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Unscrupulous Developers Need to be Taken to Task

Editorial
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DEPUTIES examining the long delays in the issuing of title deeds to homebuyers appeared to have finally understood the main cause of the problem after Monday’s House Interior Committee meeting. Light was shed on the problem by the director of the Land Registry Department Andreas Christodoulou, who said there were cases of home-buyers who had been waiting to have title deeds issued for seven or eight years.

Our government departments may be bureaucratic, slow and inefficient, but nobody can believe they need so may years to issue title deeds. The problem, as we pointed out in this column two weeks ago, is caused by developers who do not pay off their loans to the banks and thus cannot take ownership of the buildings they have sold.

These properties are legally the ownership of the bank because they had been signed over by the developer as security for loans received. If the loan is not repaid in full, the banks have ownership and no title deeds can be issued.

This was confirmed by Christodoulou at the committee on Monday. He said there were countless such cases and explained that developers were not in a hurry to pay off their bank loan even after they had sold all the properties in a development. Often the money collected was used for another development project, while the bank kept ownership as security and the buyers were kept waiting for their title deeds.

Deputies had hoped that an amendment to the law passed last year would have speeded up the issuing of title deeds but it made no difference, which is why they are grappling with the problem now. No progress was made because the amendment envisaged complex legal procedures against the developer, which very few people were prepared to take. The amendment put no legal pressure whatsoever on the developer to issue title deeds, which is why it never worked and deputies are considering drafting another bill.

News that the UK’s Channel 4 television station is preparing a documentary about this scandalous situation has given deputies fearing the negative publicity a sense of urgency in drafting new legislation. Such a documentary could be disastrous for developers and the construction industry, which has been enjoying an unprecedented boom thanks to the sale of properties to foreigners.

Any new law should target the developers, who should be legally obliged to issue title deeds within a specified time period. Even if a developer has not managed to sell all the properties in a development in time to repay a bank loan, why must the buyer be made to wait for his title deed? When someone has paid for a property, he should be able to enjoy the right to ownership immediately and not when it suits the seller.

This should be the primary concern of the lawmakers when they are drafting the new law, because developers have been allowed to take too many people for a ride for far too long.

Copyright © Cyprus Mail 2006

Title Deeds Nightmare to End Up on Channel 4

Leo Leonidou
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BRITISH broadcaster Channel 4 is coming to Cyprus after being contacted by expats who have bought property on the island and not received their title deeds.

The property boom over the past few years is one of the main causes of the problem as the authorities struggle to stay afloat, swamped with applications.

Last Thursday, Parliament voted to extend the time period in which the law for the legalisation of a significant number of irregularities regarding immovable properties purchased before March 2005 is in effect.

In an effort to combat the huge delays, the government enacted the temporary law 18 months ago, but it was only valid until the end of September 2006. The extension now runs until January 1.

Lawyer George Couconis, a property specialist, has told the Mail that developers do not rectify irregularities in construction, while town planning and local authorities tolerate the situation.

He added that when somebody has not received their deed, legal action has to be taken against the vendor, with the appointment of a third party who will issue title deeds on his or her behalf.

But an amendment to the law involving no legal action is being sought by DISY deputy Ionas Nicolaou in an effort to combat the huge delays.

He is proposing that properties, such as blocks of flats, are divided into separate entities, with each buyer receiving a separate deed.

As the law currently stands, only the developer can apply for the deeds and not the individual buyers.

Lawyer and European Party MP Ricos Erotocritou is raising awareness of the issue before Parliament and he said yesterday that, “the whole procedure needs modernisation in a way that will facilitate its speeding up. The major cause of delay is the developers and I suggest introducing financial sanctions against them. If they then continue to delay, they should face criminal charges.”

Green Party leader Giorgos Perdikis agreed, saying more should be done to punish developers. “If they were threatened with jail, I’m sure they would be more co-operative in issuing deeds.”

Speaking from England, Vanessa Moussa, assistant producer for Ricochet Productions, who have been commissioned by Channel 4, said: “We are preparing a show called Selling Houses Abroad about Britons living in Cyprus who have had problems buying a property or who have had issues with their property after buying.

At this stage, I am in contact with people who have bought in Cyprus and who feel they have been victims of unscrupulous developers, estate agents and even lawyers and there are countless examples I could give you.”

She said the “typical situations are buyers who bought and can’t get hold of the title deeds for a property or who discovered problems with the house such as bad constructions due to inexperienced builders (house moving from ground or construction walls falling down.)

Some are trying to get the deeds but then have been faced with further legal problems. Others found themselves in strange situations where the developer has sold the land twice and are not sure where they stand in a legal system they don’t understand in a country foreign to them.”

Land Registry Director Andreas Christodoulou said the problem often lies with mortgages taken out by developers. “They will mortgage a property, but then sell off different parts of it, such as flats or shops. The flats will all get sold and the developers get their money but leave the property mortgaged.”

He said deeds couldn’t be issued until developers had paid off loans or transferred mortgages.

Spokesman for the British High Commission in Nicosia Nigel Boud said: “The High Commission has received a number of requests for assistance from British nationals residing in Cyprus who have had problems obtaining title deeds. Our advice, in what is a private or civil matter, is that people should seek independent and qualified legal advice.

Part of the Foreign and Commonwealth Office advice for Cyprus states that before purchasing property anywhere on the island, the buyer is strongly advised to seek legal advice from a source independent to the seller.”

Copyright © Cyprus Mail 2006

Cost of Construction up 3.9%

Editorial
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According to CYSTAT data released on Monday, the Building Material Price Index recorded an increase of 3.9% in September 2006.

