalties and termination
What happens if the design changes	Design changes can shrink your floor areas

If the design is not yet approved, agree that your units will be fixed by an annex within a set period after approval. Also agree a minimum area your units cannot fall below.

Guarantees that actually protect the owner

The main risk is that the developer builds and sells its own units while yours stay unfinished. Negotiate at least some of the following:

A bank guarantee covering the value of your units or non-performance. This is the strongest protection, but not every developer can provide one.
A mortgage in your favour over another property of the developer, or security over some of its future units.
Staged release: the developer may sell its units only after the matching stage of your units is complete.
Penalties for delay (per day or month) and a separate termination penalty. Under the Supreme Court of Cassation's case law (Interpretative Decision 7/2014), when a contract is terminated only the termination penalty is due, not the delay penalty. Agree both.
A dedicated bank account for the project's money. This is a contractual arrangement, not a statutory escrow regime, but it gives you visibility of the cash.

The five-year rule, and what if the developer stops

Art. 67 of the Property Act provides that the building right lapses in the owner's favour if it is not exercised within five years. Courts have held that the period runs from when building actually becomes possible. Case law differs on what counts as "exercised": some decisions require completed rough construction, others accept an issued building permit. Don't rely on Art. 67 alone. Set your own, shorter deadlines in the contract.

If the developer stops work or becomes insolvent:

The units allocated to you remain yours by accession. Without a guarantee, however, you will pay to finish them.
For a material breach you can ask a court to terminate the contract (Art. 87 ЗЗД). The claim is entered in the register (Art. 114 of the Property Act).
Note: termination does not affect rights that third parties acquired before the claim was registered (Art. 88(2) ЗЗД). Buyers who have already acquired flats from the developer stay protected, so timing matters.

Until rough construction is complete, the building is traded as a building right. After that, the units themselves are sold (Art. 181 of the Spatial Planning Act). We explain Acts 14, 15 and 16 in our guide to new-build property.

VAT in brief

For VAT purposes the deal is an exchange. The National Revenue Agency (NRA) treats it as two reciprocal supplies (Art. 130 of the VAT Act): the owner's grant of the building right and the developer's construction. The tax base of each is the market value of what is received in return (Art. 26(7)).

Granting a building right before a building permit is issued is an exempt supply under Art. 45(2) of the VAT Act. An individual owner who is not VAT-registered normally charges no VAT. The developer, in turn, charges VAT on supplying the new units. The planned changes to VAT registration for sellers of new buildings and plots are covered in a separate article.

Taxes for the owner

Local acquisition tax (ЗМДТ): it is due on the tax valuation of the building right granted. The developer usually pays it, but state in the contract who bears which costs.
Income tax: in its rulings the NRA has treated a grant against compensation as potentially giving rise to taxable income under Art. 33 of the Personal Income Tax Act. Whether an exemption applies depends on how and when you acquired the land. NRA positions are not uniform, so get an accountant's view before signing.
Selling a unit later: for a flat received as compensation, the NRA has taken its market value at acquisition as the acquisition cost.

How to vet a developer

Commercial Register: owners, managers, history, filed accounts and any insolvency proceedings.
Central Professional Register of Builders (ЦПРС): for residential buildings the contractor must be registered for the relevant group and category (Art. 3(2) of the Chamber of Builders Act). Check at register.ksb.bg.
Past projects: visit completed buildings and confirm they have Act 16 (the occupancy permit). Ask landowners from the developer's earlier deals whether they received their units on time.
Property Register: check mortgages and attachments on the company's other properties.

In short

A land-for-apartments deal works when the compensation is defined unit by unit, deadlines are split into stages and the guarantees are real, not just on paper. The earlier you bring in a lawyer and an accountant, the cheaper it will be.

Verified October 2026. This is general information, not legal or tax advice for a specific case.

If you are weighing an offer like this for your plot, call us or visit our office. We will go through the plot's parameters and the proposals you have received.

Land for apartments in Bulgaria: how to negotiate the compensation and protect yourself as the plot owner