Many questions about investing in property

[JMot]

My first post, I looked at the forum but I still have some questions on purchasing property to let as a Cyprus non-domiciled tax-resident:

1) I am looking at foreclosure sites and market places like Bazaraki and excluding holiday villas and any property which is priced above 2k eur per sqm (the yield is just not there). Only looking at Limassol area, since most professionals (who work and rent) are based in Limassol, I do not see the other cities as "liquid" enough. Maybe I am wrong on this point and I am open to suggestions based on facts. Can someone suggest other websites where this kind of properties are commonly advertised?

2) I am excluding every property built before 1/1/2000 since properties built before 2000 suffer rent control and a "de facto" almost permanent loss of possession once they are rented first time (permanent security of tenure for the tenant). Is my understanding correct? If an old property needs substantial renovation (requiring planning permission) would it be considered under the rent control law even after the renovation? Is requesting planning permission for demolition and then new building construction the only way to remove an old property from rent control law jurisdiction?

3) I am mostly excluding new properties or off-plan properties for two problems: the 19% VAT (which is pure state robbery) and the lack of title deeds on new apartments (maybe on new freehold houses the deeds of the land can be transferred). My understanding is that on new properties, on the first purchase in Cyprus and only on the first 200sqm (which is not small) you can reduce the VAT to 5% and even if you hold the property for less than 10 years the pro-rata discount is substantial; If bought through incorporated company then you have to charge VAT on rent which is a bummer for non commercial property. Is my understanding correct? Is the title deeds problem truly endemic with newly built properties (like 80% without them)?

4) for free rental contracts, I have been told by Cypriots that, since access to district courts is equally difficult for tenants (they have to put some money up front, same as landlords), evictions of non paying or anti-social tenants (the scourge of landlords) are usually quickly "enforced" by cutting utilities and avoiding the expensive and long legal route. Is it true that this "process" is quite common? Has anyone got some experience on average length of the eviction process in a District court and the cost of the legal fees?

5) A lodger normally shares a part of the property with the landlord. Is there a rent-a-room scheme in Cyprus? If you just rent to lodgers in Cyprus and one starts to cause problems, can you just show him/her the door at short notice like in the UK or in Ireland? Do lodgers have security of tenure like tenants?

6) Is there a rented property registration scheme in Cyprus? Like the one they have setup for holiday lets.

7) Has anyone used a reliable and independent surveyor? I have not found any indications in the forum. I am also looking for a reliable architect that specializes in planning permissions, so any suggestion on the architect would be much appreciated.

My understanding is that any internal non structural change of a building does not require planning permission (for example new floors, new bathroom, new kitchen). Would that also apply to electrical or water piping as long as it is executed by a licensed contractor? I looked at the planning laws and regulations here: http://www.moi.gov.cy/moi/tph/tph.nsf/i ... endocument and I could not find what is exempt.

Any answer or suggestion would be greatly appreciated.

[Nigel Howarth]

Hi JMot and welcome to the forum

1) The best place to look is Limassol and Nicosia - take a look at some of the banks that have repossessions, like the Bank of Cyprus Real Estate Management Unit, Alpha Bank's Alpha Real Estate Services, APS Holding, etc.

2) You don't have to exclude all properties built before 1/1/2000 - only those subject to the rent control law.

3) Yes - Restrict your search to properties with Title Deeds.

4) Get a proper rental agreement. It can take many years to get a tenant evicted as the laws here are very pro-tenant. (It took an Irish friend 4 years to get his tenants evicted and they trashed the place before they left.)

5) I don't believe there's a rent-a-room scheme here or (6) a rented property registration scheme.

7) Maybe someone else here has someone they can recommend. I have on in Limassol, but I'm not sure if he's still living here. My architect in Limassol is excellent, I guess you looking to extend?

8 ) Basically you can change what you like as long as the external appearance of the property remains unchanged - floors, bathroom, kitchen no problem. I don't believe is absolutely necessary to get licensed contractors to handle the plumbing and electricity.

Regarding returns, the RICS Cyprus Property Price Index will give you some ideas.

