Buying Property In Cyprus – The Process
The island of Cyprus remains a firm favourite for British buyers thinking of purchasing a holiday home, for those looking to invest in property abroad as well as for those thinking of retiring in the sun. But once you’ve found the property to fulfil your Cyprus dreams – what about the legal process of actually buying it?
Buying property abroad can be a daunting process, especially if you are unfamiliar with the legal system there. In Cyprus, the legal system is firmly based on English Law. The fundamental principles of contract law apply and this means that the process (whilst not the same as in the UK) is generally familiar to British buyers.
In Cyprus there is a two stage buying process; exchange of contracts and transfer of the title deeds.
1) Exchange of Contracts
If you have found a property that you would like to purchase in Cyprus and a price has been agreed together with exactly what is to be included for that price, it is usual to enter a reservation agreement under the terms of which, the seller agrees to withdraw the property from the market in return for a deposit towards the purchase price. Reservation fees are usually non refundable, so it is important to be sure before paying one over. The expectation of most developers is that the buyer will be ready to exchange contracts within 30 days of payment of the reservation fee. This is achievable if all parties provide the required documents in a timely fashion.
The Contract of Sale
The first major step on the road to purchasing property in Cyprus is to reach agreement on the form of the Contract of Sale. Many developers have their own form of sale agreement and ocassionally this can be modified to include a buyer's specific terms. However it is generally recommended that you start with a new contract which will better protect your interests. One of the commonest (and biggest mistake) made by many buyers in Cyprus, is to simply sign the developer's standard contract without taking appropriate independent legal advice.
The contract will normally be signed by the buyer first and then the developer signs when the first payment is due under the terms of the agreed contact .
The sale agreement will then be stamped at the tax office – i.e the stamp duty applicable to the Contract is paid and a copy of the sale agreement will then be deposited with the Land Registry.
For the purchaser’s protection the Land Registry in Cyprus provides a simple and effective legal instrument called “specific performance”. Once the Contract of Sale has been stamped and deposited at the District Land Registry Office, the purchaser’s ownership rights are protected until the Title Deeds are finally issued and transferred into the purchaser’s own name.
The Contract of Sale is safeguarded by the Land Registry and cannot be withdrawn by anyone except the purchaser, and therefore the property is legally registered in law as unequivocally belonging to the purchaser, it cannot be leased, sold, transferred or mortgaged without the consent of the purchaser - only the purchaser can alter the property status. It should be noted that no burdens may affect the right of specific performance after the contract has been deposited with the Land Registry. This system is particularly useful as many purchasers are more than happy to have the security it brings and delay the issuance of the Title Deeds for as long as possible to delay paying the hefty Transfer Fees (see below).
2) Transfer of the Title Deeds
The second stage is the transfer of the Title Deed into the name of the purchaser at the Land Registry. At this point the buyer becomes the absolute, outright owner of the property and a Certificate of Registration (Title Deed) will be provided in the purchasers name as evidence of his ownership. However, this can not be done until the appropriate Government Department has issued the separate Title Deeds. This will not happen until the District Land Registry Office has processed any necessary plot divisions on a development. The key is the administration time taken by the District Land Registry Office and this can take many years which seems odd to British buyers! In some areas, Paphos for example, delays of up to5 years are not unknown.
Why does it take so long?
At the time of an off plan purchase, there will be only one Title Deed. The one is for the land. By the time the whole process is complete there will be new Title Deeds issued for every unit in the development. The developer can not apply for these separate Title Deeds to be issued until all work on the plot has been completed. This is because the division and the issuance of the Title Deeds will be dealt with as one application by the Land Registry.
However, the good news about this delay is that it means purchasers do not have to find their Transfer fees, payable to the Government, for several years in most cases. Since Transfer Fees can amount to 8% of the property value it can be useful that this fee is delayed for several years after the property has been completed!
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