The legal implications on buying Cyprus property.

The structure of Government is similar to other western democracies where human rights, political pluralism and private property are safeguarded.  There is a multi-party system of democracy based on proportional representation.

The legal system is based on the same principles as those applicable in the United Kingdom and all statutes regulating business matters and procedures are based essentially on English law, which makes property purchase and other legal transactions understandable to most expatriates.  The Continental system of administrative law, according to which the legality of administrative decisions can be judicially controlled, has been introduced and applied by virtue of the constitution.

Cyprus became a full member of the EU on 1ST May 2004 resulting in many changes for EU Nationals planning to purchase property in Cyprus:-

1. An EU National resident in Cyprus is allowed to buy as much property in Cyprus without restriction and does not need to obtain approval from any authority.  To prove residency in Cyprus an EU National must apply to the District Administration for certification of his residency by presenting personally to the District Administration his passport and pink slip (residency), which has already been obtained from the Immigration Department, together with Cy.£5.00 in cash.

2. EU Nationals who are not resident in Cyprus are permitted to buy as much land as they wish but are restricted to purchase one house or one apartment for which approval from the Council of Ministers is required.

3. In order to comply with the idea of free movements of people and goods certain restrictions have been lifted.  Citizens of the EU may enter Cyprus without restriction even with only their National identity card, provided there is a photograph.

4. Exchange control restrictions are no longer in force and it is no longer necessary to prove that property was purchased from External Funds.

5. Cyprus Investment Policy is liberal and allows 100% foreign participation in all sectors of the economy, not only for EU Nationals but also for investors from third countries, unless otherwise stated in the legislation; e.g. the acquisition and development of land.

COUNCIL OM MINSTERS APPLICATION.

For transfer of the property into an alien’s name, (non EU National who is resident in Cyprus) permission from the Council of Ministers is required.  The Council of Ministers has authorized the District Officers to grant approvals on its behalf.  The criteria taken into consideration in the process of examining an application for the purchase of property include, inter alia, the applicant’s family status, financial situation, occupation, the purpose of acquiring the property, its location, etc. Approval is granted in all bona fide cases.

 Applications for the acquisition of more than one residence in Cyprus are not approved, except under very exceptional circumstances.

Expert advice should be sought before entering into any transaction for acquiring property in Cyprus. However the following points shall be noted:
      
• A search with the Lands Office must be made to ensure that the seller has a valid title to the property and that there are no mortgages over the property which would present problems with the transfer of ownership.

• In the cases of property under construction it must be checked that the planning and building permits can be obtained and separate title deeds can be issued. In the contract provisions must be made to provide for remedies in the failure of the Vendor to do so.

• A foreigner, other than EU Nationals can buy land for building, up to the extent of three donums. A permit to buy land outside the development area will probably be refused.

• It must be ensured that the land is suitable for building purposes i.e. zoning restrictions, building regulations, access to an official road, and availability of water supply, electricity and telephone lines.

• A married couple can only buy one house between them, not one each. (Not applicable for EU Nationals who are residents in Cyprus)

• A foreigner wishing to rent property for periods of 33 years or more requires the approval of the Council of Ministers.

• A foreigner can sell his house and buy another.  Any bona fide repeat purchases will be granted a permit.

• A foreign purchaser may let their property only to residents of Cyprus (not short lettings).

• Any contract in the purchase/lease, etc. of real estate is valid, even if the Council of Ministers rejects the foreigner’s request. As such, when purchasing property ask for legal advice in order to ensure that the contract includes a provision for such an event so as to secure a refund or other remedy to cover such an unlikely occurrence.  The time period required for obtaining an answer from the Council of Ministers, provided all documentation is in order is approximately six to twelve months.

TRANSFER FEES.

