BUILDING and DEVELOPMENT

Thinking of buying a property in Peyia?

Building Completion Certificates

Buying With and Without Title Deeds

Thinking of buying a property in Peyia?

First impressions, especially if those impressions are gained in the summer months, could be that there is not much wrong with buying a property in Peyia.

It's hot and sunny and for a lot of people that is sufficient. It might look a bit scruffy here and there but any place has its scruffy areas. It might have a lot of building work going on but if that building work is not next door it probably would not have much of an effect. The local people are very friendly and hospitable and want to make your stay as pleasant as possible. There are good restaurants and tavernas serving excellent food and there is plenty of good local wine to wash it down with.

Unfortunately the things that are wrong with Peyia don't show themselves straight away. If someone buys a holiday home or somewhere to live permanently they may, after a few months, start to realise that all in the garden is not so rosy.

They may come here in the summer to buy a place. They may be shown plots where they would be encouraged to buy off plan. They would be looking at an empty field with a lovely view towards the sea and another field next to it. Peyia does not have much in the way of traffic so they could be standing in a field under the hot sun with almost complete silence, especially if they are visiting in the afternoon when all the builders have gone home, just the crickets churring away and maybe a light breeze to cool them.

The salesman might tell them about the magnificent view and intimate that they will always have the view to enjoy. The salesman might point to the shells of the villas next to their plot as an example of what is going to be built. The salesman might tell them about the strict planning system and intimate to them that because the planning rules only allow buildings to be two floors high they will be living in an area of low density bungalows and villas. He might also intimate to them that one reason they can be assured of the view is the fact that no more than two floors can be built. He might tell them that the zoning system in the Cyprus planning procedure means that they live in a low density area and that the hillside in the distance is agricultural land.

They may return to their hotel for a cool shower before going out to eat and decide whether to buy in Peyia or not. They may be sitting in a taverna enjoying their meal watching a fiery Mediterranean sunset and decide to come and live in Peyia.

Nothing that they have experienced so far would prepare them for the reality. The cool shower at the hotel would not have prepared them for the unannounced water cuts in the village caused by uncontrolled building without thought to the infrastructure needed to support the extra houses.

The hot dry summer would not have prepared them for the flash floods racing under their front door because the storm drains from the village above them tip out into the field next to them and nobody has thought about where the water will go.

Nobody has told them that the strict planning system is anything but strict. Nobody told them that the planning system could best be described as elastic. Elastic enough to easily stretch two floors to three and increasingly elastic enough to stretch to four or five.

Nobody has told them that the zoning regulations that guarantee their low density development area and view of agricultural land on the far hillside really don't mean a great deal because the zoning is up for change every five years. And when it does change nobody will inform them either before the change or after.

Nobody has told them that the owner of the field next to them could apply for planning permission and neither he nor the planning department are obliged to tell anyone about it.

Nobody has told them that the plot next to them will have a concrete retaining wall 15 to 20 feet high right against their boundary and they have no say in it. In fact they won't know anything about it until the shuttering starts going up.

Nobody will tell them that the concrete shells of the villas next to their plot can be pulled down and blocks of flats built in their place.

Nobody will tell them that for some unfathomable reason the title deeds can take a good few years to acquire. Or that if there are any small deviations between what has been built and what is on the plan it may take longer, a lot longer in some cases.

Nobody will tell them that their apartment or villa is going to be built on landfill and built on landfill that is illegal under EU rules.

Nobody will tell them that the area of their development is classified as “for summer residence” and that it states in the planning zones information that the separation of plots is not permitted.

Peyia is sold as a beautiful traditional Cypriot village. That is rapidly changing but maybe we can try to ensure that the development that takes place in Peyia is in keeping with the beautiful traditional Cypriot village it once was.

The big problem with lots of things in this world is a lack of readily available information, or of a certain economy with the truth. By restricting access to the full facts individuals are prevented from making informed decisions. The Peyia Community Association exists, among other things, to try to provide information on all matters concerning anything that is happening in Peyia. It is only by having a transparent open society that individuals can make informed decisions on all matters that affect their lives.

top

Building Completion Certificates

You will be aware of the time it takes to get your title deeds. One thing that can hold things up is the issuing of a building completion certificate.

In Cyprus anyone wishing to build a house will have to apply for planning permission. In this area there is an office in Paphos that deals with them. When planning permission is granted the prospective house builder has to go to the municipality and get a building permit.

With the building permit work can start. Unlike the UK there are no inspections during building to make sure that things are being done properly unless someone makes a formal complaint.

When the building work is finished the technical department at the municipality will inspect the work to see if it complies with the plans and building permit. If all is well a final completion certificate will be issued. If all is not well, even small things, a certificate will not be issued. And it will not be issued until everything complies with the planning permission.

As we understand it the final completion certificate is supposed to be the thing that makes the builder stick to the plans/rules. The idea is that nobody will buy a house without a final completion certificate. So in order to get their money the builder has to stick to the rules so to speak.

The trouble comes when people buy off plan and make payments before building is completed. You could find yourself in the position of having paid for your house before the final completion certificate is issued as there are irregularities in the building. It might then prove extremely difficult to get things put right.

