Due to the delays that are met in securing the various building permits and the consequential delays in getting the titles and the much sought after transfer of title, the market has come up with a new way to by-pass the system.
The time that it takes for a property to have its title secured from the date of delivery of a project, is nowadays not earlier than seven to 10 years (five years ago it used to be three to four years) and this provided the development has no serious problems. This time gap depends also on the district that the property is situated. There are local authorities that are efficient and others which “take their time”.
Transferring shares It also depends on the volume of work involved. Paphos for example has 30% more applications for building permits than in Limassol. So if you are “unlucky” enough to choose Paphos, you will have to put up with the delays. What is worrying here, is that the developers are now transferring shares in a project, as opposed to the proper titles. For example if you buy a house in a project of 10 units, you get an immediate transfer of 1/10th of the shareholding of the land, on which the project is built on. On the one hand this is better than no title at all (other than a sales contract deposited at the Lands Office). This 1/10th share title can be sold to third parties, mortgaged (be it not at its full value) pass it on in your will to your children etc. etc. It is an asset, but what you will find happens is the problem as to who will undertake the subsequent procedure for the title issue. In addition all 10 shareholders must sign any application and all 10 of them must coordinate (impossible, believe us). If you receive the developers assurances that he will do it, we will say that 99.9% he will not. So if you accept to settle, instead of a proper title, with a share transfer, you must know the minus as well (do not do it unless there is no hope at all to get a proper title).
A “share” title is not recognised by the Lands Office as referring to a particular property, even if all the shareholders have documents agreeing whose property is what. So in the event of, say, a “forced sale” (auction) the Court may sell your own house which is free from any impediments and not the neighbour’s, who is in default.
Whatever you decide to do, as for example a small change in your building, you will need all the other 9 shareholders’ signed approval. If one refuses either because he is being difficult or even for good reason (such as one of the shareholders has died), you are stuck for life.
A property’s value for financing purposes in terms of a share is usually assessed at around 20% less than a property with a proper title, whereas some financial institutions will refuse to accept such shareholdings for security purposes. Such shareholding properties must have a good administration/management for the common use areas. For example the roads will not be public, neither the street lighting and other public services, requiring your constant contribution in the upkeep. Bearing in mind the problem that there is in collecting common expenses, this can develop into something very serious.
Regrettably this new form of “substitute titles” is increasing in popularity, despite the described problems and this state of affairs is widespread in the Paralimni/Ayia Napa/Sotira region (eastern Cyprus) where unscrupulous developers (and more serious unscrupulous lawyers) encourage this state of affairs.
The new Minister of the Interior (Neoklis Sylikiotis) to whose attention we have brought the whole problem of the permit/title issue, has taken action by promising the creation of a committee, comprising of public officers and the Technical Chamber, whose scope of work is to come up with firm suggestions on how the problem of delays can be solved. This is a positive start and provided this committee can produce their suggestions within no more than six months, there is hope for a better future, because surely we do not want to have a situation like Marbella, where a large percentage of buildings were found at the end of the day to be illegal and the unaware buyers faced with a demolition order (the other problems in Spain apart such as the confiscation of property with no compensation payment etc etc). We criticise the previous Ministers of the Interior who have left this situation come to a most difficult stage and we blame them for their inability to grasp the seriousness of the situation. We have the feeling that with this new Minister, we have hope. We will see and we will keep you informed of developments.
By Antonis Loizou, FRICS
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