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Revised Memorandum of Understanding full text

Memorandum of Understanding (Cyprus)CYPRUS and its international lenders have agreed an updated 42 page Memorandum of Understanding (MoU) following the troika’s fourth assessment of the island’s economic adjustment programme.

A summary of the key points relating to property are as follows:

The authorities established a Task Force to prepare a study assessing the magnitude of registered, but untitled, land sales contracts and underlying mortgages and to develop recommendations by end-June.

The legal framework in relation to foreclosures and the forced sales of mortgaged property will be amended in consultation with the EC and the IMF and informing the ECB and the ESM, and adopted by end-June, with immediate effect for all mortgaged properties except primary residences (for which provisions will enter into effect by end-December, in line with the adoption of the insolvency legislation), to allow for private auctions to be conducted by mortgage creditors, without interference from government agencies.

Immovable property tax reform

The Cypriot authorities will reform the immovable property tax with the objective to improve the fairness of the tax burden and to increase the efficiency of the tax administration.

To this end, the authorities will:

Necessary legislative changes should be adopted by the House of Representatives by early July 2014, following consultation with programme partners. Legislation specifying the frequency of the mandatory update of the values in line with international best practices should be enacted by Q1-2015, following consultation with programme partners.

In order to ensure a smooth and timely implementation of the new immovable property tax and to minimise the operational risks, the authorities will present to the programme partners by end-June 2014:

The strategies need to be clear and practical, explicitly defining the required steps and resources, and the envisaged timelines.

In addition, the authorities will:

Housing market and immovable property regulation

Action is required to ensure property market clearing, efficient seizure of collateral, and restoring demand. A particular risk arises from legal disputes, which may be due to incomplete documentation of ownership and property rights and the slow pace of judicial procedures.

The Cypriot authorities will:

Further reading

Memorandum of Understanding on Specific Economic Policy Conditionality (May 2014)