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Archive for the ‘Cyprus Property Law’ Category
Recently there have been amendments in 3 statutes namely the (1) Town and Country Planning (N.90/72), (2) the Streets and Buildings Regulation (Chapter 96), and (3) the Immovable Property (Chapter 224) (Tenure, Registration and Valuation) Laws (hereinafter collectively called “the Planning Amnesty Amendments”).
The Planning Amnesty Amendments came into force on 8.4.2011. Their aim is to simplify the procedures regarding the legalization of irregularities and ultimately the issue of updated title deeds.
For the first time a purchaser (apart from the registered owner) has the right to activate necessary procedures for the legalization of the development or for the issuing of title deeds. Where the registered owner seems to be reluctant or unwilling to unwilling to apply for a certificate of approval or to legalize the building, the Authorities are empowered to impose considerable administrative fines. It is advisable that the statements of intent or planning applications are submitted jointly by as many co-owners as possible.
Therefore an owner and/or purchaser of immovable property unit with irregularities and no separate title deed may:
- Apply directly for the issue of separate title deed, without prior legalization of the irregularities. This means that the title deed shall be subject to the said irregularities, if any, or
- Apply for the legalization of the irregularities prior to the issue of title deed. With this way there will be no irregularities registered on the title deed.
A fixed three-year period, expiring on 7.4.2014, is defined, for the submission of applications making use of the Planning Amnesty Amendments. However if a purchaser wishes to legalize irregularities, he/she must submit a Statement of Intent the latest by 7.10.2011
Issue of Title Deed (without prior legalization)
The legality of the building is no longer a prerequisite for the issuing of an updated title deed. Thus title deeds can be issued, despite any building irregularities, provided that an application is submitted to the Building Authority, together with an accurate description of the building as well as any irregularities that may appear, in comparison to the building or the planning permit issued.
Following the said application the Building Authority shall issue:
1) a certificate of approval (in case the building was constructed in accordance with issued permits) or
2) a noted certificate of approval (where the deviations shall be described) or
3) a certificate of unauthorized operations (in case of substantial irregularities in relation to the permit)
The Building Authority may issue a certificate of approval, even if a planning permit or a building permit has expired. The certificate of approval has the effect of a building permit.
The Building Authority shall send all the relevant information to the Land and Surveys Department in order to obtain a title deed with or without notes or with prohibition of transfer and burden.
It should be noted that the updated title deeds are issued in the name of the original owner, and not in the name of the purchasers. The Authorities involved in the procedure do not have the power to transfer property rights to purchasers, without the owner´s consent. However, it is of crucial importance, that separate title deeds are issued for individual units of a larger development, as this facilitates significantly the purchaser to invoke the right of specific performance of the contract of sale, through action taken in the Courts, against the vendor. The transfer of property to purchasers is performed by the registered owner, either voluntarily, or by an Order of the Court, issued at the request of the purchaser.
Legalization of Irregularities (prior to issue of title deed)
If a purchaser wishes to legalize any irregularities, he/she must submit to the ministry of interior a 2-page Statement of Intent the latest by 7.10.2011. The said Statement contains general information that is necessary so as to ensure that the irregularities existed on April 8, 2011, and is attested by an affidavit provided by a qualified person, member of the Scientific and Technical Chamber of Cyprus (ETEK).
It is strongly recommended that each owner to submit the said notice prior to the above deadline, even if at this stage he/she is not certain whether the irregularities satisfy the conditions of the Planning Amnesty Amendments. The said statement is the KEY for an owner/purchaser to proceed later on with an application to legalize the irregularities (this does not apply to persons submitting, directly, an application for planning permit (instead of a statement of intent) to the Planning Authority until October 7, 2011, or those who have already submitted an application to the Building Authority for a certificate of approval and have not yet been informed of the Authority’s decision).
The Planning Amnesty Amendments enable the legalization of only specific type, nature, scale and significance irregularities on existing buildings under certain conditions, the most important of which is the existence of a relevant planning permit and/ or building permit for the development, even if the planning permit and/ or building permit have expired.
The scale and significance of the irregularities that can be legalised are defined by the provisions of the law. Not any irregularity, irrespective of its scale, can be legalised. In cases of irregularities of a very severe nature, the Building Authority is empowered to issue a certificate of unauthorized works, requiring the Department of Lands and Surveys to register a note on the title, prohibiting the transfer of the property to another person.