Specifically, the price of electromechanical and industrial products showed an increase of 4.7% and 4.5% respectively, the increase in the price of oil products fell to 4.3% and the price of timber, stones and quarry goods increased by 3.8%.

On the other hand, the price of chemical products slipped 0.1%.

In January-September 2006, the Building Material Price Index surged 5.25%.

© 1999 – 2006 Stockwatch Ltd

Where are the Best Areas to Buy Rental Property in Cyprus

Nigel Howarth
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Question

We’re thinking about buying an Apartment, which we will need to rent out, what are the best areas to look at?

Answer

First, Do not go into the market with a buy-to-let strategy. You will most almost certainly find that rental yields are much lower than ‘promised’.

A number of developers offer ‘guaranteed rental income’ for the first one or two years. Needless to say, the cost of this has been factored into the selling price.

Second, Do your sums. Don’t plan on getting any more than 4% gross return on your investment. Bear in mind that out of this you’ll need to pay management fees, maintenance fees, repairs, breakages, insurance, income tax, etc, etc, etc.

Third, Work out your exit strategy. You may wish to sell the property at a later date, so think about what’s attractive to others.

As for ‘best areas to look at’ what’s your intended market – singles, groups of singles, young couples, young families, retired couples – and how much money could they afford to spend?

Based on your market, the best places could be somewhere near the night clubs and bars, somewhere quiet, not too crowded and near the sea, somewhere on the edge of a traditional village, somewhere in the mountains, somewhere with facilities for the kids nearby.

Cyprus is a very varied place and different people look for/want different things.

Choosing your Property Developer

Nigel Howarth
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Don’t assume that bigger is better; the size of a company is no guarantee that its properties are of an acceptable quality. You may find that quality of properties built by some of the developers that target the expatriate market to be generally lower than those that target a wider audience.

  • Always inspect properties under construction.
  • Insist on viewing earlier properties they’ve built and speak with their owners about the quality of their workmanship and after-sales service.
  • Don’t rule out a developer just because he hasn’t got flashy offices, glossy promotional material or staff who are fluent in English.
  • Instruct your lawyer to get a profile of the company confirming its existence and listing information such as its incorporation date, registered office, status etc and ask him/her to get a credit report on the company.
  • Don’t expect the fixtures, fittings and finishes you see in show homes to be the same in the property you’re thinking of buying. It’s a bit like buying a new car; where the showroom model usually comes ‘fully loaded’, you’ll be lucky to get all four wheels on the standard model without paying a bit extra!
  • Ask for a set of specifications and list of fixtures and fittings included in the advertised price, the size of the plot and the size of the property. Make sure you understand exactly what you’re getting for your money.

Legal advice

  • It is absolutely essential that buyers seek independent legal advice.
  • Do not sign any papers or hand over any money until you have sought advice from an independent lawyer with whom you can communicate effectively.
  • Do not use the ‘free’ legal services offerred by some of the developers.
  • Similarly, do not use a lawyer who has been introduced or recommended to you by a property developer. Some of these lawyers represent the interests of the developer and the advice they provide to buyers may be incomplete or biased in favour of the developer.

Construction Quality

Nigel Howarth
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Construction Quality

The quality of construction of Cyprus property varies greatly. If you are looking to buy a new or resale property, here are a few things you should look out for when inspecting properties under construction:

Inadequate damp proofing – allows water penetration resulting in damp, cold and musty properties and may lead to structural problems in the longer term.

Poor insulation – makes concrete houses hot in the summer and cold in the winter.

Inadequate drainage – causes drains to block frequently as they are unable to cope with toilet paper and kitchen waste disposal units.

Combined ceilings and roofs – provide attractive vaulted ceilings. But without the insulating properties provided by a separate roof and ceiling, houses built in this manner can be hot in summer, cold in winter and expensive to cool and heat.

Reinforced concrete roofs – leak unless properly waterproofed and maintained. As concrete is also a poor insulator against the summer heat and winter cold, concrete roofs exacerbate problems caused by the lack of insulation.

Protruding steel reinforcing – rusts, allowing rainwater to penetrate the reinforced concrete superstructure. The rusting steel expands, causing the surface rendering and concrete to crack and fall away.

Windows and doors are installed without caulking – allowing water to penetrate, adding to any damp and insulation problems.

Electrical cables are set into walls without conduit or just nailed to the wall surface and rendered over – these pose an obvious safety risk and makes the job of replacing damaged or defective cables a nightmare.

Inadequate electrical circuits – are unable to cater for the demand placed on them. As well as the risk of fire from overheated electrical cables further, less serious, problems may become apparent:

  • Circuit breakers trip out for no obvious reason.
  • Lights dim and/or flicker when appliances, or even other lights, are turned on.

Simple plastic water pipes – are used in place of the more usual pipe-in-pipe plumbing systems. As these are buried in the concrete floor, repairs are often impossible without major building work. Any flexing or cracking of the concrete raft may damage water pipes; such damage may not become apparent for months or even years after it has occurred.

Inadequate foundations – result in properties that are susceptible to:

  • Flexing and cracking as the building settles. The visible symptoms are uneven floors, cracks in walls, floors and wall tiles and jamming doors and windows. The more sinister, invisible, symptoms are damaged water pipes and possible structural instability.
  • Small movements during minor earth tremors. This may break water pipes and cause the supply of other utility services to the property to fail.
  • The concrete raft may also flex and crack.
  • Subsidence when heavy winter rains wash away the surrounding ground soil.

Fortunately such building methods are dying out as building regulations and building standards improve and as people demand higher quality properties.

It is possible to get your property built to a good standard without paying through the nose. But as some developers may try to charge you extra for such niceties as insulation and damp proofing, be prepared to shop around and haggle!

Happy property hunting!

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