What I need to know

This article gathers the most important considerations one should make once they take that all important decision to purchase immovable property in Cyprus.

Α. Before purchasing a Property

The purchase of Property can be made either by 1) direct transfer of the title deed, without signing a Sale Agreement or 2) by Sale Agreement or 3) by an existing buyer (beneficial owner), who has not yet become a registered owner, through the process of assignment of their rights arising from a Sale Agreement that the buyer has concluded and has already deposited with the competent Land Registry.

Regardless of the way you choose to purchase a Property, it is material for the buyer to know the correct procedure that will ensure the transfer of the Property, as well as the rights and prohibitions related to the transfer of the Property.

It is important to seek legal advice before you purchase which will include the following but will not be limited to

• Review the certificate of registration of the Property (title-deed)

The title-deed indicates the registration of the Property in the Register of the Department of Land and Surveys, as well as the name of the intended seller. The title-deed should be recent, so that recent information about the Property in question is also indicated.

• Legally inspect the Property – Search Certificate of Immovable Property

It is important that prior to purchasing a Property you request a Search Certificate of Immovable Property issued by the competent District Land Office, to find out whether the Property is burdened with mortgages or other encumbrances. The Search Certificate indicates the legal characteristics of the Property (e.g., whether the Property belongs to the seller; is burdened with encumbrances, whether a court order prohibits the disposal of the Property; whether there are any prohibitions against the owner (in personam) or encumbrances on the Property (in rem) or a final court judgment (MEMO) is registered over the Property etc.).

• Negotiate with lenders and creditors

Your legal adviser will negotiate with creditors and lenders, banks or companies that manage relevant loans, in favour of which mortgages burden the Property to request a written declaration / undertaking to release the Property from the encumbrances, upon receipt of certain sum, which should be less than the agreed purchase price. The buyer may pay directly the creditors/lenders out of the agreed purchase price so that they release the Property to be transferred to the buyer free from encumbrances and mortgages.

• Information on whether the transaction (purchase of the Property) is subject to Value Added Tax (VAT)

The seller of the Property, in consultation with the Tax Department, needs to inform you whether the sale is subject to VAT. If VAT applies, the buyer could apply for a reduced VAT (5% instead of 19%) in case the Property is to be used as your main residence.

• Calculate the stamp duties and transfer fees

If a Sale Agreement is going to be signed, the buyer must pay stamp duties for the Sale Agreement. In any case, the buyer will have to pay the transfer fees of the Property, unless VAT applies for the purchase of the Property.

• Research for compliance with town-planning legislation

In case you wish to buy 1) a piece of land or 2) a building or premises which have been erected upon a Property or 3) a plot that arose or resulted from a division of a piece of land, it is important to know:

1. the urban planning characteristics and development rights of the Property, since some Properties can be developed only for a specific use;
2. whether a Certificate of Final Approval has been issued by the Authorities, with or without qualifications/notes following the completion of the construction, in accordance with the terms of a town planning permit and/or a building permit;
3. whether the Property is subject to town planning conditions;
4. in which urban planning zone the Property has been situated;
5. whether there are any common areas of the land/construction/unit (e.g., parking spaces etc.,).

B. After purchasing a Property

After purchasing a Property and provided that you have purchased the Property by a written agreement, you should:

1. Stamp the Sale Agreement in the Tax Department

• Deposit the Sale Agreement with the Land Registry

Having stamped the Sale Agreement, a counterpart must be deposited with the Land Registry, for specific performance purposes, in order to ensure that the seller will not alienate the Property or dispose it to any third party, as the deposit results for an encumbrance to be created over the Property. The beneficiaries of mortgages and other burdens registered prior to the date of depositing the contract are not legally impacted by the deposit of the contract, unless they sign a relevant waiver letter.

• Pay any taxes and rates that are due

To complete the transfer of a Property which is covered by a separate title deed, the seller must pay taxes and rates related to the ownership and possession of the Property (e.g.  Immovable Property Tax) as well as any rates and taxes due to local authorities, water supply boards and sewerage boards). The Sellers must also pay Capital Gains Tax or Income Tax, in case the trade of properties is within their business activities.

Our firm specializes in providing services related to the purchase and sale of Property. This article does not substitute the provision of bespoke legal advice. For legal expertise, you may contact Ms. Marina Karamallaki, at [email protected], or with Mr. Nicolas Mouktaroudes, at [email protected].