Cyprus: Cyprus Chapter Of The International Comparative Legal Guide To: Real Estate 2015

1 REAL ESTATE LAW

1.1 Please briefly describe the main laws that govern real estate in Cyprus. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 11.1.

The main legislation regulating real estate is as follows:

  • The Immovable Property (Tenure, Registration & Valuation) Law, Cap. 224 deals with all matters concerning the tenure, registration, disposition and valuation of immovable property within the framework of the Cyprus land registration system, in which immovable property is defined, drawn, recognised, and valued.
  • The Acquisition of Immovable Property (Aliens) Law, Cap. 109, which dates back to the time when Cyprus was a British colony, imposed restrictions on the acquisition of immovable property in Cyprus by non-Cypriots. These restrictions have been removed altogether for EU citizens and are little more than a formality for others (see question 2.1 below).
  • The Immovable Property (Transfer and Mortgage) Law, No. 9/65 regulates mortgages of immovable property and sales of mortgaged property. It requires mortgages to be registered at the Department of Lands and Surveys. It provides for transfer fees payable on the transfer of immovable property.
  • Under The Immovable Property Tax Law, Cap. 322 and The Immovable Property (Towns) Tax Law, No. 89/62, immovable property tax is payable each year by all owners of immovable property in Cyprus, assessed on the taxpayer's total holding of immovable property at the beginning of the calendar year.
  • The Capital Gains Tax Law, No. 52/80 provides for Capital Gains Tax at the rate of 20% on inflation-adjusted gains realised from the disposal of immovable property in Cyprus, including gains from the disposal of shares in private companies which own such property.
  • The Rent Control Law, No. 23/83 protects tenants' rights. It does not apply to non-Cypriots renting properties in Cyprus. Leases exceeding 15 years may be registered with the Department of Lands and Surveys and registration should be effected within three months of the signing of the lease. Registered leases afford the lessee certain advantages, including the right to trade the lease.
  • The Sale of Immovable Property (Specific Performance) Law of 2011 provides purchasers with the means to secure the remedy of specific performance by depositing a duly stamped copy of the contract at the Department of Lands and Surveys within six months from the date of its execution, thus preventing the vendor from transferring the property elsewhere or charging it for as long as the contract is valid and legally effective. If the vendor subsequently refuses to transfer the property the purchaser may apply to the court for an order to transfer the property into his name.
  • The Compulsory Acquisition of Property Law No. 15/1962 regulates the terms on which national or local government bodies may acquire property, in the public interest and by showing just cause, but only on payment of immediate compensation to the owner at the current market value. This law also provides that properties so acquired should be returned to their owners if the purpose for which they were acquired is not realised within three years of the date of acquisition.

1.2 What is the impact (if any) on real estate of local common law in Cyprus?

On account of Cyprus's history as a former British colony, Cyprus law is heavily influenced by English law and the English legal system. Cyprus, is a common law jurisdiction and has adopted the Anglo-Saxon system.

The common law principle of stare decisis, under which Cyprus courts are bound to follow decisions of courts at a higher level is of fundamental importance. In the absence of local precedents, English case law is persuasive, and in some circumstances binding.

1.3 Are international laws relevant to real estate in Cyprus? Please ignore EU legislation enacted locally in EU countries.

Cyprus's commitments under its double taxation agreements are relevant in the context of taxation of income and gains from property, but there is no international law directly affecting real estate in Cyprus.

2 OWNERSHIP

2.1 Are there legal restrictions on ownership of real estate by particular classes of persons (e.g. non-resident persons)?

The restrictions imposed by the Acquisition of Immovable Property (Aliens) Law no longer apply to nationals of any Member State of the European Economic Area ("EEA") (the EU, plus Iceland, Liechtenstein and Norway), or to companies incorporated in any EEA Member State. Such persons or companies are free to acquire property on the same terms as Cyprus citizens.

The term "acquisition of immovable property" includes the purchase of freehold property, the grant or purchase of a lease of property for a period exceeding 33 years and the acquisition of shares in Cyprus companies which own immovable property on the island.

The law requires non-EEA nationals or companies wishing to acquire immovable property to obtain the permission of the Council of Ministers. Normally, permission is routinely granted to bona fide applicants to acquire a flat or a house or a piece of land not exceeding three donums (approximately 4,000 square metres) for the erection of only one house for use as a residence only by the purchaser and his family. In May 2013 the Ministry of Interior issued a circular to the effect that non-EU citizens will be allowed to own two properties, which can be two residences or one residence and commercial premises with a floor area up to 100 square metres. Although it may take up to 12 months for the formal permit to be obtained, purchasers are entitled to occupy the property in the meantime.

Members of the family of an original purchaser may also acquire their own property, provided that they are completely independent of the purchaser, both financially and residentially, such as married children having their own family and business. Permission is granted for personal use, and not for letting or commercial use. This rule is relaxed for international companies which are permitted to acquire business premises, as well as houses or flats as residences for their members or directors.

