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Buying Property in Cyprus – the Specific Performance Law

Nigel Howarth
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(If you want to hear my discussion on the subject with Rosie Charalambous on CyBC Radio 2 you can listen to my podcast.)

When buying any type of property in Cyprus, it is absolutely essential that your lawyer deposits your contract of sale with the District Lands’ Office within two months of you signing it for what is known as Specific Performance.

The major objective of Cyprus’ Specific Performance law is to protect your interests as the buyer from any (some) wrongdoings by the seller. It gives you the ‘right to own’ the property once you & the seller have fulfilled their obligations to each other as defined in your contract of sale and the Title Deed has been issued.

Although it does prevent the seller from changing his mind about the sale and you from being gazumped by another buyer, the Specific Performance law is not watertight. For example:

  • There is no requirement for the seller to clear any mortgage on the property before your lawyer deposits your contract of sale. They may also reschedule or extend any existing mortgage without your permission.
  • If the lender forecloses and calls in the mortgage, any claim it has on the property will take precedence over yours. This is because the lender’s claim existed before your claim created by depositing your contract of sale for Specific Performance. The mortgage lender will probably auction the property to recover the debt and you could be left homeless.

I know of a number of people who have lost or are at risk of losing everything because they bought mortgaged property. Under absolutely no circumstances should you buy any type of property in Cyprus that is mortgaged – the risks of losing everything are just too great.

The only way to protect yourself is to take independent legal advice & to ensure that your lawyer carries out a Title search – or you can pay off any mortgage yourself!

The problems with the Specific Performance law don’t end there:

  • In certain circumstances, the seller can still mortgage the land on which your home stands without your permission, even though you may have paid him for it in full and taken posession.

In Cyprus, this is perfectly legal and puts you in an invidious position. Although you may eventually own the property, you will find it extremely difficult to sell before its Title Deed is registered in your name. And should you find a buyer, they will insist that the mortgage is cleared before handing over their money – so you might end up receiving considerably less for your home than you paid for it.

One such case, concerning a block of apartments, was related to me by a lawyer. The developer fled the island with his ill-gotton gains and left the buyers in the lurch. The only way they could get themselves out of the situation was to pay the monies owed by the developer plus various unpaid taxes, charges & fees; and this is what they did. Each apartment buyer contributed their (un)fair share to the cost.

So even if you have no intention of selling your home before its Title Deed is issued, when you die, your children and the other beneficiaries of your Will may receive considerably less than you anticipated!

Your lawyer may be able to ‘dissuade’ the seller from mortgage after you’ve bought by including severe penalty clauses in your contract of sale. There is talk of introducing some form of insurance guarantee to increase buyers’ protection. Currently however, there is no cast-iron safeguard and until the Cyprus Government acts to change the law, you are at risk.

Enforce the Law or Take the Blame

Editorial
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A PARLIAMENTARY committee heard this week it was “pure luck” that more people hadn’t been killed in the devastating storms that struck the Paphos area last month, when flash floods swept a married couple to their deaths.

The committee heard that the specific drainage system for the Kissonerga river, which broke its banks leading to the tragedy, was inadequate for such a flow of water. At eight inches wide, the conduit built for the river in the 1980s was not designed for such an unprecedented deluge.

But the Paphos Water Development Department was understandably keen to spread the blame: the public also had a great share of responsibility, a spokesman said. Private landowners were building illegally and blocking drainage channels without town planning permission; locals were using dry river beds as rubbish tips, blocking drainage when the water did begin to flow.

This is all true, but it’s a bit rich to blame the public. The public will do whatever it can get away with. It is the role of the state to impose order, not just to sit back and expect responsible behaviour.

So, somebody is guilty of illegal construction: tear the offending structure down and fine the guilty party. Do it once, do it twice, and you can be sure the public will jump through hoops in order to secure proper planning permission before undertaking any building work. People are throwing rubbish in the riverbed? Don’t just wring your hands and deplore the situation, blaming the public when the river overflows. Provide proper disposal facilities (often severely lacking in rural areas) and then come down hard on people illegally dumping their old washing machines and fridges.

Government, national and local, is not just about a fancy title, an official car, and an endless resource of patronage. It is about responsibility, it is about providing the framework for a civilised society to operate within the rule of law.

For years, those in authority have shrugged their shoulders and turned a blind eye to a myriad of illegalities, from the pettiest of parking offences to the most massive violations of planning regulations. They can’t now blame the individual for having succumbed to a culture of lawlessness.

