Home Blog Page 681

Construction Costs up by 5.15% in Jan-Oct 2006

Editorial
-
0

According to the latest data from the Statistical Service, construction materials prices in the period January-October 2006 rose by 5.15% over the corresponding period of the previous year.

The price index of construction materials for October alone reached 133.25 units (base year 2000=100.00), recording an increase of 0.65% over the previous month.

The breakdown of prices shows that the biggest upward impact on prices this year has been petroleum.

Prices of petroleum products used for construction were up 25% year on year in January to October.

By contrast, prices of chemicals products used for construction fell by 0.7% in the same period.

Copyright © Financial Mirror 2006

Stuck Waiting for Title Deeds?

Tasos Coucounis
-
0

Action can be taken through the courts to ensure receipt in a reasonable time to get there hands on long-awaited title deeds, home buyers should seek a court order which obliges the seller to take all duly and necessary actions to obtain the requested permits and approvals including the necessary application for the issuance of separate title deeds within a specified time limit.Those buying homes from developers often have to wait years for the issuance of title deeds because of the complicated system in place. A developer will mortgage an entire property and then sell it off in pieces, however the developer himself will not get the title deeds until the entire amount has been paid off, delaying their issuance to buyers.

However, law 96 (I)/97 gives the court the authority to issue an order against the obliged vendor and to put him under the court’s observance, so within a reasonable time limit, such as six months, separate title deeds are issued. This remedy can be used by any immovable property purchaser who has deposited his sale contract with the District Land Office and has been waiting for years for the vendor to issue separate title deeds. Through this procedure, the court is able to order the issue of separate title deeds on the immovable property sold without a title deed, before the claim for the specific performance of the sale contract. The sale contract, upon its deposit with the District Land Office within the two-month legally defined time limit from the date of signing, creates an estate in land over the piece of land on which the immovable property in question has been constructed or forms part of.For the above mentioned law to be implemented in a particular case, the purchaser has to take legal action against the vendor with a claim that mentions the facts and which requests the court to control the vendor’s actions or to appoint any other appropriate person to issue the separate title deeds in the name of the vendor. In this way, if after the issuance of the separate title deeds the vendor does not transfer the purchased immovable property into the purchaser’s name, then the latter could again request the court to order the specific performance of the sale contract, thus to order the Director of the District Land Office to register the purchased immovable property in the name of the purchaser without the participation of the vendor. The specific performance of the sale contract order cannot be issued unless a separate title deed has been issued and as long as the vendor continues to deny or neglect to transfer the purchased immovable property.

The conditions which the relevant law sets for the court to be able to issue the order for the vendor or to appoint another appropriate person for the issuance of the separate title deeds are the following:

  • the immovable property sold under the sale contract must not have a separate title deed, thus must be part of the immovable property of the vendor (other from the undivided share)
  • the vendor must purposely make the separate registration impossible
  • the vendor must neglect to make all necessary actions for the issuance of the separate title deeds or to take all necessary steps for the obtainment of the necessary certificates, permits or approvals for the issuance of the separate title deeds
  • the vendor refuses without any excuse to make the necessary actions for the issuance of a separate title deeds or to take the necessary steps for the obtainment of the necessary certificates, permits or approvals necessary for the issuance of the separate title deeds.

If the first and one of the three other conditions apply then the court has the discretion and it can exercise it so as to secure the issuance of separate title deeds. Before it issues the order, the court takes into consideration the behaviour of the vendor until the trial. If the reason for not issuing the separate title deeds is attributed to the liability or negligence of the vendor, the court is also able to intervene with the issuance of an order. If the vendor does not comply with the order within the specified time limit then he will be guilty of court order disobedience, with the due consequences. For such an offence, the court has the authority to punish the vendor by imposing his imprisonment.

By George Coucounis – an Advocate – Lawyer practising in Larnaca. email: [email protected]

Copyright © Cyprus Mail 2006

The Rights & Responsibilities of a Cypriot Estate Agent

Antonis Loizou FRICS
-
0

From the numerous letters that we have received (28) and are keep coming, it appears that, especially foreign people, have problems with the commissions involved in a sale and there is a complete confusion as to what the sellers/ estate agents rights and responsibilities are.

