Immovable property acquisition in Cyprus has been on the rise for the last 20 years, and it continues strongly as it is a lucrative investment for both Cypriot and non-Cypriot nationals. The Government’s investment programme, through which the purchaser may ultimately acquire the Cypriot citizenship, has contributed heavily to the increase of construction and sale of immovable property.
Independent Legal Advice
It is nevertheless important when dealing with any such transaction to obtain independent legal advice for safeguarding you from any pitfalls which may jeopardise your investment.
We always receive the question – do I need to be represented by a lawyer when it comes to purchasing or selling property in Cyprus?
Our opinion is that retaining the services of a law firm affords you the added security which otherwise you would not have if you were to perform the transaction yourself or even worse, if you were to make use of the same lawyer as that of your counterpart.
In many instances estate agents suggest that legal representation in conveyancing cases is not necessary. There are also those estate agents who unfortunately undertake to prepare the sales agreement themselves(!) Notwithstanding that this is illegal, it is obvious that the estate agent who has a vested interest in completing the transaction will not bring to your attention any dangers, and most certainly will not make provisions which will afford you any protection in case of breach by the vendor.
Lawyers in Cyprus owe a duty of care to their clients, the level of which should be that of a ‘usual, diligent and competent professional’ (Beaumont Muriel and other ν. NK (2010) 1 CLR. 525). Being under this duty, your lawyer will be obliged to perform all necessary due diligence procedures in order to identify inherent dangers and bring them to your attention. Failure to do so could lead to a negligence claim by which ultimately you may be compensated for the damages you have sustained from such behaviour.
Various Types of Conveyancing Transactions
It is necessary to differentiate between the various types of properties, as each one has important elements which need to be considered before finalising the transaction. Broadly speaking these are:
- Purchase of plot(s) of land
- Purchase of off plan properties being constructed by the vendor
- Purchase of already constructed are ready to move in properties
Prior to engaging and finalising a transaction with any vendor, the following matters need to be taken into consideration:
- The financial standing and viability of the Vendors (especially when buying off plan properties), and the risks arising from the possibility of their financial insolvency.
- If the Vendor is or was under liquidation / bankruptcy or if any liquidation / bankruptcy notices or proceedings have been filed against such Vendor.
- The Vendor’s prior conduct. Have any Court proceedings been instigated against the Vendor, and what were those cases about?
- The Vendor’s general reputation in their respective field.
Issues to consider prior to concluding a transaction
In our practice we have completed throughout the years numerous property transactions. The following is a list of matters which need to be investigated prior to concluding a conveyancing transaction, especially if purchasing a property. The list is not meant to be exhaustive and is merely an indication of some of the main issues vital to a transaction:
- Title deeds – every property bought has to be specifically described on the title deed, and its surface area to be clearly indicated. This signifies that the property has been erected legally and according to the permits and licenses. We advise against purchasing properties for which no separate title deeds have been issued, unless a certificate of final approval exists or the competent authorities confirm in writing that there are no obstacles to the issuing of the title deeds. Many times we come across properties which have been erected illegally and/or without obtaining any licenses prior to commencing construction. It is not farfetched to say that in many instances properties have been illegally erected over beach protection zones or are extended into neighbouring plots. With title deeds such dangers simply do not exist.
- Quality of structure – consideration has to be given to the quality of the property and to the existence of any latent damages. For this reason, it is recommended and your lawyer should advice you to retain the services of an architect and/or civil engineer who will carry out the necessary surveys so as to evaluate and establish the safety, soundness and quality of the structure.
- Unauthorised additions or alterations – one has to establish that the property and its size correspond to the descriptions on the title deed. If there are any alterations which are not contained in the title deed, it could mean that unauthorised work has been carried out on the property. Therefore, and since it is illegal to be in possession of such property, it is always important to establish whether any additions or alterations had been licensed by the competent authorities.
- Third country nationals – any person not being a Cypriot citizen or a citizen of an EU Member State has to obtain permission from the Council of Ministers prior to registering immovable property in their name. If no separate title deeds have been issued it is essential to include along with the application to be submitted to the Council of Ministers the building license and approved architects’ plans. Hence the importance of establishing at the outset that the necessary permits and licenses have been obtained prior to commencing construction.
- Land Charges – it is extremely important to investigate whether there are any mortgages, memos or other encumbrances registered over the property to be bought. The encumbrance created by the filing of the contract of sale follows the order of priority it receives by filing it. Therefore, if other charges pre-exist of the filing of the agreement, it will not be possible to transfer ownership to the purchaser unless all other previous charges are eliminated.
- Communal Management Fees – the vendor should produce a declaration, issued by the management committee of a jointly owned building, evidencing the settlement of communal fees owed to date. Otherwise, the new owner is as much as liable for owed communal fees as the previous owner.
Terms of the Sales Agreement
Another important aspect of the conveyancing transaction is the sales agreement. When formulating the terms, all possible scenarios have to be taken into consideration. From experience, we are of the opinion that the below elements are of utmost importance and should be carefully addressed in a sales agreement:
- Deposit – under Cypriot law and caselaw, deposits paid under agreements are refundable unless damages can be proved. The intention of the parties as to the deposit in case of breach or rescission by a party has to be clearly stated in the agreement. Also, provision could be made that the legal fees, estate agents’ fees and moving out costs will be covered by the deposit in case that the purchaser is responsible for breach of the agreement.
- Time – time for performance has to be agreed upon. It should be clearly stated as to when the vendor is obliged to give possession and to transfer ownership of the property, until when the vendor is under an obligation to issue separate title deeds, or more importantly until when the vendor is expected to complete the property. Otherwise, and if time is not stated and made of the essence, no specific performance may be ordered by the Court and/or the innocent party may not be able to terminate the agreement.
- Technical terms – when the property is bought off plan, it is vital to agree on all the technical terms of the construction as well as the basic cost for every material used or fixture installed. This will ultimately be of use if during the construction process the purchaser wishes to substitute something. By agreeing to basic costs, it will thereby be easier to calculate the difference of costs for extra work performed or different materials used.
- Third country nationals – provisions should be made as to what will happen in the event where a 3rd country national is not granted permission by the Council of Ministers. It could be stipulated that the purchaser may be able to assign his/her rights over the property to another party provided the full purchase price is paid. Otherwise, the agreement will be frustrated and any money paid under the agreement should be refunded to the purchaser, unless the vendor may prove that damages have been sustained.
Conveyancing encompasses many elements which if not taken seriously into consideration at the initial stages of the negotiation, can and will have serious financial consequences to the innocent party. It is therefore without hesitation that our advice is to retain the services of a law firm when considering to sell or more importantly buy immovable property in Cyprus. At the end of the day the cost incurred is disproportionately smaller to the benefits obtained and to the money potentially saved.
Y. Argyrides & Associates LLC can offer you comprehensive services comprising legal and administrative assistance in activities related to immovable property. The aim of our company is to assist clients to have a clear view of the land registry system and the Law in Cyprus. The professional qualifications and expertise of our can assist you with the various stages of the procedure. For requesting assistance and support please feel free to contact us at: [email protected]
Yiannis Argyrides │ Managing Director
Email: [email protected]
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Any interested party should seek professional advice from their legal experts.