Qatari investment deal collapses

Alan Lawton
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ACCORDING to media reports, Qatar is quitting its real estate investment plans for Cyprus. It appears that Qatar believed that the investment was too big a risk and it had expressed its discontent with the government concerning other related matters.

Last November we reported that Qatari Diar Real Estate Investment Company and the Cyprus government signed a Memorandum of Agreement to undertake feasibility studies and land evaluation for a new project in Nicosia, Cyprus.

The project was to have been located on 25,000m2 of a prime site in Nicosia and required a financial investment of some €500 million. It would have included a 5-star hotel, luxury residential villas and apartments, retail space and office buildings. It was envisaged that the project would have become a major tourist destination, aimed at sophisticated investors and tourists from around the globe.

Cyprus courts in chaos

Nigel Howarth
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RESTRICTED resources, antiquated infrastructure and failure to undertake responsibility are the ready-to-explode ‘ingredients’ in the Cypriot courts. The number of pending cases exceeds 80,000, while the charges against the Republic to the European Court of Human Rights have piled.

Despite the huge problems in the sector, the executive and judicial powers blame one another.

A fair state?

The condition in the Cyprus’ courts is more or less known to everybody. It is discussed by the Parliament every year and is often included in the reports of the foreign credit rating firms with the worst possible rate. Thousands of citizens wait almost three years to have their cases heard.

Those delays have referred the Republic of Cyprus to the ECHR six times. In her statements to StockWatch, Attorney Maro Tsiappa said that 9 more charges have been filed in the past year but they were subject to a compromise. Moreover, 26 cases have been heard since 2006 and the fines have been paid. “We expect that certain measures will be taken to avert future breaches in relation to the time that the cases are heard“, she said.

“This entails two things; First, the adoption of measures by the Supreme Court so as to deal with the problem of time and second, the adoption of effective treatments in Cyprus. This means that in case of a delay in the hearing of a case, Cypriots will have the opportunity to appeal to the Cypriot courts“, she said.

Ms. Tsiappa explained that the Legal Service has prepared a plan, which has been referred to the Ministry of Justice, which is competent to promote it to the Council of Ministers and the House of Representatives for approval.

Lack of staff

The Supreme Court recognizes the problem and stressed that any efforts that have been made so far had no result due to a lack of resources and the antiquated infrastructure.

“Nothing has been achieved so far“, Chairman of the Supreme Court, Petros Artemis, said and blamed the executive power that controls the budget of the Judicial Service.

“It has been three years now that the Supreme Court’s request for the opening of three new posts of district judges is pending. One in the Nicosia District Court due to the large number of penal cases, one in Paphos due to the increased cases for accidents and one in Paralimni. We are still waiting for an answer“, he said.

The budget of the Judicial Service stands at €28 million and includes the judges’ salaries and the operating and development expenditure. It is almost one fourth of the CTO budget.

As for the human resources, the problems become more and more. The courts run the risk of running out of stenographers. “Unfortunately, they found better offers and working conditions in other public sectors and they decided to leave the Courts“, Mr. Artemis said.

Antiquated infrastructure…

The problems, however, do not focus on the human resources only. There problems in the infrastructure are even bigger.

For example, things are quite complicated in the introduction of the stenotypes. Although the Supreme Court decided to introduce a mixed system, there was a problem with the supplier and so as not to have further delays it was decided that the issue is handled by the IT Service Department.

More than that, the building that hosts the courts dates back to 1950.

“The problem that emerged from the transfer of the United Nations is handled by the government. We hope that it will be solved soon“, Mr. Artemis said.

Obstacles

According to Mr. Artemis, the legal service which has undertaken the preparation of the new institutions for the simplification of the procedures works too slowly.

Obstacle or independence?

The executive power, on the other hand, blames the Supreme Court judges. Justice Minister, Loucas Louca said that the improvement of the service lies entirely to the Supreme Court because according to the constitution, it is an independent service and has its own budget.

According to Mr. Louca, the government promotes the electronic administration of the courts.

“The Council of Ministers approved a sum of €5.5 million and will proceed with tenders for the 27 new posts. It might take up to 3 years for the procedures to be finalized“, he added.

“It’s Hadjipetris’ fault…”

Chairman of the House Legal Committee, Ionas Nicolaou said that they are probably not aware of how serious case the case is.

