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Law changes would curb illegal holiday rentals

Massive losses of tax revenue, health and safety issues and illegal holiday rentals could be reduced if the law enabled more homeowners to register their properties with the Cyprus Tourism Organisation.

Illegal holiday rentals could be curbedAN ESCALATING problem of illegal holiday rental properties could be solved, if changes to current legislation allowed more homeowners to register properties, according to the secretary of the Paphos Hoteliers Association.

Euripides Loizides, also a board member of the Paphos regional board of tourism, told the Sunday Mail that although renting out domestic properties in Cyprus to tourists is illegal, changes to the law could encourage homeowners to register with the Cyprus Tourism Organisation (CTO), the responsible body for classification and administration of all tourist establishments.

“We want to bring more tourists in to Cyprus, so why not change the law and encourage those that want to rent legally, to sign up? They can pay an annual fee to the CTO and declare themselves to the government. It’s a chance to change, and help solve this phenomenon. It’s a global problem and its time that the government say ‘rent it out legally.'”

CTO tourist officer, Marios Tsianakas, said changes to the law may be possible, as they are preparing the new tourist strategy for the forthcoming year and are looking at ways of increasing visitor numbers.

“All of the legislation relating to this matter is under review. It is possible that the law could be modified so that the properties may become part of the accommodation product offered,” he said.

Current legislation states that all properties which are used to accommodate tourists must be declared as such by planning authorities and must secure a licence in advance and meet strict criteria. This covers all of the different categories, including traditional houses, apartments, villas and hotels, he said.

A licence is valid for two years and costs between 27 and 51 euros (for a villa with a pool).

For a villa to be considered and licensed by the CTO, it has to be on a plot of at least 1000m2 and have a swimming pool. But, that swimming pool – even though it is for a villa and probably rented out by just one family – must also have a lifeguard to supervise.

This alone is a perfect example of why the legislation is in need of an overhaul, and why homeowners are so tempted to rent their properties without a licence.

Tsianakas said that probably thousands of properties in Cyprus, of all types, are illegally rented out to holidaymakers on a regular basis, with homeowners making the most of the growing popularity of private holiday rental sites available on the internet.

“These properties are not allowed to accommodate tourists and cannot be let out legally.” He added that unlicensed properties can only be utilised for domestic use.

“First the owners have to secure the relevant permit from the planning authority. If approved the authority will make the change of use from domestic to tourist. There are many different types of categories in which properties fall into, we have around 200 registered as independent tourist villas. We realise that this is a very small percentage of this type of property which is being let out to tourists.”

That leaves thousands more unregistered and unregulated. Popular global holiday rental sites show thousands of possible private rental options available all over Cyprus, including studio flats, apartments, villas, luxury homes and traditional accommodation.

These renters are paying none of the taxes that should go to the government and the local authority.

Loizides said that illegal private rentals pose unfair competition to licensed accommodation as they carry out rentals in a ‘clandestine’ manner. He stressed that the dangers of unregulated renting also carry high risks in areas of health and safety.

Owners should have insurance in place and must also be ABTA and ATOL protected.

“The law is crystal clear on tourist renting. You must be licensed and comply with all of the regulations on renting to holidaymakers, including fire and health and safety,” he said. “This is the most important thing, imagine if there was a fire. In licensed accommodation, we have strict regulations. I don’t think that the authorities are enforcing the law enough.”

Loizides accepts such rentals happen all over the world.

“But it’s expensive for us and it’s not fair. It amounts to huge money in lost taxes. If you are renting something out, you are providing a service and you have to pay VAT. You are making a business, so you should pay local tax. Just because you are getting the cash in the UK doesn’t make it OK.”

Francis and Dai (real names withheld) bought their Paphos villa a number of years ago and were informed by their developer that it was illegal for them to rent out their home as holiday vacation property.

“Until we retired to Cyprus a few years ago, we just used it for holidays, as we understood that we couldn’t make an income from renting it out,” said Frances. “Four years ago, a neighbour started renting out their house out to tourists for holidays on one of the rental sites, and it’s been a nightmare ever since.”

The couple said that the house – which is substantial – is full almost all year round with large parties of visitors, up to twelve at a time, obliterating the peace of an otherwise quiet area. Dai said that other neighbours were also unhappy, but that the property owner couldn’t care less.

