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Details of new Title Deed law emerge

Nigel Howarth
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DETAILS of the proposed legislation concerning Title Deeds and designed to protect property buyers in Cyprus have recently emerged in the local news.

The Interior Minister, Mr Neocles Sylikiotis, admits that the problems concern both foreign and Cypriot buyers and confirms that the new legislation will be ready by the end of the year.

Speaking to the Cyprus Weekly, Mr Sylikiotis said that the new law will mean that “buyers will pay for their property directly to the bank and separate Title Deeds will be issued for each property in a block or group of houses, irrespective of any town planning or bank problems faced by the developer.

In this way buyers will get separate Title Deeds for their property whether or not a Certificate of Final Approval has been issued for a whole block or for a project“.

Another law in the pipeline concerns a Town Planning amnesty, under which Title Deeds will be issued even though there may be Town Planning irregularities or weaknesses.

“This means that title holders of properties with town planning flaws will not be able to improve or sell their property until the irregularities are overcome.”

The new laws will go to the Cabinet and the House by the end of the year and Sylikiotis expects developments on the matter sometime next year.

The Minister acknowledged that “This is a chronic problem in Cyprus,” and stressed his determination to solve it.

Comment: A step in the right direction – but more work needed

I’m sure that everyone will welcome the fact that Title Deeds will be available much sooner for property buyers; but isn’t the proposed legislation going to devalue them?

Apart from the fact that it is illegal to occupy a building that has not been issued with its Certificate of Final Approval (under Article 10 of the Streets and Buildings Regulations Law, Cap. 96), isn’t there a health and safety issue?

Under the current system, the only independent inspection a property gets is when the Municipality/District Office/Town Planning Department has it inspected by the local Civil Engineer. This ensures that the property has been built in accordance with the various permits issued for its construction, which will have included building and health and safety regulations.

Who is liable if someone in the property is injured because it wasn’t constructed in accordance with the regulations? The property developer who failed to adhere to the regulations? The Government who failed to inspect the property?

And if there are severe town planning irregularities that cannot be resolved, what happens if the authorities issue a Demolition Order? Will the people who have bought such properties be reimbursed at its current market value? And if so, who is going to pay?

We’ve all seen the so-called ‘luxury properties‘ thrown up by the cowboys in the property development industry. Isn’t the fact that the proposed legislation is going to weaken some of the controls merely going to exacerbate the situation?

New Rights for Cyprus Property Buyers were promised in 2005, but the Government at that time failed to implement them.

I’m sure everyone wishes Mr Sylikiotis every success in his endeavours. If the achievements of his predecessors are anything to go by, he’s certainly going to need it!

Cyprus Building Permits June 2008

Nigel Howarth
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THE Cyprus Statistical Service (CySTAT) has just released the building permit figures for June 2008.

During the month 779 were issued, compared with 848 during June 2007. The total value of these permits was €244.7 million and their total area 312.8 thousand square metres. They provided for the construction of 1,659 dwelling units.

During the first six months of 2008, 4,299 building permits were issued; a decrease of 14.5% compared to the first six months of 2007. Their total value decreased by 6.8% and their total area by 8.7%. During the six month period, building permits were issued for the construction of 9,437 dwelling units compared to 10,498 during the same period last year; a decrease of 10.1%.

Cyprus property market enters recession

Nigel Howarth
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In a recent interview with StockWatch the Land Registry manager, Andreas Christodoulou, advised Cyprus property investors to expect a lower return on their investments as the market has entered a period of recession.

In his interview, he said that property prices will stabilize in the next four years – then they will recover but at a slower pace, as prices neared those of the competitive European markets.

Mr Christodoulou noted that demand in the property market has fallen by an average of 40%, the highest drop of 50% being recorded in Famagusta  and the lowest in Nicosia and Limassol, where it has dropped by 12%. This mostly affects houses and apartments in seaside areas. But Mr Christodoulou added that “The demand for plots remains stable“.

Mr Christodoulou considers that “Despite the lower demand, property prices remain stable. As Land Registry we don’t expect a decrease in prices, but if there is one – as a result of the credit crunch – it will be low“.

According to the Cyprus Central Bank data, the price of housing properties grew by 15% in 2007 compared to 10% in 2006, 12% in 2005, 20% in 2004 and 8% in 2003. Although there are no official figures for 2008, a recent StockWatch survey gave the impression that market prices have dropped.

“What developers do is to reduce their profit, making several offers. When they sell, for example, a apartment, they either reduce their profits or offer housing equipment of £2-3 thousand. But they never say that they will reduce prices from £100 thousand to £90 thousand“, he stressed.

Mr. Christodoulou believes that the market will recover in 3-4 years.

“When the market recovers, the price increases will not be serious. As the years go by, we will approach the prices of other European countries“, he noted.

Property activity slumps

Nigel Howarth
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FIGURES released by the Cyprus Inland Revenue Department show that Capital Gains Tax receipts resulting from the sale of properties slumped 42% in August, driving down total losses for the first eight months of the year by 18%.

The Cyprus Government collected approximately €54.5 million less from the property sales compared to the same period in 2007.

The figures confirm the forecasts for a sharp drop in demand, particularly in tourist areas, where there was a very high dependence on sales to British property buyers.

According to the IRD’s figures released Thursday, revenue from the Capital Gains Tax in the first eight months of 2008 fell to €246.9 million from €301.4 million during the same period last year.