For this reason we will attempt in this article, within the time and space allowed in this paper, to set out a brief guideline for the parties involved. This information is drawn both for the Cypriot estate agents law as well as local and U.K. case law.

  • An estate agent must be so registered with the Registrar of the Estate Agents in Cyprus, he must have a professional indemnity insurance of at least £100.000 and he must have a registered office.
  • An estate agent must be a person and not a company.
  • The agent must carry out an investigation regarding the state of the physical building, he must inform the buyer/seller of the various legal and physical characteristics of the property (e.g. zoning, limitations, repairs, mortgages and impediments, ownership and title availability etc etc).
  • Expenses – If there is no agreement as to who pays the expenses for promoting the property, then the seller is liable to pay such costs, but which must relate to the efforts and time. The expenses are payable even if no deal is concluded, but any “reasonable” expenses may be claimed. The agent must, however, inform the client, of his intentions and actions and the estimated expenses.
  • Cancellation – Even if there is a cancellation of the contract at the buyer’s fault, the seller must pay the analogous commission, provided he has received a reasonable amount of money e.g. 25%-35% of the total price. If the breach is caused by the seller, then the whole commission is payable.
  • Instructions – Independently from whom the agent received instructions for, it is always the seller who pays the commission (unless there is an otherwise agreement).
  • Exclusivity – Care is needed if an agent is instructed as an exclusive agent since whoever sells the property within the time described in the exclusivity agreement, the seller may be called upon to pay the agent, (even in case the owner himself sells the property or if another agent is involved).
  • Duty of Care – Not clear to whom the agent owns a primary duty of care i.e. to the seller (from who he gets a commission) or the buyer, who trusts the agent to find him the right property.
  • Clear Instructions – It is a must and it should include:
  • The period of sale
  • The commission rate
  • When the commission is paid
  • What will happen if another agent is involved
  • The sales price and the terms of payments required
  • Lower sales price – If an agent concludes a deal at a lower price than instructed originally, but for which approval has been obtained (or a deal is concluded), the commission is payable.
  • An agent can act on behalf of both the buyer and agent.
  • An agent is liable if he has not carried out his duties, provided it has the ability to execute them (e.g. if he cannot ascertain any mortgages because the Lands Office refuses to let him have the information). The duty of care is increased if the agent has an exclusive right to sell.
  • If an agent is also the buyer, he is not allowed to get a commission.
  • Even if an estate agent is not directly involved in a sale, but he has given all the details of the property to a potential buyer who concludes the deal directly, then the commission is payable.
  • If an agent acts contrary to instructions, but in any case a deal is concluded, he may not be entitled for a commission.
  • If an agent acts in an doubtful or improper manner, he may not be entitled for a commission.
  • There is a great confusion whether an agent is entitled for the payment of his commission or his expenses, in case the seller changes his mind or acts in such way so as not to allow the deal to go through. There are contradictory court cases both in the British & Cypriot common law.
  • The only fact that the agent must prove in order to be entitled for a commission is that, it is out of his own acts that the sale was concluded.

We hope that this helps, to an extent, all the people who are involved in a property transaction, since we do appreciate that the circumstances are not cleared. Most of the law cases quoted above refer to U.K. cases, for which there is no law regulating the agents’ activities. In Cyprus with the agents’ act, the situation is more clear, be it still confusing.

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

Buy to Let

Antonis Loizou FRICS
-
0

Cyprus is becoming attractive with increasing number investors, whose prime consideration is to buy a property, in order to let it as an investment.

