Common expenses

[june]

We have had an apartment on a small development in Polis since 2003. As we still still don't have title deeds the developers manage the site, and not very efficiently. However, the expenses keeping increasing and the immovable property tax too. A majority of the owners met in May to discuss the developers insistance that we now form a committee to take over the management, stating it was a legal requirement.
As out of the 14 units around 5 are never used and we have no way of assuring payment from these owners, along with other issues everyone is reluctant to do this.

Can we demand to see account for the common expenses and must we carry on paying the immovable property tax indefinately?

We would appreciate advice on both.
Thank you

[Nigel Howarth]

Dear June,

I must apologise to you also for the delay in replying.

It is a legal requirement for building complexes to have a management committee that manages, maintains, insures, etc the common parts of the building. However, as far as I'm aware there is no requirement for you to do this (although you can if you wish even though you do not have your Title Deeds - see http://www.news.cyprus-property-buyers. ... /id=003397 ).

The Management Committee (i.e. the developer at the present time) should be providing you with quarterly accounts - you can download the official English language translation of the law on this subject from http://www.cyprus-property-buyers.com/f ... gs-law.pdf

Regarding the Immovable Property Tax demands, the developer should be providing each of you with evidence of how much he has paid so that you can get a rebate from the Inland Revenue once your Title Deeds have been issued. You'll find an article about this at http://www.news.cyprus-property-buyers. ... /id=005183 - the interesting piece for you is under the heading "How should Immovable Property Tax calculated?" - and you will also find a link to a letter from the Interior Ministry that may prove useful in your negotiations with the developer.

Regards

[pafos105]

Nigel,
I am confused about how you calculate the Immovable property tax - in your article it says that this is calculated on 1980 prices. Given that my apartment was bought new for 270Euro in 2007- what would it have cost in 1980? In your article the table states that the % is per thousand not sure how you would apply this.

Am I right in thinking that the developer is paying this tax each year while the title deeds are being processed and then when the deeds are transfered to our name we have to reinburse the developer? If so this could become a sizable amount of money over several years. If we have sold the property during this time, does the new owner become responsible for the whole lot or do we have to pay for the years that we 'owned' it? When would we pay this?

Finally, you mentioned that you can claim refund from the inland Revenue for overpayment - where does this come in and how would you know if you have over paid?
Many thanks, Helen

[Nigel Howarth]

Hi Helen,

Immovable Property Tax is confusing and it's difficult to explain - let me try.

The Land Registry assess the 1980 value of property - and this figure will appear on your Title Deeds when you eventually receive them. (It's a bit like the old rating system used in the UK, which was also based on the assessed 1980 values of property).

The larger plot of land on which your developer is building will have a Title Deed - and that will show the assessed 1980 value of the plot. And this is what is used to calculate his Immovable Property Tax + the assessed value of all the inputs or 'improvements' he has made to the land as a result of his construction activity.

Every year the developer will submit information to the Inland Revenue Department who will calculate his tax liability and send him a tax demand for his Immovable Property Tax.

The percentage per thousand (or ‰) is the same as one tenth of one percent (one thousandth). So 1‰ of 100,000 will be 100.

What the developer should be doing is providing you with a record of the amount of Immovable Property Tax he has paid and the rate of IPT applicable to the property - see http://www.cypruspropertybuyers.com/IPT-Govt-Reply.pdf

He can easily calculate the amount to charge you by working out the ratio of the tax paid on your property in relation to his overall bill.

Let's say he is developing 10,000 m2 of land and your property is built on a 500 m2 plot of that land, he should expect you to pay one twentieth (5%) of his Immovable Property Tax bill - and he should provide you with records of the amount of Immovable Property Tax he has paid and the rate of IPT applicable to the property as this will enable you to get a refund from the Inland Revenue Department.

When the Title Deeds are eventually issued - and you pay the Property Transfer Fees to get ownership of the property to your name - your Title Deed will show the assessed 1980 value of your property.

Armed with this information together with the records the developer has supplied, you can visit the Inland Revenue Department and apply for a rebate of any overpayments you (will almost certainly) have made.

I hope that explains things.

