- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Banks and government destroying property market

LAST year the government introduced legislation designed to improve the protection afforded to those buying property on the Island.

One provision of the new law entitled ‘The Sale of Immovable Property (Specific Performance)’, N81(I)/2011, enables someone who is buying a property that is already mortgaged to pay a proportion of that mortgage to the mortgagee (usually a bank).

The mortgagee is required to accept this arrangement – and the buyer’s contract of sale, having been duly lodged at the Land Registry, will take precedence over that mortgage regardless of whether the whole amount of the mortgage has been repaid. Furthermore, the vendor cannot intervene in this arrangement.

Although this arrangement does not guarantee the eventual issue of Title Deeds and transfer of ownership to the purchaser, it does provide purchasers with a degree of added protection against the cowboys who plague the Island’s property industry.

However, cash-strapped banks appear to be exploiting this legislation to improve their cash flow to the detriment of both property developers and purchasers.

One case reported in the local press by Antonis Loizou involved the sale of a property valued at €2.5 million. The mortgagee demanded 70% of the sales price to release the property from the mortgage. Needless to say, as the developer needed 50% of the sales price to build the property and cover his other expenses, the deal fell through.

Cyprus government demands its pound of flesh

THE cash-strapped government has also joined the merry band of those demanding their pound of flesh.

It has always been the case that Title Deeds could not be issued to a purchaser unless the vendor provided a Tax Clearance Certificate to the Land Registry proving that he had paid his outstanding tax liabilities.

This condition is obviously detrimental to the interests of those who have bought property. Why should the government of Cyprus deny their rights to owning a property because the vendor has failed to pay his taxes? (In some cases purchasers desperate to secure ownership of their home have paid taxes owed by the vendor to the Inland Revenue department).

This situation was exacerbated recently when the government started lodging ‘memos’ for unpaid taxes against developments registered to property developers who have failed to pay their taxes.

A ‘memo’ is a charge against a property or properties resulting from a successful court action brought by a creditor (in this case, the government) for the payment of a debt (in this case, unpaid taxes).

This memo (more correctly a memorandum) effectively prevents the transfer of ownership from the vendor to the purchaser or the sale of a property until that memo is cancelled.

So we are now in the ridiculous situation where buyers’ rights to owning a property are being denied through no fault of their own and are being placed in a position where they cannot sell the property until the vendor (or they) pay the vendor’s tax liabilities.

I hope that some intelligent life form in Government (or is that an oxymoron) manages to resolve this situation before the European Court of Human Rights gets involved.

Until such time as a secure and reliable means of purchasing off-plan properties and a reliable means of transferring those properties to their purchasers is put in place by the government, you are advised not buy property in Cyprus unless it has a full Title Deed.