The market is changing and from a 10% share, which originally represented this investment market, these buy-to-let buyers have surpassed now the 25% percentage of the foreign purchases. Residential returns are in the region of 4%-6% on the value of a property, but this return is applicable provided that:

  • The acquired purchase price is the market value. We see that quite a large percentage of sales are grossly overpriced. Very few buyers (mainly foreign) opt to carry out a valuation of the property they intend to buy and they find subsequently that they have paid over the odds. A very recent example is a sale of a two bedroom apartment at Oroklini village (Larnaca) of 75m², having a large verandah and offering good views towards the beach (2kms away) was sold for £160.000 in an area where the prevailing prices do not exceed £75.000 (2 bed).
  • Special care is needed for inspection flights and highly promoted foreign estate agents, who charge a commission amounting to 12%-14% (plus V.A.T.), a cost which is of course added on the price (see our article on inspection flights).
  • Buy to let should be directed towards residential areas, where there is a stable demand forthcoming both from locals, as well as foreign people and for letting periods in excess of 12 months.
  • Residential units located within a tourist area, with their seasonality, do not provide such rental returns, whereas an attempt to let them for short periods (mainly to holiday makers) you will find that you have to furnish it fully, have a person on spot to clean, repair, make sure about damages etc, keep an eye on maintenance, unpaid electricity and telephone bills etc. For these reasons and unless your property is located at a prime spot in the tourist areas (e.g. Limassol on the beach etc) do not buy a property in locations of seasonality with the rental income in mind.
  • Locations such as Larnaca tourist areas, as well as Paralimni and the eastern region, have a very limited and most seasonal demand. On the other hand buy to let villas with private pools of the 2-4 bedroom capacity can be an attractive proposition (mainly in the Paphos region) earning an approximate annual income of £20.000 (less expenses).
  • Be very careful when you see developers advertising about high returns. We noted recently a developer in Limassol offering a guaranteed return of 15% p.a.!! In addition to the “out of the word” return, when we addressed the developer whether the guarantee meant a bank guarantee, the reply was “…. what we mean guarantee is that the return we advertise is attainable…”!!
  • For those who borrow in order to buy, must not depend on the rental income in order to pay off their loan, if the loan is in excess of 50% of the acquired price (this is a general rule).
  • What people sometime confuse is the capital appreciation and the rental income. It is correct to say that as prices move upwards, at the rate of approximately 10% p.a. (not in all areas) and the rental income of say 4%. In this case, yes, the total return can reach around 14% p.a. But again this is not for all areas and for all properties. We note that foreign estate agents in particular using inspection flights and other high pressure tactics, charging a 12%-14% commission, increasing the prices at levels above the market rates. For this reason, in the eventuality that a purchaser of this type wishing to resell the acquired property, he might find that even after a couple of years he may have to sell at a price lower than the initially acquired. Bearing in mind that the transfer fees (stamp duty) are charged on the acquired price, the inflated sales price gets more inflated, when the transfer fees are added on top.

As a conclusion, we can say that:

  • Buy to let in Cyprus is O.K. in residential areas, not ignoring in particular Nicosia which shows the best and steady returns.
  • Buy in residential areas and not in tourist ones.
  • Check the price you pay.
  • Have someone to look after your property (and get a costing).
  • Make an all inclusive rental contract (to include common expenses).
  • Bear in mind the furniture and equipment costs.
  • Etc.

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

Estate Agents’ Commission

Antonis Loizou FRICS
-
0

By Antonis Loizou & Associates Limited – Chartered Surveyors & Property Consultants

IN CYPRUS, the Estate Agents’ law regulates the profession and sets out the rights and duties of the estate agents.

All estate agents must be registered with the Registrar and obtain a licence, otherwise no- one can call himself an estate agent or carry out any of the activities that represent an estate agent’s activities.

There are certain requirements that anyone who wants to become a registered estate agent must meet, including practical and theoretical education, and professional indemnity insurance cover etc.

Because of the newness of the law, there are numerous court cases going on, as to what constitutes an estate agent and what is a commission.

So we find some people claiming that they are not estate agents, but advertisers of property, others call themselves not estate agents, but property finders, other are called property tour guides, others auctioneers etc.

As you can appreciate all these attempts are a cover-up for illegal estate agents who cannot comply with the law’s requirements.