For example the provisions of the law can apply where there is an increase of the approved plot ratio (of the building or the individual unit) up to 30% of the approved covered area, of which only 10% could be allocated outside the approved shell of the building, differences in the approved general layout of the development etc. In such cases compensation levy will be imposed on the owner or purchaser, which will be equivalent to the market value of the area in excess. These values will be determined on the basis of general estimates carried out by the Department of Land and Surveys, which will be published by an Order of the Minister of the Interior. A 20% discount on the compensation levy is set for all applications submitted within the first year period, and a 10% discount for applications submitted within the second year of the implementation of the provisions of the law.
http://www.pirilides.com/en/cyprus/practices/property-law/10 - Cyprus Property Law
The immovable property letting in Cyprus is regulated by the Rent Control Law of 1983. This law was originally drafted mainly aiming at the protection of the tenant, by regulating the landlord and tenant relationship in Cyprus.
This Law comes into operation when the tenant continues to occupy the rented property, after the expiration of the first period of lease, i.e. the rental period forming part of the original written agreement between landlord and tenant. This protection of the tenant applies and covers the case where in the meantime change of ownership takes place.
The intention of this Law is the protection of the tenants, who continues to occupy the property and consistently pay their rents, after the expiration of the initially agreed rental period.
Who is a Tenant?
A tenant, according to the Rent Control Law of Cyprus (1983), can be an individual or legal person (i.e. a company or any other corporation) resident of Cyprus or having headquarters in Cyprus. The Court through its case law has extended the term “tenant”, so as to include every European citizen or Company.
Who is a Landlord?
According to the Law, a “landlord” can be any individual or legal person that has possession or right of possession of the property and, in the event of subletting, the sub-tenant who is then considered to be in the position of landlord vis-a-viz his tenant.
Rent is the sum agreed to be paid as rent but common expenses are not included and unless the agreement suggests otherwise, the landlord is presumed to be liable for the payment of common expenses.
The letting is essentially an agreement between landlord and tenant. Generally the Law does not interfere and is not concerned with the terms regulating the agreement between the two parties, but simply provides some limitations aiming at the protection of the tenant with regards to any increase of the rent or the grounds upon which the tenant may be ordered to vacate the same.
Read more: http://www.pirilides.com/en/cyprus/practices/property-law/10
The world population is growing rapidly and so is the demand for land. Land is a finite resource and thereof its value worldwide is constantly increasing. Increases in value are exacerbated by inflation and by the instability of the monetary systems and fiscal policies of advanced economies, making investment in immovable property more attractive. Cyprus is no exception!
The economic and social evolution that has taken place in recent years and the sophisticated methods of cultivation and industrialization, together with the earlier absence of alternative forms of investment, have diverted capital from both home and abroad to land ownership.
Since 1st of May 2004, Cyprus became a full member of the European Union and since the 1st of January 2008, Cyprus entered the Euro Zone.
Our Property Department is able to offer legal assistance to both sellers and purchasers of immovable property in Cyprus.
Cyprus’s location
The location of Cyprus in the eastern Mediterranean at the crossroads of Europe, Asia, the Middle East and Africa, its safe and protective legal system, in combination with its EU membership, the excellent climate and the friendliness and hospitality of its people, are just some of the reasons that have made Cyprus attractive to foreign investors.
Foreign investment in immovable property
Foreigners who seek to invest in immovable property in Cyprus may be classified in the following four main categories:
• Retired residents. These are people who settle permanently in Cyprus upon retirement. A series of incentives is given by the Cypriot government to retired people, including very low taxation of their income which emanates from abroad. These people pay also enjoy, under certain circumstances, the benefits of the double taxation treaty of their country of origin with Cyprus, if there is one. Cyprus has signed 40 such treaties, and many more are under negotiation.
• Employed residents. These are people who settle permanently in Cyprus upon retirement. A series of incentives is readily available to retired people, who mostly favour the island for its excellent weather conditions, its friendly and relaxed atmosphere and environment which combines sea side as well as villages & mountains. Further incentives are provided by the Cypriot government, i.e. the very low taxation of income emanating from abroad. These people may also enjoy, under certain circumstances, the benefits of the double taxation treaty of their country of origin with Cyprus, if there is one.