We would strongly suggest that nobody buys a house or signs up for one off plan without first checking this out with their lawyer. In fact we don't think that it would be unreasonable to demand a final completion certificate before parting with any money at all or at least have it written into the contract that the final payment will only become due when a final completion certificate is issued.

top

Buying With and Without Title Deeds
The Options

Title Deeds are a very emotive issue for some people, of scant regard to others and some even relish the idea of having lived in their property for 15 years and not had to pay the Property Transfer Tax, (PTT), many even openly boast about making such a saving. Many say you are perfectly OK without Title Deeds – nothing to worry about.

So what are the benefit of having your Title Deeds?

Q. What is a Title Deed?

A. Title is a legal term for an owner's interest in a piece of property. In Cyprus Title Deeds, which are also know as "Certificates of Registration of Immovable Property", are formal documents that serve as evidence of ownership. Conveyance of this document is required to transfer ownership of the property to another person.

Q. What are the implications of not having Title Deeds to your Cyprus property?

A. On the plus side, you do not pay Property Transfer Fees to have ownership of the property transferred to your name.

However, on the downside:

A. You are unable to enjoy the full benefits of ownership, including the right to transfer it to anyone you wish.

A. As the property is not legally yours, you cannot legally sell it to whomsoever you want. Should you wish to sell, you have to come to an arrangement with its owner. This arrangement will require you to cancel your contract of sale which will enable the owner to enter into a new sale agreement with your buyer.

A. Making unauthorised changes to the property before its Title Deed has been issued or without seeking planning permission is extremely unwise. Before the District Lands' Office can issue Title Deeds, the building needs to be inspected by the planning authority to ensure that it complies with the Planning Permission and Building Permissions Permits that have been issued for its construction. Should the inspector find that the structure does not comply with those permits, the availability of Title Deeds may be further delayed.

A. Even though the assessed 1980 value of ‘your' property falls below the CYP 100,000 threshold, you may be required to pay Immovable Property Tax. This is because the assessed value of property owned by a developer may run into many millions of pounds; some of those developers recover an element of their tax liability from those buyers who have yet to have ownership of the property transferred to their names.

A. Although you may have paid for ‘your' property in full, its legal owner (i.e. the person whose name appears on its Title Deed) is still able to use the property as security to raise a loan. If this happens you may find it difficult, if not impossible, to sell the property.

A. Without a Title Deed you will be unable to use the property as collateral to raise money and unable to access any of the capital you have tied up in the property through equity release schemes and other mechanisms.

A. As the Cyprus financial institutions refuse to grant mortgages on resale properties without Title Deeds, anyone wishing to buy the property you have bought must be a cash buyer.

Q. How do I get ownership of the property?

A. Transfer of ownership from Vendor to Purchaser is carried out by a straightforward procedure at the District Lands' Office. This can be done by the buyer in person or by a third party with Power of Attorney. The process culminates in the issue of a Title Deed for the property in the name of the purchaser.

Q. How much does ownership cost?

A. The ‘Property Transfer Fees', which are paid at the time of the transfer of ownership, are normally based on the price you paid for your property. Currently, these are:

3% - on the first CYP 50,000
5% - on the next CYP 50,000
8% - on the remainder

So for a property costing CYP 100,000, the Transfer Fees would be CYP 4,000; for a property costing CYP 200,000, the Transfer Fees would be CYP 12,000.

If your Contract of Sale is in joint names (e.g. a husband and wife), the lower rates are granted to both parties, i.e.:

3% - on the first CYP 100,000
5% - on the next CYP 100,000
8% - on the remainder

As a result, the Property Transfer Fees for a property costing CYP 200,000 in joint names would be CYP 8,000.

Q. How long does it take to get ownership of a property I've bought and paid for?

A. This is an impossible question to answer – there are too many variables. If you've bought ‘off plan' then you may have bought at the start of the development's construction. If the development takes several years to complete and be signed off by the planning authority, you may have to wait a similar period for Title. But in some cases, it is possible to speed things up by getting Title to the land on which the property's to be built.

A. If the property has a Title Deed in the name of the vendor, you can get ownership immediately.

Q. Do properties with Title Deeds carry a price premium?

A. Yes – for obvious reasons they are more attractive to buyers.

Q. What happens if the developer fails to complete the development in accordance with the Planning Permission & Building Permit(s)?

A. The Title Deed cannot be issued until the matter is resolved. The Cyprus Government has introduced a limited ‘amnesty' designed to help buyers who have bought property with minor planning infringements. It is also looking at ways to plug loopholes in current legislation that have reportedly left thousands of buyers in limbo.

Q. How do I protect my interests between the time I sign a contract of sale and the time I become its owner?

A. Your contract of sale needs to be deposited at the District Lands' Office for what is known as ‘Specific Performance'.

Q. If my contract of sale has been deposited at the District Lands' Office for ‘Specific Performance' am I assured of eventually owning the property.

A. Assuming that there are no other claims against the property that pre-date your deposit of contract – generally speaking you're assured of eventually owning the property.

