As we are gaining experience on the insurance covers and the various tricks that the insurance Cos come up with, we will report to you a new experience on the subject of insurance.Firstly and based on our previous report on the same subject (insurance Cos tricks and illegalities) we had a visit from the administrative staff of the Association of the Insurance Cos. We were informed that provided the property is correctly insured (not under insured) the insurance Co will cover the replacement cost of a similar quality without deducting wear and tear.I have asked for this to be put in writing because the depreciation deduction appears that it is widespread used by the insurance companies, based on our readers’ reaction. So, for those who dispute the depreciation claim could take the insurance Co to court and ask the court to be present the association as a witness (will the association go against its members who are the insurance Co – in Cyprus??).Regarding the subject of bad workmanship as a result of which the insurer suffered damages, its validity will depend on the insurance Co’s surveyor’s report. For this reason and if you have such a claim against you, ask to get a copy of the surveyor’s report, which you may dispute using your own consultant on the subject. Getting a copy of the insurance Co report is therefore a prerequisite.We came up with another innovative claim by the insurance Cos that is that of third party insurance. It is highly recommended that you get an insurance cover to pay any damage caused to a visitor to your property. A simple fall down as a result of protruding tiling, protruding pavements etc within your cartilage etc etc could give a cause for anyone who suffers damage to seek payment of damages. The cost of such cover is not much, whereas the law suit/damage sought could run into thousands. The cause of the “neglect” on behalf of the insured must be doubted and for the injured person to have exercise due care himself. So here you are – the odd situation is that the insured resident/himself is not covered, be it that all others are covered. Did anyone know this? It was explained to us by an insurance Co that not only the insured/owner is not covered but also his wife, children and other extended members of his family etc. We have asked this also to be put in writing, so that people know the insurance policy short falls. On this point we had a case some time ago where two young boys entered the ground of a house illegally and used the pool as a result of which one of them got injured. End result the insured had to pay damages? So trespassers are the responsibility of the insured?In an odd case the property belongs to a company, the ownership of which belongs to the insurer (in shares). The insurance Co claimed that because the insurer was in effect the owner the insurance Co was not liable for payment. The insured claimed that the Co and himself are two different legal entities and the insured in such a case had nothing to do with his Co. He (insured) claimed that he is also shareholder of the Bank of Cyprus, Louis, Group, several insurance Cos etc (be it small shares) and wondered that in the event he suffered any damage in such buildings etc, if he is covered or not.The last case is that we came to know that whereas a person with a full comprehensive car insurance, in case of an accident, he is not covered himself (be it everybody else). This last information and the others can be covered with a small additional amount say €10-€20 p.a., but has anyone been informed about this? The claim by the insurance Cos is that “you should study the contract”, but then should not the insurance provider explain all these odd things to the insured? What is the responsibility of the Registrar of the Insurance Cos?Is it not the “duty of care” of a provider to explain fully the pitfalls, as well as that of the Registrar of the Insurance Cos to make sure that the public at large understands and the Insurance Cos are not hiding behind legalistic expressions and small prints that are not usually understood.In ending, please read this. A house duly insured for fire suffered some damage and it was almost burned down because the neighbors decided to burn the weeds and clean their plot next door. He was informed that “he is lucky” because the contract stipulated that he the insured) ought to clean a distance of 3 meters around his plot perimeter!! So that we understand it, this means the employment of a labor force is a must unless you insure for this eventuality (in addition of trespassing into the neighbors’ property!!). God help, we say, the unfortunate insured who seem to believe that his insurance cover is all fine!!