• Holiday makers and speculators. These people purchase property in Cyprus as holiday homes or as possible permanent places to live upon retirement, or to sell at a profit at a later stage. Profits realized by foreigners from the sale of immovable property may now be exported subject to capital gains tax.
• Business investors- These are foreign individuals and/or companies which acquire property in Cyprus for tourism or business office & industrial purposes, making use of the location and the climate of Cyprus, its excellent infrastructure and the various incentives offered for these purposes, especially in the area of taxation.
Price of land
The relatively small area of Cyprus and the great demand for immovable property, especially in recent years, have led to a considerable increase in the cost of land and accommodation in Cyprus. However, despite the increase, the prices, as well as the cost of living, are still comparatively lower than those in most European countries or holiday destinations..!
Legal advice
The complexity of the legislation on immovable property and the formalities which need to be considered when dealing in immovable property, render it necessary, especially when foreigners wish to invest in immovable property in Cyprus, to seek and obtain from the start reliable and efficient legal advice in order to avoid unpleasant results and future undesirable consequences. It is imperative that prospective purchasers seek and receive such advice from independent and impartial legal advisors.
Further, before entering into a contract for the purchase or sale of immovable property some should ensure that the legal representative conducts a search at the Land Registry to make sure that the property is free from any encumbrances, charges or burdens.
N. PIRILIDES & ASSOCIATES LLC is able to offer assistance in:
• Conducting due diligence on Property;
• Drafting Property Sales Agreements;
• Providing advice on the Acquisition of Property in Cyprus by foreigners and non residents;
• Estate Planning and Administrations;
• Wills, Probate and Re-sealing of Estate Administration etc
Charges and fees payable with relation to the Purchase, Sale and Ownership of Immovable Property
The purchase, sale or simply the ownership of immovable property in Cyprus entails financial obligations to the purchaser, seller or owner of such property. Below we list some of these obligations:
Revenue Stamp Duty
Any contract of sale, according to the Stamp Law, requires the payment of revenue stamp duty according to the purchase price.
Failure to pay revenue stamp duty on a contract of sale of immovable property does not render the contract void. However without the payment of revenue stamp duty a party may not use file the agreement at the Land Registry or use it in legal proceedings. Contracts may be stamped at a later date if they are to be used in legal proceedings; however a penalty fine is then imposed according to the value and the date of execution of the relevant contract.
Transfer fees
Transfer fees are payable by the purchaser on the purchase price or under certain circumstances, on the current market value and cumulatively with each scale:
- If the value is up to €85.430 the transfer fee is 3%
- If the value is between €85.430 to €170.860 the transfer fee is 5%
- If the value is from €170.861 and above the transfer fee is 8%
Immovable Property Tax
Subject to the exemptions listed below, immovable property tax is imposed on the market value of immovable property as at the 1st January 1980 and is calculated on the immovable property owned by the taxpayer on 1 January of each year.
If the value of the property at that time exceeds € 170.860,14 then the registered owner of the property must pay immovable property tax according to scales.
The following properties are exempt from immovable property tax:
• Public cemeteries
• churches and other religious buildings
• public hospitals
• schools
• immovable property owned by the Republic, foreign embassies and consulates
• buildings under a preservation order subject to conditions
• buildings of charitable organizations
• agricultural land used for agriculture or animal husbandry by a farmer
• immovable properly situated in inaccessible or depressed areas
• property of a missing person under administration.
Capital Gains Tax
Capital Gains Tax is levied at the rate of 20% on gains realized from the disposal of immovable property, including gains from the disposal of shares in private companies which own immovable property.
The following categories of disposals are exempt from Capital Gains Tax:
• Transfers by reason of death;
• Gifts between relatives up to the third degree of kindred;
• Gifts to limited companies all the shareholders of which are members, and continue for 5 years after the gift to be members, of the family of the donor;
• Gifts by family companies to their shareholders, but only in cases where the property given was originally acquired by the company as a gift;
• Gifts to charitable institutions or to the Republic of Cyprus;
• Exchanges of immovable properties; and
• Compulsory acquisitions.
