Buying property in Cyprus can hide many pitfalls which may turn the purchase into a nightmare, find help and how-to's in our legal guide!
TABLE OF CONTENTS
- About this Guide
- Information you’ll need when buying a second-hand property in Cyprus
- What if it is a new property rather than second-hand?
- Vendors’ legal and financial obligations towards buyers
- What can I expect from the legal process for buying a property in Cyprus?
- What potential pitfalls should I be wary of?
- What fees, taxes and charges do I pay when buying a property in Cyprus?
- Obtain a TIC
- Property Taxes in Cyprus
- VAT & types of property
- Local Authority Taxes
- Capital Gains Tax
- Property Management Fees
- Other Charges
- Getting a valuation of the Property
- Checks on the Land Registry
- The Public Notary
- Inscription of your New Title on the Land Registry
- Removal of the Previous Mortgage from the Registry
ABOUT THIS GUIDE
Welcome to the Advocate Abroad® guide to purchasing a property in Cyprus!
This property guide will give you an overview of the conveyancing process in Cyprus, including information on both your and the seller’s legal rights and obligations as well as pitfalls to avoid.
Of course, no guide can take the place of independent legal advice. Throughout this guide you will find customer reviews of the Advocate Abroad English-speaking lawyers in your area of Cyprus.
Advocate Abroad® is a unique network of independent English-speaking lawyers, accountants, architects, translators and financial service companies in Cyprus.
You are guaranteed that all of the officially registered and regulated professional members of the network conform to strict protocols and standards for legal services, which are overseen by a legal professional in the UK and member of the Chartered Institute of Legal Executives.
Now, on with the guide!
WHAT INFORMATION DO I NEED BEFORE BUYING A SECOND-HAND PROPERTY IN CYPRUS?
There are a number of legal issues that need to be considered when buying a property in Cyprus.
In particular, when facing a Property purchase the vendor is legally obliged to provide the following documentation:
- Land Registry information regarding the property (title deed or contract of sale)
- Tax Certificates from Inland Revenue Department, Municipality or Community Council, Sewerage Board.
- Land Registry Search Certificate for the property upon request of the buyer
- Ensuring the registration of the contract of sale with the local Land Registry for specific performance purposes, which safeguards the purchaser’s rights to the property until the title deed is transferred into their name. It is the obligation of the Purchaser to request the registration of the contract of sale with the land registry, to which the Seller is obliged to comply. Any contract of sale may be registered with the local land registry within 2 months of the date of signature.
- Recently, the law of Specific Performance relating to Property Sales of 2017 has entered into force and has amended article 12 of the Law of 2011 and 2012 on the same matter, granting the jurisdiction to the Court to permit the filing of a contract or an action to be brought for specific performance, even if the prescribed period of time has elapsed, as per the provisions of the said law, provided that the Court considers that it is just and reasonable to do so for the protection of the purchaser.
- Name and identification of the current owner of the property
- Clean Title Deed – ensuring that the property has met all governmental and municipal qualifications, i.e. building permit, final approval.
- If there is any mortgage or other charge/encumbrance on the property
- The physical property conforms to the description of the title deed
- All re-sale properties are sold “as is”, a buyer cannot claim breach of contract for defects after the transfer of the property.
- That the land is correctly zoned for building.
- The buyer should also make sure there are no sitting tenants in the property.
AND WHAT IF IT IS A NEW PROPERTY?
Before buying a new property it is advisable to confirm the following:
- The existence of a building permit and a final approval in which the relevant technical department confirms that the building project has been carried-out in accordance with the approval originally issued by the town hall.
WHAT LEGAL AND FINANCIAL OBLIGATIONS DO SELLERS HAVE TOWARDS THE BUYER?
The vendor of the property has the following legal obligations:
- To conserve the property until it is handed over to the purchaser.
- Transfer the property.
- Make good certain defects or deficiencies in the property.
- To pay certain costs and taxes.
If buying an off-plan property and there are any defects in the property known to the seller and which may not have been communicated to the buyer, the buyer may possibly rescind the contract or claim damages instead.
Unless there is agreement to the contrary, the purchaser is obliged to pay the costs relating to effect the transfer of the property – this would include paying stamp duty after the signing of the contract and transfer fees (exemptions exist). Any capital gains tax that is due will be payable by the vendor.
WHAT CAN I EXPECT FROM THE LEGAL PROCESS FOR BUYING A PROPERTY IN CYPRUS?
The Cypriot legal process is quite straightforward and, in fact, based on our own UK law. Here is a six-step plan of what to expect:
Step One: Once you have had an offer accepted you may be asked to sign a reservation agreement which, though not legally binding, shows your commitment to buy. The vendor should now remove the property from the market while your lawyer does some basic due diligence and the bank carries out its own valuation if you require a mortgage.