We seem to follow the Irish example on the ways to correct our economy and many of the steps undertaken in Cyprus are a copy of Ireland’s measures.The more recent one is the incentives that the Cyprus Government has introduced in order to provide Affordable Housing, both for rental, as well as for acquisition purposes. The lack of development over the recent years (post 2013) suitable mainly for the middle income groups/locals, as well as the increased demand emanating from the students housing demand, Airbnb and restricted financing to home buyers etc, has increased demand for rentals, which, according to the Ministry of Labour statistics, caused rents to increase by 30%-40% in Limassol and Nicosia over the last couple of years. So the Government came up with the idea of providing incentives to make the development of affordable apartments/housing and units to let attractive (in order to increase supply and satisfy demand).We have examined the incentives and we have published in detail in the local Greek press why we think that the measures are not enough and imaginative (whereas on some occasions are contradictory) in order to help the situation.Basically the incentives on the one hand provide increased building density, so that more units can be provided on a certain plot, but then it places numerous restrictions and limitations, so at the end it is a “gift without substance” (as we say in Greek).The main cause of the housing shortage started 15 years ago, when some theoreticians from the Planning Department decided to fix the minimum size of apartments/houses, depending on the number of bedrooms. So we ended up for a 2 bedroom unit to have a minimum size of 100 sq.m., a 3 bedroom one of 120 sq.m. and so on. Instead of letting the market demand express the wish what people want/can afford, we ended up with units around 20%-30% larger in size than what people can afford – hence one of the reasons of the problem.Quoting again the ex-minister of Environment of Ireland, who declared that “we should build houses that people can afford” (affordable housing) and following their experience, we have (as Government) now waken up to the facts of life and reality. We objected to the fixing of housing sizes 15 years ago and every year 2-3 times we remind the Government at the time how wrong this was. Now we are faced with non-affordable housing and even with the incentives given, the Government came too late to cover Cyprus needs (especially for the younger generation and the lower income groups). Such hopefully incentives/new projects will not come into the market earlier than 2-4 years and in the meantime the shortage of affordable housing will become worse (a similar situation exists with the non-workable common fund law for which we object regularly in the press as well as through direct contact with the Interior Ministers at the time - 10 years ago and keep going in hope of correction).We are annoyed and angry about the stupidity of our own “experts” on the subject and we have even proposed to have those in charge and with deaf ears to bear some sort of a personal financial responsibility and or letting them go from the Civil Service.The creation of incentives for affordable housing should be compared in a cost/benefit analysis in order to ascertain if the incentives will work and reach the desired goal, or they stand to fail (as we expect).In this article we do not provide the full analysis as we did through the Greek press and we have also addressed to the Ministry of Interior, as well as to the political parties (we did the last with respect because this is not necessary a political issue, but more of a common sense one).We live in hope dear readers, but even our own hope is fading away (be it that we will not stop nagging and criticize the attitudes, including the independent technical groups, such as the Architects Association, planners and others who have a role in this – but keep indifferent-quiet. To our criticism we include the journalists who do not appreciate, it seems, their power and affect they have through their publications on corrective measures needed. It took one month of reporting in the local media for the Government and political parties to wake themselves up and to face a problem that is in existence for over 7-8 years.In our original article on the matter (since 2018) we have asked if the Irish Government could lend us its Minister, who come up with this idea of affordable housing to teach our thick headed planners and others how the job is done.
We can tell you it takes a lot of courage to do the job with the intention not to provide profit for themselves, but to improve and operate one of the local land marks in Limassol. We report from time to time in this paper about our disappointment of a sector of the younger generation that it is not all the best. The crime rate is particularly high during the ages of 16-30 years old and most crimes have drugs as the underlying factor, problematic families and even the pampering of parents, who, by spoiling their children they think then (the children) that they can get away with almost everything. The football hooligans and the throwing of eggs on passing tourist buses at Pafos are some examples. Yet the new requirements for ID of the attendants has reduced this. The hooligans percentage is not large but it is there to be noted. Education standards in high schools is not what it should be, admitting that our education system with the aged and out of date teachers (with their primary concern the money) being one of the primarily reasons (teachers etc are appointed based on a waiting list, with no other major criteria other than the waiting time, with most teachers reaching 45-50 years old by the time they are invited to teach. This low standard even had the Czech Republic and Germany to warn Cyprus that they will not recognize the school leaving certificates for admission to their universities, whereas even the Cyprus University is admitting students with very low grades with approximately 20% of the newcomers scoring less than 50% of the minimum score set by the same university. The number of qualified Cypriot people is very high, but one must also examine their standard, whereas the lack of knowledge of the professional English language is most shocking (even those who attend local English teaching colleges and universities).Alas, there is a ray of hope for this country which has as a basis part of the younger generation. If one examines who attended the Syrian refugees, he will note that most volunteers were young people. The more recent one and regarding real estate matters however is a group of young people mainly architects/engineers, town planners who got together in order to clean up an ex shopping mall project, out of use for years in Limassol, all sorts of debris, from dead pigeons to syringe etc. The clean up using their own labor fully equipped with mops, buckets, cleaning chemicals