Basic Rules and Regulations to Purchasing Property in Cyprus

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Basic Rules and Regulations to Purchasing Property in Cyprus

PATRIKIOS & PAVLOU & CO Advocates-Legal Consultants

Acquisition of real estate by foreigners in Cyprus

1. Cyprus

1.1 Cyprus is located in the eastern Mediterranean at the crossroads of Europe, Asia and Africa. The island has proved to be a favorite destination for those seeking to purchase a holiday or retirement home in the sun. Demand for real estate continues to increase at an alarming rate. Why is Cyprus so popular? Some of the advantages are:

· Its excellent all-year-round climate

· Rrelatively low cost of living

· Low crime rate

· Favourable tax regime

· Strong Cyprus pound in relation to the GBP UK Pounds Sterling or Euro

1.2 The social and economic evolution that has taken place in Cyprus over the last two decades combined with the sophisticated methods of industrialization and cultivation has diverted capital to land ownership. Cyprus has developed a constructive legal framework that allows its involvement in the international land market while at the same time protects the social, economic, agricultural and industrial interests of the island and its people.

1.3 It is often said that investment in Cyprus property carries limited or no risk. This may be true in the sense that Cyprus has not as yet experienced a downturn of its real estate; but for a purchaser who does not act prudently, the risks could be great and the pitfalls many. Professional legal advice is strongly recommended!

2. The Legal Framework

2.1 The Acquisition of Immovable Property (Aliens) Law (Cap 109): The Law deals with the acquisition of immovable property in Cyprus by foreigners and was enacted during the World War II when Cyprus was still a colony of the British Empire and those who were not British subjects were classified as “aliens” i.e., ‘foreigners’. The use of the term ‘alien’ was used to control the acquisition of immovable property in Cyprus by enemies or non-British subjects.

2.2 Although in 1960 Cyprus acquired its independence and became a modern State, Cap 109 survived save for a few amendments designed to ensure proper control of foreign investment in Cyprus real estate, and to protect the foreign investor as well as the socio-economic interests of Cypriot citizens due to the country’s small size.

2.3 According to Cap 109 as amended foreigners purchasing real estate in Cyprus are obliged to comply with specific formalities and are subject to certain restrictions aimed at protecting the foreign investor, ensuring proper control of foreign investments etc.

2.4 The Acquisition of Immovable Property (Aliens) (Amendment) Law – N.54 (I)/2003 came into force on 1/5/2004 i.e., the date of Cyprus’ accession to the EU. Although non-Europeans remain subject to the same restrictions that existed before Cyprus joined the EU, such restrictions have been lifted to a considerable extent in the case of European citizens. This new law appears to differentiate between two categories of Europeans:

2.4.1 European nationals or legal entities permanently resident in Cyprus: the Law has lifted the restrictions previously imposed so that this category of Europeans is no longer subject to any restrictions when purchasing land or property. Even before the enactment of this new Law, according to the Treaty of Establishment of the Republic of Cyprus (Appendix T), British Subjects of United Kingdom origin, that were ordinarily resident in Cyprus on the Independence Day (i.e. the 16^th of August 1960), could acquire real estate in Cyprus without the restrictions imposed by Cap 109 as amended.

2.4.2 European nationals or legal entities not permanently resident in Cyprus: to this category of Europeans some restrictions still apply. They can purchase any type of real estate except for a secondary residence for which a Council of Ministers permit must first be obtained.

2.5 The removal of most restrictions since Cyprus' accession to the EU in May 2004 has resulted in a further influx of demand and market activity causing local property values to increase, although the prices remain comparatively lower than those of other popular destinations such as France, Italy and Spain. All the indications are that this upward movement of values will continue and at worst remain stable for a period.

2.6 All restrictions for Europeans (whether or not resident) who purchase property in Cyprus will be lifted by 2009.

3. The Legal Formalities

3.1 It is imperative to seek professional advice and assistance from a lawyer when acquiring real estate in Cyprus, so as to ensure among other things that: the terms of the agreement are negotiated in a fair and balanced way; the proper investigations are conducted, and that the necessary formalities are complied with according to local laws and regulations.

