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What hope for justice in Cyprus?

Nigel Howarth
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WHEN Interior Ministry official Savvas Ioannou was questioned by Jean Christou about the ‘Immovable Property Tax Scam’, he was reported as saying: “This is not a matter where the state can intervene, but if a buyer feels that any term in the contract is abusive, this can be examined by the courts in the context of a civil action filed by the buyer against the seller.”

Mr Ioannou and his colleagues in the Interior Ministry may wish to read and take note of the following article from today’s Stockwatch which reports that “The hearing of a simple civil case may take up to 4-5 years”.

If the Cyprus Government refuses to act against the property crooks & conmen and the Cypriot courts cannot hear even a simple case within 4 -5 years, what hope is there for any property buyer getting justice in Cyprus?

A need to reform courts

THE REFORM of the judicial system does not fall under the priorities of Justice Minister, Kypros Chrisostomides, despite the general acknowledgment that the system is not healthy and the acknowledgment that Cyprus’s convictions for the huge delays in the hearing of cases that might even take five years.

According to latest figures, the number of pending cases in the district courts stood at 75 thousand in 2006, while those in the Supreme Court reached 5,200.

Due to the time-consuming procedures, credit rating firm Moody’s rated the island’s “legal system” with an “E”, which is the worst. Comparatively, the Greek “legal system” received a “D”.

The conditions in the Cypriot courts have led Cyprus to 23 convictions by the European Court of Human Rights, while some 14 cases against the state are still pending.

“The Justice Ministry has been informed on the prevailing conditions in the courts due to the delays”, Mr. Chrisostomides told StockWatch. Invited to comment whether he will take drastic measures, the Minister referred to the judicial power.

“The Ministry of Justice cannot intervene if the judicial power, as “independent authority” do not ask for it. However, the Ministry is ready to offer its help for the solution of the problems and the fastest hearing of the cases”, he stated.

In his statements to StockWatch, the new President of the Supreme Court, Petros Artemis expressed his surprise on Mr. Chrisostomides’ statements. After admitting that the delays in the hearing are huge, he noted that several positive steps have been made. These steps include the restriction and preparation of the time for the pleading in the civil cases.

“We are ready to adopt new rules of civil procedure, which were prepared by the Magistrates Committee after taking into account the views of all parties involved”, he stressed.

Referring to the office automation problem, Mr. Artemis said that this is linked to the lack of specialized staff. “We expect that the government will give solutions via the appointment of specialized staff”, he added.

On the other hand, Chairman of the Bar Association, Doros Ioannides stated that the lawyers often complain about the chaotic conditions in the Cypriot courts. “It is worth saying that they still use handwriting, an old and time consuming procedure. The hearing of a simple civil case may take up to 4-5 years”, he stressed.

Similarly, Chairman of House Legal Committee and DISY MP, Ionas Nicolaou expressed his concerns on the dramatic delays and urged the Justice Minister to undertake his responsibilities for an issue pending since 2002.

Commenting on the Minister’s statements, Mr. Nicolaou said that the problem must be solved the soonest possible because Cyprus is maligned abroad.

Mr. Nicholaou also rejected the Minister’s statements on the judicial power, clarifying that there are issues concerning the government and not the judicial power.

“It is about an infrastructure problem that needs certain changes. The delays in the hearing of cases are a problem concerning the whole society, especially the economy”, MP and member of the Legal Committee, Nicholas Papadopoulos stated.

Mr. Papadopoulos also stressed that the problem is not irrelevant to the foreign investments in Cyprus. “When foreign investors know that it will take 4-5 years to be vindicated in courts, they avoid investing in Cyprus. This affects negatively the capital inflow”, he concluded.

© 1999 – 2008 Stockwatch Ltd

Cyprus property lawyer says contract cancellation fees are illegal

Nigel Howarth
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DISREPUTABLE Cyprus property developers extort ‘contract cancellation fees’ from buyers wishing to sell their property before Title Deeds have been issued in the buyers’ name.