A similar slump was reported in receipts from stamp duties, charges and real estate tax.

The world-wide credit crunch, the falling value of Sterling against the Euro, and the widely reported property scams are having a significant detrimental impact on the Cyprus property market.

Cyprus Title Deed scandal reported by Overseas Property Professional

Editorial
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In its latest issue, the Overseas Property Professional (OPP) magazine published an article about the Title Deed scandals experienced by thousands of people who have bought property in Cyprus. (The OPP is a very well respected international trade magazine published for overseas property agents, developers and associated professionals).

“OPP has learnt that disgruntled expat buyers in Cyprus have formed a new pressure group against one of the country’s biggest developers to highlight problems regarding the issuance of title deeds.

The pressure group, which has not yet decided to go public with its formation, along with other similar bodies, are complaining that they have been waiting years to receive their title deeds from developers which, for a variety of reasons, have not issued them to their buyers.

“Most property buyers in Cyprus do not actually own their properties as for up 10 -15, and possibly up to 30 years after purchase, the developers do not transfer the Title Deeds and instead use them to raise mortgages on the land on which the properties are built to finance further developments,” alleged Denis O’Hare from the Cyprus Property Action Group (CPAG), a body formed in 2007 to tackle the problem of title deeds in the country.

“Currently, Cypriot developers have record mortgages of over €400million, this in a relatively small market. This is an extremely risky situation for these buyers as if their developer defaults they can lose their property which they have already paid for in full to the lending bank. We think this situation is a national scandal as most Cypriot buyers are also in the same trap. By the way, whilst in this trap most foreign buyers are subject to financial exploitation by the developers. Imagine buying a car, driving it away, and the dealer keeping the log book and ownership for 30 years,” he added.

CPAG recently took the matter to the Cypriot Minister of Interior Neoclis Sylikiotis and Minister of Commerce, Industry and Tourism Antonis Paschalides, in the first of a series of meetings to discuss a CPAG Report outlining and documenting the problems facing property buyers in Cyprus.

The CPAG Report was commissioned by former Minister of Finance Michaelis Sarris and was delivered in early January this year.

Minister Sylikiotis told CPAG that as a result of the boom on the island over the past decade, issues had surfaced however he would do his best to push through new legislation clarifying title deed concerns by the end of the year. He also added that various meetings had already taken place with the Land Registry, to facilitate the new laws and that extra resources would be called to aid with the transition.

Growing problem

Although not a recent problem, the issue of title deeds has been thrust to the surface of debate on the island as economic conditions force the industry to tighten its practices.

A recent report by Greek-language newspaper Politis, quoting industry sources, said that “the reduction in interest from Britain is not only due mainly to the Sterling- Euro exchange rate, or the international economic crisis, but also to the publicity in the British mass media and on the internet concerning the problems with issuing title deeds that face British buyers”.

The triple whammy of exchange rate, economic conditions and title deeds is starting to hit the Cypriot industry where it hurts, as it relies heavily on the international market to continue its growth.

“In the last three months the reduction [in sales] is in the area of 30-40% from the foreign market and 5% for the internal market, while the forecast is that the reduction will continue until the end of the year and beginning of 2009,” said Solon Kourouklidis, president of the Pancyprian Real Estate Association, in an interview with Epiloges.

Many of the island’s biggest developers state that the blame for the problem should lay at the feet of local authorities, government and the Land Registry for not streamlining the process sooner, whilst the above blame developers for the situation.

In an effort to clarify the respective positions, a conference has been organised by law firm Michael Kyprianou & Co, in conjunction with the Bank of Cyprus, to be held in Paphos on October 29.

“The aims of the seminar are to clarify the legal process for obtaining Title Deeds and to dispel much of the misinformation and bad press in recent UK media coverage and incorrect information being given by some property developers and real estate agents,” explained a spokesperson.

Entry is free to the event, to which various developers and government ministers have been invited to attend.”

Police raid BuySell Larnaca offices

Nigel Howarth
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POLICE have raided the BuySell offices in Larnaca. The company, which is the largest advertiser of property in Cyprus, is scheduled to appear in court on Wednesday. In the meantime, it has been ordered to suspend operations pending the court’s decision.

On Monday, the Larnaca District Court ordered the company to close its three local branches. Police seized computers and other technical and office equipment from their premises as part of the ongoing investigation.

It has not been confirmed whether the company’s 13 other branches face a similar fate. No-one from BuySell was available for comment.

Following the reported police raid Dinos Soteriou, president of the Council of Real Estate Agents, said that dozens of real estate agencies in Cyprus operate without a licence; this is illegal and jeopardises consumers’ when deals go bad. Like many other real estate agents, both large and small, BuySell is not licensed to operate.

This is the second case to be brought against BuySell. On October 24th 2005, the Paphos District Count ruled that all charges brought by the Registration of Estate Agents in Cyprus to obtain an order against BuySell were “invalid and unsubstantiated”. BuySell subsequently sought CYP 1,000,000 in damages.

(See also Cyprus Real Estate Agents Developers & Lawyers)

Editor’s note: Channel 4’s damning report on the numerous Title Deed scams included a couple who had been introduced to their crooked developer by BuySell. Although the developer subsequently spent some time in prison, it is believed that he continues to run his ‘business’ of renovating and selling old village houses.

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