“One of the reasons we bought here was the quiet residential neighbourhood. We can’t even use our garden during the summer as noise levels can get extreme. We have had to call the police on a number of occasions, but as most of the visitors are youngsters, they have little respect and it gets noisy again once the patrol car has pulled off.”

Tsianakas said that such instances should be reported and that CTO inspectors often need help to secure a prosecution.

The pair may take some comfort in the knowledge that a number of successful prosecutions have been brought by the CTO in recent years, although Tsianakas said he didn’t know actual figures.

“We have inspectors that collect all of the relevant evidence and then we will bring a case before the court. Ideally, we need a person to testify, then we have a concrete case,” he said.

However, in many instances, people don’t want to give a statement and testify, he said. It’s also down to timing, he added, as inspectors have to try and ensure that tourists are in the property when they visit. “Sometimes this is hard, which is why we need the help.”

The tourist officer said that the CTO usually wins cases, and on conviction the penalty is a 512 euro fine and/or up to six months in prison.

On conviction, a court order will be issued to cease the operation immediately. If it continues, a 25-euro daily penalty will ensue and perpetrators could face prison. The court order is very strict, he said.

“It’s hard as we are only a small team of 30 people and all of the licensed properties in Cyprus are in our remit.”

This includes 800 licensed hotels, 3,500 catering and entertainment establishments, 300 travel agencies, tourist guides and beach inspections.

Many of the properties being offered for holiday rental are British owned and are being rented out to British tourists.

Undeclared income may also result in hefty fines, warned Nick Cairns of Blevins Franks, leading advisors in international tax and wealth management to UK nationals living in Europe.

“Always be transparent and declare your income. Our clients always declare any rental income on their tax returns.”

Loizides added that changes to the law are a necessary way to curb the illegalities and help solve the ongoing problem.

Readers' comments

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  • Rip Doff says:

    I bought three properties in Cyprus almost 10 years ago, purely for investment.

    The agents and developers included in their information pack, the likely HOLIDAY rental income from the properties and occupancy levels and recommended the particular developments because of their holiday rental potential.

    The solicitor was aware of this and the bank took the rental income into account when assessing our ability to pay the mortgages.

    So if agents, developers, solicitors and banks either don’t know, or turn a blind eye to, the law, how is someone relying solely on these ‘professionals’ for advice meant to know.

    As for lost tax, not all businesses have to be VAT registerd – just as they don’t in the UK. This guy must think we’ve all bought mega-villas if he thinks the rental income on one property is going to take you over the VAT threshold.

    Equally, income tax is payable where the income earner is domiciled for tax purposes. So any profit (good luck with that if you’ve got a CHF mortgage!!) made by a UK based owner is declared on the overseas property section of the self assessment form and tax paid in the UK.

    And why is he just talking about UK owners – there are plenty of Cypriots, Russians, Chinese etc who are doing holiday rentals too.

    The CTO needs to stop knocking people who are trying to make the best of bad investments and get on with something useful e.g. stop all the building of yet more apartments that, if they get finished, will sit empty or divert business away from existing ones and stop the appalling litter problem on beaches which happens every Sunday when the Cypriots go to the beach and leave everyhing from cans and bottles to used toilet paper behind.

  • Tojo says:

    Like Mr Bunny, we also have had our apartment broken in to at St Nicholas and locks changed by persons unknown but we are aware of other owners who this has happened to and everyone is convinced that it is the developers that are doing this so they can rent the properties out.

    We sought legal advice and we were informed that this is an illegal act and our legal team would produce a letter for us but we feel that this would be a wasted effort as the developers just do as they please and let’s face it trying to get any form of justice would be impossible in Cyprus.

    Instead we spoke to the police and guess what? They aren’t interested but they are obviously aware of these illegal acts.

    WHY WOULD ANYONE EVER BUY PROPERTY IN OR EVEN VISIT LAWLESS CYPRUS WITH EVERYTHING IN SUCH A TOTAL MESS THERE!!??

  • Costas a fortune says:

    Totally agree Birdy, this corrupt island needs a good shake up! There’s thousands of people (in Paphos alone) caught up in property scams yet the Cypriot authorities do nothing at all to help the hand that feeds them. Developers, banks, lawyers could not get away with what they do if this was in England, yet authorities over in Cyprus are scared to rock the boat.

    Once again I urge anyone thinking of buying on this island PLEASE STAY WELL AWAY.