Regards,

[JMot]

Hi Nigel,

thank you very much for your detailed answers.

on point (2) from the best of my understanding if the dwelling is located in Limassol city (my target) and was built before 1/1/2000, as soon as a tenant stays beyond initial term established in tenancy agreement, he/she becomes a statutory tenant with an almost permanent security of tenure and rent control protection. So to the best of my understanding the only effective way to avoid the tenancy falling into a statutory status is to purchase a dwelling completed after 1/1/2000. Is my interpretation faulty? In any case I shall verify with a solicitor on this point.

on point (7) I am not sure if you can PM me the name of the architect. I am also looking at a bank sale of a small uncompleted bulding (only structure built with pillars and a couple of floors) which has only got the land plot title. I need the opinion of an architect on this one about planning permissions, timeframes, costs, ... I have done a project like this in Ireland on a house, but there were some costly surprises along the line.

Thanks again

[Nigel Howarth]

Hi Jmot

Statutory tenancy only applies to properties in locations controlled by the Rent Control Law. I don't have a list of those locations to hand.

And the law only applies to Cypriots. A foreigner cannot become a statutory tenant.

I know some changes were made to the Rent Control Law earlier this year to make it easier for landlords to evict statutory tenants. But I can't say how effective these are.

I'll PM you the name of my architect. (He's based in Limassol.)

Regards,

[Pantheman]

Hi Nigel

Regarding your comment:

‘And the law only applies to Cypriots. A foreigner cannot become a statutory tenant.’

This is new to me as I don’t recall the law specifying this detail.

Where did you hear about this? I will try to look it up

Regards

[Nigel Howarth]

Hi Pan

There's a paper at https://www.google.com/url?sa=t&rct=j&q ... 7jeWvqezB7 - see para 10.5. (I see the restriction may be limited to business leases.)

I know there were changes to the law earlier this year but I don't have the detail.

Regards,

[Pantheman]

Hi Pan

There's a paper at https://www.google.com/url?sa=t&rct=j&q ... 7jeWvqezB7 - see para 10.5. (I see the restriction may be limited to business leases.)

I know there were changes to the law earlier this year but I don't have the detail.

Regards,

Thanks I will check this, however the wording in the that paper is a little ambiguous and allows the reader to misinterpret what he intended to say. In any case I will look up the law 23/83 and see what it says.

Thx take care.

[Nigel Howarth]

a little ambiguous and allows the reader to misinterpret what he intended to say.

Thanks Pan - some of the laws seem to be open to interpretation. You ask two lawyers the same question and they'll give you two different answers.

Cheers,

[Nigel Howarth]

Hi Pan

I've tracked down the law - http://cylaw.org/nomoi/enop/non-ind/1983_1_23/full.html and translated it to English using Google Chrome.

It opens with an Interpretation section that starts:

"In the present Law, unless a different meaning arises from the text;"

and goes on to defining a tenant as:

"Tenant" means any natural or legal person who normally resides or has his registered office in Cyprus and who is a tenant of a property in relation to which he is rented and includes;

(a) institutional tenant

(b) any sub-tenant or any other person acquiring the right of ownership of the property by the original lessee or sub-lessee

(c) the surviving spouse who, or the child of a tenant who, resided or had his main occupation in the rented property with him at the time of his death or a full-time student abroad or temporarily working abroad at the time of his death of the tenant or, in the case of renting a residence, where the tenant has not abandoned a spouse or the tenant is a woman, that is, a member of the tenant's family who has lived with him for a period of not less than six months immediately before the tenant dies.

(d) the divorce due to the abandonment of the marital home by the spouse of the tenant's spouse as well as their children

(e) the Government of the Republic of Cyprus and any legal person governed by public law;

but does not include a non-citizen of the Republic, with the exception of the spouse or spouse of a citizen of the Republic, or a legal entity controlled by foreigners.

I've found different information at https://sslawyersco.com/cyprus-rent-control , which talks about the recent amendments to the law that says:

"This amendment concerns “statutory tenants” – a situation that arises once the first tenancy expires and the tenant (either a Cyprus or EU citizen, residing on the island) continues to occupy in the property. The property in question must be located within the “controlled areas” as specified in the Law and has to have been completed by the 31st of December 1999. The new provisions of the law come into effect immediately, and are not applicable to eviction applications filed in Court before the 31/01/2020 or to rent due before this date provided that such due rent is settled within 12 months from the 31/01/2020."

I think I'll go and lay down

Cheers,

[Pantheman]

Hello Nigel,

so there is no provision in the law for non-Cypriots then?? If I understood you correctly. (edit: the law says the definition of 'tenant' does not apply to non-citizens of the RoC. I don't understand how this can be so, but does not make clear if they can or cannot be statutory!! ) I think I need a lie down now.


