Buying property in Cyprus could be a wise decision, given that most of the land is chartered and registered in the Land Registry of the State. The existence of such a system provides the security- necessary- for a potential Purchaser to proceed safely with the purchase of real estate in Cyprus.
Nonetheless, the potential Purchaser bears the onus to inspect some important issues before proceeding with the purchase of the property. The matters dealt with below are the main prerequisites, which the potential Purchaser should investigate as part of the due diligence when buying real estate in Cyprus.
The first and most important step for the potential Purchaser is to ask the Seller for a copy of the title deed of the property. The title deed contains important information regarding the property to be purchased, including but not limited to its registration number in the records of the Land Registry, its location, its size, and its description. More importantly, the title deed shows the existence or absence of the so-called "notes". The notes may be recorded on the title deed for several reasons; however, they are usually imposed by a Competent Authority because the Seller (registered owner) did not conform with the terms set forth by the permits for the construction of the property.
When such notes are in place the potential of the property will be affected, sometimes because there is a cost to remove such notes, and other times because the notes may not be removed. On some occasions, the existence of such notes may even prohibit the transfer of the title deed and/or may prohibit the ability to mortgage the property. Consequently, it is paramount that the potential Purchaser inspects the copy of the title deed provided, ideally with the guidance of an experienced lawyer in Cyprus property law.
The non-existence of a title deed for the property is a red flag for the transaction unless the property to be bought is newly built and/or under development and/or under construction. In such cases, it is prudent for the potential Purchaser to ask the Seller to provide a copy of the relevant permits by the Competent Authorities such as the Local Municipality and/or the Department of Town Planning and Housing, etc. No development may be performed without obtaining permits from the Competent Authorities. As a result, it is crucial for a potential Purchaser (in the absence of a title deed) to confirm the existence of the relevant permits from the Competent Authorities. The Competent Authorities may also confirm other important aspects regarding the characteristics and the use of the property (commercial, residential, or otherwise), and they may additionally reveal any limitations to the development of the property.
Generally, it is wise for the Purchaser to look into the past and present reputation of the Developer of the property regarding conformity with the terms of the relevant permits which will eventually lead to the issuance of title deeds.
If the Developer has conformed with the terms stipulated in the relevant permits, the Competent Authority issues a Certificate of Final Approval, which verifies the conformity of the development with the requirements of the Law. Consequently, the existence of a Certificate of Final Approval is a good indicator that a title deed will be issued eventually. Nonetheless, it should be noted that – even when there are no issues regarding the development- it may take years for a separate title deed to be created due to bureaucracy.
Furthermore, in the absence of a separate title deed, a potential Purchaser should ask for the architectural plans of the property to be bought, not only when the property is under development but also when a property is recently completed. The plans should also be attached to the Contract of Sale as an integral part of the agreement to purchase the property.
An additional crucial element of due diligence when buying real estate in Cyprus is to ask the Seller for a search certificate from the Land Registry for the property with (or without) encumbrances.
The existence of encumbrances on the property will prohibit the transfer of the title deed in the name of the potential Purchaser, and as a result, it is paramount to ensure that no such encumbrances exist or if they do exist, that they will be lifted off before or simultaneously with the transfer of the title deed in the name of the Purchaser.
The above-mentioned search certificate will also reveal the existence (or absence) of any other Contract of Sale on the registration of the property. Consequently, the potential Purchaser will ensure that the property has not already been sold to any other person.
It is also deemed necessary to ask the Seller to provide a search certificate for personal prohibitions, as a personal prohibition regarding the name of the Seller of the Property will prohibit the transfer of the property in the name of the Purchaser.
Lastly, a potential Purchaser should inquire about the existence of a VAT obligation regarding the property, and if such an obligation exists, then the potential Purchaser should inquire about the amount that should be paid to the State. Newly built properties and/or properties under development and/or under construction will definitely be charged with VAT. However, whenever a Purchaser pays for the VAT, he/she is not obligated to pay for transfer fees in the Land Registry.
Our law firm is able to provide a wide range of services regarding property law-related matters and the purchase of real estate in Cyprus, not only by exercising due diligence on your behalf, but also by providing any necessary service, guidance, assistance, and advice concerning all stages of purchasing property, while protecting your interests and ensuring a safe transfer of a title deed in your name.
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.