“The government is responsible for the stenotype system and the creation of new job posts“, he said.

“The courts do not operate properly and they need up to 3 years. This is unacceptable for a country such as Cyprus“, he said.

“The Legal Committee is in regular contact with the Supreme Court in order to improve the conditions. The efforts hit to the executive power“, he concluded.

A good time to buy

Charles Charalambous
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THE CYPRUS Land Registry expects property prices to fall by the end of the year as pressure grows on developers to offload unsold stock, it emerged yesterday.

Prices should start falling noticeably from September, due to the combined effect of a lack of movement in the property market and the large debts owed by developers to the banks. The Land Registry indicated that if prices of existing unsold property fall by as much as 15%; this would make the local property market more competitive for foreign investors.

Economic analyst Stelios Platis said that, according to the BuySell Home Price Index (BHPI), “selling prices are in fact already falling. Over the last three months, prices have fallen by around three per cent, which although modest, is part of a trend that will probably be gradual. We should see more of a price reduction in the second quarter.”

There do seem to be bargains to be had – for those with a bit of spare cash. UK real estate company Unique Living, which specialises in “superior properties in prime exclusive locations“, is advertising a four-bedroom villa in Souni, Limassol, at €895,000, reduced from €1 million. The company describes this as “an amazing drop of 10.5 per cent“.

Managing Director Serge Cowan is quoted in a company press release as saying that “the market is certainly giving all the appearances of being ready to bottom out“, adding that “2009 therefore, is a good time to buy while there are some distressed sales and good buys around.”

Platis agrees that the reason for a noticeable drop in prices would be the developers’ need to service their loans. “Developers will reduce their prices in order to liquidate their assets and avoid paying their profit to the banks in the form of interest“, he said, adding that this will not affect units that have not yet been built.

“The danger they face is not selling at a reduced price now, but then at the end of the year, after having racked up interest payments due to the banks, they may still not realise 100 per cent of what they need“, Platis said.

Platis is the creator of the BHPI, which is updated monthly on behalf of BuySell Cyprus Real Estate by MAP S.Platis. The Index is announced quarterly and depicts the movement of prices at which residential properties are actually sold in Cyprus, based on the extensive, Cyprus-wide, BuySell Cyprus Real Estate database.

He said that the property market is always cyclical, and historically prices have tended to rise during the summer months. “This summer will be crucial to indicate where the market is heading“, he said, adding: “I expect prices to fall year-on-year in 2009, but not as dramatically as happened in the UK.”

The lack of movement in the property market has already had a dramatic effect on government revenues. Data released yesterday by the Inland Revenue for the period January-May showed an 81% drop year-on-year in property transfer tax, from €144.4 million to €26.9 million.

In its 2009 budget, the Finance Ministry was counting on just a 7% drop over the year, and pencilled in a total of €350 million in revenues. A resurgence in property transactions in the later part of the year – however modest – would certainly help to offset what is looking like a gaping hole in the government’s accounts.

Copyright © Cyprus Mail 2009

Editor’s comment

It is essential that anyone considering buying property in Cyprus takes legal advice from a lawyer who is independent of the vendor, agent or property developer.

The British High Commission publishes a regularly updated list of lawyers who are able to give advice in English to British nationals. To obtain a copy of that list, click here

The UK Foreign & Commonwealth Office is advising Britons visiting Cyprus that “there are risks involved with purchasing property on the island of Cyprus” and that those contemplating buying property should “seek qualified legal advice from a source that is independent from anyone else involved in the transaction, particularly the seller“. To read the FCO advice in full, click here.

Reactions on call for Cyprus ban

Nigel Howarth
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REACTIONS to calls by Lord Jones of Cheltenham to shut down the UK offices of Cypriot companies selling property and to impose a ban on the promotion of Cyprus property at overseas property exhibitions in the UK appeared in the English-language press this morning.

Chairman of the Land and Building Developers Association, Lakis Tofarides, expressed surprise at Lord Jones action:

He told the Cyprus Mail “I have read what Lord Jones said and frankly I think it is a little bit out of proportion, exaggerated actually. This is not a matter of British versus Cypriots, it’s a problem which affects us too“.

