OUR sales team has noticed that foreign (in particular) buyers demand that a Title Deed be issued prior to proceeding with an acquisition. This is very logical and understandable.
Yet there are numerous units/projects which have a Building Permit, a Certificate of Final Approval and the seller even offers a bank guarantee the titles will be issued within a certain period, a mortgage release, etc., as well as helping with the financing of the buyer.
Yet, buyers, most notably in the Paphos region, where the Property Action Group has produced such alarming reports (some of them quite justified, others not) that even sellers who are “clean” have a problem.
The same situation does not apply to other towns and based on the parameters that we have given to potential buyers under our “10 Building Commandments” (visit our web-site) there is still a problem.
An exaggeration and an unreasonable demand, but on the other hand the “no title” slogan has been driven into the minds of buyers.
So, we are aware of the delays regarding the title issue etc., but if you are offered a bank guarantee, stipulating the date of issue of the titles, we feel that this is in some cases practically better than the title issue, since you get your money and interest (on top of the use of the unit for x years before) if the titles are not issued. So where is the problem?
Some people who got a bank guarantee are using this as an excuse to get their money back at times they know they cannot sell their unit even at the original cost. We have a buyer in Limassol who bought his apartment for €120,000 with a bank guarantee for a date of title issue, the titles were not issued on time with one year delay (they are at the Land’s Office and expected to be issued say within 12 months).
He called in the bank guarantee which with interest etc., came to €150,000, he got the cash and he is still holding the apartment which he is renting out. So, for an apartment now worth say €200,000, the buyer got €150,000 in cash, is still renting it and can sell it for €200,000!!
Bank guarantees should, in addition to the original purchase price and interest, contain a clause which should say that if a buyer wishes to call in the bank guarantee, he should return the apartment to the seller, otherwise it makes no sense.
Have we gone the other way during these difficult times with unreasonable demands? And if a “developer” is under such bank guarantees, with the buyers claiming them and living at the same time in the unit, will he not go under (How is he going to pay the bank guarantee to the bank if he cannot sell the property)?
In addition, if he has mortgaged his remaining assets, which are not affected by mortgage at all, but the bank cannot get a refund from the seller (since he is not able to sell the property) will the bank not freeze the developer’s other assets, and as a result create problems for unaware and free of mortgage property owners?
We wrote to the bankers association that the issue of unconditional bank guarantees was wrong. We wrote also to the Governor of the Central Bank on the same subject, indicating also that at the end of the day, this situation will cause a number of banks to collapse, with a knock on effect on their profitability and its shareholders. Who is listening, however? Lack of knowledge, too busy to look into details and indifference, as well as non forward thinking, are a recipe of disaster for everyone – banks, sellers, buyers etc.
As we have said, we wrote to the Governor of the Central Bank, he has appointed a person to look into the matter, we have explained the situation to this person and he promised to come back to us (year 2009). We are still waiting! We know that this is a siga-siga (slowly-slowly) country, but then don’t you think that there is a limit somewhere?
We, as an office, cannot have a fight with the establishment on all fronts on our own, notwithstanding the fact that we have the support of a number of our readers and the public in general (for those who listen).
By Antonis Loizou, FRICS
Antonis Loizou & Associates Ltd
Chartered Surveyors
Property Valuers – Project Managers
Email: ala-HQ@aloizou.com
Web: www.aloizou.com.cy
Editor’s comments
Readers may obtain a copy of my ‘Golden Property Commandments’, which describes how to avoid the potential problems associated with buying property in Cyprus, by visiting the Free Publications page.