The purchaser will be liable to pay the following transfer fees for the property acquired, when this is registered in their name at the District Lands office.  The fees are charged on the property’s market value at the date of purchase.
Value of Property Cy£ Transfer Fee Rate % on property value
Up to £50,000 3.0%
£50,001 - £100,000 5.0%
Over £100,000 8.0%

For example:-

Transfer fee of a property valued at CY£130,000, provided such property is in one name the transfer fee will be:-

3% for the first CY£50,000 =   CY£1,500
5% for CY£50,000 to CY£100,000 = CY£2,500
8% for CY£30,000     CY£2.400
Total Transfer Fee    CY£6,400

Should the property be in joint names the transfer fee will be:-

3% for the first CY£50,000 X 2 = CY£100,000 = CY£3,000
5% for CY£30,000 =     CY£1,500
Total Transfer Fee     CY£4,500

The registered owner of the property is liable to an annual immovable property tax calculated on the market value of the property as at 1 January 1980. The tax is imposed on the value of the whole of the immovable property someone owns, so a Purchaser may have to pay immovable property tax prior to the transfer of the property to his name which can be claimed back with the actual transfer of title deed to his name.
Market Value CY£ Annual Tax Cy£ per thousand
Up to £100,000 Zero
£100,001 - £250,000 £2.5
£250,001 - £500,000 £3.5
Over £500,000 £4.00

Transfer of immovable property means the passing of the title of immovable property from one person to another by the voluntary act of such persons.

Transfer Requirements

a) Completion of Form N270 (Declaration of Transfer of Immovable Property).  The certificate of registration (title) of the immovable property, which is to be transferred, must be attached thereto.  Where the transfer of the property takes place at a Lands Office other than the Lands Office of the District where the property is situated Form N270 must be completed in duplicate.
b) Completion of Form N.313.
c) Production of the receipts of payment of all fees, charges and taxes payable for the property under transfer.  Such fee, charges and taxes are:
i) Immovable Property Tax,
ii) Immovable Property Town Tax,
iii) Capital gains tax,
iv) Estate Duty Tax (receipts of payment for all the above taxes and duties may be obtained from the Internal Revenue Department).
v) Sewerage Board Tax (receipt obtained from the Sewerage Board)
vi) Town rate (receipt obtained from the municipality in whose boundaries the property is situated)
vii) Communal rate (receipt obtained from the community in whose boundaries the property is situated).

Transfer.

All documents mentioned above must be completed and signed by the interested persons and deposited with the Lands Office accepting the transfer.

All District Land Offices are open to the public on all working days (Monday 0 Friday, 8:00 a.m. – 12:39 p.m.),

Acceptance of Transfer

The acceptance of the transfer is effected by order or priority.  Both parties must appear either in person or by agent and produce their identity card or other documents proving the same before the Lands Officer accepting the transfer.

- Disabled persons must be represented by their lawful agent or any agent appointed by the Court or any other person.

- Corporate bodies are represented by those persons who manage their affairs in accordance with the statutes, the law or any regulation.

Time require for completion of the procedure

Transfers without particular problems may be completed within one hour.  In this case the registration of the immovable property and the delivery of the titles to the parties may be made on the same day, provided all interested parties appear at the Office on time.  If not, the title is issued on the day following the transfer.

RAISING MONEY.

It is very easy to obtain a loan in Cyprus for the purchase of properties.  More or less all banks in Cyprus offer the same product.  A loan can be granted in Cyprus Pounds or in any Foreign Currency. In order to avoid any exchange risk it is advisable to establish the loan in the currency of the income of the borrower.

There is no maximum loan amount – up to 70% of the forced sale value of the property (according to the official valuation of any independent valuer).   The maximum repayment period for mortgages in foreign currencies to non residents is 10 years.
 Interest rates depend on the bank and will be between 2% to 2.75% above the libor. 
An arrangement fee of between 0.5% to 1% will be charged, depending on the bank.
 The purchased property will be used as collateral.  If there is no separate title deed for the property the bank asks for a bank guarantee to be issued by the developer.  In such a case, the purchaser will have to pay the cost, which is 1.8%, for issuing of the bank guarantee.

There are also some house loan schemes offered by Cyprus banks.

MORTGAGE (Law 9/65).