After the permit has been granted and the property has been registered in the purchaser's name there is no further restriction and the property may be sold or disposed of by will or other instrument. Moreover, the legal heir is not required to obtain a permit in order to have the property registered in his name.

3 REAL ESTATE RIGHTS

3.1 What are the types of rights over land recognised in Cyprus? Are any of them purely contractual between the parties?

Land may be held freehold (estate in fee simple) or leasehold (for a term of years). A lease must have a minimum unexpired term of at least 15 years for it to be registered. Joint ownership of property is not recognised in Cyprus: each owner (who may be a real person or a legal person) owns an undivided share of the property. However, Part IIA of the Immovable Property Law provides a framework for the ownership, possession and enjoyment of the various flats or storeys of a building by their respective owners, as well as the relations between them and their rights and obligations.

The following legal interests over land may be created:

  • legal mortgage;
  • easement; and
  • rent charge.

Contractual rights affecting land can also be created, such as leases, licences to occupy and options and pre-emption rights.

3.2 Are there any scenarios where the right to a real estate diverges from the right to a building constructed thereon?

No. Under the Immovable Property (Tenure, Registration & Valuation) Law, immovable property means:

  • Land.
  • Buildings, structures or fixtures affixed to any land, or to any building or other structure.
  • Trees, vines and any other thing planted or growing on any land, and any of their produce.
  • Springs, wells, water and water rights whether held with, or independently of, any land.
  • Privileges, liberties, easements and any other rights and advantages relating, or reputed to relate to, any land or to any building or other erection or structure.
  • An undivided share in any of the above.

The land and any buildings on it are registered together and are inseparable for title purposes. The owner of the land owns the buildings on it.

4 SYSTEM OF REGISTRATION

4.1 Is all land in Cyprus required to be registered? What land (or rights) are unregistered?

All land is registered.

The system of land registration is a system of registration of title (as distinct from registration of title deeds). The legal value of registration lies between an indefeasible title (that is, title that cannot be avoided under any circumstances) and a defeasible title (that is, title which is not absolute but may be annulled or voided at a later date). A registered person is considered to be the undisputed owner of the land and its title to ownership is absolute, subject to the power of the Director of the Department of Lands and Surveys to correct errors or omissions under certain circumstances and the inherent power of the courts to order amendment or cancellation of a registration.

4.2 Is there a state guarantee of title? What does it guarantee?

There is no state guarantee of title and no government indemnity. Any person who disputes the facts recorded in the land register can seek rectification by application to the Director of the Department of Lands and Surveys, or to the court.

4.3 What rights in land are compulsory registrable? What (if any) is the consequence of non-registration?

It is not compulsory to register rights acquired in land (for example, by purchase or mortgage), but these rights have no legal status unless they are registered and owners or lenders who fail to register new or transferred rights lose the benefit of registration and their priority rights.

4.4 What rights in land are not required to be registered?

See question 4.3 above.

4.5 Where there are both unregistered and registered land or rights is there a probationary period following first registration or are there perhaps different classes or qualities of title on first registration? Please give details. First registration means the occasion upon which unregistered land or rights are first registered in the registries.

This is not applicable.

4.6 On a land sale, when is title (or ownership) transferred to the buyer?

Title is transferred to the buyer in accordance with the provisions of the contract for the sale and purchase. However, the buyer's rights have no legal status until the duly executed and stamped contract is deposited with the Department of Lands and Surveys under the Sale of Immovable Property (Specific Performance) Law of 2011 or until the Department has transferred the title.

4.7 Please briefly describe how some rights obtain priority over other rights. Do earlier rights defeat later rights?

The priority of rights is generally determined by the date of creation, ceteris paribus. However, if a right is not registered, a later registered right will not be subject to it.

5 THE REGISTRY / REGISTRIES

5.1 How many land registries operate in Cyprus? If more than one please specify their differing rules and requirements.

The Department of Lands and Surveys, one of the longest-established government departments, has sole responsibility for land registration. It has offices in the six major towns.

5.2 Does the land registry issue a physical title document to the owners of registered real estate?

An official copy of the registered title is issued on completion of the registration of any transaction involving the property.

5.3 Can any transaction relating to registered real estate be completed electronically? What documents need to be provided to the land registry for the registration of ownership right? Can information on ownership of registered real estate be accessed electronically?

At this stage this is not possible.

5.4 Can compensation be claimed from the registry/ registries if it/they makes a mistake?

There is no statutory scheme, but it would be open to the aggrieved person to pursue a claim for negligence in the courts.

5.5 Are there restrictions on public access to the register? Can a buyer obtain all the information he might reasonably need regarding encumbrances and other rights affecting real estate?

Information or documents in the public register of titles connected with the ownership of immovable properties and charges or encumbrances over immovable property are treated as confidential and the practice of the DLS is to disclose them only to the registered owner or his duly authorised agent and attorney or the administrator of his estate or to a judgment creditor of the registered owner, or an enquirer with a personal interest in a particular plot such as a purchaser of a unit of a development.

To read this Chapter in full, please click here.

Originally published by Global Legal Group.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Christos Vezouvios
 
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