A small holding deposit is usually now required – and it is not unusual for this to be paid direct to the vendor. You may lose this if you simply ‘change your mind’ so it’s good practice to have a receipt drawn up by your lawyer stating that the deposit is, ‘subject to satisfactory checks’ which will mean you are protected. The buyer’s and vendor’s lawyer details are then exchanged.
Step Two: Your lawyer will now carry out checks to ensure the property is free from any other debts. (It was common practice in Cyprus in the last few decades for developers to take out mortgages on the land and not pay them back – and if this were the case, you would effectively own the house but not the land it stands on.)
The lawyer will also carry out a Title Search to check the seller is the legal owner of the property with the right to sell. Boundary Searches will be made and all planning consent verified.
A voluntary Plan Search at the local council is also useful at this stage to find out if any other development is planned in the area. Although you will not be able to guarantee a property won’t be built right in front of yours in a couple of years’ time, it will at least help to mitigate your risk.
Step Three: If you are happy to proceed following the surveys, and no issues have been brought up by your lawyer, you will move onto the Contract of Sale. This is the same as an exchange of contracts in the UK and all necessary details will need to be noted.
If you are unable to travel to Cyprus, you must appoint power of attorney to your chosen representative to sign on your behalf. A non-refundable deposit will need to be paid of between 10% and 30%, so be sure that you’re entirely happy with the details before you sign.
Step Four: Once the Sales Contract has been signed by both parties your lawyer will register it with the District Land Registry Office. This prevents the seller from remortgaging the property or selling it to anyone else until the Title Deeds are produced. This is known as Specific Performance Law and goes some way to protecting you until deeds are issued.
Bank and character references will need to be submitted along with your registration. As a non-Cypriot, you will also need to apply for a permit from the Council of Ministers. Bear in mind this can take a few months to come through.
Step Five: Funds will now need to be put in place to complete the sale. If you are paying via a mortgage the lender will arrange for the funds to be sent to the vendor. If paying by cash your currency exchange company or bank will organise the transfer.
Step Six: As obtaining the final Title Deeds can be a drawn out procedure in Cyprus, this is where the process differs from the UK system.
In some cases, the Title Deeds will be available for immediate transfer into your name. If this is the case, the transfer fee is paid to the Land Registry and you have ‘completed’ in the way we understand in the UK.
In other cases, however, the Title Deeds can take months or even years to be issued. But it’s still commonplace in Cyprus to continue with the move, pay the balance and live in the property while you wait. Consult with your lawyer as to whether this is advisable in your particular case – new laws have been passed recently which aim to ensure Title Deeds are passed directly to buyers.
Note: if you are buying a new property you may be asked to pay the purchase price in key stages through the property development – rather than on completion. Ensure you receive bank guarantees for each payment in case there are difficulties with the completion of the build.
WHAT POTENTIAL PITFALLS SHOULD I BE WARY OF?
If you use an independent lawyer your home buying process in Cyprus should run smoothly. Nevertheless, it’s worth reading these common pitfalls first:
Buying a home on land which is still mortgaged or doesn’t have legal title
Although this is a practice which the Cypriot government is working hard to prevent, it can still happen. It’s imperative that your lawyer carries out all due diligence and background checks on your developer.
Neglecting to notice the condition of your fittings
The property is supposed to be ‘sold as seen’ but crafty developers sometimes swap more expensive fittings in the ‘show home’ back to more basic ones. Check carefully before signing the Contract of Sale that everything is in working order and hasn’t been substituted!
Being late with the Contract of Sale
Cypriot law specifies a finite time frame during which the Contract of Sale must be deposited and stamped by the Land Registry. Failing to adhere to this will lead to you losing important legal rights.
Failing to calculate the exchange rate correctly when working out the final purchase price
Currency prices fluctuate all the time. While this might be manageable when buying your holiday money, if the final price of your home varies significantly from the time you made your offer, it can prove to be a big problem. It’s a good idea to fix your rate via a specialist foreign exchange company.
Cyprus operates strict laws on non-resident owners renting their property on a short-term or holiday basis. When you apply for permission to purchase from the Council of Ministers you have to declare the property won’t be used for ‘commercial purposes’. If you’re planning to buy property to let out to the holiday market, it’s best to obtain legal advice first.
WHAT FEES, TAXES AND CHARGES DO I PAY WHEN BUYING A PROPERTY?
Whether you are buying or selling a property in Cyprus there are a number of costs associated with the process.
A number of these you will expect if you have been through the process in another country, but some you will not.
In this guide the main charges will be covered and the party that is usually responsible is the buyer (unless otherwise indicated).
However, it should be borne in mind always that the concept of freedom to contract is a cornerstone of Cypriot law and the parties may always assume whatever responsibilities they wish with regard to payment of the costs and taxes incurred when transferring property in Cyprus.