A mortgage may be made to secure payment of an existing, future or contingent liability.  The “mortgagor or mortgage debtor” is an owner of immovable property who creates a mortgage thereon whereas the person in whose favour the mortgage is created is called “mortgagee or mortgage creditor”.

Requirements for declaration of mortgage.

• Form N271 (Contract and Declaration of Mortgage) is to be completed in three copies.  Where the mortgage is to be declared at a Lands Office other than the Office of the District where the property is situated one extra copy of the form needs to be completed.  All copies must be typed and signed by the mortgagor, the mortgagee and any guarantors.  More than one property, which belongs to one or more persons or more properties either, belonging to the same and/or different persons, may be included in the contract and declaration of mortgage.

• Form N312 (one copy of this form needs to be completed).

• Any additional documents in the same number as the copies of Form N271.
• Stamp duties paid and affixed on both Form N271 (and to the copies thereof) and to any additional document.  One form/document is stamped as the original and all others as copies.  No stamp duties are payable for mortgages granted to Co-operative Society certifying their membership.
• Certificates of registration (titles) of the properties under mortgage.

Acceptance and registration of mortgage.

Mortgages are accepted only if the properties to be mortgaged are free from encumbrances and if the mortgagor is not under any prohibition.

It is possible to constitute an unlimited number of subsequent mortgages provided that each subsequent mortgage shall include all properties included in the immediately previous mortgage and no other property.

All documents are to be submitted to the Lands Office accepting the mortgage.  Both the mortgagee and the mortgagor must appear in person or by agent before the Lands Officer accepting the mortgage and produce their personal identity card.  Where agents act on behalf of the parties an instrument of agency must be produced.  The competent Lands Officer shall confirm the identify of the persons appearing and read the declaration whereas the mortgagor is required to pay the relevant fees.  The competent Lands Officer shall thereafter sign the documents, affix the Office’s stamp thereon and return them to the interested parties.  The original of the document is to be delivered to the mortgagee whereas the mortgagor shall be given a copy thereof.  A third copy remains with the Department of Lands & Surveys.

The fees payable to the Department are calculated on the amount of the mortgage debt and are paid on the same day in cash or with a bank cheque.  In the last instance, the bank cheque must be good for payment.  If not, the mortgage will not be registered until the cheque is cleared (usually after two months).

No fees are levied for the registration of mortgages created in favour of a Co-Operative Society where the mortgagors are members of such Societies.

Time required for completion of the procedure

The mortgage may be accepted and registered on the same day.  The whole procedure does not take more than one hour to be completed.

RELEASE OF IMMOVABLE PROPERTY FROM MORTGAGE.

Any share smaller than the mortgagor’s share in a mortgaged property or any property included in a mortgage in which other in which other properties of the same or other mortgagor are also contained may be released from the mortgage against partial payment of the mortgage debt or for any other reason.

Procedure followed for the release of a property from a mortgage

1. Both the mortgagee and the mortgagor must appear before any District Office during working hours, between 8:00 a.m. and 12:30 p.m.

2. The mortgagor and mortgagee must complete and sign Form N273.

3. Where there are any guarantors and their consent is necessary it may be obtained on the same form (N273) at the same time as the mortgagee and the mortgagor or on a separate document.  In the last case the signature of the guarantors must be certified.

Where the property is charged by more than one mortgage, it must be released from all such mortgages.

The form is to be completed in two copies where the application for release from a mortgage is filed with a Lands Office other than the Lands Office of the District where the property is situated.  In this case it is necessary to pay a transmission fee of £0.25.  In all other instances, the release is granted without payment of any fees.

Other documents attached to Form N273
(a) Certificate of registration of the property to be released and
(b) Original of Form N271 (contract and declaration of mortgage) with all documents attached thereto.

Acceptance of the release of mortgage is acknowledged by certifying the signatures of the parties on Form N273.  Upon such acceptance the Department of Lands & Surveys shall update its records and the original of the contract and declaration of mortgage (Form N271) and return the documents to the parties and the certificate of registration to the mortgagor.

Time of completion of procedure: 30 minutes

STAMP DUTY AND MORTGAGE FEES.