etc is progressing. The project known as Fysco Lotus Plaza originally designed as a hotel and later converted into a shopping mall accommodating over 150 units, failed in its operation and left for the last 20 years to its fate. We, as an Office, managed the development/sale of this project into a shopping mall and notwithstanding its initial success, the “curse” (the non payment of the common expenses) ended the project to fail, in addition the lack of attraction of magnet outlets.We have participated partly in the effort of these young people idea, of turning the mall into a young people business hub. The idea was to have at the basement level one large supermarket and retail with low cost clothing outlets, the ground/upper level with small offices with common entrance and common reception and secretariat and the first level small retails/restaurants/pubs etc for uses suitable for the younger generation.This and other ideas by this young group is under discussion in order to make the Fysco Lotus Plaza “viable” by inviting investors/users/existing owners to turn the project as a young people business hub. We can tell you it takes a lot of courage to do the job (with no charge) with the intention not to provide profit for themselves, but to improve and operate one of the local land marks in Limassol. The group offers various initiatives such as inviting Limassol people to visit and note the change and this in hope to attract interest. To this end the Municipality of Limassol is all for it and this is most positive. This exercise however it is not as straightforward as it may sound. The units are owned by various people, part of the units are under tenancy, whereas evicting some remaining illegal occupiers and others will require legal procedures. We believe that it is a model exercise requiring Governmental and possibly E.U. assistance, both in terms of funding and legal guidance – most difficult (and at the end it did not materialize to date).These young and romantic people must not be left on their own however and Governmental assistance is required, especially by the Ministry of Labor, that of the Ministry of Industry and the Ministry of Interior. The use of a fund coming possibly from E.U., will be a major boost as well as the assistance of Sir Stelios H”Ioannou foundation.A generation of young people to be proud of and an example for others to follow.
The relatively new way of let (Airbnb and others) seems to be increasing worldwide, whereas the recent report by the International Auditors KPMG refer to an increase of 48% in demand for Cyprus over the year before.It seems that demand is not directed solely for holiday/beach locations, but it is extending to the non-beach locations (Nicosia included) including locations in the centre and the old cities.It is a lucrative income for suitable location and quality and reflects the services offered. It produces an income well above the ordinary lets which (income) in most occasions are concluded through the internet and most likely without income tax declaration and pay. Be it illegal, this is how it is at this point of time (worldwide mind you). Based on the information that we have, occupancy rates can reach 50%-60% of the total year and depending on the services, it can produce an income of €70/per day per bedroom. So, on average the income (say 1 bed apartment) will produce an annual income of ±€13.000 p.a., a figure well above the ordinary year’s let of ±€7.000 p.a.All in not “gold” we are afraid and lets of such a nature including letting (website) costs of around 15%-20% (unless one has its own website) plus another 20% for damages, management, insurances etc. There is now a rather sudden upsurge of demand in the Nicosia Eleftheria Square periphery, as well as within the old towns locations. Compared this with hotel accommodation cost, it makes such short lets quite attractive for the tenants. Such lets take a lot of time to manage running after the tenants and the units upkeep, irresponsible tenants with over occupancy of people (recent example of one bedroom apartment let but in fact there were 4-5 people stay) with all night parties, loud music/noise and bad language are some of the drawbacks. Landlords must have a person in charge not only to deliver the property, but also to take repossession of the property once the let ends, check irresponsible use of facilities (on another occasion the a/c units were working the whole day, notwithstanding the non-occupation of the property), complains by neighbours etc.For those who have time in their hands these sort of lets can be a job for them to do and it takes an effort to manage and maintain their units in a reasonable state of repair. On a recent USA report regarding short lets regarding New York, the report recorded tenants leaving the apartments with furniture and equipment taken away, others were actually subletting to unknown third parties and so on. Not everything is done through the internet and physical presence of the landlord is require quite often, whereas landlords must have some sort of a technical team to repair and fix damages/non-working equipment etc. These type of lets require a higher insurance premium (must declare your let with your insurance Co) whereas certain items are still pending, such as the recent proposal to charge such lets by 20% for income tax purposes, VAT (not as yet clear 100%) and so on.Provided one lets out and runs a business in a “proper” way (regular cleaning, good quality furniture, looking after the tenants’ requirements, offering a present e.g. a bottle or two of wine/fruit every week etc it will not be a miss. A client of ours who has for let his 20 apartments in Limassol (in various locations) is very happy with the reservations, but then he adds “I am out and about most of the time”.This new type of lets for Cyprus is extending mainly for apartments/studio for which there is an increasing noticeable demand, be it that for such units should be offered with internet/wifi etc, as well as better quality furniture.The more popular season lets of such a nature, are villas near the beach at the Protaras/ Famagusta region, as well as for Paphos. Shorter period of lets than the towns, but at a higher income per day.This is an extension of the innovation that exists to exchange one’s unit with another within the same or another country or otherwise. It is also evident that the more people stay in a unit the lesser their cost (which is much less than a hotel accommodation) and since the cost is the main criterion – most important for the younger generation, the clients to let are of the younger age ranging from 18-30 years old (with the related problems). For office lets the situation is better, but it is not as yet fully operational in Cyprus.For our part and unless you have time on your hands we suggest that you do not go for such lets, unless you decide to make it an organised business and have the time to run it.