OBTAIN A TIC
Before being able to do, well, almost anything in Cyprus (and certainly to purchase a property) you will need to arrange a TIC number or Tax Identification Code. This is arranged at the local tax office of the area where you are intending to reside.
A TIC may also be arranged by your legal representative upon completion of a power of attorney or similar document. Advocate Abroad offer this service.
PROPERTY TAXES IN CYPRUS
Cyprus is famous for it’s sun, sand and quality wine, however, undeniably it is a world-beater when it comes to taxes! Here we highlight the principal property taxes in Cyprus that you are likely to come across when buying a property. In general the principal taxes or charges in Cyprus relating to property can be grouped as follows:
- VAT on new property bought / If you are required to pay VAT, then you are exempt from paying transfer fees.
- Capital Gains tax on selling a property
- Local Authority Property Tax (yearly)
- Local Authority Water usage (monthly) / refuse collection (yearly)
- Local Authority Cemetery tax in some areas (yearly)
- Local Authority Sewage fee (yearly
After the contract of sale is signed, the purchaser is liable for the payment of stamp duty as follows:
Contracts with a fixed amount as from 1st March 2013
The first €5000………………………..0
Between €5001 and €170,000…..1.5%
Contracts without fixed sum…….€35
*Capped at a maximum of €20,000 as and from March 2013.
N.B: Payment is due within 30 days of signing the contract of sale.
Transfer of Property through the District Land Registry Office
The transfer of ownership is effected by a simple process of registration with the District Land Registry Office. The prescribed application form N270 should be completed for submission in person to the District Land office together with:
- The registration certificate (title deed) of the property.
- Copy of the Council of Ministers’ permission to acquire the said property.
- Written confirmation from the Central Bank of Cyprus that purchase is done by foreign funds.
- Evidence of payment of all property taxes to date (these taxes may include sundry municipal/local authorities taxes and sewage tax).
- The contract of sale duly stamped.
The purchaser and seller may give specific powers of attorney to any third party to attend and effect the transfer on their behalf. Upon transfer of the property and registration in the purchaser’s name, the District Land Registry Office will charge transfer fees, which are based on the market value of the property at the time of the purchase and are calculated as follows:
Current Market Value € Rate % Fee € Accumulated fee €
First 85,000 3 2.550 2.550
85,001 – 170.000 5 4.250 6.800
Over 170,000 8
In the case of free transfers of property the transfer fees are calculated on the value of the property as at 1st January 2013 as follows:
- from parents to children : Nil
- between spouses: 0,1%
- between third degree relatives : 0,1%
- to trustees : €50
- Mortgage registration fees are 1% of the current market value.
In the case of companies’ reorganizations, transfers of immovable property are not subject to transfer fees or mortgage registration fees.
Since Cyprus’ EU accession in 2004, a standard VAT rate of 19% is required to be paid when buying a new property. However, following a recent VAT Amendment Law, a reduced VAT rate, starting from 5%, is applicable for the acquisition of new residential properties.
For the reduced rate to be applicable, certain terms and conditions must be met:
- The property must be used as the primary and permanent residence of the applicant (for the next ten years).
- The applicant has not acquired any other residence in Cyprus with a reduced VAT rate.
- The applicant must be an individual, over 18 years old, thus legal entities are excluded.
- The reduced VAT rate of 5% is applied on the first 200 square meters (building coefficient) of the property as per the architectural plans submitted to the Authorities. On the remaining square meters, the standard rate of 19% is imposed.
VAT & TYPES OF PROPERTY
On what type of property do you pay VAT and at what rate? The VAT laws relating to the acquisition of property in Cyprus are as follows:
- Sales of land are exempt from VAT although it was anticipated that value added tax would be introduced on sales from 1st August 2008, the Cyprus Government negotiated a delay and it will now be introduced on 1st January 2009.
- Buyers of custom homes pay VAT at the current rate on the construction costs (this has always been the case).
- Those who are buying a home from a property developer are liable for VAT if the application for a Town Planning Permit was submitted after 1st May 2004.
- Sales of resale Cyprus property are exempt from VAT (assuming that the property has been used).
LOCAL AUTHORITY TAXES
This is a charge that is similar to Council Tax or rates in the UK. It is normally payable once a year (occasionally it is billed quarterly) at the town hall or Community Council and the specific date that the charge falls due depends upon the individual town hall/community council though is often towards the end of the calendar year.
Care should be taken when buying a property given that the purchaser should pay for only those months of the year that they own the property. If the previous owner has paid for the full year then they may claim return of that portion which they will not use.
Council Tax includes property tax, water usage and refuge collection and in some areas a standard yearly cemetery tax is charged.