A defiant Tofarides is reported to have scoffed at the idea that such proposals would ever be considered, let alone adopted in the UK. “Come on, this is exaggerated, overrated and I believe that serious people should take more serious action“.

Gerard Batten MEP was also critical of Lord Jones’ proposals:

“Lord Jones questions are too broad-brush. You don’t close down a legitimate business sector because some people are mis-selling and some people are not protecting their own interests by buying into something that does not have a title deed.

“If every sector was closed down to crookedness and in some cases stupidity, then the whole world of finance and business would close,” he said.

One well known developer, who wished to remain anonymous, said the British market was his ‘bread and butter’ but saw Lord Jones’ actions as political posturing:

“He has not helped, but I think it’s about getting his name in the newspapers. The reputations of our companies are being dragged through the dirt daily in England, however, we must do something to give people confidence now or we will all suffer very badly,” he said.

The Cyprus Property Action Group (CPAG) supports Lord Jones’ suggestions. “We’ve been saying the government won’t do anything for ages because this can’t be fixed by legislation – it needs money,” said Denis O’Hare of CPAG. “The longer the government fails to act, the worse the damage will be.”

Editor’s comment

Lakis Tofarides

A number of the companies in Mr Tofarides’ Land and Building Developers Association are believed to be involved in various fraudulent practices involving Title Deeds. Perhaps Mr Tofarides could put his own house in order before criticising Lord Jones’ suggestions.

Some 70,000 of the 100,000 properties without Title Deeds have been bought by Cypriots and George Strovolides, president of the Cyprus Land & Property Owners Association (KSIA), has been actively campaigning on their behalf and working with the Cyprus Property Action Group. So I don’t understand why Mr Tofarides seems to believe it’s ‘a matter of British versus Cypriots’ – clearly it isn’t – and never has been.

There is no question that serious people should take serious action. Perhaps Mr Tofarides should direct his comments to the Cyprus Government. It is they who have let this problem drag on for more than 20 years – and who continue to show their contempt of the Cyprus Property Action Group by refusing to even acknowledge their letters, report and requests for a Presidential review.

Gerard Batten

Mr Batten may be unaware that unless property buyers in Cyprus are fortunate enough to find an ‘honest’ lawyer to conveyance a property they remain completely oblivious of the fact that a developer has mortgaged the title to ‘their’ property – until they come to sell it – or the bank comes knocking on the door for its money.

The well known developer

Lord Jones of Cheltenham is a peer in the House of Lords and therefore has no need for ‘political posturing’.

Regrettably, the reputations of property developers (and the reputation of Cyprus) are getting dragged through the dirt daily in the UK. If something needs to be done now to give people confidence, I suggest that the Cyprus Government keeps its earlier promises to sort out the mess.

Whether or not you agree with Lord Jones’ views, he certainly appears to have ruffled a few feathers!

UK politician calls for Cyprus ban

Editorial
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LORD  Jones of Cheltenham from the House of Lords has asked the UK government whether it will take the steps against Cypriot companies and what it will do to protect British homeowners in Cyprus and those looking to buy. The comments come after the revelation that around 100,000 property owners awaiting Title Deeds will not be helped by proposed measures from the Cyprus government.

UK foreign office minister Lord Malloch-Brown revealed that the minister of interior for the Republic of Cyprus told the British High Commissioner on 27 April 2009 that “the Cyprus Government will introduce legislation to speed up the issuing of Title Deeds, but this legislation will only apply to future cases“.

However, this contradicts what the Minister, Neoclis Sylikiotis, said at a Land and Building Developers Association meeting in May. According to a report by Cyprus Property Magazine, Sylikiotis said legislation would remove the main reason why developers effectively block the issuing of deeds and bring an end to the problem for those homeowners already affected.

Title Deed transfer delays arise because the developers who sold the properties have mortgaged the land on which the homes are built. Buyers are then at risk of losing their properties because the banks’ claims to the developers’ money take precedence over buyers’ land ownership. The issue affects both Cypriot nationals and foreigners.

Strict measures

Panayiotis Michaelides of Aristo Developers said Lord Jones’s comments were “extreme and strict“.

Kevin Maddison, chief executive of IFA network ROPUK, said there were already ways property buyers could protect themselves and ensure they obtained deeds, as long as they were willing to pay the real estate transfer tax. “With our draw-down mortgage facility, our clients become co-owners with the bank and the developer cannot mortgage the property separately,” he said.