I have personally heard from some buyers who have been charged as much as CYP 20,000 (34,000 Euros) by these crooks for the privilege of selling a property they have bought and paid for in full.

Although earlier this year the Paphos District Court ordered a property developer to reimburse a British couple monies they were obliged to pay when they sold a house without Title Deeds, this did not set a precedent for other similar cases (such precedents can only be set in the High Court).

George Coucounis, a Larnaca-based lawyer specialising in Immovable Property Law, has entered the debate. In his opinion, ‘contract cancellation fees’ are illegal – and he urges the Cyprus Government to examine the matter with a view to ending this illegal practice.

(Unfortunately, it seems extremely unlikely that the Cyprus Government will be prepared to act as it has already given property buyers a “one finger salute” on the subject of illegal Immovable Property Tax demands).

Cancellation fees are illegally claimed

By George Coucounis

A MAJOR problem seems to be created by a number of greedy property developers, who insist on claiming cancellation fees from purchasers. The developers try to take advantage of buyers who wish to re-sell property purchased without a separate title deed.

Some of them rely on their dominant position to gain unlawful profit. Not only are cancellation fees illegal, but also some developers claim an enormous amount, which cannot even be justified to cover their administration expenses. They even claim cancellation fees near to the amount of the transfer fees and refuse to discuss their claim. This issue must be examined by the Commission for the Protection of Competition since it appears that there is an understanding and an agreement between many of the developers claiming cancellation fees and the buyers, as consumers, suffer. The issue must also be examined by the governmental authorities with an aim to end this illegal practice.

The situation is exacerbated by the fact that developers fail to issue separate title deeds on time, creating problems for buyers who cannot dispose freely of the property purchased and are stuck.

The developers take advantage of this and instead of facilitating the buyer to re-sell his property, they take the good opportunity to reap money they are not entitled to. It makes no difference if the buyer is an investor or has purchased the property for holidays or for residence purposes. The issue is that cancellation fees are illegally claimed without any consideration.

In most sales contracts there is a clause giving the buyer the freedom to re-sell his property, placing an obligation on the vendor to sign a cancellation agreement and a new contract of sale with the new buyer. Consequently, a customer who wishes to re-sell his property should refuse to pay cancellation fees and make the developer undertake his responsibilities under the sales contract and the law. If the developer keeps asking for cancellation fees, the initial buyer (owner) should warn him, in writing, that if the re-sale is not concluded, he will be held responsible for damages, for breach of contract and for the buyer’s losses and damages. The buyer must consider the re-sale clause as an essential term of the sale contract and rely on it.

Good advice to new buyers is to refuse to sign a sales contract without a clause clearly stating that the developer will not be entitled to claim cancellation fees if the buyer re-sells his property at any time. Such a clause indicates the credibility of the developer regarding his future intentions of claiming cancellation fees or not. A developer who refuses to include such a clause should be avoided. The real estate market offers a great deal of properties adequate to meet the needs of any individual new buyer.

The current economic crisis should have made developers think professionally and be worried of the situation instead of being short-sighted and looking to gain a temporary and unjust profit.

Many developers correctly spend a lot of money on marketing and promotion and some, instead of being firm, protecting their reputation and the property market, later behave arrogantly and greedily claim more money by way of cancellation fees.

The issue must be examined seriously by their associations, and action must be taken so that no member will claim cancellation fees and furthermore, to undertake at any time to facilitate a buyer to re-sell his property before the issue of the separate title deeds.

A buyer will then know from the outset that by purchasing a property in Cyprus, apart from making a good investment, he will always be free to sell it and the non-issuance of separate title deeds will not be a problem.

Copyright © Cyprus Mail 2008

Editor’s Note

George Coucounis says that buyers should refuse to sign a sales contract without a clause clearly stating that the developer will not be entitled to claim cancellation fees if the buyer chooses to sells his property at any time.