Outside Utopia, responsibility starts from the top. Left to their own devices, few in society look beyond their immediate self-interest, or at best that of their family or closest friends. That is why we need a framework of law and enforcement to ensure order prevails over the law of the jungle.

We have plenty of laws, but shockingly lax enforcement. Until the day that changes, the blame for tragedies such as those of last month lies squarely on the shoulders of the state.

Copyright © Cyprus Mail 2006

Uncontrolled Development

Nigel Howarth
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Sir,Further to your recent article where Mr Foukaras correctly sights Tala and Emba’s uncontrolled property development as the cause of the recent tragedy:

In July 2004, I forwarded a letter highlighting the problems of high density development to the Director of Planning in Nicosia with copies to Paphos Director of Planning, the District Officer and Tala Community Board. Although this letter was accompanied by well over a hundred signatures, I still await an acknowledgement.

In August 2005 and January 2006, I wrote to the Ombudswoman concerning two separate developments. Although I received letters of assurance that my concerns would be investigated, I still await notification of the outcomes.

In August 2005 and January 2006, I wrote to the Ombudswoman concerning two separate developments. Although I received letters of assurance that my concerns would be investigated, I still await notification of the outcomes.In January, I wrote to the District Officer about the development of two separate apartment blocks within the inner village area.

Both these letters were endorsed with the signatures of concerned householders on neighbouring plots. To date no acknowledgement has been received.

In March 2006, I wrote to the Minister of the Interior highlighting the local problems of high density development with plans of a proposed four storey apartment complex. Although this letter was accompanied by some 150 signatures no acknowledgement was ever received.

In April 2006, I read an article in which the President was stated as saying that he was vetoing government plans to issue an amnesty to all illegal restaurants in the Republic. Because I had already raised a local issue against the Mukhtar’s daughter, who had built a very large restaurant in a residential zoned area adjacent to my home without planning approval or approval for change of use, I wrote to the President highlighting the case and wishing him better luck than me. Receipt of this letter was acknowledged, without further comment.

Since early 2004, realising that the Planning Department were doing absolutely nothing to control the outcome of the development explosion; I started attempting to form an association to battle the problem. Because I was determined that any worthwhile association must be fronted by Cypriot nationals, it took me until April of this year to get things off the ground.

In spite of making approaches to the District Officer and Tala community leader, this association has had little real effect other than to have managed development of a 48 apartment block within the main village area.

This was achieved through a technicality, as the planning approval was based on being able to purchase irrigation tracts which are owned by villagers and run between three adjoining plots of land. Having apparently already sold the complete project to some Scandinavian investment company, this now appears to be causing some embarrassment.

Because of our general lack of progress in stemming the rapid demise of our village, we came to realise that things can only be altered from within. We have now gathered together a team of independents with no financial attachments within the community and are backing their attempt for election in December to the position of Mukhtar and board members.

I thoroughly agree with all you say. It is unfortunate that it requires a tragedy such as occurred last week to bring our plight to people’s attention. My main concern now is that this will all amount to nothing in a few weeks’ time if we continue to act as fragmented groups.

John Moffat,Paphos

Copyright © Cyprus Weekly 2006

No Title Deeds–Security

Nigel Howarth
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It is a fact that new property take a long time to secure a title deed and this creates serious problems regarding ownership, finance, re-sale and other matters. At this point of time there is a serious debate that it is taking place in the House of Representatives on the subject, but we have not detected any solution in the horizon.The numerous permits (approximately 8 permits in total) required after the building is completed and the long delays that the authorities take to examine and issue these permits, the average period for the title issue is 4-6 years (and this is provided that the building has no major or even minor problems) after the building’s completion.

Surely this is not a satisfactory situation and the present delays have been evidenced by the demonstration that has taken place outside the Town Planning Office in Paphos (although the problem is not isolated at Paphos, Paphos is the worst region). The authorities claim that over the last few years it had to process 14.000 applications per annum, as opposed to the 8.000 applications prior to the recent property boom.

For these reasons we suggest to the buyers to take some “security” measures in order to protect their interest when buying a property as an interim measure until the titles are issued.