However, the news is likely to shake confidence in the market and several developers also stressed the need for the Cypriot government to take further measures. Panayiotis Makedonas of Country Rose said: “We understand that there is an issue and the government should definitely take immediate action to help more existing property owners, in order to improve our image which has suffered over the years.”

One developer told OPP the government had its head in the sand in the hope the title deed issue would go away, that the impact on the property market was immense and the situation for developers was dire.

In contrast, the Cyprus Property Action Group (CPAG), which represents buyers who are unable to obtain deeds, supports Lord Jones’s suggestions. “We’ve been saying the government won’t do anything for ages because this can’t be fixed by legislation – it needs money,” said Denis O’Hare of CPAG. “The longer the government fails to act, the worse the damage will be.”

Neither Minister Sylikiotis nor Lord Jones were available for comment.

© Overseas Property Professional

Editor’s comment

As those who have been caught in the ‘Title Deed trap’ will appreciate, the ROPUK Chief Executive is incorrect when he says property buyers could protect themselves as long as they are willing to pay the “real estate transfer tax”.

Ban Cyprus property companies and close their UK offices

Nigel Howarth
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cyprus-property-exhibition
Overseas Property Exhibition Hall

ALREADY suffering from the effects of the global economic crisis and a tarnished reputation, Cyprus received another body blow in the British House of Lords on Thursday.

Following last Tuesdays bombshell that the changes to property laws being planned by the Cyprus government will bring no relief to existing buyers, British peer Lord Jones of Cheltenham has called on the UK Government takes positive steps to protect British citizens by:

  • Closing down the UK offices of Cypriot companies selling property.
  • Banning the promotion of Cyprus property at overseas property exhibitions.
  • Increasing the warnings to those contemplating buying property in Cyprus of the risk of losing their homes.

In three written questions tabled in the House of Lords on Thursday, Lord Jones also asked the British government to work with its EU partners to bring pressure of the Cyprus government to prosecute individuals who have retained Title Deeds after completion of property sales.

Economic impact

OVERSEAS property sales are a major contributor to the island’s economy.

After Spain and France, Cyprus used to be the most popular place for Britons seeking a place in the sun and it has been estimated that over 60,000 have bought property on the island. Although their appetite started to cool at the beginning of 2004, Britons still make up the majority of overseas property investors.

Closing down Cypriot companies in the UK and banning the promotion of Cyprus property at overseas property exhibitions will have disastrous consequences on property sales and the island’s economic well-being.

Empty promises

ON MANY occasions successive governments have ‘promised’ to clean up the property industry, but to date, these promises have proved to be no more than hot air.

  • In October 2005, the Cyprus Government said it was going to plug loopholes in the law, introduce fines, and provide property buyers what it called ‘an arsenal of weapons against unscrupulous property developers.
  • In September 2007, the Government said it was going to look at providing greater security to homebuyers by enabling their Contracts of Sale to take precedence over the developers’ mortgages.
  • In June 2008, Interior Minister Neoclis Sylikiotis assured property buyers that newly proposed legislation to resolve problems in the property sector could be implemented by the end of the year.
  • In January 2009, the Interior Ministry gave its assurances to the British High Commissioner that it intended to introduce a Bill to address the Title Deed issue.
  • In April 2009, Interior Minister Neoclis Sylikiotis qualified his earlier assurances to the British High Commissioner by saying that the Bill will only apply to future cases.

Law reform is long overdue

Although they have attracted more interest in recent years, property problems have been around for a long time.

When Pieris Estates went under back in the 1980s, the bankruptcy soured diplomatic relations with Kuwait as many of those who had bought property from the company were Kuwaiti. The affair continued until 2006 at which time the European Court of Human Rights ordered the Cypriot Government to pay €29,000 to four Greek Cypriot buyers for allowing their case to drag on in Cypriot courts for more than two decades.

One thing is clear – protecting the buyer is not a priority for the Cyprus government, the Cyprus banks or the property developers. When a developer goes bankrupt an individual without a Title Deed faces the risk of losing everything. The banks have the right to claim the collateral and property buyers will be left homeless and tens of thousands of pounds worse off.

(The UK Government is expected to reply to Lord Jones’ questions by 25th June).

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