THE Memorandum of Understanding between the Cyprus government and the Troika calls for a reduction in the backlog of immovable property sales contracts with title deed issuance pending for more than one year to less than 2,000 cases by the fourth quarter of 2014.
In July, the European Commission published a paper “Macroeconomic imbalances – Cyprus” which confirmed that: “For a number of administrative and regulatory reasons, between 120,000 and 130,000 properties are currently lacking title deeds. The average time for obtaining a title deed is just under 12 years and more than 200,000 owners are affected by this.”
(As there are some 430,000 residential dwellings in Cyprus you can gauge the extent of the challenge facing the Land Registry and Planning Authorities).
The bailout condition to reduce the backlog of deeds waiting to be issued is certainly a step in the right direction and one that should be warmly welcomed. But will it resolve the Title Deed problem once and for all?
Sadly not – although it may be possible to reduce the backlog, it may prove impossible to transfer those properties to their purchasers because:
- Properties are encumbered by mortgages and possibly other impediments that the developer has failed to remove. These properties cannot be transferred until all mortgages and other impediments have been cleared.
- The developer has not cleared his tax commitments and is unable to provide the Land Registry with receipts of payment for Immovable Property Tax, Capital Gains Tax, etc., which the Land Registry requires before a transfer can take place.
In addition to those deeds that cannot be transferred, there are a number of other issues that will result in delaying or preventing their transfer:
- Some developers charge buyers Immovable Property Tax based on a property’s purchase price rather than its 1980 value as defined by law and will often use the threat of withholding Title Deeds to elicit payment. Some have the audacity to add penalty payments imposed on them by the Inland Revenue Department for late submissions and payment.
- The Land Registry inflates the market value of a property and demands that a purchaser pays Property Transfer Fees based on its inflated valuation. This is often considerably more than the purchaser actually paid for the property, and they refuse to pay.
- The purchaser has sold or intends to sell the property.
- The purchaser has not paid the whole of the purchase price.
- The purchaser has died and probate is being sought.
- Problems with ‘tainted’ Title Deeds issued as a result of the Town Planning Amnesty have yet to be faced. These deeds will be marked as suffering from planning infringements and it will not be possible to sell a property with severe infringements. It is unlikely that a buyer will be prepared to pay a (possibly inflated) Property Transfer Fee for a property they will be unable to sell.
No matter how good the intentions of the Troika may be, if the Title Deed system sucks and is not fit for purpose, and if developers and the Land Registry continue to exploit those buying property, no amount of target setting or massaging will fix the Title Deed problems.