Such a clause would look something like the following:

“If at any time after the signing of the present agreement the Purchasers desires to sell the said Property, they will have an absolute right in doing so as they are deemed to be the beneficial owners of the Property providing that the Purchasers have fulfilled all their obligations as herein provided. The Vendors shall be obliged and cannot in any way object to and /or deny and/or withhold their consent to sign any necessary cancellation contract and new contract of sale with the new purchaser/s”

I cannot emphasise more strongly that when buying property in Cyprus you MUST NOT sign any papers or hand over any money until you have taken independent legal advice.

Property buyers get “one finger salute” from Government

Nigel Howarth
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Home buyers and property investors will be outraged to learn that the Cyprus Government has given them a “one finger salute” by refusing to take action against property developers who illegally demand money from them under the guise of ‘Immovable Property Tax‘.

A widely reported example of this scam involves an 83 year old British widow who has been waiting 29 years for the Title Deeds to her home. She was horrified to receive an Immovable Property Tax (IPT) bill from her developer, Korfi Mountain Estates Limited, for €25,000 when it should have been around €430. Her lawyers are pursuing her case through the court.

The Government’s decision effectively gives the property developers a green light to continue with their illegal practices even though obtaining money under false pretences is a criminal offence.

It also sends out a very clear message to those who are thinking of buying property on the island: “Don’t count on the Cyprus Government for support, you’re on your own!”.

Property tax scam “you’re on your own”

By Jean Christou
Cyprus Sunday Mail – 2nd November 2008

FOREIGN property buyers are on their own when it comes to being scammed on Immovable Property Tax (IPT) by unscrupulous developers, the government has said.

“Immovable property tax is payable by the owner of the property, and details as to payments by the buyer to the seller, regarding this payment, should be detailed or determined in the Contract of Sale between the two parties,” said Interior Ministry official Savvas Ioannou.

Speaking on behalf of the Ministry’s Permanent Secretary, Ioannou said: “This is not a matter where the state can intervene, but if a buyer feels that any term in the contract is abusive, this can be examined by the courts in the context of a civil action filed by the buyer against the seller.”

The Ministry’s response will come as unwelcome news for buyers who have been hoping the government would do something about the issue. Civil action can take years and is costly. The Cyprus Property Action Group (CPAG) has highlighted on a number of occasions that the IPT demanded by developers from buyers without Title Deeds can be grossly higher than what the developer pays to the Inland Revenue Department.

In some instances it can be 500 times as much, CPAG said.

The holder of the Title Deeds to a property must pay IPT annually on a varying scale based on the 1980 value of their property, if it was worth more than €171,000 at that time. Householders who own their Title Deeds are normally exempt, as their homes would not have been worth that much in 1980.

However, developers who have not handed over individual Title Deeds are liable to pay on the total 1980 value of their properties, which may have dozens of homes that separately would not have to pay IPT.

And while developers are paying the state the correct IPT, which can run into as little as hundreds of euros, buyers are being asked for thousands, even though if they were in possession of their Title Deeds they would not have to pay any IPT. CPAG says the developers are pocketing the difference between what they extract from the buyers and what they pay to the state. The group has obtained a legal opinion on the issue, which was given to the government.

CPAG says this has been ignored.

Ioannou agreed that developers should not be asking buyers for more than what is due to the state, but he said that as long as the correct amount was paid to the government, there was nothing the Ministry could do.

“It’s a private agreement. People should negotiate and agree the specifics of a purchase with their developer,” said Ioannou. He said the state had no mechanism to deal with what goes on between developers and buyers.

Ioannou said it was recognised by the government that the current legislation “may be more developer-friendly than buyer-friendly”, since the issuance of separate Title Deeds requires the consent of the developers.

An amendment of the current legislation is currently being examined by the relevant government departments, he said, adding that payment details of IPT should carefully be negotiated by buyers and included in the contract, to avoid any extra cost, problems or misunderstandings.

