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

Rent reduction law judged unconstitutional

PRESIDENT Nicos Anastasiades has sent back to Parliament a law aiming to reduce residential and commercial rents for a period of a year on the grounds it was unconstitutional.

The law, meant to come into effect on Friday and expire on October 31, 2014, was applicable to all contracts (rents and leases) concluded prior to October 2012. Parliament will now have 15 days as of Wednesday – the day of the law’s referral – to issue a response, including sending back the law as is or else amending it.

In a letter informing House President Yiannakis Omirou of his decision, Anastasiades said Article 26 of the Constitution protected the freedom of parties to reach their own contract agreements.

To bypass the constitution, parliament would need to evoke the Law of Necessity, a measure that is “justifiable only in exceptional circumstances,” Anastasiades said. The law of necessity was passed after the Turkish Cypriots abandoned parliament and governmental posts in the 1960s, to enable the state to function in a way that would not conflict with the 1960 constitution.

Anastasiades argued that Supreme Court case law did not justify applying the law of necessity in this case since market forces had been regulating rents anyway, pushing them down. The law of necessity had previously been used during states of emergency in the 1960s and in the 1974 Turkish invasion when the state was trying to keep order and prevent its collapse, he said.

The reasons cited by parliament, that of the financial crisis “are not comparable nor should be put on a par with the ones mentioned before [the 1960s and 1974]…,” Anastasiades said.

According to the law passed two weeks ago, residential rents up to €300 would have seen a reduction of 15 per cent (up to €45). From €300 and above, a reduction of 20 per cent applied, with a maximum reduction in absolute terms of €120.

Commercial rents up to €600 would have been reduced y by 15 per cent (up to €90). For rents in the €600 to €2,000 bracket, there would have been a 20 per cent decrease, but with a reduction cap of €250, including the €90 in the first bracket. Rents over €2,000 would have seen a reduction of 20 per cent with a cap of €400.

Voting on the law- pursued by opposition party AKEL- had been postponed several times. Business groups opposed the bill, arguing the market should be left alone, and warned they would contest the law’s constitutionality in the Supreme Court.

The small shopkeepers’ union POVEK hailed the law which they said would ease pressure on tenants and shopkeepers. A different rent control law already allows tenants to go to a specially set-up court if they feel their rent is unfair. Anastasiades said in his letter this made further legal regulation unnecessary and an intervention on the existing institutions.

Cyprus pariament to reconsider rent reduction law