CYPRUS and its troika of international lenders have agreed an updated 41 page Memorandum of Understanding (MoU) following the eighth review of the island’s economic adjustment programme.
A summary of the key points relating to property are as follows:
Legal framework for private debt restructuring
1.12. All legal, administrative or other hurdles currently constraining the seizure and sale of loan collateral will be removed so that the assets pledged as collateral can be recovered within a reasonable period deemed to be a maximum time-span of 1.5 years from the initiation of the relevant proceedings. In the case of primary residences, this time-span could be extended to 2.5 years. The authorities commit not to introduce any further impediments to the seizure of assets pledged as collateral.
1.13. By end-November, the authorities will present to programme partners revised draft legislation for all future title deeds transfers that:
- ensure that property buyers who have paid the purchase price in full, will have their title deeds transferred without delay after title deed issuance,
- put obligations on all parties involved to ensure that the procedures releasing encumbrances and transferring the title can operate without delay, legal uncertainty and as automatically as possible, and
- provide safeguards against abuse, inter-alia by introducing a mandatory escrow account system that will ensure that all payments related to a property transaction are processed in a safe manner, at low operational cost and without delay.
By end-December, the legislative proposals regarding all non-legacy title deeds transfers will be adopted by the Council of Ministers. By end-January, these will be adopted by the House of Representatives.
The authorities will assess the need for further legislative measures necessary to incentivise the swift transfer of title deeds, including minimum standards for property sales contracts by end-November.
Immovable property tax reform
3.8. 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.
- By Q1-2016, the House of Representatives will adopt the legislation on the reformed recurrent immovable property tax with effect for the 2016 collection, based on the most updated General Valuation for all immovable properties. The new immovable property tax should be based on the recommendations of the study on the consolidation of property taxes, should ensure a broad tax base and should be fiscally neutral, taking also into account the reduction of the transfer fee,
- the House of Representatives will adopt by Q1-2016, legislation specifying the frequency of the mandatory update of the cadastral values to three years maximum from 2018 onwards,
- continue the assessment of the relevance of the parameters used in the Computer Assisted Mass Appraisal (CAMA) model for the General Valuation, on a quarterly basis.
Housing market and immovable property regulation
5.2. Action is required to ensure property market clearing, efficient seizure of collateral, and swift transfer of property rights. 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. Resolving the backlog in issuing title deeds requires legislative action. In addition, streamlining of building and planning procedures, also in the context of local government reform, will minimise the risk of building up new backlogs in the future.
The Cypriot authorities will:
- aim at reducing the title deed issuance backlog of immovable property units from development projects pending3 for more than six months to less than 3,500 units by Q4-2015. To that end, the Cypriot authorities will continue to provide to programme partners analytical data on the stock of backlogs of permits, deeds, certificates, and mortgages associated with the underlying properties and continue publishing the quarterly progress reviews. From January 2016 onwards, at least 3,000 titles will be issued per month to reduce the backlog on remaining projects,
- ensure that based on the recommendations by the working group on title deeds, the following actions will be taken on removing bottlenecks to title deed issuance, and thus
the Cypriot authorities will present to programme partners draft legislation on enforcement and remedy periods regarding non-certified completed buildings, as well as unauthorized works by mid-December 2015. Where parliamentary ratification is required, the corresponding legislation will be adopted by the House of Representatives by mid-February 2016,
the Cypriot authorities will present to programme partners draft legislation to enforce the timely issuance of building compliance certificates by the relevant authorities by mid-December 2015. The legislation will be adopted by the House of Representatives by mid-February 2016,
the House of Representatives will adopt by mid-February 2016 amendments to the Streets and Building Permits law that ensure the timely issuance of certificates of completion by the supervising engineers, also with view to expand self-certification,
the Minister of Interior will issue ministerial decree by mid-December 2015 that defines an exhaustive list of what constitutes unauthorized works, with retroactive effect covering also all past pending cases, ensuring that the rest of deviations will not prevent the certification process,
- moreover, the authorities will present a progress report by Q1-2016, on the further comprehensive streamlining of building, planning and title deed procedures from 2016.
Memorandum of Understanding on Specific Economic Policy Conditionality (Full text – January 2016)