“A lot of these issues could be avoided if buyers are aware of their rights, or seek proper legal advice before accepting the terms of a contract for the purchase of immovable property,” loannou said.

CPAG’s Denis O’Hare said one of the problems with legal advice was that many lawyers were in on the practice and did not advise clients about IPT before the purchase.

He also scoffed at the notion that the government had no mechanism to deal with the rip-off.

“It’s obtaining money under false pretences, which is a criminal offence,” said O’Hare.

“Obtaining money from buyers that is not correctly calculated on the basis of what they [developers] pay the government is false pretences. This is what our legal opinion says. It’s collecting more than is paid to Inland Revenue. It’s interesting they won’t do anything about it. It’s tantamount to organised crime. They are all in on it,” he added.

Property buyers are so fed up with the lack of interest from the government that they are going to take the whole issue to Europe and have already been in touch with the European Ombudsman. They also plan to involve the governments of foreign buyers.

Copyright © Cyprus Mail 2008

Can we get our money back?

Nigel Howarth
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WE are new to all this and hoping for some help and advice. We paid a reservation fee of £2,500 to an overseas property marketing company in the UK for an off-plan apartment in Kiti.

Having returned from their viewing trip to Cyprus and despite them trying to persuade us to use their lawyer, we appointed an independent and really helpful lawyer on the list provided by the British High Commission in Nicosia to do some checks prior to us proceeding.

Within a day he informed us that the land was mortgaged and that we should not proceed on this basis due to the problems that this would bring us in the future when trying to get our Title Deeds or if the builders were to fold in the interim and the land was repossessed.

On enquiring with the mortgager they declined to sign a waiver and so we decided to walk! We have been back to the marketing company and requested that we should at least get the majority of our reservation fee back as we were clearly not given the whole picture. Although we have a receipt, we never signed anything but they are flatly refusing to return our money.

Any help and advice would be much appreciated!

Answer

I’m sorry to hear about your problem – at least you found out about it before you handed over more money. I suggest you speak with your solicitor in the UK – with the correspondence from your lawyer in Cyprus. Perhaps a ‘stiff’ letter to the company in question may do the trick. You should also have a word with your local UK Trading Standards office to see if they can help.

I’m afraid that reservation fees are usually non-refundable (at least in Cyprus). But in this situation, where it seems they tried to con you by not disclosing vital information about the property, I would have thought that you will be able to recover your money.

Editor’s note

When buying any sort of property in Cyprus, it is absolutely vital that you take independent legal advice before handing over any money or signing any papers.

In the case of reservation fees, you pay these to your lawyer who acts as your ‘escrow agent’. He/she would then check that there were no mortgages or other claims lodged against it with the Land Registry before handing over the reservation fee to the company concerned.

See also: How to reduce your risks when buying off plan property in Cyprus

Top 5 tips: Buy Cyprus property safely

Nigel Howarth
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PAUL OWEN, the Chief Executive of AIPP, the Association of International Property Professionals, gives us his top 5 tips on buying overseas property.

I often get cries for help from people who have come to Cyprus on a two week holiday and thought “this is nice, I’ll buy a property”, without really investigating what it would really be like – too many people fall into this trap. To avoid doing the same thing yourself, follow Paul’s top 5 tips below:

Buying property is not a process to be rushed. You need time to research the market as a whole and your particular destination of choice. You should also spend time researching the companies in the market place – using the right professionals will save you time, money and stress. Investing time at the beginning of the process will save you time later.

1. Independent lawyer

  • No matter what anybody tells you, no matter how easy it all seems and no matter how lovely the agent seems, ALWAYS use an independent lawyer to represent you throughout the purchase of your property overseas.
  • It is the lawyer’s job to protect you and inform you.
  • You will need to pay the lawyer a fee – accept that as part of your purchase costs. This is not an area in which to keep costs down.
  • The definition of ‘independent’ is that the lawyer represents you and only you.