Not a long time ago, we, as Cyprus, had to face the protests of the local Property Action Group. A Group which was set up by foreign buyers mainly to place pressure on the Cyprus Government and through the E.U. to correct the wrong doings of the Cyprus Real Estate Market. We supported the Group because it was correct in its reasoning and stand and because the Government at the time did not respond timely to the wrong doings. This “adventure of correction” is not fully behind us, but it helps to raise public awareness, get Ministers and others off their chairs and do something about such matters. Indeed something was done be it not good enough and even now after 3-4 years from the peak of the protests, discussion is still going on.Following this we are now faced with a new confrontation against the “Government” for not protecting those who suffered damages as a result of soil subsidence in the Pissouri and Armou areas. Our non-timely responding Government and various theoretical solutions suggested by the Cyprus Technical Chamber, brought up again new protests by the unfortunate buyers (who like the previous group comprises mainly of British foreign buyers). We offered a possible solution (published in this paper and duly provided to the Ministry (of Interior) which (our solution) could form some sort of basis of discussion in order to help out.We do not agree with the Auditor General’s report that the Government has on the one hand approved the structural designs of the building, but “because this approval is more of a typical one, the Government has no responsibility”. No, we disagree and we believe that the designers of such projects are the main reasonable and by projection we blame the Government by approving such designs without checking (otherwise why submit and seek approval by the Government). At the same time we disagree with the affected peoples’ protests defaming the island in international property exhibitions etc, as this will hardened all sides stand, making the reaching some sort of a solution more difficult.This is a primarily private case between buyers/developers/designers with the Government bearing a reduced responsibility. Also we indicate the responsibility to the buyers’ legal advisors for not providing safeguards to protect their clients/buyers.Also the same group raises the question of loan finance by local banks in Swiss francs which increased in value in relation to euro. We do not see here how the Government is to blame, since this was a normal practice (at the time) for all sorts of business, bearing in mind the low interest rates loans as opposed to the loans to be changed into euro loans. From what that we understand this is again a private agreement between the buyers and the financing banks and in our opinion is that it cannot be the Government’s blame (be it that the loans not being business ones, the Government could try to help by encouraging the banks to reduce their demand – not really within the Government’s authority to do so, but at least it can help if nothing else by supporting the buyers and give them a feeling of comfort. Of course we disagree that for such matters Cyprus is to be held responsible for private deals that go wrong. There is a mutual protection agreement regarding foreign investments in Cyprus, but as we have seen with the Zambian bank and the Vgenopoulos case, it is very difficult to succeed. We do not see how “corruption in Cyprus” comes in in the sense how this is related. We had an experience when a buyer has bought a property, deposited his sales contract with the Lands Office, he did not met his payments and the developer through the Courts cancelled the sales contract, re-took possession of the property and sold it to third parties. So by reporting an one sided view that deposited sales contracts cannot offer a protection, is not correct and it gives a bad impression/misinformation. Real estate developers/agents and others are not “angels” as we say, but neither are the buyers, coming up with all sorts of excuses (some very innovative) however not to pay or claim back part of the sales price (a more recent one is a British buyer at Pissouri – no problems – regarding soil subsidence who having the property transferred it on his name, duly extended the property with added buildings ignoring the developers/administrative committee views and stating that “I am the owner of the property and I will not let anyone tell me what to do”!!So not everything in such cases is black and white, whereas the demolition of non- license projects that took place in Spain a few years ago for unlicensed properties is a case in hand that similar problems (be it unrelated) happen elsewhere.In ending one is the goal for us, to find a solution and without talking to each other it will not help of course.
