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Thursday 6th August 2020
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Title Deeds & the financial crisis

Title Deed Gordian KnotTHE BRITISH parliament raised the issue with the Cypriot authorities’ inability to protect the property rights of UK citizens who had invested in Cyprus properties back in 2007. To their astonishment, these buyers found out that they would get no Title Deed even though they bought the property through a law office (something that in their country implies that you automatically get a Title Deed).

In 2007 Cyprus, no-one involved in the rapidly developing and already large property sector (banks, developers, chartered surveyors, land registry, town planning and municipal authorities, lawyers, accountants, politicians etc.) was alarmed, despite the developing dangers for an economy trying to sell properties. In my opinion, ultimate responsibility for failing to tackle this problem must lie with the government agencies that have the primary responsibility of protecting property rights.

One basic principle for an economy to function well is the protection of a citizen’s property rights. In this case, the property right is protected with the issue of a Title Deed. My fundamental position is that no immovable property should change hands without a Title Deed. With this tough measure in place (which would have forced authorities to ditch bureaucratic procedures because of the large economic cost from failing to do so), subsequent systemic problems would have been largely avoided.

First, in the absence of Title Deeds, reselling a property is difficult, therefore increasing the possibility for an unrestrained increase of immovable property prices. When reselling becomes very difficult, the property market is not allowed to function properly. Not only do prices rise too fast in the good times but in the bad times dangers rise disproportionately due to property illiquidity in a leveraged economy. Second, in the absence of a central credit register, it is more likely for credit from the banking sector to increase very fast in the good times without the central bank having the necessary tools to control credit expansion. Third, the state loses substantial revenue from transfer fees and subsequent property taxes.

The solution to this Gordian Knot is simple, and a state respecting its citizens would not have waited for the imposition of a solution by the Troika. No property transaction without a Title Deed should be legal and there should be a central credit registry. The financial crisis would have been much more manageable were these simple instructions from the Troika put in place back in 2007.

Inability to quickly apply similar changes to the “business as usual” model will bring the next economic crisis to Cyprus sooner than many people think.

About the author

Alexandros Michaelides is a Professor of Finance at Imperial College Business School London.


  1. The good professor’s solution to the Gordian sounds excellent and wonderful future buyers, but what about all those who still are waiting for their deeds. Until the Land registry actually delivers deeds according to the recent laws we are all waiting to find out if this promise will be met and how many excuses will be paid, or return trips to the Land registry, for yet more pieces of paper will be required.

    Recently we were asked to prove we had paid the sewage connection charge in Pegeia, for a sewage system which was never built…….

  2. Peter Davis has it spot on, sadly most ex pat buyers were woefully ill equipped to deal in foreign property markets and probably still are. We still see idiotic telephone number prices being asked for worse than poor property and still someone comes along and pays it.

  3. “Beware of Greeks bearing gifts” – we didn’t heed this old saying and now we’re left with a gift, a Gordian Knot. Wonder what will emerge from this Knot? Cyprus seems to be the only EU country that still hasn’t resolved the property crisis and probably never will. The dust will settle when all the “claims” are finalised. The second phase is the Chinese interest in property in Cyprus, don’t think they’ll be fooled!

  4. Spot on Peter.

    In 2006-7 many people in the UK had spare cash lying around.
    Investing in property was daily national news in the UK.
    Many UK citizens were keen to get involved but woefully inexperienced.
    Cypriot & UK ‘professionals’ saw this & eagerly/ruthlessly exploited it.
    British, Cyprus and E.U governments sat back and said/did nothing.

    Now we are where we are.

    This wasn’t selling a dodgy used car – this has ruined people’s lives and the redress needs to be comprehensive and fair.

  5. To quote..”In 2007 Cyprus, no-one involved in the rapidly developing and already large property sector…. was alarmed”.

    In order to be alarmed you have to understand what is happening. And of course then have be concerned for those caught in the web of lies.

    As my developer said to me as I sat in his office. “You have to realised that if you fail to take advantage of a situation you’re regarded as a poor businessman” Nothing was mentioned about concern, honesty or credibility.

    You then realise that the expats were viewed as suckers who could be fleeced, and they were by all the parties involved. And this with the permission and consent of the Cyprus Government.

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