Cyprus: Notes on Real Estate and Property in Cyprus

1.0 INTRODUCTION
1.1 General
1.2 Cyprus

2.0 CYPRUS IN THE INTERNATIONAL LAND MARKET
2.1 Foreign investment in immovable property
2.2 Price of land
2.3 Legal assistance

4.0 LEGISLATION RELATED TO IMMOVABLE PROPERTY
4.1 General Legislation
4.2 Specific Legislation
4.3 Double Taxation Treaties

5.0 BRIEF REFERENCE TO SOME ASPECTS OF LEGISLATION CONCERNING FOREIGN INVESTMENT
5.1 The Constitution of Cyprus
5.2 The Contract Law and the Civil Procedure Law
5.3 The Stamp Law
5.4 The Wills and Succession Law, the Administration of Estates Law, the Probates (Re-Sealing) Law and the Estate Duty Law
5.5 The Trustees Law
5.6 The Exchange Control Restriction Law and the Central Bank of Cyprus Law.
5.7 The Immovable Property (Tenure, Registration and Valuation) Law
5.8 The Sale of Land (Specific Performance) Law
5.9 The Acquisition of Immovable Property (Aliens) Law
5.10 The Immovable Property Tax Law and the Immovable Property (Towns) Tax Law
5.11 The Capital Gains Tax Law
5.12 The Rent Control Law

ANNEX 1: FEE SCHEDULE FOR LEGAL SERVICES RENDERED BY THE REAL ESTATE & PROPERTY DEPARTMENT

Nowadays the world population is growing rapidly and so is the demand for land. The need for land is not limited to the residential sector; it occurs in the agricultural, industrial, commercial and touristic sectors as well. Land is a finite material and therefore its value world-wide is constantly increasing.

This increase in value is aggravated by inflation and by the instability of the monetary systems and fiscal policies of the countries which lead the race in the financial field, thus making investment in the safer sector of immovable property more attractive. The great technological progress in communication, transportation and international trading has made investment in this field easier and more accessible than in the past.

Man’s affinity with the land stems from time immemorial and it is easy to understand why land has always been considered as one of the most precious commodities, closely connected with social and economic stability and progress, and why the various legal systems have always tried to regulate in detail the rights of possession, occupation and ownership of immovable property.

Cyprus is no exception to the rule. The economic and social evolution that has taken place in recent years and the sophisticated methods of cultivation and industrialisation, together with the earlier absence of alternative forms of investment, have diverted capital from both home and abroad to land ownership and land transactions.

This trend has necessitated the establishment of a suitable legal framework which, while allowing the involvement of Cyprus in the international land market, protects the social, economic, agricultural and industrial interests of the island and its people.

Cyprus has achieved this task. Despite its troubled history, it has managed to develop a constructive legal system for immovable property which is as efficient as similar systems in other advanced countries. It is operated through a series of laws which are regularly amended to meet everyday demands and balance conflicting interests in this vital sector of the economy.

The location of Cyprus in the eastern Mediterranean at the crossroads of Europe, Asia, the Middle East and Africa, the safe and protective legal system, the perfect infrastructure coupled with regular communication with all parts of the world, the relatively low cost of living, its excellent climate and the friendliness and hospitality of its people, are just some of the reasons that have made Cyprus attractive to foreign investors.

Foreigners who seek to invest in immovable property in Cyprus may be classified in the following four main categories:

The relatively small area of Cyprus and the great demand for immovable property, especially in recent years, have led to a considerable increase in the cost of land and accommodation in Cyprus. However, despite the increase, the prices of land and accommodation in Cyprus, as well as the cost of living, are still comparatively lower than those of most European countries or holiday resorts.

2.3 Legal assistance

The complexity of the legislation on immovable property and the formalities which need to be considered when dealing in relevant matters render it necessary, especially when foreigners wish to invest in immovable property in Cyprus, to seek and obtain from the start reliable and efficient legal advice in order to avoid unpleasant results and future undesirable consequences.

Realising the vital importance of immovable property matters for Cypriot and foreign clients dealing in land, Andreas Neocleous & Co has set up a special department the Real Estate and Property Department, in order to perfect the services offered in this field and to achieve quick and efficient results.

The Real Estate and Property Department deals with all matters relating to freehold and leasehold property, including transactions and disputes involving commercial and residential property and the provision of a comprehensive service to non-resident purchasers of property in Cyprus. Areas of work include:

• drafting contracts on behalf of purchasers and sellers
• all aspects of the acquisition of immovable property by aliens including applications in respect of residence permits, expatriation of funds and exchange control
• estate administration planning
• wills, probate and re-sealings
• property management for non-residents

The lawyers in the Real Estate and Property Department routinely answer queries from both individuals and corporate clients and provide comprehensive advice on all aspects of commercial and domestic property matters.

4.0 LEGISLATION RELATED TO IMMOVABLE PROPERTY

Many laws in Cyprus regulate matters affecting immovable property and transactions related thereto either directly or indirectly. Such legislation may be divided into two categories, namely General Legislation and Specific Legislation.

4.1 General Legislation comprises those laws which, although not regulating matters of immovable property directly, do contain provisions applicable to rights in immovable property and to transactions related thereto. The main laws in this category are as follows:

4.2 Specific Legislation includes all the laws and regulations referring particularly to immovable property and are as follows:

4.3 Double Taxation Treaties

Cyprus has entered into 26 Double Taxation Treaties, certain provisions of which affect directly or indirectly the possession, ownership and disposition of immovable property especially in matters of taxation.