It is difficult to appreciate the living requirements of people to their full extent unless and until one meets the circumstances that they are experiencing. We refer to people with mobility problems in particular, which, as a result of our own recent accident have come to know. We concentrate in this article on own house design and facilities to be provided/are required. Usually people who buy-erect their own house are on the average age of 30-40 years old, an age with limited medical and other problems and with death and other limitations seem to be a long time away.Ideally one should build a house at one level (ground) but then bearing in mind the small size building plots that we have (±600 sq.mts.) this takes up much more land, reducing the garden size etc than otherwise.You will notice however that even with single storey units, architectural features come in, such as split level floors, sunk/elevated kitchen and guest w.c., steps leading to bedrooms etc. Yes they add to the appearance but at an older age and/or with children, these steps become both problematic and dangerous. This problem escalates as age/living years is extended (expected life spam in Cyprus for men 80 years old and women 85 years old), whereas young children require increased vigilance and the installation of various gadgets (e.g. gates-cameras etc).As we come to know better and after the necessary installations of pools, we are now incorporating in the design private lifts. Regarding the swimming pools and with special regard to children/immobile people, the pool should have a maximum depth of 1.50-1.80 mts. at one level. No diving board and provide steps access which are better than a ramp (it takes more space) with a handle (two ideal or at least one and steps).Regarding access on upper/lower levels, make a provision (if not of immediate need) for a private lift (with large door opening to cater for a wheel chair). Yes it can be expensive (provision cost €10.000 and final cost €30.0000), be it a lift of hydraulic design. Alternatively and should you consider this as being expensive, opt for an electric chair which costs around €8.000, but make sure that the stairwell is wide enough for such an inclination to be accommodated.Of course there are many other parameters that we should take into account depending on the requirements of the individual and care is required especially for buildings on uneven ground surface and the actual access to the house from the road.As we have reported the majority of house builders/purchasers are at an age when these special facilities are not of priority, so it is reasonable that the resultant increased costs (inevitably) will not be compensated fully by a potential future buyer.So we are getting wiser as time passes and own/others experiences are appreciated. For our part we refuse to go/visit w.cs. on 1st floor in a restaurant or in basement – not worth it, better opt for another place.
We are at a loss dear readers what are the new VAT provisions all about. We have read the law over and over again and we have attended one lecture on the subject given by one of the international auditors, but we still cannot profess that we understand fully the provisions. What we are somewhat clear about (not 100%) and a subject which may be of particular interest to foreign residents regarding rentals and land purchase is as follows:Residential properties let out will not bear a VAT (+19%). Commercial properties if let post to 2018 will bear the VAT charge unless the landlord declares upfront that he does not wish to have this charge. No major harm done, but if VAT is charged, it is so only if the tenant is a VAT registered, so that he can claim the VAT back.The law refers to the exemption of the residential units but there is a confusing proviso that the property is not to be placed into “an economic activity”. So, what does this mean? If a house is let as holiday/seasonal/ daily let and/or on a Airbnb is this not a business activity, be it a residence? If our understanding is correct, VAT should be charged, increasing the rental by 19% (will this not put off prospective season tenants who are not VAT locally registered?).Buying a building plot will bear a 19% VAT charge if bought from a person/owner who is dealing with development/real estate business. So, two adjoining plots are for sale, one from a developer and the other by a private individual who does not do this (sale of plots) as a business the second plot will be less 19% from the first!!Confusion is going on however if a private individual sells a plot without VAT situated within an area where nearby a developer is selling similar plots with VAT, then the VAT authorities might charge the private seller also with VAT for “avoidance” of unfair competition”!!Bearing in mind (be it not clear) that in case VAT is paid by the buyer, he will not be liable for the transfer fees (so out of the 19% charge a reduction by approximately 4% transfer fees - net cost 15.if someone buys a plot in shares (e.g. a Co owning the plot) no VAT is charged.Because developers will sell you a plot with a 19% VAT but then they can claim it back, they will be in a more competitive position than a private individual who will pay the 19% with no refund. So if one appoints the same developer who sells you the plot to build your house with a total VAT charge of 5% (main residence) he will be in a more competitive position than building yourselves your home?Even those consultants who gave us the lecture did not fully understand as they have no answers to all the questions and it will take a while say a period of at least 6-8 months to clear the situation. The VAT authority says for any enquiry should be addressed to it for clarification. Bearing in mind that the Governmental Departments do not answer within the same day, but more likely 2-3 months, so what happens in the meantime? Will the seller hold back the property until the authorities decide? If then there is a sales contract and no VAT is charged what will the situation be if the VAT authority decides afterwards that the 19% should be charged? Nobody knows at the end dear readers what is happening and the situation is not clear also regarding agricultural land with the only clear exemption for certain categories (agricultural zones, Natura areas etc). We will come back to you as added information is received.