3.2 Searches: Land Registry searches must be conducted to ensure that the seller has the legal right to sell and the property being purchased is free from encumbrances or charges.

3.3 Stamping: Once the Contract of Sale has been negotiated and signed, the purchaser will have to pay, within 30 days thereafter stamp duty at the Inland Revenue, which is calculated at the rate of:

1.5 Per thousand of the value up to C£100,000

2.0 Per thousand over C£100,000

In the case of a mortgage the registration fee is 1% of the amount secured plus the relevant stamps.

If stamp duty is paid after the time frame of 30 days expires, an additional penalty is imposed.

3.4 Filing: Within 60 days of signing the contract, the same must be filed at the District Lands Office until the parties are ready to transfer title of ownership. This will adequately preserve the purchaser’s legal rights pending other formalities being dealt with.

3.5 Council of Ministers (COM) permit: Where a COM permit is required, a prescribed form must be submitted to the local District Administration Office along with all necessary supporting documents. It can take up to one year for this permit to be issued. As a general guideline the following points are worth noting:

· The real estate will be used as a residence and the building plot does not exceed 4012,5 square meters, or

· Where the applicant is a company, it will be used for professional purposes, and the legal entity has a sound status, identifiable ownership and clear business, or

· Physical persons do not have a serious criminal record in their country or in Cyprus and have the financial means to support themselves in Cyprus

· The COM believes that any industrial project proposed will be for the benefit of the economy of Cyprus and the production involves the use of new technologies or technical knowledge, or

3.6 Transfer of title: Unless and until a COM permit is secured and separate title deeds have been issued; transfer of title (ownership) cannot take place. Where the parties are ready, the transfer can take place at the local District Lands Office on payment by the purchaser of: any balance of purchase price due to the seller; the transfer fees, and other taxes. Transfer fees are calculated on the market value as at the date of purchase as follows:

Value of property C£ Transfer fee rate % on property value

Up to £50.000 3, 0

£50.001 - £100,000 5, 0

Over £100,000 8, 0

3.7 Immovable Property Tax: The registered owner of the property is liable to an annual immovable property tax calculated on the market value of the property as assessed on the 1^st January 1980.

Market value Annual tax C£ per thousand

Up to £100.000 zero

£100.001 - £250,000 2, 0

£250, 01 - £500,000 3, 0

Over £500,000 3, 5

The seller as the registered owner usually pays the immovable property taxes and at the time of transferring ownership can seek reimbursement from the Purchaser for the period starting from the date of delivery i.e., the date upon which the purchaser is handed the keys or as otherwise specified in the contract.

Conclusion

The formalities described above merely outline the basic steps that may have to be taken in any given situation but they are by no means exhaustive. Each transaction must be handled according to all the circumstances. The complexity of the local legislation relating to acquisition of real estate renders it necessary to seek at the outset professional legal advice and assistance in order to avoid any adverse consequences that could arise where sufficient care is not taken.

Please Contact:

Mr Patrikios Pavlou E-mail: ppavlou@pavlaw.com

PATRIKIOS PAVLOU & CO
Advocates-Legal Consultants
Patrician Chambers
332, Agiou Andreou Street
P.O. Box 54543
3725 Limassol
Cyprus

Tel: +357 25.87.15.99
Fax: +357 25.34.45.48

Note: The contents in this article are provided for general purposes only and are accurate to the best of our belief at the time of writing. They do not constitute legal or other professional advice. We accept no responsibility for any loss that may arise from reliance placed on information herein

Andrew Sharpe, a British expatriate, has been living in Cyprus since 1977. He is married to a Cypriot and has four children. Thanks to the many years he has lived in Cyprus, he is able to offer a hands-on approach to the many unknowns that may await any prospective resident, providing a very relaxed helpful, information service for property sales. Cyprus property has offices in all the island's major towns, i.e. Nicosia, Limassol, Paphos/Pafos, Protaras, Larnaca/Larnaka and Platres. Details on property finance, property sales, laws on purchasing property in Cyprus. Regular web site updates.

E-mails replied to within 24 hours.

Cyprus Fax/Tel 0035725571715 Mobile 00357 99537985 E-mail andrew@cyprusprop.com

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