Title Deeds
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| This article was written by me. |
Sellers have a habit in stating that “The Property Comes with Title Deeds” as if not having title deeds is a bad position. This is not so in Cyprus and many more property transactions take place without title deeds than with them. If not then the Cyprus Property Market would grind to a halt. If title deeds are issued then the Land Transfer Tax will have been paid and this will be factored into the asking price, you pay more.
If There are “No Title Deeds” then the Cancellation Fee for the existing contract between the original purchaser of the property and the developer is a cost of selling which is borne by the Seller. At roughly 3% of the original purchase price it will be more or less the same amount as land transfer tax. The Buyer pays the land transfer tax if he is in possession at the time of registration of Title. Nobody gains or loses between the Buyer and Seller – only the developer gains. But original purchasers might like to get this capped at CYP500 in their contract when they purchase.
Much is said about Title Deeds which ends up worrying people. Phrases like “you do not own your property” and that “you have not completed the purchase” are bound to send people running to their lawyers in panic.
Provided you use a registered independent lawyer all the procedures and necessary clauses will protect you in purchasing and your right to sell as well.
Section 40 of the ‘Immovable Property (Tenure, Registration and Valuation) Law’ (1946) provides that ownership of immovable property or rights in immovable property can only be acquired by registration at the Land Registry, through the procedure described in the law and that such registration may only be effected by the registered owner of the property.
Section 40 relates to the transfer of registered title from one to another. The procedure requires that the current registered owner is present, or the representative of the current registered owner is present to effect the transfer at the Land Registry.
Specific Performance has been enacted in the Laws of the Republic of Cyprus to protect your interests completely during a period of deferred completion or rather until the Title is registered in your name.
Provided that a seperate title exists (as determined by the Land Registry by splitting) the whole basis of Specific Performance is that if the registered owner then refuses the rights of the person who hasregistered their contract of sale at the Land Registry in compliance with all requirements, basically within 60 days,then the prescence of the registered owner is not required if the registrant of the contract for sale has an Order of Court for Specific Performance.
So as you can see Specific Performance protects anyone who becomes the registrant of a contract for sale in deferred completion.
There is no problem here if the searches are done by the lawyer and after cancellation of the “sellers” contract and deletion of the entry the buyer just registers his new contract at the land registry with no prior encumbrances.
There are always potential risks in everything we do but all the potential risks of purchasing without Title Deeds or selling without Title Deeds can easily be dealt with by a competent lawyer. Notably one registered at the Cyprus Bar.
Calculation of Transfer Tax - an example;
When the Title Deed is issued to you, you will pay Transfer Tax calculated as 3% on first CYP 50,000; 5% on next CYP 50,000 and 8% on the remainder. If buying in joint names each person has the tax on their ½ share.
According to my calculations if you are buying in joint nanes at CYP200K then the position on transfer tax is as follows for each of you;
Individual assessment is on CYP100K ie., half each
3% on CYP 50K = CYP1500
5% on CYP 50K = CYP2500
Total per person = CYP4000
Total transfer tax on property CYP200K is 2 X CYP4000 = CYP8000
Stamp Duty. The purchaser is liable for the payment of Stamp Duty at the rate of CYP 1,50 per thousand up to the value of CYP 100.000 – and, thereafter, the rate is CYP 2 – per thousand. This is CYP150 plus CYP200 = CYP350
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| This came from Antonis Loziou. |
Advice on obtaining Title Deeds
The Cyprus Property Title Deeds Issue
IT IS a fact that it takes a long time to secure a title deed for new property and this creates serious problems regarding ownership, finance, re-sale and other matters. At this point of time there is a serious debate taking place in the House of Representatives on the subject, but we have not detected any solution in the horizon.
Numerous permits (approximately eight permits in total) are required after the building is completed.
And there are long delays until authorities examine and issue these permits.
This means the average period for the title issue is four to six years (and that is provided that the building has no major or even minor problems) after the building’s completion.
Surely this is not a satisfactory situation and the present delays have been evidenced by the demonstration that has taken place outside the Town Planning Office in Paphos (althogh the problem is not isolated to Paphos, Paphos is the worst region).
The authorities claim that over the last few years it had to process 14,000 applications per annum, as opposed to the 8,000 applications prior to the recent property boom.
For these reasons we suggest buyers take some “security” measures in order to protect their interests when buying a property as an interim measure until the titles are issued:
- Deposit your contract with the local Lands Registry Office. The sales contract must be duly signed within two months from the date of signing of the agreement. This deposit acts as a charge on the property and it will protect you for any subsequent sale, mortgages etc that might follow the deposit date.
- Get a release from the mortgagee (if any). The release to be secured by the seller and it should stipulate that once the title deeds are issued, the mortgage holder will have no objection in releasing the title for transfer.
- If you require a bank guarantee you must bear in mind that you will have to pay 1.8% on the amount of the guarantee, p.a., a quite high charge.
- Get a corporate guarantee from the developer/owner securing the free transfer of the property.
- Carry out your own search through your advocate regarding the seller’s/developer’s financial standing and check his “name” in the local market. There is a lot to be said in buying from the more “known” developers, as opposed to the small scale and financially weak developers, with no track record (even through their prices might be slightly lower than otherwise).
- Set a date in the sales contract by which the developer is bound to secure a title.
- Make a provision in the sales contract that the developer must comply with a request for a resale with a fixed charge (maximum £1,500) so that you can cancel your sales agreement by selling it to another buyer. The developer/original buyer, is to enter into a cancellation agreement and then the new buyer to enter into a new sales contract with the developer. In this case however the developer may ask the original buyer to cover his tax costs or for the original buyer to provide him with a tax release.
Surely the above measures are not a substitute to a title, but at least one should take such appropriate steps to protect himself during the period of waiting.
By Antonis Loizou
Property Valuers & Consultants
The Black Art of Buying Property in Cyprus™ ®
The Cyprus Informer™ ® ©
http://cyprusinformer.eu
