Information Regarding the Purchase of property in Cyprus
If you have found a property that you would like to purchase in Cyprus, you should first agree a price with the seller and what is to be included for that price. As the contract of sale will not be ready instantly, 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.
once a reservation fee is paid, the purchaser’s lawyer will conduct a background check on the property, to verify that the seller is the legal owner of the property and that they have legal capacity to sell, verify that there are no encumbrances or restrictions on the property and that it can transferred freely to the purchasers and make sure that, if there are no title deeds, all the necessary planning and building permits have been obtained.
The Contract of Sale
1. The first major step on the road to purchasing property in Cyprus is to reach agreement on the form of the contract of sale. Most developers have their own sale agreement and, sometimes, this can be modified. However, it is usually necessary, to fully cover the client’s interests, to draft our own contract
2. The contract will then be signed and the first payment due under the terms of the contact will be made.
3. The sale agreement will then be stamped. The stamp duty is EURO 2.57 per thousand for purchase prices up to EURO 170,860 and EURO 3.42 per thousand for the part of the purchase price exceeding EURO 170,860.
For example if the purchase price is EURO 300.000
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.
4. A copy of the sale agreement will then be deposited with the Land Registry. For the purchasers protection the Land Registry in Cyprus provides a simple and effective legal instrument called “specific performance”. As soon the Contract of Sale is 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 name.
5. The Contract of Sale is in the hands of the Land Registry and cannot be withdrawn by anyone, and therefore the property is legally registered in law as unequivocally belonging to the purchaser, it cannot be leased, sold, transferred or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. Indeed “specific performance” is particularly useful as many purchasers are more than happy to have the security it brings and delay the issuance of Title Deeds for as long as possible to avoid paying the Transfer Fees!
Council of Ministers Approval
1. A prerequisite to registration, in the case of non Europeans residents, is approval by the Council of Ministers of the Purchaser’s application to buy property in Cyprus. The main purpose is to safeguard Cyprus from allowing foreigners to enter the country to reside who cannot financially support themselves. A licence must be obtained from the Council of Ministers allowing you to acquire such property, in accordance with the Immovable Property Acquisition (Aliens) Law. Such licence is granted to bona fide (genuine) purchasers.
2. The application is processed after the Contract of Sale is signed and the procedure may take up to three months. In the meantime, there is no restriction in taking possession of the property. The main information required for completing the application is
a) Personal details of the applicant(s)
b) Details of financial standing and proof of investments and/or a nominal annual income/pension is required.
c) Particulars of the property
d) Particulars of the present owner, the Sales Contract & terms of payment
e) The method of acquisition, i.e., whether Freehold, Long Lease, by Share etc.
Transfer of title
1. On obtaining the above permit and upon full settlement of the purchase price, the property can be transferred into the name of the purchaser at the Land registry. However, this can not be done until the relevant Government Authority has issued the title deed. 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 be many years! IN Paphos in particular, delays of over 5 years are common.
2. Real Estate Transfer tax-fees must be paid in order to transfer freehold ownership to the name of the purchaser. The Transferee is responsible for the tax payment and it is payable to the Government at the time of the transfer of the property and the issue of a title deed in the name of the purchaser.
3. The rates are on a graduated scale. The transfer fees are;
a. 3% on purchase prices up to EURO 85,430
b. 5% on purchase prices from EURO 85,430 – to EURO 170,860
c. 8% on purchase prices over EURO 170,860
For example if the purchase price is EURO 119,602
The first EURO 85,430 @ 3% = EURO 2,550.00
next EURO 34,172 @ 5% = EURO 1,730.10
Total EURO 2,140.05
Should the purchase be made in joint names (provided the price is more than EURO 85,430) the effective value for calculation is halved.
For example if the purchase price is EURO 119,602
The first EURO 59,801 @ 3% = EURO 1,794.03
Total EURO 1,794.03
6. Transfer of ownership takes place on the payment of the transfer fees and registration at the Land Registry Office. A title deed will then be issued to the purchaser. This process can be done either by you personally or by a Power of Attorney to your Solicitor.
Summary of Our Legal services;
Consequently, our services include:
1. search on the title deeds of the property and obtaining from Land Registry registration and site plans;
2. perusing proposed sale agreement and modifying same, if necessary, to fully cover client’s interests or drafting, if necessary, our own contract;
3. drafting power of attorney, if necessary, enabling us to act for the client in the relevant matters, when he is away;
4. attending signing of sale agreement for the land and building agreement for the villa;
5. stamping and depositing sale agreement with the Land Registry for specific performance purposes;
6. preparing and submitting on client’s behalf application to the Council of Ministers for a licence to acquire immovable property in Cyprus;
7. attending Land registry and accepting transfer and registration of the property in client’s name and issuing title deeds.
Other Useful Information
1. In Cyprus if a person has properties registered in his name where the market value exceeds EURO 170,860, there is a property tax on the excess value. The annual immovable property ownership tax imposed by the government is levied at the following rates:
|Purchase Price||% Payable||Cumulative Property Tax (EURO)|
|EURO 0-170,860||0.0%||EURO 0|
|EURO 170,860-427,150||2.5%||EURO 640|
|EURO 427,150-854,300||3.5%||EURO 2,135|
|EURO 854,300 and above||4.0%|
2. The basic utilities, electricity, water and telephone are payable individually in accordance with the consumption and based on a meter reading. In the case of flats, the owner also has to meet a proportion of the common expenses e.g. for the lightening and cleaning of the common facilities and the maintenance of the lift (and of course the upkeep of a garden and a swimming pool where there is one).
3. Local Authority Taxes and Rates are payable by each registered owner of a property. A rough guide could be approximately EURO 85 -256 per year depending on the size of your property. This tax is for refuse collection, street lighting, sewerage, etc.
4. There are no restrictions on the selling of your property. In the event that the purchaser should wish to sell a property at some time in the future, the funds/profits from the sale can be repatriated easily to the value of the purchase price including any amounts spent on improvements and/or additions to the property. Profits can also be repatriated plus the interest earned.
5. Cypriot and non-Cypriot sellers can sell their properties to both Cypriot and non-Cypriot buyers.
6. Property Sales in Cyprus are subject to Capital Gains Tax at a rate of 20% on the gain, however the first EURO 17,086 is exempted. There is also an indexation allowance. On top of this allowance, the seller is entitled to a further allowance regarding the transfer fees paid, inflation rate per year and the cost of any additions made to the house. Gains from the disposal of a dwelling house are exempt up to EURO 85,430 in total if the owner resides in it continuously for at least five years prior to disposal.