In addition this bit 'has to have been completed by the 31st of December 1999', did you know that a very recent Supreme Court ruling actually clarified the meaning of this statement by saying that just because a property was completed before 31/12/1999 does not mean it comes under the rent control law, for the property to come under the rent control law it would have had to be rented or advertised for rent before this date!!!

How you can prove this though is anyones guess. I suppose an owner who lived in a property that was built before 31/12/1999 (never rented it out), then decides to rent it out, then this property will not be covered by the rent control law and the tenant will not be statutory.

I think you will need a longer lie down haha

[JMot]

This week I spoke with a solicitor that deals mostly with property and rental law. Due to the ROC joining the EU and the prohibition of discrimination between nationals and EU citizens established in the EU treaties which supersede national law, "does not include a non-citizen of the Republic" nowadays would be interpreted by the courts as "does not include a non-EU citizen". Non EU citizens "tenants" can only have contractual tenancies in Cyprus, never statutory tenancies.

One further pending point I was left with is the following: for a non resident EU citizen, is a yellow slip necessary in order to purchase real estate in Cyprus? I thought that in order to register a property as a non resident EU citizen at the land registry, only a TIC (Cyprus Tax id code) was necessary and the Limassol tax office told me that it was possible for a non resident EU citizen to get a TIC by emailing them a list of documents.

[JMot]

In addition this bit 'has to have been completed by the 31st of December 1999', did you know that a very recent Supreme Court ruling actually clarified the meaning of this statement by saying that just because a property was completed before 31/12/1999 does not mean it comes under the rent control law, for the property to come under the rent control law it would have had to be rented or advertised for rent before this date!!!

How you can prove this though is anyones guess. I suppose an owner who lived in a property that was built before 31/12/1999 (never rented it out), then decides to rent it out, then this property will not be covered by the rent control law and the tenant will not be statutory.

I believe you are referring to this case: https://www.mondaq.com/cyprus/landlord- ... -tenancies "Fisentzides v K&C Snooker & Poll Entertainment"

"The Supreme Court of Cyprus has recently issued a judgment in a landmark case (Fisentzides v K&C Snooker & Poll Entertainment, Civil Appeal 30/2019, dated 1/6/2020) providing guidance as to the interpretation of the term "property" as defined in section 2 of the Law.

A property falls within the remit of the Law if it is "a property under lease or available for lease as a residence or shop that is located within the boundaries of a controlled area and has been completed by 31st December 1999". In its judgment, the Supreme Court emphasised that the fact that the property should have been "under lease or available for lease" by 31/12/1999 is a precondition for the tenancy to be regarded as statutory and fall under the provisions of the Law. It agreed with the interpretation of a District Judge in a case decided back in 1993, stating that, as a matter of interpretation of the legislation, words in a legislative piece are not used unnecessarily. As a result, it is now clarified that a property must have been both completed and leased or available for lease as a residence or shop for jurisdiction to be afforded on the Rent Control Tribunal. Accordingly, parties wishing to rely on the provisions of the Law, being either landlords or tenants, need to satisfy the Court that the property being the subject matter of the dispute duly meets these requirements."

[Pantheman]

This week I spoke with a solicitor that deals mostly with property and rental law. Due to the ROC joining the EU and the prohibition of discrimination between nationals and EU citizens established in the EU treaties which supersede national law, "does not include a non-citizen of the Republic" nowadays would be interpreted by the courts as "does not include a non-EU citizen". Non EU citizens "tenants" can only have contractual tenancies in Cyprus, never statutory tenancies.

One further pending point I was left with is the following: for a non resident EU citizen, is a yellow slip necessary in order to purchase real estate in Cyprus? I thought that in order to register a property as a non resident EU citizen at the land registry, only a TIC (Cyprus Tax id code) was necessary and the Limassol tax office told me that it was possible for a non resident EU citizen to get a TIC by emailing them a list of documents.

A passport is sufficient to register a property, you will need the tic when you sell.

[Nigel Howarth]

Hi JMot

I'm living proof that you don't need a TIC when you buy property. I bought mine in 1992 before we moved to the island in 2002 and registered for tax.

Also, it's a good idea to keep the passport you use when you buy a property (i.e. Don't destroy it as recommended by HMG.) There are issues with some of the Land Registry staff who insist on seeing the passport whose number is shown on the contract of sale when the property was purchased to confirm the seller's identity.

Regards