Rent Control Law: New Decree On Increase In Rent Rates

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Michael Kyprianou Law Firm

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Owners of real estate properties, which fall under the scope of the "Rent Control Law of 1983 (23/1983)" as amended (the "Rent Control Law"), are entitled to raise rent rates to their tenants...
Cyprus Real Estate and Construction
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Owners of real estate properties, which fall under the scope of the "Rent Control Law of 1983 (23/1983)" as amended (the "Rent Control Law"), are entitled to raise rent rates to their tenants with an upper limit of 6%, following a decade of zero increase in rent rates.

More specifically, acting on the recommendation of the Ministry of Justice and Public Order and exercising the powers conferred upon it pursuant to Article 8(4)(a) of the Rent Control Law, the Council of Ministers issued a decree deciding an increase in rent rates. By virtue of the relevant decree, the Council of Ministers has set the maximum percentage of rent rate increase to 6% for real estate properties falling under the scope of the Rent Control Law. The relevant decision is effective for the period starting from 22 April 2023 and ending on 21 April 2025.

Under the provisions of the Rent Control Law, a landlord may request a rent increase every two years, and such increase should not exceed the maximum percentage set by the said law. It should be noted that, for the first two years as of the enforcement of the Law, the upper limit of rent rate increase had been set to 14%. Following the expiration of the said period, this figure is determined every two years by virtue of a relevant decree issued by the Council of Ministers. The said decision providing for a 6% rent rate increase came after 10 years where the specific decrees, as these had been issued every two years, provided for zero rent increase. It is noted that the latest decision was issued on 22 April 2021 and expired on 21 April 2023.

On the basis of the above decree, landlords are entitled to request from their respective tenants a rent increase of up to 6% for the period starting from 22 April 2023 and until 21 April 2025. Evidently, an increase of more than 6% may be considered as being contrary to the provisions of the Rent Control Law. In such a case, the tenant should have the right to refuse it provided that two years have elapsed from the date the tenant took possession of the property. Such refusal might give landlords the opportunity to file a claim with the Rent Disputes Court to establish a fair rental value with regard to the property in question. The Rent Control Law also gives tenants the right to file a claim with the said court if they believe that the rent is significantly higher than the market price. In such proceedings, the Rent Disputes Court shall determine a fair rent amount taking into account, amongst others, all the circumstances excluding personal circumstances. Such circumstances include the age of the property, its specifications, its size and location, its condition as well as the facilities provided with the property.

Referring to the applicability of the Rent Control Law, rental properties in Cyprus are divided into two categories: those that fall within the scope of the Rent Control Law and those that do not. Accordingly, the tenancy of such properties is divided into two types of tenancy:

  1. "Statutory tenancy" which falls under the protection of the Rent Control Law; and
  2. "Contractual tenancy" which falls under the provisions of the Contract Law (Cap. 149) as well as the contractual provisions stipulated in the relevant tenancy agreement in place.

Statutory tenancy arises where the first tenancy expires or is properly terminated and the tenant remains in possession of the property. Furthermore, the property, which can be residential or commercial, must be situated within the "controlled areas" as defined under the Rent Control Law and the property must have been completed by 31 December 1999.

Therefore, a real estate property falls under the scope of the Rent Control Law provided that the following requirements are met:

  1. The property, either residential or commercial, is situated within the "controlled areas" as defined under the Rent Control Law and has been completed by 31st of December 1999.
  2. A tenancy agreement had been concluded between the landlord and the tenant; and
  3. The said tenancy has expired or is properly terminated and the tenant remains in possession of the property.

It should be noted that a tenant becomes a "statutory tenant" only if the property in question was also leased or available for lease before 31 December 1999.

If all the above requirements are met, the property falls within the scope of the Rent Control Law and the rent increase is regulated by the said law regardless of any provision of any tenancy agreement whether valid, expired, or terminated. Accordingly, any disputes related to rent are resolved before the Rent Dispute Court. Therefore, identifying the type of tenancy that exists in any given case is important in order to ascertain which court has jurisdiction to decide on the matter.

On the other hand, if the property does not meet the above requirements, it does not fall within the scope of the Rent Control Law. As a result, the matter of rent increase as well as any other rights and obligations of the landlord and the tenant are subject to the Cyprus Contract Law (Cap. 149) and such increase shall be determined in accordance with the provisions of the tenancy agreement in place. In the absence of a tenancy agreement or if the tenancy agreement does not explicitly provide for rent increase, then the landlord has the right to demand a rent increase without any limitations. Such a request is subject to the tenant's acceptance.

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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