It should be noted that since 2019 Governmental Property tax has been abolished, and only council property tax is charged to property owners.
CAPITAL GAINS TAX
Capital Gains Tax (CGT) is imposed (when the disposal is not subject to income tax) at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own such immovable property directly, excluding shares listed on any recognized stock exchange.
The following disposals of immovable property are not subject to Capital Gains Tax:
- Lands or land with buildings acquired between 16th July 2015 and 31st December 2016 are exempt from CGT (subject to certain conditions) upon their disposal.
- Transfers arising on death.
- Gifts made from parent to child or between husband and wife or between up to third degree relatives.
- Gifts to a company where the company’s shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after the day of the transfer.
Individuals can deduct from the capital gain the following:
Disposal of private main residence (subject to certain conditions) €85,430
Disposal of agricultural land by a farmer €25,629
Any other disposal €17,086
N.B:The above exemptions are lifetime exemptions subject to an overall lifetime maximum of €85,430.
PROPERTY MANAGEMENT FEES
Cyprus, similar to other mainland European countries has a much higher proportion of apartment style properties than in the UK or Ireland. When multiple proprietors share common parts of a property such as the lifts in the building, porter facilities, the building edifice, the car-park or swimming-pool there is a cost associated with the upkeep of such shared amenities.
Accordingly, each proprietor is required to contribute financially to the upkeep by way of a community charge, known in Cyprus as ‘communal fees’.
The amount payable varies from building to building or urbanization to urbanization but will also be determined by the square meters of the property owned within the building (some properties are larger than others and therefore should pay a larger share).
For purchasers of property, an important point to note is that the purchaser of a second-hand apartment within a building or community may assume the debts and pending community charge for the previous and current years.
For this reason the buyer should request from the seller to present them with a certificate of proof of payment of the communal fees before purchase of the property.
In addition to the main taxes and charges outlined above it may be necessary to make provision for other ancillary charges such as rubbish collection and water rates.
If a community charge is being paid then this will most likely include the charge for common area electricity and water bills but if the property is a separate building such as a villa in its own grounds, then such charges are paid separately.
VALUATION OF THE PROPERTY
This will usually be a requirement of the financial institution that may issue the mortgage and is usually carried through the Bank’s surveyors and is considered a mortgage charge.
The Buyer, if they wish, may carry out a private valuation at his own expense.
The person carrying out the valuation must be certified by the Cyprus Scientific and Technical Chamber (ΕΤΕΚ) which is the statutory Technical Advisor to the State and is the umbrella organisation for all Cypriot Engineers, established by Law 224/1990.
CHECKING THE LAND REGISTRY
To ensure that the particulars of the property are correct i.e. the identity of the current owner(s), the mortgage charges and any other encumbrances that currently exist on the property and the existence of any court judgments affecting the property etc it is necessary to check with the land registry at the local town hall where the property is located.
While strictly speaking it is legal to arrange for the transfer of a property in Cyprus via a private legal contract, this is not the typical, nor the recommended way of doing so.
This is because for any new property title to be registered in the public Land Register it is necessary to complete the transfer of the property by public deed. Failure to register the title would permit an unscrupulous vendor to sell the property to a third party who, upon registration of their title would be entitled to retain the property, while you – the poor earlier purchaser – would be left chasing repayment from a (probably) long-gone seller.
Also, failure to register a purchaser’s new title on the Land Register and thereby remove a prior title would allow the possibility of embargos being place on the property due to debts relating to the prior owner.
From a practical point of view, no financial institution will offer a mortgage to facilitate the purchase without a public deed.
The procedure involves the drawing-up of the deeds of transfer by a public notary. This is an independent official who oversees the process and ensures that the proceedings take place according to the law and that the documentation is verified.
The amount charged by the notary is prescribed by law and varies in function to the price of the property.
INSCRIPTION OF NEW TITLE ON THE LAND REGISTRY
Once the property has been transferred it is advisable to register the new ownership details with the public property register.
Apart from not being able to obtain a mortgage without doing so, failure to register can cause multiple problems in the future with regard to future property transfers, inheritances, defending title against third parties etc.
REMOVAL OF THE PREVIOUS MORTGAGE FROM THE REGISTRY
While not a legal requirement, it is preferable to have the previous mortgage removed from the property register and the cost is normally attributable to the seller, who sells ‘free of encumbrance or charge’.
It is best practice even though the mortgage has been paid off following the sale of the property. The charge will still appear on the register and its removal incurs a number of charges, notably notary and registry charges.
The process involves obtaining a certificate from the financial institution that issued the mortgage that the mortgage has been discharged.
This certificate is then presented to the notary who draws up a public deed to that effect. The deed is then presented to the registry for inscription on the property register which thereby removes the mortgage charge from the property.
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