It appears that there is an increasing rate of title issue and this without the affects of the Building Amnesty.Be it with some years delay (approximately 4-7 years after completion) titles are being issued. This positive development has brought up at an increasing rate some problems that are related to the transfer of property.Transfer Fees These are calculated on a scale as follows:Market Value%FeesCumulative Fees0 - €85.4303€2.563€2.563€85.431 - €170.8605€4.272€6.835€170.861 and over8 Discount on transfer fees:No transfer fees are payable (at present) if VAT was applicable/paid at the time of purchase of the property.Transfer fees are reduced (at present) by 50% on all purchases of immovable property. If of course VAT was not paid.Transfer fees paid on the transfer of property to a family company are refunded in five years provided the company still owns the property and there have not been any changes to its shareholders.On the transfer of immovable property from a family company to its shareholders as well as on transfer by donation between spouses, spouses and children or relatives up to third degree of kindred, transfer fees are calculated on the estimated value of property as at the 1/1/2013 and at the following rates:Between spouses0.1%Parent to childrennilBetween 3rd degree relatives0.1%To trustees€50The actual cost refers to very little transfer fees around €100.Transfers of immovable property by a company to another company for the purpose of a company re-organization are exempt from transfer fees.The date of the valuation is taken as being the date of sale/acquisition. As such if one bought a property in the year 2002 and transfers the property now, the transfer fees will be based on the market value on the date of the acquisition i.e. 2002.Market Value The law stipulates that the Lands Office must ascertain the value of the property on the relevant (sales) date, based on the market value on the date of sale. Usually the Lands Office accepts the actual sales price, but approximately 20% of the total is disputed by the Lands Office if it can ascertain from its own records that the market value at the time is different (usually it charges higher values and never lower!!). The main method adopted in order to ascertain the market value is the comparable one (there are others also). So if you bought an apartment for say €100.000 and the Lands Office has in the records other sales for €120.000 for similar properties, it will charge you fees on the €120.000.Regrettably a good percentage of locals and others under-declare their sales/acquisition price for the purpose of saving capital gains (by the seller) and transfer fees (by the buyer) and this is widely known – hence the Lands Office stand.Objection You are not in a situation of take it or leave it, but if one disagrees with the Lands Office valuation, you can apply to the High Court supporting your claim using a private valuer’s report. This must be done within approximately 40 days from the date that the Lands Office makes its final/determination assessment. What is infuriating in such cases is that even upon determination/final valuation, the Lands Office does not provide the affected parties with a written report supporting its own assessment, whereas the buyer must do so in writing etc, in order for the Lands Office to re-examine.On the other hand we have the odd situation of a project of 9 houses of similar extent etc, bought by myself (A.L.), an ex-minister of Finance, on ex-mayor of Nicosia etc, at the average sales price of €260.000 we were charged with €300.000. In another project of 33 apartments with an average sales price of €100.000/each, the buyers were charged €130.000/each. The buyers want to object but then the cost element to go to Court, legal and valuation fees would amount to the same. So under this “blackmail” approach most buyers accept this. Is this correct however?Date of Assessment If a contract is deposited with the Lands Office, then the date of sale so recorded in the contract is the one adopted. If the contract is not deposited, you must produce your contract as well as the receipt of the down payment, so that the Lands Office can ascertain the sales date.The Economic Situation + Transfer After all the uphill battle to secure the deeds, it has now been ascertain that only 20% of the title deeds issued are actually transferred and this because nowadays where every cent counts, people are not willing to come up with (say) €15.000-€30.000 transfer fees since they feel that the fees are fixed on a certain date and since no interest is charged and provided you have no immediate use of the title this may be a solution, be it temporary.We hope that we have cleared the situation since from the various letters that we receive, it seems that there is some confusion.We are at a loss dear readers what are the new VAT provisions all about. We have read the law over and over again and we have attended one lecture on the subject given by one of the international auditors, but we still cannot profess that we understand fully the provisions. What we are somewhat clear about (not 100%) and a subject which may be of particular interest to foreign residents regarding rentals and land purchase is as follows:Residential properties let out will not bear a VAT (+19%). Commercial properties if let post to 2018 will bear the VAT charge unless the landlord declares upfront that he does not wish to have this charge. No major harm done, but if VAT is charged, it is so only if the tenant is a VAT registered, so that he can claim the VAT back.The law refers to the exemption of the residential units but there is a confusing proviso that the property is not to be placed into “an economic activity”. So, what does this mean? If a house is let as holiday/seasonal/ daily let and/or on a Airbnb is this not a business activity, be it a residence? If our understanding is correct, VAT should be charged, increasing the rental by 19% (will this not put off prospective season tenants who are not VAT locally registered?).Buying a building plot will bear a 19% VAT charge if bought from a person/owner who is dealing with development/real estate business. So, two adjoining plots are for sale, one from a developer and the other by a private individual who does