Buying property overseas is exciting indeed and Cyprus is a great choice whether you are considering purchasing a property for relocation, investment, retirement or as a holiday home.
What needs to be stressed, however, is that it is extremely important for one to go about things the right way, collecting as much data as possible before taking such an important decision and settling on that dream home.
Purchasing property in Cyprus, as in any other place in the world, can involve a number of pitfalls. Any Purchaser needs to be extremely cautious prior and during the process to ensure that such pitfalls are avoided.
Firstly, it is very important and cannot be emphasized enough that any prospective Purchaser needs to instruct a reputable, independent lawyer registered with the Cyprus Bar Association specializing in Immovable property law for assistance and guidance. Most of the regrettable experiences that Purchasers have had in the past could have been avoided if they had obtained independent legal representation from the outset as opposed to relying on the Developer or the Developer’s in-house lawyers to represent their interests during the purchase. Though they may have believed at the time that by not obtaining independent legal representation they were saving on legal fees, unfortunately this has not always been the case as they have often ended up paying much more later on in order to rectify mistakes that could have been avoided if they had appointed their own legal advisor to adequately protect and represent their interests from the very beginning.
Secondly, when a reservation fee is paid, whether to the Agent directly or to the Vendor’s legal representative, it is very important that a Reservation Agreement is signed by the Agent and the Purchaser stating the agreed deposit for the property and the circumstances in which a refund will be paid. Purchasers should insist that their reservation fee is paid subject to ‘clear title deeds’ and the property is free from any encumbrances. Consequently, in the event that during the due diligence process the purchaser’s legal representatives find that there are legal issues preventing the Purchaser from acquiring ‘clear title deeds’, free from encumbrances, then such deposit can be refunded.
Due diligence on the property to be purchased is of the utmost importance. Any reputable and independent lawyer specializing in immovable property law that has been appointed by a Purchaser would first and foremost conduct due diligence on the property. A search should be undertaken to examine whether any mortgage or other encumbrances in the form of memos have been registered on the land. In the event that such mortgages are discovered, provided that the purchase price is sufficient to cover the amount of the mortgage, it would still be possible to proceed with the purchase by paying the bank the purchase price at the Land Registry Office on the day of completion to ensure that they lift the mortgage and that clean title deeds are transferred to the Purchaser. Alternatively, where applicable, a waiver could be granted. In the absence of either of these options, it is often advisable to avoid the purchase. Moreover, as part of due diligence, the Purchaser’s lawyer needs to ensure that the property being purchased is as per described on the title deeds and that no amendments or alterations have been made to the property that would require the issuing of any additional permits. We often find that all the existing structures/annexes and, in many cases the swimming pool, for example, have not been included on the Title Deeds, and, in such an event, an application needs to be made to authorize these additions/alterations to the property.
All terms negotiated between the Parties need to be expressly included in the Contract of Sale to be drafted by the Parties’ lawyers, including the agreed inventory.
Once the Contract is signed and an amount of approximately 20-30% is paid over to the Vendor’s legal representative, it is essential that the Purchaser’s legal representatives first of all stamp and then lodge the Contract of Sale at the Land Registry Office within the timeframe provided by the law. The lodging of the Contract of Sale at the Land Registry Office will protect the Purchaser’s rights up until completion and prior to him receiving his title deeds, prohibiting the Vendor from disposing of the property.
It is also important when making a decision to purchase property that one should consider all relevant costs. During a purchaser’s first meeting with his legal representative, the Purchaser should request a breakdown of all costs surrounding his purchase in order to be able to budget accordingly. The relevant transfer fees or VAT rate (where applicable), stamp duty, legal fees and other disbursements, should be calculated, depending on the value of the property to be purchased, to enable the Purchaser to include these expenses into his budget.
Lastly, and often neglected by the Purchaser, once the property purchase is completed and the Purchaser becomes the registered legal owner of the property, it is recommended that he drafts a will in Cyprus in order to ensure that the property is disposed of according to his wishes and not based on the forced heirship Cypriot legislative provisions that would otherwise apply
In conclusion it would appear that the most valuable piece of advice for any prospective Purchaser is to appoint a reliable lawyer, independent from the other parties in the transaction. One could safely say that if accurate legal advice is obtained from the outset any potential pitfalls outlined above could be avoided when making a decision to purchase property in Cyprus. Following the correct procedure can ensure that the transaction progresses and completes smoothly, efficiently and successfully.
For any further information please contact Esme Palas, Senior Associate, Michael Kyprianou and Co. LLC. Esme.Pala@kyprianou.com