  • Bendybunny says:

    This situation is completely exasperated by companies that break into properties change the locks and rent them out without any permission. This has happened at St Nicholas elegant residence. Trip advisor comments on this are disgusting. I had a phone call from someone purporting to be renting my apartment out going to the reception to complain, they were then assaulted this was caught on video. They complained to the police only to be told they did not want to see the footage and were not prepared to take the complaint. Good luck with any complaint declaring no life guard!

  • Deanna says:

    Sounds like sour grapes from the hotel industry to me.

  • David says:

    Euripides Loizides, a board member of the Paphos Regional Board of Tourism and Secretary of Paphos Hoteliers Association is talking rubbish when he says:

    Owners should have insurance in place and must also be ABTA and ATOL protected.

    ABTA refers only to British tourists, so will PHA ignore other nationalities and ATOL protection applies only to packages which include a flight, so will villa owners have to become illegal travel agents to comply with this one? Does Paphos not want flights with with Thomas Cook, Easyjet, Ryanair etc – as these are not ATOL protected.

    ATOL protection applies only to UK package holiday bookings, not flights booked separately to accommodation.

    Like many ‘officials’ connected to Cyprus tourism, he does not understand his own market.

    The CTO spokesman says they are working on plans for the forthcoming year. IT’S TOO LATE. Most major Tour Operators have their programmes already on the market.

  • Doug Barrett says:

    I am not sure from this article who has actually made the statement contained therein:- ‘Owners should have insurance in place and must also be ABTA and ATOL protected’.

    Having spent 40 years in the UK airline and tour operating business I would strongly dispute this statement on the following grounds:

    ABTA is the Association of British Travel Agents. It is a UK trade body with voluntary membership. It was set up for the mutual benefit of travel agents and their clients so why would an independent owner need this protection?

    Similarly ATOL stands for Air Tour Operators Licence issued, in the case of the UK, by the Civil Aviation Authority. Most other countries have a similar system, I believe. This is issued to ensure that tour operators using air transport conduct their business in a proper manner and is also a protection for the customer in the case of failure of the tour operator or airline which are covered by heavy bonds which have to be placed with the CAA in order to obtain the licence. Again this has nothing to do with an individual property owner whether registered with the CTO or not. Any contract would be between the owner and the tour operator and would not involve ABTA or an ATOL licence.

    Whoever made this statement is firstly scaremongering and, secondly, has little idea what they are talking about.

  • Birdy says:

    Are they saying that they are not interested in properties below 1000 sq m ? So they can carry on renting ??? Our Cypriot Developer who sold us a residential development rents out 30+ properties and doesn’t declare anything………why not make sure all the other Cypriots pay their taxes first like dentists cash in hand no receipt…… Instead they just attack those who have invested in their country……..

  • Dunn Good says:

    Can understand the need for P.L. insurance and contents to protect, but is this not a case for even more ways to stunt tourism.

    If enforcement was increased would not even more people put their properties up for sale, and who would buy them ? what would happen to prices then, no doubt drop even more. If properties were not up to a high enough standard who would recommend them or return to them! I would say this is a natural way to regulate use. Flights to Cyprus are not cheap prices for rental would increase substantially, Spain, France and Italy would be preferable for the Sun.

  • Adrian Wright says:

    Marios Tsianakas should get out more into the real world. I cannot see someone renting out their 4 bed villa with pool for a few weeks in the year and having a “lifeguard” on duty!

    If you have a lot of noise etc. from a nearby rental property and report it to the police, if they turn up and if they take a statement and if it comes to court and if they get fined 500 euros there is a very good chance that you would sustain many hundreds of euros of damage to your property in retaliation. The authorities cannot stop all the fly tipping at Sea caves so they have little chance of organising this brewery party.

  • Uboat says:

    Well well well … they have lost money on sales and now want to fleece the property owners.

    If this is put into place …. rentals will go up and the opposite will happen and the potential tourist that would have gone for a perfectly safe holiday let will look for cheaper alternative and tourism will go down ….. Very short sighted yet again.

  • Mike says:

    …I don’t think that the authorities are enforcing the law enough.”… That statement alone sums it all up. We can have as many laws as any statute book can accomodate but if they are not enforced there really is no point in having them is there.

  • Who Gives says:

    Should this new law go though then it will take out 90% of the rental properties in Cyprus as majority holiday lets do not meet the criteria which I know where this is going.

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