Legal

LEGAL SYSTEM

The legal system for the Island of Cyprus is the Common Law. Cyprus was a British Colony for years and the British Legal System was adopted as well as the Land Registry procedures. Land Registry in Cyprus is good and accurate and investors and/or buyers can rely on the information and results of searches given by this office.

TITLE DEEDS

As the law stands, foreigners not residing in Cyprus can buy and acquire Title Deed to only one property on the Island (house or apartment). For Europeans there is no restriction on the number of pieces of land or on the size of land they can buy.

A physical person, and citizen of an EU Member State, to whom a permit to stay in the Republic of Cyprus is granted, and who is permanently living in the Republic of Cyprus, can secure a certificate that he/she can use to acquire as many properties in Cyprus as he/she wishes.

Acquiring a certificate is very simple. It is obtained from the District Administration Office for the area in which the person lives. A passport and Temporary Residence Permit must be presented, and a form giving full name and address will be filled in and a fee of CY£5 paid.

Purchasers buying a property built some years ago, or in one unit and not part of a complex, can acquire their Title Deeds immediately.

The procedure is exactly the same as in the UK.

It is wise to appoint a local lawyer. The lawyer must then make a search and if the results are satisfactory, contracts can be exchanged immediately. The vendor then provides the Title Deed without delay.

Purchasers of property under construction, or just completed, or part of a project, must follow a slightly different procedure and cannot acquire the Title Deed to their property immediately. The Title Deeds to new properties, or to properties which are part of a project, take approximately 3-4 years following completion, to be issued.

Purchasers can feel safe as long as their lawyer acts as follows:

1) A search is made to confirm that the land on which the project is under construction, or has just been completed, is clear of any encumbrances.

2) Ensures that the stage payments are in accordance with the progress of the work.

3) That the Contract of Sale is stamped by the Tax Office and lodged with the Land Registry for Specific Performance Purposes.

The lodging of the Contract with the Land Registry Office (fee payable CY£1.00) is very important because the property is blocked and the Vendor cannot sell it or transfer it to anyone else. Neither can the property really be mortgaged as the banks are not in favour of waiting in line.

In the unforeseen event that the developer should suffer financial problems, the Purchasers must be satisfied first, then the banks. Hence it is in general, the policy of the banks to avoid the mortgage of the property by the vendor.

If the contract is not lodged with the Land Registry, the purchaser(s) cannot sue the vendor requesting the specific property. He/she can only sue for the market value of the property at the breach.

The lodging of the contract with the Land Registry secures and restricts the amount payable for transfer fees (stamp duty) which are payable when the Purchaser(s) acquire their Title Deed.

By lodging the contract, the Land Registry is bound to take as the value of the property, the value as at the date of the contract. In this way, the Purchaser(s) do not pay heavy transfer fees based on a valuation much after the date the property was purchased.

Contracts must be stamped within 30 days of signing otherwise a penalty is charged and added to the cost of the stamps. The contract must also be lodged with the Land Registry Office within 60 days of signing. Failure to do so results in the right to lodge being lost, and the contract can never then be lodged.

The Title Deeds take time to be issued because the Companies developing the land, must secure a Building Permit, a Certificate of Approval for the building. Division Permit, and a certificate of Approval for the Division, for the submission to the Land Registry to issue separate Title Deeds. Government Departments are very busy and Title Deeds take some time to be released.

The lack of a separate Title Deed does not prevent the property owner from selling their property. In this instance a cancellation contract between the original purchaser and the vendor, and a new contract of sale between the vendor and the new purchaser will be drawn up.

Purchasers must, at the time of purchase, agree the cancellation fee that the Developer will charge, should the Purchaser decide to sell his/her property before the separate Title Deed is issued. It is advisable to include this agreement in the contract of sale.

STAMP DUTY

Before the contract is lodged in the Land Registry for specific performance, it needs to be stamped by the Tax Office.

The stamp duty is calculated as follows:

C£1.50 per thousand on the first C£100,000

C£2.00 per thousand on the balance

(Therefore a house costing C£170,000 would incur C£ 290.00 stamp duty)

The stamp duty must be paid within 30 days of the signing of the contract to avoid paying a penalty.

IMMOVABLE PROPERTY TAX

This tax is imposed on immovable property situated in Cyprus. The rates are as follows:

Property Value(C£) Rate per thousand Up to 100,000 Nil

100,001 – 250,000 C£2.50 per thousand

250,001 – 500,000 C£3.50 per thousand

500,001 and above C£4.00 per thousand

Thus a house costing C£170,000 would incur C£425.00 immovable property tax.

Immovable Property Tax is payable annually.

INHERITANCE TAX

The avoidance of Inheritance Tax by British Subjects requires specialist advice. We have associates who can give this advice on request.

CAPITAL GAINS TAX

From the profit following the sale of a property, the first C£10,000 per person, a figure for inflation, transfer fees, estate agents fees (provided the agent is registered) and any additions to the property (provided receipts can be produced) are all free of tax. Capital gains tax is then charged on the balance at the rate of 20%.

If the property sold has been the home of the vendor for at least 5 years, C£50,000 tax relief can be claimed.

TRANSFER FEES

When purchasers acquire their Title Deed they must pay transfer fees to the Government.

In cases where property is part of a project under construction, the purchaser must expect the separate Title Deed to be ready in approximately 3-4 years from the date of the delivery of the possession of the property and he/she will pay the transfer fees at that time, in order to acquire it.

The transfer fee is the most serious expense over and above the sale price that the purchaser bears, and is calculated as follows:

3% on the first C£50,000 of the value of the property

5% on the second C£50,000

8% on any amount above C£100,000

Two purchasers buying one property will pay less in transfer fees as the first C£50,000 per person is at a rate of 3% and the second C£50,000 is at 5%.

Therefore a property bought in one name for C£170,000 would incur C£9,600 Transfer Tax but the same property bought in joint names would be C£6,500

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