Unless otherwise stipulated in the contract, the purchaser is liable for the payment of stamp duty at the rate of 0.15 per cent of the value up to CY£100,000.  Thereafter the rate becomes 0.20 per cent.  Although the non-affixing of stamps does not invalidate the contract, the stamp duty plus a fine will be payable when the document is produced to the court or any Government department.  In order to avoid the payment of a fine, which could be substantial, the documents should be stamped within 30 days of their signing.

The registration fee for a mortgage is one per cent of the amount secured, plus the relevant stamps.

The Sale of Land (Specific Performance) Law.

The deposit of a contract of sale at the Department of Lands & Surveys creates an encumbrance of a great practical importance on the encumbered property.  The subsistence of such encumbrance prevents the vendor from selling or charging any such property whereas the purchaser may obtain a judgment from the Court directing the registration of the property in his name, if the vendor refuses or fails to transfer the property within the time agreed as per contract of sale.

For the deposit of a contract of sale with the Department of Lands & Surveys the applicants are required to:

(a) deposit a copy of the contract of sale at the Lands Office of the District where the property is situated within a period of two months from the date of the contract of sale.  The original of the contract of sale must be produced for purposes of confirmation and shall then be returned to the applicant.

(b) cause both the original and the copy of the contract of sale to be duly stamped (purchasers are advised to present the documents at the D9strict Offices of the Internal Revenue Department and pay the prescribed stamp duties).

(c) deposit a copy of the contract of sale together with Form N34 signed by the purchaser, his agent or attorney.

(d)       state both the vendor’s and the purchaser’s name and address on Form N34.

Note:  The contract may be deposited provided that the property is registered in the vendor’s name.

(e) pay the prescribed fees at the Department of Lands & Surveys (see Fees and Charges).  The Department does not issue any certificate of deposit of the contract of sale and the public is advised to keep the receipt of payment of the fees.  The receipt shows the serial number given for each contract of sale deposited and the date of deposit.

The acceptance of the contract of sale does not take more than 15-30 minutes.

The deposit of contracts of sale is also allowed for building sites under division or for part of a field under division or for part of a building (flat, shop, office etc.) under construction or proposed to be erected.  In both instances, the field under division or the land whereon a building stands or is to be erected must be registered in the vendor’s name.  The contract of sale shall in both cases be accompanied by a survey plan or an architect’s plan (as the case may be) showing that part of the field or that part of the building site, which is sold.

The deposit of the contract of sale creates an encumbrance, which expires within six months from the date of the contract of sale or six months from the last date of transfer specified therein.  Where only part of the property is sold (a building site or field under division or flat, office or shop under construction) the encumbrance is attached to the whole of the immovable property until the issue of a separate title for the apartment so sold.  This means that the encumbrance created shall thereafter be limited to the part of the property so sold.  Until the issue of a separate title, the vendor may transfer his property subject to the contract of sale, which is deemed to be a mortgage on the property so transferred, in the name of the new owner (purchaser).  The contract of sale is binding upon the purchaser.  The vendor may also choose to mortgage the property.  In this case the contract of sale is deemed to be a prior mortgage (subsisting before the new mortgage).

CAPITAL GAINS TAX.

Capital Gains Tax is payable at the rate of 20% on gains arising from disposal of a property, with the first CY£10,000 for each person being except.  In addition to this allowance the Vendor is entitled to further allowance regarding the transfer fees paid, and any other expenses for any additions to the property.  The subsequent increase in the value of the property due to inflation which is calculated in accordance with the Retail Price Index issued every month by the Department of Statistics will also be deducted.

Gains from the disposal of a dwelling house are exempt up to Cy£50,000 in total if the Vendor resides in such property for at least 5 years continuously prior to the sale of the property.

A person will be allowed to make use of the above exemptions once only in his lifetime and not for every property he sells unless they have not been exhausted by the first sale in which case any balance would be carried forward.

V.A.T.

From 1st May 2004 VAT is introduced on new properties.  However properties for which an application to obtain a planning permit has been lodged with the Planning Department are exempt.