In assessing the gain the following will be deducted fro the price received:
• The assessed market value of the property as at 1st January 1980, or the price paid or the consideration given for the acquisition of the property, if the property was acquired after 1st January 1980;
• The subsequent increase in the value of the property due to inflation, which is calculated in accordance with the Retail Price Index issued every month by the Department of Statistics;
• In sales of agricultural land by farmers, the first Euro 25,630 of the sale price, provide that the farmer was residing in the same area at the time the sale;
• In sales of property used as a residence by the vendor, the first Euro 85,430 of the sale price, provided that he has been using the same as his residence for at least 5 years prior to the sale; and
• In all sales, the first Euro 17,090 of the sale price.
These deductions are granted once only, unless they have not been exhausted by the first sale, in which case any balance would be carried forward.
Other Charges
Owners of immovable property are also subject to other forms of minor taxation, such as municipal or village rates, sewage fees and refuse collection charges, ranging from Euro 85,43 to Euro 170,86 per annum.
Restrictions on the Purchase, Sale and Ownership of Immovable Property
1.1 The Acquisition of Immovable Property (Aliens) Law
The word ‘alien’ in this law should not be interpreted in its strict meaning (i.e. enemies) but as meaning ‘foreigners’ or ‘non-Cypriots’.
According to this law, foreigners purchasing immovable property in Cyprus, apart from following the general rules which regulate such transactions, are also obliged to adhere to special formalities and are faced with certain restrictions, which are aimed at the proper control of foreign investments and the protection of foreign investors.
The term ‘foreigner’ or ‘alien’ is defined as any person not being a citizen of the Republic of Cyprus and includes a local company controlled by non-residents (international business), a foreign company and a trust in favour or a foreign person. It does not include:
• Non-resident Cypriots
• Foreign wives of citizens of the Republic not living apart from their husbands under a decree of a competent court; or
• From 1st May 2004, citizens of Member States of the EU permanently residing in Cyprus or European companies having their main base in Cyprus.
‘Trust in favour of a foreign person’ means any kind of trust of which the beneficiary or one of the existing beneficiaries is a foreigner will not be the absolute owner but will have ownership for the benefit of another or where ownership will be held on trust for his benefit.
The term ‘acquisition’ of immovable property’ includes:
• The grant or purchase of lease of immovable property for a period exceeding 33 years;
• The acquisition of shares in a company which is duly registered as a legal entity in the Republic or in the Sovereign Base Areas and which (in either case) has acquired immovable property in the Republic or the Sovereign Base Areas, taking into account that if a majority of shares in the company belong mainly to foreigners, the company is considered as ‘controlled by non-residents’; and
• The formation of a trust in favour of a foreigner which involves, wholly or partly, the leasing of immovable property falling within the provisions of a lease for a period exceeding 33 years or a shareholding in a company falling within the provisions described above.
Under the Acquisition of Immovable Property (Aliens) Law, no foreigner can acquire immovable property without the prior permission of the Council of Ministers. Normally permission is granted to bona fide foreigners to acquire a flat or a house or a piece of land not exceeding three donums (about 4000 m2) for the erection of only one house for use as a residence only by the purchaser and his family.
Members of the family of an original purchaser may also acquire their own property, provided that they are completely independent of the purchaser, both financially and residentially, such as married children having their own family and business. Permission is given for personal use, and not for letting or commercial use. International companies are permitted to acquire business premises, as well as houses or flats as residences for their members or directors.
Although it may take up to 12 months for the Council of Ministers’ permit to be obtained, purchasers are entitled to occupy their properties in the meantime.
After the permit has been granted and the property registered in the name of the foreigner, no further restriction is imposed on him and he may sell or dispose of it by will or other instrument. Moreover, the legal heir is not required to obtain a permit in order to have the property registered in his name.
Foreigners are now also entitled to borrow money for the purchase of immovable property upon mortgaging such property to the bank from which they borrow the money.
It is to be noted however that as from the 1st of May 2004, when Cyprus became a member of the European Union, Europeans may acquire immovable property in Cyprus without a license from the council of Ministers but only land and building sites or for investments purposes. For houses and flats the restrictions remain as long as they are not considered “investment” but “secondary residence”, i.e. residence other than the permanent residence. The same applies to legal entities set up in Europe. On the other hand Europeans permanently residing in Cyprus or European companies based in and conducted from Cyprus may acquire immovable property without restrictions.