The commission charged by an estate agent is deductible for income tax/capital gains tax purposes. As such, if you sell your property, the tax authority will not make an allowance if a commission (however, this is named on paper) is paid to a non-registered estate agent.

New attempts are now being made by the Registrar of estate agents to exclude from income tax deduction the various other “illegal” commissions and to make it not only non-deductible, but also an illegal act (with possible imprisonment) for both the seller and the illegal agent.

Various receipts given for “services rendered”, “repairs”, “advertising fees” etc, are now to be strictly scrutinised and checked against the illegal estate agents’ activities and income tax returns.

So if you want to deal with an estate agent, make sure your dealings are with a registered estate agent. The estate agents’ law sets out that the commission, if not agreed, is set at 3% on the concluded sales price. An agreement could be made however for a commission to reach 5% and anything above this level, whether it is in writing or not, is not allowed.

As you may have noticed, however, most of the foreign estate agents charge a commission of 10%-14%, whereas some local developers offer an increased commission (in excess of the 5%) in order to be given priority.

We are always very concerned when we receive invitations for a 10% commission, since we know very well that the prices are increased, in order to cover this exaggerated commission.

In general, the prevailing rates in the seaside/tourist areas are set at 5% and for inland proper- ties (e.g. Nicosia) at 3% (V.A.T. in addition). The commission is always paid by the seller, independently whether the agent has been appointed or not by the seller. Unless you strike a deal with an estate agent we suggest you:

  • Agree the commission.
  • Agree whether it will be on an exclusive (not suggested) or a non-exclusive basis.
  • Agree on the period of the appointment.
  • Make clear whether the agent is allowed to place a “for sale” sign on your property.
  • Clarify who will pay the advertising cost.
  • Agree as to when the com- mission is paid (usually when the 25% of the sales price is collected).

It is at times rather difficult to determine whether the agent is entitled to a commission or not.

The several UK and local common law cases, do not give a clear indication and it depends on the circumstances of each case. However, there are certain indicative court decisions, which, we believe, are useful to note.

  • You need not appoint an estate agent to sell your property, if you accept him to show your property around. If a deal is concluded the seller is liable for a commission.
  • A mere introduction of the property to the buyer is enough for the payment of the commission and this responsibility exists and is not related to the work and expense involved by the agent.
  • There is no time limit in terms of an interested party’s awareness of a property and its concluding date. So if an estate agent introduces a buyer and the deal is concluded two years later, the agent is entitled to his commission.
  • If the same client is introduced to the seller by more than one agent, it is the first one who is entitled, although this will depend on the circumstances (e.g. if the first one could not conclude the deal and it was the second who did, then it is the second who is entitled). It is best in such cases to inform both agents that the buyer was brought in by another agent as well.

We are not claiming that all registered estate agents are correct and straight with their dealings and like in any profession, there are the good and the bad. At least, however, if you deal with a registered agent and not a “cowboy”, you know that you will have a legal right against him, some- thing which you do not with the others.

Lastly, we wish to point out that British estate agents need not have a permit of any sort to act as such in the UK. The Department of Trade however can issue a court order against a fraudulent agent not to exercise his business in the UK and provided the fraud is carried out in the UK and not (say) in Cyprus!! Does it remind you of the James Bond film “Licence to Kill” … … (but we could add) outside the UK !!

Copyright © Cyprus Weekly 2006

Property Prices Slip for Second Month in a Row

Editorial
-
0

Central Bank influence being felt?

Property prices slipped for the second month in a row in October according to the BuySell Home Price index, dropping by 0.9% over the previous month, after a fall of 0.8% in September.

However, prices are still 6.7% higher than they were in January and 5.7% higher than in October 2005.

The Average Home Price is now CYP 91,625, compared with CYP 83, 226 in January 2005, according to S. Platis ECONOMIC RESEARCH, the independent research organisation that devised and maintains the index for BuySell Cyprus.

Copyright © Financial Mirror 2006

1...680681682...691Page 681 of 691