Q. You say ‘generally speaking' – why?

A. Even though your contract has been deposited for ‘Specific Performance', a court judgement can still be registered against the Title as security for the recovery of a debt even if that debt is not related to the property you have bought. If the vendor is in financial difficulties, creditors can apply to a court and, if successful, the court's judgement can be registered with the District Lands' Office in the form of an encumbrance known as a memo.

And as I pointed out earlier, it is possible for the vendor to use the property as collateral for a loan. Although this will not prevent you from owning the property, it could well cause difficulties should you wish to sell.

Q. So what happens then?

A. That's a matter for the Court to decide.

Q. What if the developer is declared bankrupt?

A. Some developers protect themselves from this eventuality by setting up small companies to handle each development; this limits their financial loss. You will be treated as a creditor by the company's receiver.

Q. What qualifications or licences are needed for someone to set up and operate a property development company?

A. None whatsoever. Anyone can set themselves up in business calling themselves a property developer.

Q. How can I check out the standing and financial status and credit rating of a development company?

A. You can obtain company reports and credit ratings for any company registered in Cyprus .

Q. How can I best protect my interests when buying property in Cyprus ?

A. By taking independent legal advice.

The above information on Title Deeds has been extract and adapted from: Buying a Home in Cyprus : A Practical Guide to Successful Real Estate Purchase ISBN: 0-9548621-0-4
by Nigel Howarth
Available from www.cyprus-property-buyers.com

This is the book all the developers, lawyers and estate agents in Cyprus would love to have banned and burnt.

So what are the ways of purchasing a property to ensure you get your legally entitled Title Deeds. There are basically two:

One. First buy the land and obtain your Title Deeds, with professional help of course, and then have your dream villa built on it to your design. This way you can go out to tender to construction companies and with the assistance of your architect choose the one that meets your needs in terms of quality, cost and timescale. You are in total control. However, this avenue may not be open to everybody.

Secondly. Buy a re-sale, as second-hand homes are called here, that already has Title Deeds. This is a very quick method of buying a property. You can see what you are getting for your money. You can have it professionally surveyed. See the environment in which you will be living, both by day and by night. And finally the Title Deeds are easily transferred into your name. The most hassle free way of buying out here. With re-sales you usually get more land and facilities for your money than with newer properties.

Having carefully considered the pros and cons of having Title Deeds immediately on purchase or not, the next two options need to be thought through thoroughly so that you fully understand the implications. If you don't have your Title Deeds what is your status on the land your property sits on. You are not the legal owner of the land; you are not the leaseholder nor are you the tenant. You are totally in the developer's hands. No conveyancing lawyer in the UK would allow you to be in such a situation.

Thirdly. Off-plan. This is the option that causes most grief to potential purchasers exasperated by trying to answer your lawyers and developer's questions long hand from the UK or somewhere else out of Cyprus , via phone, email or Fax, or expensive visits to Cyprus . Off-plan is where you purchase a property from the developer's plans; see the location your property will be sited, maybe view similar properties and pay a non-refundable deposit. Experience has shown that the timescales to complete given by your developer are rarely met throwing out any plans you may have made. Always add at least six months to the completion date given by the developer. The developer will also tell you that it could take between 3 to 5 years to obtain your Title Deeds. What he really means is that if he can keep delaying issuing you your legally entitled Title Deeds he avoids paying capital gains tax and other payments to the local municipality. The 3 to 5 years of course extends out, in some cases, to 15 years. He may also have a loan or mortgage on the land your property sits on and has the loan on say a 10-year period. You may get your Title Deeds when he has paid off the loan.

Remember you have paid for the land and you should be fully entitled to receive your Title Deeds on completion of your property.

What you may like to try to force your developer to handover Title Deeds on or near completion is to enter into two contracts with him. One for the land; which is only paid when you receive Title Deeds, and the second for the bricks and mortar.

Fourthly. Buy a resale but it doesn't have Title Deeds. At least you will be able to see and inspect what you are buying beforehand. But again you have absolutely no status.

In both of the last two options you are in fact parting with a considerable amount of money without full security to your property. Again your UK lawyer will strongly advise against it.

OK, if you adopt a policy of only purchasing where Title Deeds are available you will be restricting your choice of properties. Correct, but until enough potential buyers stick to this policy the developers will not change their on-sided and sometimes illegal practices.

With so many property owners still waiting for their Title Deeds, estimated at cy£150 million in Paphos area alone, half a billion through the country, the government will have to change the law and start to collect this money. The EU may force them to do so. Under what terms and what cost will the government impose on mainly foreign property owners to transfer Title Deeds. Add VAT at 15%. Increase the percentage price on the cost of the property. Remember you were entitled to them when you originally purchased your property.

Conveyancing in Cyprus is for the most part probably un-regulated with little or no recourse at the moment to any form of Ombudsman for redress. The developers and lawyers hold all the cards.

We need to change this situation so that purchasing property is fair and equitable to both parties. It will take time. It won't happen tomorrow. But we must start somewhere.

top