By Antonis Loizou & Associates Limited – Chartered Surveyors & Property Consultants
IN CYPRUS, the Estate Agents’ law regulates the profession and sets out the rights and duties of the estate agents.
All estate agents must be registered with the Registrar and obtain a licence, otherwise no- one can call himself an estate agent or carry out any of the activities that represent an estate agent’s activities.
There are certain requirements that anyone who wants to become a registered estate agent must meet, including practical and theoretical education, and professional indemnity insurance cover etc.
Because of the newness of the law, there are numerous court cases going on, as to what constitutes an estate agent and what is a commission.
So we find some people claiming that they are not estate agents, but advertisers of property, others call themselves not estate agents, but property finders, other are called property tour guides, others auctioneers etc.
As you can appreciate all these attempts are a cover-up for illegal estate agents who cannot comply with the law’s requirements.
The commission charged by an estate agent is deductible for income tax/capital gains tax purposes. As such, if you sell your property, the tax authority will not make an allowance if a commission (however, this is named on paper) is paid to a non-registered estate agent.
New attempts are now being made by the Registrar of estate agents to exclude from income tax deduction the various other “illegal” commissions and to make it not only non-deductible, but also an illegal act (with possible imprisonment) for both the seller and the illegal agent.
Various receipts given for “services rendered”, “repairs”, “advertising fees” etc, are now to be strictly scrutinised and checked against the illegal estate agents’ activities and income tax returns.
So if you want to deal with an estate agent, make sure your dealings are with a registered estate agent. The estate agents’ law sets out that the commission, if not agreed, is set at 3% on the concluded sales price. An agreement could be made however for a commission to reach 5% and anything above this level, whether it is in writing or not, is not allowed.
As you may have noticed, however, most of the foreign estate agents charge a commission of 10%-14%, whereas some local developers offer an increased commission (in excess of the 5%) in order to be given priority.
We are always very concerned when we receive invitations for a 10% commission, since we know very well that the prices are increased, in order to cover this exaggerated commission.
In general, the prevailing rates in the seaside/tourist areas are set at 5% and for inland proper- ties (e.g. Nicosia) at 3% (V.A.T. in addition). The commission is always paid by the seller, independently whether the agent has been appointed or not by the seller. Unless you strike a deal with an estate agent we suggest you:
- Agree the commission.
- Agree whether it will be on an exclusive (not suggested) or a non-exclusive basis.
- Agree on the period of the appointment.
- Make clear whether the agent is allowed to place a “for sale” sign on your property.
- Clarify who will pay the advertising cost.
- Agree as to when the com- mission is paid (usually when the 25% of the sales price is collected).
It is at times rather difficult to determine whether the agent is entitled to a commission or not.
The several UK and local common law cases, do not give a clear indication and it depends on the circumstances of each case. However, there are certain indicative court decisions, which, we believe, are useful to note.
- You need not appoint an estate agent to sell your property, if you accept him to show your property around. If a deal is concluded the seller is liable for a commission.
- A mere introduction of the property to the buyer is enough for the payment of the commission and this responsibility exists and is not related to the work and expense involved by the agent.
- There is no time limit in terms of an interested party’s awareness of a property and its concluding date. So if an estate agent introduces a buyer and the deal is concluded two years later, the agent is entitled to his commission.
- If the same client is introduced to the seller by more than one agent, it is the first one who is entitled, although this will depend on the circumstances (e.g. if the first one could not conclude the deal and it was the second who did, then it is the second who is entitled). It is best in such cases to inform both agents that the buyer was brought in by another agent as well.
We are not claiming that all registered estate agents are correct and straight with their dealings and like in any profession, there are the good and the bad. At least, however, if you deal with a registered agent and not a “cowboy”, you know that you will have a legal right against him, some- thing which you do not with the others.
Lastly, we wish to point out that British estate agents need not have a permit of any sort to act as such in the UK. The Department of Trade however can issue a court order against a fraudulent agent not to exercise his business in the UK and provided the fraud is carried out in the UK and not (say) in Cyprus!! Does it remind you of the James Bond film “Licence to Kill” … … (but we could add) outside the UK !!
Copyright © Cyprus Weekly 2006
