Home buyers and property investors will be outraged to learn that the Cyprus Government has given them a “one finger salute” by refusing to take action against property developers who illegally demand money from them under the guise of ‘Immovable Property Tax‘.
A widely reported example of this scam involves an 83 year old British widow who has been waiting 29 years for the Title Deeds to her home. She was horrified to receive an Immovable Property Tax (IPT) bill from her developer, Korfi Mountain Estates Limited, for €25,000 when it should have been around €430. Her lawyers are pursuing her case through the court.
The Government’s decision effectively gives the property developers a green light to continue with their illegal practices even though obtaining money under false pretences is a criminal offence.
It also sends out a very clear message to those who are thinking of buying property on the island: “Don’t count on the Cyprus Government for support, you’re on your own!”.
Property tax scam “you’re on your own”
By Jean Christou
Cyprus Sunday Mail – 2nd November 2008
FOREIGN property buyers are on their own when it comes to being scammed on Immovable Property Tax (IPT) by unscrupulous developers, the government has said.
“Immovable property tax is payable by the owner of the property, and details as to payments by the buyer to the seller, regarding this payment, should be detailed or determined in the Contract of Sale between the two parties,” said Interior Ministry official Savvas Ioannou.
Speaking on behalf of the Ministry’s Permanent Secretary, Ioannou said: “This is not a matter where the state can intervene, but if a buyer feels that any term in the contract is abusive, this can be examined by the courts in the context of a civil action filed by the buyer against the seller.”
The Ministry’s response will come as unwelcome news for buyers who have been hoping the government would do something about the issue. Civil action can take years and is costly. The Cyprus Property Action Group (CPAG) has highlighted on a number of occasions that the IPT demanded by developers from buyers without Title Deeds can be grossly higher than what the developer pays to the Inland Revenue Department.
In some instances it can be 500 times as much, CPAG said.
The holder of the Title Deeds to a property must pay IPT annually on a varying scale based on the 1980 value of their property, if it was worth more than €171,000 at that time. Householders who own their Title Deeds are normally exempt, as their homes would not have been worth that much in 1980.
However, developers who have not handed over individual Title Deeds are liable to pay on the total 1980 value of their properties, which may have dozens of homes that separately would not have to pay IPT.
And while developers are paying the state the correct IPT, which can run into as little as hundreds of euros, buyers are being asked for thousands, even though if they were in possession of their Title Deeds they would not have to pay any IPT. CPAG says the developers are pocketing the difference between what they extract from the buyers and what they pay to the state. The group has obtained a legal opinion on the issue, which was given to the government.
CPAG says this has been ignored.
Ioannou agreed that developers should not be asking buyers for more than what is due to the state, but he said that as long as the correct amount was paid to the government, there was nothing the Ministry could do.
“It’s a private agreement. People should negotiate and agree the specifics of a purchase with their developer,” said Ioannou. He said the state had no mechanism to deal with what goes on between developers and buyers.
Ioannou said it was recognised by the government that the current legislation “may be more developer-friendly than buyer-friendly”, since the issuance of separate Title Deeds requires the consent of the developers.
An amendment of the current legislation is currently being examined by the relevant government departments, he said, adding that payment details of IPT should carefully be negotiated by buyers and included in the contract, to avoid any extra cost, problems or misunderstandings.
“A lot of these issues could be avoided if buyers are aware of their rights, or seek proper legal advice before accepting the terms of a contract for the purchase of immovable property,” loannou said.
CPAG’s Denis O’Hare said one of the problems with legal advice was that many lawyers were in on the practice and did not advise clients about IPT before the purchase.
He also scoffed at the notion that the government had no mechanism to deal with the rip-off.
“It’s obtaining money under false pretences, which is a criminal offence,” said O’Hare.
“Obtaining money from buyers that is not correctly calculated on the basis of what they [developers] pay the government is false pretences. This is what our legal opinion says. It’s collecting more than is paid to Inland Revenue. It’s interesting they won’t do anything about it. It’s tantamount to organised crime. They are all in on it,” he added.
Property buyers are so fed up with the lack of interest from the government that they are going to take the whole issue to Europe and have already been in touch with the European Ombudsman. They also plan to involve the governments of foreign buyers.
Copyright © Cyprus Mail 2008
