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Saturday, May 30, 2020
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Using our apartment as collateral for a loan etc

WE PURCHASED an apartment on the ground floor of a three-story block of six and were told that Title Deeds would be forthcoming in no longer than six-years which at the time we thought was fair because we had heard ‘the’ horror stories.

However, what we did not know, because we had never had a property where title deeds came in to question before were the limitations involved in not having them; and so failed to ask the right questions by omission.

For one, we planned to use the collateral of the property, which we own outright to form a small business in Cyprus – but I am informed that as we do not have title deeds this cannot be done?

Secondly, I would like to build a structured awning over the patio area for purposes of sun and rain which eventually we would like to completely enclose and make into a conservatory sitting area (though the latter could take some time), but as we have been here three years, and have another three to wait before we (hopefully) receive the title deeds; another (relative tenant to owner) of a property two stories above ours has said that any of this will somehow frustrate the obtaining of the deeds (and from this I assume she also wishes to oppose it (as she is no oracle or lawyer) – if she can?)

Can you tell me if this is all true / false?

I also beg to ask further that am I right in thinking that as our contract of sale (a legal document) states the that the deeds will be obtained in no less than six-years (and such was an undertaking by not only us, the Developer and the Lawyer) that should they not be forthcoming in due order then it will not cost me further to ‘chase’ them and it remains the responsibility of not only the Developer, but the Lawyer to make good on their promise?

Finally, could you clarify if there will be (and what) charges when I finally do receive the Title Deed from the Land Registry?

Answer

Raising money using your property as collateral

Unfortunately, as you do not have the Title Deeds to the property you have bought, you cannot use it as collateral to raise any form of loan from a Cyprus bank – including one to start your own business. Even though you may have paid for the property in full and have been living in it for many years, you are not considered to be its legal owner until its Title Deed has been issued and transferred into your name.

As the Cyprus banks will not grant mortgages on resale properties without their Title Deeds, this also becomes a problem if you wish to sell. So even if you wanted to sell your home in order to raise the money to start your business, you’d need to find a cash buyer (and you’d also need the consent and active involvement of the legal owner of the property; most probably the developer from whom you bought it).

Making alterations to the property

Before Title Deeds are issued, inspectors will visit the property and check that it conforms to the various planning & building permits issued for its construction. If there have been any planning infringements, such as changes to the external appearance of the property by the addition of a permanent awning, a swimming pool, or garage, etc., then the authorities will not issue a ‘Certificate of Final Approval’ until the infringement has been corrected and the property has been re-inspected to ensure that everything is OK. Note that this ‘correction’ may require the demolition of any unauthorised additions or changes that have been made.

As the ‘Certificate of Final Approval’ is required by the Land Registry before it will issue Title Deeds, any unauthorised additions and changes will result in delays in their production for the property concerned and for all the other properties covered by the original planning application.

If you wish to make some alterations, you need to discuss them with your developer; as he is the legal owner of the property, only he can submit a planning application. If he agrees he will need to submit a revised planning application to the authorities showing the changes. This could be quite expensive as he will need to prepare and submit a set of revised drawings and documentation. The bureaucratic delays involved in getting these ‘cover’ permits, which could be two years or possibly longer if there are problems, will also delay the production of Title Deeds for yours and all the other properties covered by the original planning application.

But once you have your Title Deeds then you can apply in your own name for the changes you wish to make. However, if you decide to break the law by making unauthorised changes and someone blows the whistle, the authorities may instruct you to demolish them. And you would also run into problems if you ever decided to sell.

(But regardless of whether your neighbour likes the changes you wish to make, they cannot object providing you have secured the required permits).

Title Deed delivery date

All of the contracts I can remember seeing contain clauses giving the date by which Title Deeds should be available; these clauses are virtually worthless. Even though your developer and lawyer can do everything in their power to secure the Title Deeds within the time stipulated in your contract, huge bureaucratic delays in the Land Registry mean that the developer cannot be held responsible.

(And if you’ve read some of my earlier ‘Oracle’ columns, you will know that the more nefarious property developers extort money from property buyers using various forms of deception until such time as the Title Deed is registered in the buyer’s name).

Land Registry charges

Yes, there will be charges when your Title Deed is finally ready – ‘Property Transfer Fees’.

If your lawyer deposited your contract of sale at the Land Registry within 60 days of you purchasing the property, these will be based on the assessed market value of the property at the time of your purchase. The assessed market value may or may not be what you paid for it; there is a Valuations Desk at the Land Registry and if they believe you paid less for the property than it was actually worth, they will adjust the value on which your ‘Property Transfer Fees’ are calculated.

Property Transfer Fees are based on a sliding scale as follows:

3% – on the first € 85,430

5% – on the next € 85,430

8% – on the remainder

So for a home costing € 200,000, the Transfer Fees would be € 9,165.60; for a home costing € 400,000, the Transfer Fees would be € 25,165.60.

If your Contract of Sale is in joint names (e.g. a husband and wife), the lower rates are granted to both parties, i.e.:

3% – on the first € 170,860

5% – on the next € 170,860

8% – on the remainder

As a result, the Property Transfer Fees for a home costing € 200,000 in joint names would be € 7,457.

I hope that answers your questions.

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