  • Deposit your contract with the local Land Registry. The sales contract must be duly signed (a stamp duty of 1½/oo up to £100.000 and 2 o/oo £100.000+ must be paid based on the contract price by the buyer) within 2 months from the date of signing of the agreement. This deposit acts as a charge on the property and it will protect you for any subsequent sale, mortgages etc that might follow the deposit date.
  • Get a release from the mortgagee (if any). The release to be secured by the seller and it should stipulate that once the title deeds are issued, the mortgagor will have no objection in releasing the title for transfer.
  • If you require a bank guarantee you must bear in mind that you will have to pay 1.8% on the amount of the guarantee, p.a., a quite high charge.
  • Get a corporate guarantee from the developer/owner securing the free transfer of the property.
  • Carry out your own search through your advocate regarding the seller’s/ developer’s financial standing and check his “name” in the local market. There is a lot to be said in buying from the more “known” developers, as opposed to the small scale and financially weak developers, with no track record (even through their prices might be slightly lower than otherwise).
  • Set a date in the sales contract by which the developer is bound to secure a title.
  • Make a provision in the sales contract that the developer must comply with a request for a resale with a fixed charge (maximum £1.500) so that you can cancel your sales agreement by selling it to another buyer. The developer/ original buyer, is to enter into a cancellation agreement and then the new buyer to enter into a new sales contract with the developer. In this case however the developer may ask the original buyer to cover his tax costs or for the original buyer to provide him with a tax release.
  • Surely the above measures are not a substitute to a title, but at least one should take such appropriate steps to protect himself during the period of waiting.

Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved.

House Prices Drop by 0.9%

Editorial
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House Prices Drop by 0.9%

HOUSE PRICES dropped by 0.9 per cent in the period September-October. The average home on the island now costs £91,625.

The BuySell Home Price Index was created and is updated monthly on behalf of BuySell Cyprus Real Estate by the independent economic research organisation S. Platis Economic Research. The Index is announced during the second week of each month and depicts the movement of prices at which residential properties are sold in Cyprus, based on the extensive BuySell Cyprus Real Estate database.

The Index constitutes the only valid gauge of the Cyprus housing market and is considered an effective tool for home buyers, sellers and investors.

Copyright © Cyprus Mail 2006

Pure Luck More People Weren’t Killed by Storms

Jacqueline Theodoulou
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A HOUSE committee yesterday heard it was “pure luck” that there weren’t more victims in last months flash floods in which two people died.

The drainage system of the Kissonerga river in Paphos, which overflowed during recent hailstorms and resulted in the tragic death of a married couple, was built over 25 years ago and could not deal with such a horrific storm, according to the Paphos Water Development Department.

The Board’s spokesman revealed the shocking facts during yesterday’s House Interior Committee, where deputies met for a second sitting in an attempt to ascertain who was to blame for overdevelopment in the region which led to the horrific accident.

“The water conduit at the Kissonerga river was built at the beginning of the 80s. It was eight inches wide and was not designed to hold large amounts of waters,” said the department’s Paphos District Engineer, Kyriacos Spanos, adding that his department had removed the specific conduit after the accident.

Fingers have been pointed towards state authorities, who are being asked to answer for the overdevelopment of the Paphos areas in particular, the cementation of rivers and insufficient drainage systems.

But as Spanos pointed out yesterday, the public shares a large portion of responsibility in the situation. Not only do private land owners illegally move ahead with constructions and blocking rivers without town-planning permission but the situation is worsened by the fact that locals have turned the various rivers into rubbish tips.

“You find fridges, ovens, entire kitchens dumped in rivers because the rubbish tip is so far away,” said an engineer of the Paphos Municipality. “Following the violent storm, we ad filled four containers with rubbish.”

Paphos village Peyia in particular has seen a dramatic rise in development over the past few years and as the community’s spokesman told the committee, the 1980 land distribution saw the cancellation of a number of rivers in the village.

“It is pure luck that there weren’t more victims during the storm,” he said, imploring deputies to help. “There are private land owners blocking drains to satisfy their personal needs. We want the blame to be apportioned and the culprits punished”.

Committee Chairman Andros Kyprianou of AKEL pointed out the lack of unity among the Water and Town-planning departments, the municipalities and communities when it came to setting out a clear policy to deal with all the problems that were referred to during the meeting.

As all parties involved aimed the blame towards others, it remained unclear by the end of the meeting who really is responsible for the uncontrollable development, rubbish dumping and cementation of rivers without thought to the environmental consequences they impose.

Kyprianou wrapped proceedings up by requesting the relevant authorities return to the committee’s next discussion of the matter with clear measures and thoughts on how to resolve the problem and avert any future tragedies.

Copyright © Cyprus Mail 2006

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