2. Do the numbers

  • Make sure you know your budget before you start looking at properties – this should include at least a provisional mortgage offer if you’re borrowing money.
  • Don’t then be tempted to buy more properties than you can afford (particularly on off-plan properties) hoping to sell the extra properties before completion unless you fully understand the risks as well as the rewards (see point 5).
  • If borrowing money, your repayments will stretch over several years, years in which lending criteria and borrowing costs may change. Discuss the long term repayment with a financial specialist before proceeding.

3. Beware exchange rate movements

  • The rates do not need to move substantially to affect the value of your purchase. When you start looking, £100,000 may buy you a certain property – a 10% drop in the value of the £ against the Euro, for example, may then put that property out of your budget. If you’ve already signed contracts to buy, this could cause you a problem. Speak to specialists in this area and secure your rate of exchange early.
  • The rate fluctuations will also affect the costs of mortgages (if you raise the mortgage overseas and earn your income at home). Again, speak to a foreign exchange specialist to highlight the risks and to take appropriate action.

4. Use professional agents and developers

  • There are few, if any, guarantees when buying property, at home or overseas. Using an independent lawyer (see point 1) significantly reduces the risks you take on an overseas property purchase and employing a professional agent or buying from a professional developer will also help you.
  • Ask lots of questions. 3 year old children are known for asking lots of questions (why? why? why?) and you should follow their lead when talking to agents about a purchase. Initially, focus questions on the company itself, not the properties for sale. Dig around for details on the founders of the company and the track record of the company. Ask for client testimonials (real ones) and make sure you find out in detail exactly what service they offer. Don’t just take their word for it – ask for details on their service in writing, preferably in the form of some type of ‘Terms of Business’.

5. Remember the reward : risk ratio

  • If you are buying property overseas as an investment (as many people have done in recent years), you need to bear in mind that big returns may come with significant risks. Be careful to assess the possible downsides to an investment property as well as the enticing investment numbers that could be achieved if all goes to plan.
  • Take your time and follow these tips and there is no reason why you’ll be taking any more risk buying overseas than you do at home.

Paul Owen
Chief Executive, AIPP

For more information and advice, visit The Association of International Property Professionals – AIPP

Editor’s note.

The Association of International Property Professionals (AIPP) does not sell property. It is a non-profit organisation whose sole aim is to improve the standards of professionalism in the international property market, helping the industry and the public.

The AIPP was established provide the consumer with confidence, and the industry professionals with a united voice.

For further advice see:

List of English speaking lawyers provided by the British High Commission in Nicosia

Top 5 legal tips for property buyers

Top 10 pitfalls to avoid when buying property in Cyprus

Top 10 property contract clauses

How to reduce your risks when buying off plan

Welcome to the property club Mr Clerides

Nigel Howarth
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IT SEEMS that 29,949 non-Cypriots are not the only ones waiting for Title Deeds to their property. It has been reported that former President of the Republic, Glafcos Clerides, is among the many thousands of Cypriot property buyers who have also been left twiddling their thumbs.

Mr Clerides bought a holiday home at the Spyros Seaside Complex in Meneou five years ago. Although the complex was built 15 years ago, none of the home owners have received their Title Deeds.

According to the daily newspaper Politis, the property developer made a number of ‘irregularities‘ – including building part of the complex on Government land and another part on foreign private property. The tenants were advised that this made issuing their Title Deeds more ‘difficult and complicated‘.

Some years ago, the Government introduced a bill designed to enable thousands of joint owners of illegally built properties to secure their Title Deeds. Mr Clerides, along with a number of other buyers in the complex, duly submitted his application to the Larnaca District Office two years ago. But according to Mr Clerides daughter, DISY deputy Katy Clerides, not one of the applicants has received an answer.

Welcome to the property club Mr Clerides. If the authorities are unable to issue your Title Deeds, what hope is there for the rest of us?

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