not do this (sale of plots) as a business the second plot will be less 19% from the first!!Confusion is going on however if a private individual sells a plot without VAT situated within an area where nearby a developer is selling similar plots with VAT, then the VAT authorities might charge the private seller also with VAT for “avoidance” of unfair competition”!!Bearing in mind (be it not clear) that in case VAT is paid by the buyer, he will not be liable for the transfer fees (so out of the 19% charge a reduction by approximately 4% transfer fees - net cost 15.if someone buys a plot in shares (e.g. a Co owning the plot) no VAT is charged.Because developers will sell you a plot with a 19% VAT but then they can claim it back, they will be in a more competitive position than a private individual who will pay the 19% with no refund. So if one appoints the same developer who sells you the plot to build your house with a total VAT charge of 5% (main residence) he will be in a more competitive position than building yourselves your home?Even those consultants who gave us the lecture did not fully understand as they have no answers to all the questions and it will take a while say a period of at least 6-8 months to clear the situation. The VAT authority says for any enquiry should be addressed to it for clarification. Bearing in mind that the Governmental Departments do not answer within the same day, but more likely 2-3 months, so what happens in the meantime? Will the seller hold back the property until the authorities decide? If then there is a sales contract and no VAT is charged what will the situation be if the VAT authority decides afterwards that the 19% should be charged? Nobody knows at the end dear readers what is happening and the situation is not clear also regarding agricultural land with the only clear exemption for certain categories (agricultural zones, Natura areas etc). We will come back to you as added information is received.
The main market in housing is the resales, that is individuals who wish to sell their homes. If a title in hand this is simple because you just transfer the title deed and all is finished.In this case the seller must bear in mind that he has to clear his dues prior to transfer. 1. All property taxes, Municipal and sewage taxes must be paid prior to transfer. 2. Common expenses due must also be cleared. Also pay all outstanding water, EAC, telephone charges up to date of the resale. 3. Capital gains, if any, must be settled and a clearance certificate from the Tax Authorities secured (a simple job). Having said that it is a simple job and in order to minimize your tax burden, you must have the cost of acquisition, any additions you have done (with receipts), make particular reference to furniture and equipment (not taxed) if included in the sale price etc etc. Please refer to a previous article of ours on Capital Gains tax regarding exemptions and limitations. 4. If mortgaged you must secure a mortgage release or now that loans are difficult to come by, negotiate with the Bank to have the balance of the loan due passed on to the new buyer. This should help your sale. 5. If no title available the procedure becomes more complicated, but not impossible. It requires however the cooperation of the registered owner/ developer to an extent. 6. Enter into a cancellation agreement with the registered owner, who will then enter into a new sales agreement with the new buyer. 7. Cancellation fees required by developers range depending on whether the procedure is to be undertaken by the developer/registered owner, or by the original buyer or the new one. We estimate that anything between €1.500-€2.500 is reasonable (but there are thieving examples). 8. Make sure again that what we have referred to before are settled (property taxes etc, common expenses, capital gains etc). 9. Under a new law if the original developer/owner is not cooperating, you can assign your original agreement to the new buyer and deposit this assignment to the Lands Office. This is only possible if the existing buyer has deposited his sales contract before. The Lands Office will require a capital gains tax release, but we do remind that all other matters referred to above are settled. If you opt for this procedure, include in the agreement various matters - e.g. required maintenance period, outstanding EAC/water/telephone charges (as in all cases). Both resales and assignments do not (as we are informed by the Lands Office) bear double transfer fees. So the original buyer stands to gain a considerable sum in terms of transfer fees. If we were the buyers we would opt for the cancellation and new sale option, since it is an established procedure, whereas the assignment option has been recently introduced and we are not aware of any possible would be complications. But other than our own, non-legal opinion, the assignment is simpler it is and less costly for the original buyer. Just as a tip, many banks have prepared catalogues of properties for sale which they have repossessed or for those with which they have a problem in collecting the instalments or even the Bank try to accommodate a resale in order to assist its clients. So, why not refer to your financing bank, if they have such a scheme? It is another source of sale since the banks appoint registered agents to handle, do not intervene in the sale (if not problematic) and we suspect that they have a certain inclination to finance the new buyers. We could recommend to use a lawyer in your property deals notwithstanding the fact that using a solicitor is a problem in some cases. Several readers have written to us asking for a recommendation referring to disappointing (to say the least) solicitor’s behavior. We do refer from time to time to readers who have a solicitor’s problem recommending a number per area, who we know (there are many others good ones who we do not know mind you). We are sticking our neck out but someone has to do it, whereas some law firms are using young graduates well qualified in paper and with very little experience. There is a list of “recommended” advocates issued by the British High Commission which is available on request. Once you have sorted out all the above, please refer to our previous article on “Preparing your home for sale”.
