How To Buy a Property in CyprusThe
Procedure and Costs involvedBuying a property abroad can be a very satisfying but at the same time a difficult decision to make and it is therefore imperative that the proper legal advice and the correct guidance is obtained before making this decision. There are various methods of buying property in Cyprus, the three most common methods being:
1 New Properties;
2 Resale Properties without Title Deeds; and
3 Resale Properties with Title Deeds
1 New Properties
The main difference with buying a property “off plan” in Cyprus or being a first time buyer of a property in Cyprus in comparison to many other European Countries is that there is not an automatic issue of Title Deeds as soon as the property has been completed and delivered to a buyer. In some European countries a separate Title Deed for an individual house or apartment is given to the buyer very soon after they have completed the purchase of their property. In Cyprus, however, a Developer/Seller has to apply to the Cypriot Government for the Deeds to be issued to a buyer. However, the Developer/Seller cannot make this application to the Government Authorities until he has completed building the whole project and has sold all the properties within the project.
Hence, on an average size project, a reasonable timescale for the Deeds to be issued, would be around six years from the date of delivery the property to a buyer. In order for a buyer’s interest in their purchase to be safeguarded until the Title Deeds are issued, the buyer’s purchase contract is lodged at the Land Registry Office (L.R.O.) for specific performance purposes. The L.R.O. provides a receipt to confirm the purchase contract has been lodged at L.R.O. and this receipt remains on the L.R.O.’s records until the Deeds are issued to the buyer or until the buyer withdraws his contract from the L.R.O. in the event of the sale of the property before the deeds are issued.
By having the purchase contract deposited at the L.R.O., the buyer not only secures his interest in the property, but he also prevents the owner of land/vendor from transferring the property to a third party without his knowledge. Further, the buyer is given the right to seek Specific Performance of his contract terms.
In simple terms this means the buyer can compel the seller to specifically perform something which he agreed to do and which is confirmed he would do within the contract.
2 Resale properties without Title Deeds It is possible to sell/buy a property in the absence of the separate Title Deeds having been issued. A buyer may be purchasing a property from a seller who has bought a property and who has had his contract lodged at the L.R.O. but who has still has not received his separate Title Deeds. In such a case, it will be necessary to request the original vendor i.e. the owner of the land upon which the property has been constructed to sign the necessary resale documentation/contracts so as to enable the new purchaser’s contract to be successfully lodged at the L.R.O. for Specific Performance purposes.
The original vendor will also need to sign Cancellation documents to cancel the first contract to enable this to be withdrawn from the L.R.O. so as the new contract with the new buyer can be lodged at the L.R.O. in its place. This method of a resale where a separate Title Deed has not yet been issued, is the preferred method to be adopted. It ensures that the buyer remains ‘first in line’ to receive the title deeds as and when these are ready.
However, sometimes the method referred to above cannot be followed because the original vendor/developer refuses to sign the cancellation documents and a fresh direct contract with the new buyer. Such refusal though does not prevent the sale of the property. The property may be sold by a contract which is quite valid. However, if the contract cannot be filed at the L.R.O., possession and use must be given in any event. The problem in such a case is that when deeds are issued they must pass firstly to the first purchaser and then the first purchaser must transfer the deeds to the person he or she resold to.
3 Resale properties with Title Deeds
This scenario is where there is a sale by an owner of a property directly to a buyer. A separate Title Deed has already been issued and therefore the only two parties which need to be involved in the sale are the Seller and the Buyer.
In order for this sale to proceed it is necessary for the following to be in place:
• A contract between the two parties defining the property being sold and bought and the price for the property;
• A Tax Clearance Certificate from the seller to confirm that any Capital Gains Taxes and Immovable Property Tax have been paid;
• Confirmation that the buyer has received his permission of acquisition from the Council of Ministers;
Other Matters to be taken into consideration when buying a property in Cyprus
A. Stamps of the Contract
In terms of formalities, before a buyer can lodge his contract at the L.R.O. the purchase contract needs to be stamped. This is a government levy and the rate of the stamp duty is as follows:
• 0.15% of the value of the property up to £100,000 cyp and
• 0.20% of the value of the property over £100,000 cyp.
Example:
The contract price is £110.000 cyp.
• The first £100.000 @ 0.15% = £150
• The remaining £10.000 @ 0.20 = £ 20
£170
It is imperative that the purchase contract is stamped at the revenue office within 30 days of the contract having been signed. In the event that the purchase contract is not stamped within 30 days period, the Stamp Duty plus a fine will be payable when the contract of sale is produced to the LRO for the transfer of the Title Deeds.
B. Transfer Fees
At the time when the Title Deeds are ready to be transferred to a purchaser, it is necessary for the purchaser to pay transfer fees. The Transfer Fees are calculated according to the property’s net value as at the date of the contracts. The level of Transfer Fees are as follows:
0 - £50.000 @ 3%
£50.001- £100.000 @ 5%
£100.001 + @ 8%
Example 1
The Purchase Price of a property is £150,000cyp, the buyer will pay £8,000 as follows:
First £50.000 @ 3% = £1.500
Next £50.000 @ 5% = £2.500
And £50.000 @ 8% = £4.000
£8,000
However, if a property has been bought by more than one person, the Transfer Fees will be reduced and will be assessed on the number of buyers of the property. Based on the purchase price of £150,000 and on the basis that the property has been bought by two persons, the following figures will apply:
Example 2
The Purchase Price of a property is £150,000 ÷ 2 = £75,000 paid by each
buyer.
First £50.000 @ 3% = £1.500
And £25.000 @ 5% = £1.250
(per person) £2,750
Multiplied by 2
Therefore Total £5,500
C. Approval by the Government to acquire Immovable Property
Under current legislation in Cyprus it is necessary for any non-Cypriots who are not E.U. Citizens or permanent residents of Cyprus who intend to purchase in Cyprus, to obtain approval of Acquisition of immovable property from the Council of Ministers. This application can take around 2-3 months to be received and generally in order for the permission of acquisition to be granted, the following documentation is required by the Council of Ministers:
• A duly completed Application form;
• A bank statement/bank reference to confirm the financial means of the applicant;
• A character reference by a person in authority to confirm the applicant’s good character and/or a certificate from the applicant’s country of origin to confirm that the applicant has no Criminal record; and
• Purchase contract to confirm the details regarding the property which is being purchased.
EU citizens who do not permanently reside in Cyprus will only be given permission to acquire 1 property. The acquisition of a building plot or land is unlimited. The procedure referred to above is based on current legislation and will cease around 2009 whereupon all citizens of the E.U. will be treated equally with Cyprus citizens regardless of their residential status.
4 Miscellaneous
A registered owner of a property who is in receipt of separate Title Deeds, is subject to minor municipal charges such as Immovable Property Tax, refuse collection and sewerage. These taxes/charges are assessed according to the area and size of the property.
We hope this synopsis gives you a clear understanding on the procedure of purchasing a property in Cyprus and the costs involved. With a good legal team to help you through the motions of purchasing property in Cyprus, you have nothing to worry about! - Fotos G.
Pittadjis
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