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Legal Guide To Buying Property In Cyprus
Property Ownership
Compared to many other countries, the process of purchasing property in
Cyprus by non-residents is very simple, particularly with the help of Assetz
Cyprus.
Non-Europeans are entitled to a freehold ownership of a villa, an apartment
or a piece of land, with maximum allowed extention of 4014 sq.meters (four
thousand and fourteen square metres).
Europeans are entitled to a freehold ownership of a villa or an apartment.
The above restriction, in respect of Europeans, will hopefully soon be abolished
because Cyprus has now entered the EU. It is very possible that such a change
in the legal system will increase demand of real estate sharply with the related
reflection
on property prices. In respect of plots of land, Europeans can purchase as
many as they wish. This was one of the changes which took place upon
the entry of Cyprus into the EU.
Europeans who acquire a permanent or temporary permit can register in their
name as many properties as they want provided that they sign a confirmation
to the government that they will stay in Cyprus for the following five years.
Properties in Cyprus are on average several tens of percent lower than Portugal,
Spain, Italy and France.
The Title Deed
Transfer of ownership from the seller to the purchaser is undertaken by a
simple procedure through the Cyprus Land Registry Office, either by the buyer
in person
or by
appointing a third party with a Power of Attorney.
The transfer of ownership requires a permit from the Council of Ministers
which is easy to obtain.
Making an Offer on a Property
Buying a property in Cyprus is not very different from doing so in the
UK. You make an offer, and if it is accepted it is normal to give a nominal
deposit (between €1,000 and €2,000) to reserve the property.
In Cyprus, unlike the UK, this process is legally binding, so no ‘gazumping’ occurs.
Contracts are consequently drawn up, and this takes only a few days. Upon
signing of the contract, the buyer must pay at least 20-30% of the value
of the property; the remaining sum paid according to the terms agreed
with the developer. On a re-sale, as in the UK, 10% is paid on exchange of
contracts,
the remainder on completion. Agents' commissions, as in the UK, are paid
by the seller.
If buying new-build, Assetz Cyprus has negotiated some investment property
at deposits of as little as 10% initially, with further staged payments, and
it is possible for people with high income or net assets to obtain mortgages
on
new
build
of as
little
as
10-15% deposit.
Specific Performance
The contract, once duly signed and stamped, must be deposited at the
Land Registry office within 60 days. This is done by your lawyer and this measure
prevents any seller from re-selling their property to anyone else, hence safeguarding
the buyer until the Council Of Ministers application has been made and
approved. It is vital that you ensure your lawyer does this in time and that
the land is then registered in your name. Beware of lawyers who act for the
developer in case any unfortunate delays mean you miss this deadline.
Approval of the Council of Ministers
Having signed a contract of sale for your property, it is necessary to make
an application to the Council of Ministers to grant its approval for a non-Cypriot
to acquire immovable property.
This is a routine procedure which controls issues such as criminal records,
that land size is within the required limits, that only one home is owned in
Cyprus by the buyer, and that the buyer has the minimum required funds to live
in Cyprus. You will simply require a bank reference and a character reference.
The whole procedure can take up to 12 months, but in the meantime there is
no restriction on you taking up possession of your property.
The following points should be considered:
- Should approval not be granted, you can re-apply.
- Should approval not be granted, you have 17 years in which to sell
your house.
- You can live in your house from the moment you purchase it, prior to the
Council of Ministers granted approval.
- You can re-sell your property
during this time. Inheritance rights are not affected by this process.
- No UK citizen has ever been refused approval.
The Contract - Reselling Rights - A Warning
Beware of developer contracts in Cyprus that do not allow you to resell the
property without permission and the payment of a large fee to the developer.
This can be a problem long after you think you have purchased the property
if not dealt with by a reputable and efficient lawyer in Cyprus. Assetz Cyprus
can assist with the selection of a reputable lawyer.
Real Estate Transfer Tax
Real Estate Transfer Tax fees are necessary in order to transfer FREEHOLD ownership to the name of the purchaser. The transfer fees will be paid when the transfer of the title deed in the name of the purchaser will take place. The Purchaser is responsible for the tax payment. The rates are on a graduated scale. This tax is payable some years after the purchase in many cases.
| Value of property (EUR) |
Transfer fee rate (%) |
| up to €85,430 |
3 |
| from €85,431 to €170,860 |
5 |
| from €170,861 and over |
8 |
If the property is in joint names e.g. of a couple (husband and wife) or two
individuals, then the purchase value is divided into two parts which results
in reduced transfer fees.
The following example clearly shows how this special case works :
For property purchased for €120,000 in one name, the fees payable are €4,291.50.
| For Property in one name |
| Up to €85,430 |
@ 3% |
= €2,563 |
| The remaining €34,750 |
@ 5% |
= €1,728.50 |
| Total fees payable |
= €4,291.50 |
For property purchased for €120,000 in the names of two persons, the fees
payable are €3,600.
| For property in the
names of two persons |
| First €60,000 |
@ 3% |
= €1,800 (Share of husband) |
| Second €60,000 |
@ 3% |
= €1,800 (share
of wife) |
| Total fees payable |
= €3,600 |
Immovable Property Tax
The registered owner of the property is liable for this annual tax and it is
based upon the value of the property as at 1st
January, 1980.
| Value (€) Annual Tax Euros per
Thousand |
| up to €170,860 |
exempt |
| €170,861 to €427,150 |
2.0 % |
| €427,151 to €854,300 |
3.0 %
|
| over €854,300 |
3.5 % |
In essence due to the price rises over recent years there are almost no apartments
and very few villas that attract any immovable property taxes in Cyprus.
VAT
Since 1/5/2004 a statute in respect of VAT on properties was introduced. In
addition to other amendments, this statute introduced VAT at the rate of 15%.
Mortgage Fees
There is a registration fee of 1% of the amount secured plus any relevant
stamps.
What legal advice do I need ?
It is advisable to seek advice from a solicitor on the purchase of your property.
Their duties will be to do the necessary searches on the property, check the
contracts (and draw them up in some cases), and complete the ‘Specific
Performance’ and Council Of Ministers application. By law in Cyprus,
all registered estate agents must do searches on their properties and must
inform clients on any legal encumbrances or problems related to the property. Legal
fees are likely to be in the region of €1000 for a normal transaction.
Buying Through A Company
It is quite possible to buy a property through a company. For legal and
inheritance law reasons it is recommended to review this option - please read
our guide
to buying a Cyprus property through a Company.
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