If one is to look back and examine the foreign nationals who buy real estate (mainly holiday homes) in Cyprus we can deduce a certain pattern of demand.Since the 1960’s the main foreign market source was the British, with their main initial interest being Kyrenia and after the invasion the interest moved to Limassol and Paphos Districts.In the 1970’s interest appeared from Lebanon (due to their civil war) and the gulf countries. This lasted up to the 1990’s when “riots” (of a kind) took place in Limassol, with the Arab nationals (not the Lebanese) leaving Cyprus for other destinations. The Pieris Developing Co (who discovered the Gulf states market) is notable and the Co’s downfall was another cause for the abandonment of Cyprus from this market source.During this same period 1980 - 1990 the British market came back in force with their main interest initially being directed towards Limassol and then Pafos - Interest included also the Paralimni / Protaras area and the areas around the Bases in Limassol (Akrotiri, Kolossi and the Souni Zanadjia, Ayios Nicolaos area).After the 1990’s the Russian (and the Russian speaking countries) started to appear with a huge initial interest (Yetlsin era), but then it slowed down differentiating down their budgets. The preferential area of this market source was/is Limassol where a vibrant community has been set up (and one thing brings another).In the 2000 era, we have had (and still have) the Chinese and the far east market whose main interest was/is for Pafos be it that it is expanding in other towns (see recent developments regarding Chinese restrictions (with an unknown the end result).The Cyprus real estate attraction regarding foreign buyers is due to:• The passports/visas best scheme in relation to our competitors.• The rather low cost of living, clean air and weather conditions. Short term increasing rentals and improving facilities/infrastructure (golf, marinas etc) also.• Security plays a most important role, as is the lack of racism and discrimination.• The friendly nature of (most) of the locals, as well as the wide use of the English language, makes foreigners feel “at home” both for them and their families.• The taxation attractions, including the more recent abolition of the property tax is a huge plus.• Most important is also the creation of foreign speaking primary/secondary schools and local universities which on most occasions are connected with U.K. quality universities with lower fees than that of U.K., but still ending up with a U.K. degree. The creation of medical schools is another major attraction, as is the recent legal battle with the E.U. (Greece etc) which ended up with the recognition of local university status attracting students and investors from abroad.• The bail in has disappointed many foreign investors, who having lost their “cash” do not want to know Cyprus. But as time passes and memories of this fade, it seems that interest is coming back (this is shown from the increasing foreign deposits by foreigners).• The property market situation with the lowering of prices, has provided another attraction (save the high-end properties) and for the resales the British owners / resales are offering good opportunities (as well as from locals) whereas the recent start of housing loans is another plus. Cyprus remains, however, a country isolated in terms of air connection, whereas the Cyprus political problem, although not a major issue, is there, at the back of everybody’s minds.• What is strange (to an extent) is that Nicosia is out of the demand cycles regarding foreign buyers. Other than embassies and some foreign firms, Nicosia is the “poor relation” of the other towns.Regrettably, there are no statistics on the number of buyers by nationality and by District, but based on our own experience, it seems that demand is mainly forthcoming from the following nationalities (not in order of volume of buyers) with the following preference.• Russian speaking in general:Limassol (80%) - Larnaca (10%) - Paphos (5%) - Famagusta region (5%)• BritishPaphos: (90%) - Limassol (5%) and Famagusta (5%)• ChinesePaphos (85%) - Limassol (5%) - Larnaca (10%)• Lebanese / Israelis:Mainly investors and for the major towns. Seeking income producing investments (very difficult clients)• Greeks from GreeceNothing to speak of. Main interest is to let with short term periods due to the new taxation system in Greece.• International tour operatorsAn increasing interest by international tour operators which follows the high increase in the tourist numbers and prospects. Debatable how long will this last (it depends on the Egypt/Turkey/Arab countries tourist demand).• International investors - Real EstateNot serious interest so far due to their expectation for high returns, as opposed to the results on ground. The banks attempt to sell off large chunks of real estate and the recent Bank of Cyprus property fund will show their interest in real estate.• Etc etcIn ending our experience we wish to add that foreign interest is created mainly by private developing firms and it is notable with a certain developer who on its own attracted the Chinese for Paphos, whereas a Larnaca developer who is now active in the same country, is attracting high end interest from there.