Regards,

[pafos105]

Thank you very much for this Nigel, I think I almost understand it - a couple more questions though to make sure...
1) Do we reimburse the developer for the tax he has paid on our property once the title deeds are transferred or should this be happening already?
2) From using the government's ready reckoner I calculated that we would have to pay 11,500 Euro in Property transfer fees to get the deeds, are you saying we can reclaim the difference between this and the Immovable Property tax we pay? My husband was orginally given the impression that we would have to pay around £500 to get the title deeds so this could explain where that figure came from.
3) What happens to all these payments if we sell the property before the title deeds are issued - are the new owners liable for the lot or do we pay the IPT for the time we were owners?
Many thanks for your time, I will call Pafilia today to find out why they have not yet mentioned the IPT.
Helen

[Nigel Howarth]

You're welcome Helen

Firstly I should point out that not all developers pass on their Immovable Property Tax bills to their buyers - so it's probably best if you say nothing at the moment - you don't want to give them any ideas!

You should pay the developer for the Immovable Property Tax that he has paid on your property when he gives you the bill - that is assuming it includes the information enabling you to claim a refund at a later date.

No, you can't reclaim the difference between your Property Transfer Fees and your Immovable Property Tax - they are two different things.

As for what happens if you should sell the property before its Title Deeds have been issued:

1. There will be no Property Transfer Fees to pay because ownership of the property will not have been transferred to your name.

2. As for the other bits and pieces, much depends on what's written in your Contract of Sale - but typically you would be responsible for these until your buyers take delivery.

Regards,

[pafos105]

Thanks Nigel that makes perfect sense now! Sorry to labour the point but what order of magnitude are we talking about for the IPF? If I can't ask the developer is there a way I can calculate the amount myself, given that it all depends on a proportion of the developers total tax liability. Are we talking 100 or thousands of pounds - I am still recovering from the shock of finding that we will actually be charged 16,000 euros for the property transfer fees as I got my initial purchase price wrong when I calculated it before.

You are probably not the best person to ask but my other thought is whether it will count against us to move our mortgage to an English bank. If we sell the apartment in Cyprus without any apparent mortgage will this affect our capital gains or other tax calculation as we will not have an obvious debt to offset it against or will it be based on the initial purchase price and make no difference? In other words, is there any other benefit from keeping the mortgage in Cyprus in terms of renting, selling or ownership? Is this a question for a lawyer?

Thanks again for all your help, I feel I am getting a much better handle on where we are at the moment, unfortunately we have a couple of big decisions to make now which will determine just how much money we lose in the long run.

[Nigel Howarth]

Hi Helen,

I expect you should be paying the developer for IPT is in the hundreds of Euros - unfortunately there isn't a way you can calculate it yourself.

I can't see any reason why you shouldn't move your mortgage to a UK bank - but there may be some expenses involved in the early settlement of your existing mortgage with the bank in Cyprus.

Moving your mortgage will not affect your Capital Gains Tax - or any other tax liabilities.

I think you best idea is to talk with the banks and see what the situation is.

Regards,

[june]

Nigel, The developers (Maispa) have given notice that they are no longer going to provide services such as cleansing and pool maintainance after the end of this month. Given that we still have no title deeds I understood that they were legally responsible for property maintainance. It appears that after several of us have questioned their management fees they have thrown the teddy out. I'm sure that George Maispa does not sign cheques to pay invoices without checking what he has received and this is no diferent.

Given this situation some of the owners are considering forming a committee to run the complex. Personally I have reservations; there are questions about liability and getting the absent and uncontactable owners to contribute. Is there another option such as individually or collectively suing Maispa for specific performance to continue their obligations, or to recover any debt incurred by a management committee regards non-payment from owners?

[Nigel Howarth]

Hi june

The law is open to interpretation - it says that the 'owner' is responsible for registering the building as being jointly owned. The owner is defined by the law as the person entitled to be registered as the owner or the actual person registered. So a project without separate Title Deeds can be registered.

Unless your contract of sale states that the developer will manage the complex until separate Title Deeds are issued, you may have difficulty convincing a court that he should do so.

It's probably best if you set up a a management committee to manage things yourselves - and you will need to do this a some time anyway. If your complex has a properly formed management committee it can sue non-payers. (If you get the Land Registry to carry out a Title search, this will show the names and contact details of the buyers).

Regards,