5.0 BRIEF REFERENCE TO SOME ASPECTS OF LEGISLATION CONCERNING FOREIGN INVESTMENT

A brief analysis and reference is attempted hereinafter on some aspects of the above legislation of Cyprus, in relation to the protection of ownership and the rights pertaining to immovable property, the regulation of relevant transactions and the developed policy in similar matters especially where foreign investments are concerned.

5.1 The Constitution of Cyprus

The Constitution of Cyprus establishes the equality of all persons irrespective of their nationality and includes provisions for the protection of human rights of all persons without discrimination. Any violation by an administrative authority of a person=s fundamental rights entitles such person to request that authority to remedy the situation. The authority has a period of 30 days during which it must give a prompt answer to the petitioner.

Furthermore, such person has free access to any competent court in Cyprus, as well as the European Court of Human Rights.

The right of ownership of immovable property is considered as one of the fundamental human rights under the Constitution of Cyprus and as such it is clearly and absolutely protected. According to article 23 of the Constitution, compulsory acquisition or imposition of restrictions on immovable property by the Government is regulated by the Compulsory Acquisition Law, No. 15/62, whereby the Government may acquire, in the public interest and by giving just cause, property on payment of immediate compensation to the owner at the present market value. This law also provides that properties acquired as above should be returned to their owners if the purpose for which they were acquired does not materialise within three years of the date of acquisition.

Therefore foreigners who own property in Cyprus can also enjoy all those rights pertaining to property which are available to the citizens of Cyprus and can be assured that their property is absolutely protected.

5.2 The Contract Law and the Civil Procedure Law

These laws are to a large extent modelled on their English counterparts and they regulate all kinds of transactions, including those relating to immovable property and the court procedures in resolving disputes arising therefrom.

It is advisable that contracts referring to immovable property should be made in writing, duly stamped and properly signed and witnessed.

All disputes arising from transactions concerning immovable property are governed by the laws of Cyprus and are subject to the jurisdiction of the courts of Cyprus. The parties, however, may in some circumstances agree concurrent jurisdiction of other courts or refer any dispute to arbitration before resorting to court proceedings.

5.3 The Stamp Law

The Stamp Law defines the revenue stamps payable on contracts in accordance with the purchase price as follows:

The absence of the revenue stamp does not render a contract null or void but it cannot be used in Court proceedings or for the transfer of ownership of property in the Land Registry. Previously unstamped contracts may be used as above if properly stamped at the time of such use, in which case a fine is also imposed according to the value and the time of execution of the relevant contract.

These laws are modelled on their English counterparts and they deal with the rights of persons as regards the disposition of their properties after death and the relevant procedures.

Cypriots cannot dispose by will of the whole of their estate if they have a spouse or children. The undisposable portion is one half of the estate if the deceased leaves a surviving spouse but no children and two thirds if he also leaves children. British subjects, however, are exempt from this rule and they may dispose by will of the whole of their estate. The law applicable in all respects is the law of Cyprus.

As to wills made in Cyprus by other foreigners, the law applicable with regard to the formality of such wills is the law of Cyprus, i.e. wills should be in writing and attested by two competent witnesses and they should reflect clearly the free and true wishes of a sane and competent testator. With regard to the essence and legal effectiveness of these wills the law applicable is, for provisions referring to immovable property, the law of the country or countries where such immovable property is situated (lex rei citae) and for provisions referring to movable property, the country where the deceased was domiciled at the time of death (lex domicilii) which may not necessarily be the country of residence.

Wills may be deposited with the Probate Registrar of the District Court who issues a receipt to this effect, or may be entrusted for safe custody with lawyers.

It should be noted that upon the subsequent marriage or divorce of the testator his will should be renewed, as it will, in most cases, be automatically revoked. Testators should also seek legal advice if the executor or any beneficiary changes his name or dies or becomes incompetent to act, or if any property in the estate is subsequently sold or changes its nature, as otherwise his wishes may not take effect.

It is advisable that an executor or executors be appointed in the will to carry out the wishes of the testator.

Foreigners may set up a trust by will and bequeath the whole of their estate to appointed trustees to hold the same in trust for the benefit of certain beneficiaries and to manage and dispose of it in accordance with the instructions of the testator.

If a person dies intestate or does not appoint an executor in his will, the court will appoint an administrator of his estate. If there are heirs under disability the court will appoint at least two administrators.

The administrator administers the estate according to the law, pays the debts of the deceased, collects and distributes the assets amongst the heirs and accounts to the Court. The surviving spouse inherits in equal shares with the children.

The Probates (Re-Sealing) Law makes special provisions for persons who die in the United Kingdom or in any British Dominion or in any country of the British Commonwealth and who, at the time of their death, also had property in Cyprus. According to this law, the Grant of Probate or the Grant of Letters of Administration issued by a competent court of such country may be re-sealed in Cyprus and an administrator may be appointed by the court to administer their estate in Cyprus. The intended administrator should accompany his relevant application to the court for a grant of probate with copies of the Grant of Probate and will or of the Grant of Letters of Administration, certified as true copies by the court issuing the Grant, and a power of attorney of the executor/s or administrator/s appointed by such court and upon completion of the administration he should file with the court final accounts of his administration, accompanied by a declaration of the foreign executor/s or administrator/s that the administration in Cyprus was carried out to their satisfaction.

The estate duty (inheritance tax) is calculated on the assessed net market value of the estate at the time of the death, as follows: