Builders and developers in Cyprus have been getting a bad press due to the “process” to acquire title deeds which can take up to 10 years or more! One would assume that anyone that pays for their property in full and upon completion of the property the title deeds would be issued. However, this is not the case and I will explain what can happen and how to safeguard your self when buying property in Cyprus.
In Cyprus, owners do not actually own the property or enjoy full benefits of ownership; including the right to sell or transfer it to anyone they wish, including heirs, without reference to the title deed holder who is most often the developer.
To sell a property, the buyer/owner needs to cancel or transfer their contract of sale at the Land Registry office with the cooperation of the developer. Then the developer enters into a new sale contract with the new buyer. However, the ability to sell is not automatic; a special clause in the original contract of sale is needed which should limit the cancellation and transfer fee charged by the developer to a ‘reasonable’ amount. Without that clause, those wishing to sell their property are at the mercy of the developer. Many buyers have been charged much greater amounts than the actual costs incurred by the developer to cancel their contract of sale. This results in eliminating any profit resulting from the sale of the property.
An example of this is a case reported to Cyprus Property Action Group where a property developer is demanding CY£14,647.45 from a buyer claiming it is for ‘immovable property tax’. The property was purchased in 1982 for CY£37,270 and is still registered in the name of the property developer. The title deed is still awaiting transfer until the demand has been met.
In other cases, the developer can still get a mortgage against the land a buyer’s property is built on. It is used as collateral, without the “owners” knowledge or consent. This prevents buyers from selling their property because no one is going to buy a property knowing there is a mortgage on it.
There are also some problems obtaining mortgages on resale properties without title deeds. Anyone that wants to buy needs to have cash or buy a home that has full deeds available. Some developers threaten to withhold the deeds in order to demand additional payments or to stifle valid complaints by clients. At the end of a long wait, the developer may not even be willing to pass the property to the buyers and legal action may be needed.
Below are some security measures to take until deeds are issued. Firstly, deposit your contract with the local Lands Registry Office. The sales contract must be duly signed within two months from the date of the signing of the agreement. This deposit acts as a charge on the property and it will protect you for any subsequent sale that might follow the deposit date.
Secondly, get a release from the mortgagee. The release should be secured by the seller and it should stipulate that once the deeds are issued, the mortgage holder will have no objection in releasing the deeds for transfer.
Thirdly, if you require a bank guarantee you will have to pay 1.8% on the amount of the guarantee which is quite a high charge. Ensure a corporate guarantee from the owner securing the free transfer of the property. Also, carry out your own search through your lawyer regarding the seller’s financial standing and check his reputation in the local market. Buying from the reputable developers opposed to small scale developers is generally a better bet even if prices are slightly higher. Next, set a date in the sales contract when the developer is bound to secure the title deeds.
Lastly, 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 original buyer will enter into a cancellation agreement and then the new buyer will enter into a new sales contract with the developer. In some cases, the developer may ask the original buyer to cover his tax costs or to provide him with a tax release.
The above measures are not a substitute to having title deeds, but they are appropriate steps to protect buyers during the title deed waiting period. These are ways to ensure a stress-free transaction and fully enjoy your property in Cyprus.
Published Sunday, December 21, 2008 4:50 PM by Cleo Shahateet
Filed under: Selling Paphos Cyprus Property, Ownership, Land regisrty, Title deeds, Buying Properties in Cyprus, sale, Action group