The Virus & Rental Reductions

June 17th 2020

We are considering what stand to adopt on the proposal submitted by the Traders’ Association and others, regarding the possible rental reductions due to the virus situation.

This is not an easy job and it needs extensive discussions and thought is required as to who will benefit (if reduction) and what will be the basic general (if any) the % on the business people/current rent, on the rental passing etc.

For our part Civil Servants and those of the semi-Governmental bodies, banking employees, those with the minimum Governmental income (E.E.E.) and others including pensioners, should not benefit from any reduction, since their income has not been reduced by a cent (mind you we just got off not to repay these Governmental servants of €800 mil.

Business owners who can show that their business circle is reduced by more than 25% will get support from the state. So, we do not think that it is reasonable to get in addition a rental reduction.

There are businesses that have increased their business operation, such as take away, delivery business, supermarkets and delivery firms should be excluded.

There are businesses which in any case are either closed or no operation during the winter/low season, especially those in the tourist areas. So, when we refer to the 25% income reduction, it should relate for the whole year and not for a special season.

Then we have who will vouch for this 25% reduction. Being the people we are in Cyprus and with a small percentage of businesses have updated detailed audited accounts, the check for the reduction to be certified by auditors, who will bear also the responsibility of correctness.

As a general stand we say that business that will be assisted by the Government, they should be looked upon with some limited sympathy.

Regarding rents and their possible reduction (see Greece with a flat 40% reduction on rentals – shocking), we should differentiate those business/individuals who pay market/near market rents and those who are paying a lower rate than the market level. If we are to take the statutory tenants and for those properties which are let to refugees at well subsidized rental, why should they benefit?

The never-ending non-paying tenants will grasp the opportunity to excuse themselves for not paying the rental, notwithstanding the recent freeze on eviction of 3 months.

Business/individuals who own their own property and notwithstanding the non-payment of rent that the business has used its own cash (see opportunity cost) and/or have borrowed to buy their property, why should they be in disadvantageous situation, as opposed to those who are tenants?

These and other circumstances are not easily formulated and implemented. So, shall we take into account from now on the “personal” circumstances of each tenant and landlord and what will these thousands of landlords do, who await their rental to survive themselves, studies cost for the children and loan repayment? How can assess the “personal” circumstances?

If anyone gets the benefit of rental reduction, it should mean that when the prevailing situation is over, the rents to be returned to their original level and if business improves, will not the landlords ask for a higher rent? (to be fair on both sides).

So that we can start “talking” on the subject, our initial stand is as follows:

• Civil Servants and bank employees those on a fixed salary income from the Government such as pensioners etc, not to have the benefit of the reduction.
• Non E.U. business/individuals not to benefit.
• Touristic business in the tourist areas including hotels not to be benefited, unless prior the reduction of the 25% on the circle of business is proven and this for the whole year – bearing in mind that the winter season they are not operating anyway.
• For residential units the tenants which have not been affected from their salary zero discounts.
• Commercial units/offices to have a maximum reduction of 20% for a 3 month period (unless they get a Governmental subsidy – no firing of staff) and this if they are paying market rents and if business circle is reduced by 25% over the year.
• For those whose income is reduced and for residential units, to get a discount of 20% for 3 months only (depending on their income reduction) subject to the above exemptions.
• Touristic areas and including hotels to benefit with a 15% reduction (subject to the above).
Etc. Etc.

At the end of the day the best solution of course is the possible agreement between landlords and tenants, but bearing in mind human nature, each of the two sides will try to gain/save as much as possible.

This is a start, but so that we can illustrate reduction, as an example we provide the following:

Is an apartment 2 bedroom at Neapolis area (Limassol) with a paying rental of €350 p.m. (current market rental of €700 p.m.) is claiming a 50% reduction of rent because he been affected both financially and psychologically!! The landlord is a retired person who uses his rent in part to cover his children cost for their studies abroad. So, the tenant has stopped paying any rent in order to place pressure on the landlord to accept the 50% reduction – Is this not an exploitation?

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