Distortions in Cyprus property sale contracts

THE LEGAL SERVICES AND CYPRUS LAND REGISTRY OFFICE are to prepare a bill that would improve procedures for land purchases in an effort to close numerous loopholes in the system that lead to price distortions and other manipulations.

House Legal Affairs Committee Chairman Ionas Nicolaou of DISY said that maybe as many as 90 percent of the contracts for land transactions do not have the real sale price of the property, which has various repercussions at the expense of the public; for example, the price written on the contract is determinant for the compensation that will be decided in the event that the land needs to be expropriated.

Furthermore, the state’s income in taxes is affected, as are transfer costs. “But the most affected by this situation is the land owner, whose best interests are harmed in the event that the state decides to move ahead with expropriation,” said Nicolaou.

Another significant issue raised is that some have spotted the weaknesses in legislation and are selling the same land twice. As the DISY deputy explained, there have been cases where someone sold his land at a certain price, then realised the value of land had gone up and so proceeded to sell the same property on for more, while compensating the first buyer.

“For example a piece of land worth CYP 50,000 in 1995 and sold at that price is then sold to another buyer at CYP 500,000 with the seller paying off CYP 50,000 to the original purchaser,” said Nicolaou, adding that for this purpose it was necessary to close all such loopholes in the system.

Copyright © Financial Mirror 2007