ONGOING COSTS:-

1. Electricity, depending on consumption   CY£ 70.00 every two months

2. Water, depending on consumption    CY£30.00 every two months

3. Municipal rates, depending on location and property CY£50 to                                                                
        Cy£150 per annum
4. Sewerage, if applicable, as sewerage is not
 available throughout Cyprus     Cy£50 per annum

5. Communal costs, depending on size of
apartment and communal area    CY£100 – CY£200 per annum

6. Insurance, based on the property                         CY£200 per annum. Approx.

EU NATIONALS PROCEDURE TO OBTAIN WORK/RESIDENCE PERMIT. 

The Free Movement and Residence of Nationals of the Member States of the European Union and their Families Law of 2003 [No. 92 (1) (2003)] which was on adopted on 18 July 2003 by the House of Representatives and entered into force on 1st May 2004, the date of Cyprus’s accession to the European Union, provides inter-alia the following:

Nationals of any Member State who move to Cyprus in order to pursue activity as employed persons are granted a residence permit.  The residence permit is value for not less than five (5) years from the date of issue and it is effective throughout the territory of the Republic.  It is automatically renewable upon the request of the person concerned.

Application forms for the issue of a residence permit are available at the Civil Registry and Migration Department of the Ministry of Interior and at the District Aliens and Immigration Branches of the Police. They are also available at the web site: 222.moi.gov.cy.  The application form must be submitted within three (3) months of entry in the Republic.  The residence permit is issued within a maximum period of six months from the date of submission of the application to the above mentioned Department or Police Branches.

For the issue of a residence permit for employment the following documents are required:

A valid passport or identify card and a photocopy of it with which the EU National entered the Republic.

A confirmation of engagement from the employer or a certificate of employment stamped by the Labour Department of the Ministry of Labour and Social Insurance, in which the duration and type of the work provided by the employee is state and:

Two (2) recent passport sized photographs.

Completion of the formalities for obtaining a residence permit does not prevent the immediate employment of the applicant.

Nationals of any Member State, who are going to provide or accept services in Cyprus, should first secure the relevant professional permit required by relevant Laws of Cyprus before they apply for work and residence permits.

The right of residence for persons providing or receiving services in the Republic is of equal duration to the period during which the services are provided or received.  Where the period does not exceed three (3) months, it is required by Law that the person concerned should report his presence to the Civil Registry and Migration Department of the Ministry of Interior, or any District Alien and Immigration Branch of the Police within 8 days from the date of arrival. (Form 2DECL)

MEDICAL COVER.

According to the EU Co-ordinating regulations, EU citizens who are employed and pay social insurance contributions in Cyprus, they could apply for a Cyprus Medical Card and their application will be treated equally as an employed Cypriot National.
 
Applications for a Cyprus Medical Card are available at any Government Medical Institution and the Ministry of Health or it can be printed from the Ministry’s website www.moh.gov.cy.  All concerned are advised to read the instructions at the back before filling in the form. Applications could be submitted either to the nearest Government Medical Institution or be sent be post to the Ministry of Health, 1448 Lefkosia.

WILLS.

It is imperative that expatriates have wills which are appropriate to the national laws of the country in which they are living. 

Needless to say, English law is not entirely the same as the law of Cyprus jurisdiction.  Owners of holiday homes outside the UK are sensibly advised to make a local will to deal just with that property, either for reasons of local law, or because it makes things easier, when the time comes to wind up the estate, to deal with a property under a local will.

It saves a great deal of time and effort later on if you now review your English will and make a separate Cypriot will dealing with your affairs in Cyprus
You need to insure your property and its contents.

If you make a foreign will, and subsequently change your English will dealing with the rest of your estate, it is essential that your solicitor knows about the foreign will, and sees that it is mentioned in the new English one.  The practice in drawing up English wills is to include a provision that automatically revokes all earlier wills, and without adding the reference this could inadvertently revoke the foreign will with quite unintended consequences.

Estate duty has been abolished.