The Exchange Control Law, the Central Bank of Cyprus Law and the Movement of Capital Law
The Exchange Control Law provides that the export of funds by Cypriots or foreigners and all money transactions with foreigners are subject to the approval of the Central Bank of Cyprus in its capacity as Exchange Controller.
The Exchange Control Law has been effectively repealed and replaced by the Movement of Capital Law which provides that all movement of capital and payments between residents of Cyprus and residents of EU member states or third countries may be carried out without restrictions. However, it does not remove the restrictions currently imposed on the movement of Capital by residents of third countries which involves direct investments, including the acquisition of immovable property.
Foreigners who sell immovable property in Cyprus may export immediately the proceeds of sale, subject to capital gains tax.
Due to the harmonization with the acquis communautaire of the European Union and in order to encourage foreign investment in Cyprus, the Government has liberalized its exchange control rules in relation to investment by non-residents in Cyprus. Since 7 January 2000 all restrictions on the percentage of foreign participation in most enterprises in Cyprus (including the share capital of a Cypriot company listed on the Cyprus Stock Exchange) have been abolished, provided that the maximum foreign equity participation remains at 50%.
Limitations applicable under other laws or regulations remain in force, e.g. the Acquisition of immovable Property (Aliens) Law which is described above, though, even in this sector; there is a differentiation between citizens and firms of member states of EU and other foreigners. Foreign investors will also have to prove that their new ventures will not pollute the environment, damage the economy or constitute a severe risk.
Conclusion
This article on acquiring immovable property in Cyprus is intended to give purchasers & sellers and more particularly foreign investors wishing to invest in the Cyprus property market, a general outline of the financial implications and restrictions on purchasing, selling and owning immovable property in Cyprus.
Legal Advice should be sought prior to entering into any agreement as there is complexity in the legislation on immovable property and there are various formalities which need to be considered; i.e. before entering into a contract for the purchase of immovable property, the legal advisor should conduct a search at the Land Registry to make sure that the property is free from any encumbrances, charges or burdens.
Read more: http://www.pirilides.com/en/cyprus/practices/property-law/10
Cyprus Property Law - http://www.pirilides.com/en/cyprus/practices/property-law/10
Real Estate Purchasers from all countries around the world prefer to purchase property in Cyprus because of low taxation, low costs, high standards of living, the hospitality of the local population, the excellent all year round climate, safety and security. The island has one of the most advanced and reliable Land Registry Offices in the world and a banking system equal to other developed European countries.
Cyprus maintains an effective Land Registry system in which all “immovable property” (a term that includes both land and property) is registered.
Each piece of immovable property has an associated:
- Registration Certificate (also known as a Title Deed) containing information such as the owner(s), its size and location and the Land Office reference;
- An accompanying Site Plan that situates the land on a map.
The Acquisition of Immovable Property (Aliens) (Amendment) Law 54(I)/2003 brought about some changes to the old policy relating to the acquisition of immovable property by EU nationals or legal bodies.
Procedure for acquiring property in Cyprus
- BY EU NATIONALS
Nationals of EU member states that are resident or work in Cyprus may purchase as much property as they wish. Such residence is ascertained by the local District Administration Offices.
Nationals of EU member states who are not resident and/or who do not work in Cyprus are restricted as to the size and type of the property (other than land) that they wish to purchase. They are only entitled to purchase one of the following that is to say one apartment, one house or a building plot or land up to 4.014 sq. m.
Cyprus Companies whose shareholders are EU-nationals, who live or work in the Republic, do not need a permit to own any kind of immovable property in Cyprus. If the shareholders do not live or work in Cyprus, then they need a permit to own immovable property in Cyprus.
Companies which are registered in any member state of the EU do not need a permit to own land in Cyprus but they need a permit to own a house or apartment.
Central Bank Exchange Control Regulations
From the 1st of February 1997 and onwards, the acquisition of property in Cyprus by foreigners and Cyprus Companies is not subject to the foreign exchange controls. Thus, on disposal of the property the whole amount can be exported, after the tax obligations have been met.
Our firm has the legal expertise and experience to advise and assist local and international clients on all matters relating to the purchase of immovable property in Cyprus and finding the most practical solution for their deal. Our services include drafting the contract of sale, acquiring approval from the Council of Ministers for our non-EU clients, transfers at the Land Registry Office and ensure that all the registration requirements are complied with.
http://www.pirilides.com/en/cyprus/practices/property-law/10
