Cyprus Property Forum for Buyers, Sellers & Investors

Hi all/Nigel,

I am new to the forum, but have sought advice and read numerous posts on here about the Trapped Buyers Law in Cyprus as my father is now going through as he tries to sell his property and get it pushed through to the new buyer.

In a nutshell, my partner and I visited Paphos last June 2018 and we visited the family holiday home that has been left to fester for 7-8 years! My father had hit stony ground financially and could no longer afford to holiday/visit the property which he bought outright in 2001. We managed to get hold of the developer's son who gave me the keys to access the property - it was very run down. We decided to pop in to an estate agency to get a possible valuation (needs a lot of renovation work/TLC), and he was very affable, understood our situation and put the property on the market. He introduced us to a lawyer who are now handling our case. The estate agent was quick to find a buyer/property investor; so we commenced with the sale. I am now managing the sale on my father's behalf as his representative as per the POA.

It took many months gathering the relevant paperwork for the lawyers to progress with the application (POA's, Affidavit, inside leg measurement etc) but we got there in the end. Today, the lawyer told us that the Land Registry is to proceed to send the notice to all interested parties to object to the transfer within 45 days. Slight concern here... there are MEMOs registered against the property; one from the tax department and one from another company (a steel fabricator), but as I understand, the developer will also receive the notice and may also object to the transfer.

Now, I must add here that the developer wanted to buy the property, but was only interested to buy it off us once we told him we had found a buyer - they said we should cancel it. Too late, as we had already accepted the buyer's offer via the estate agent and gazumping - albeit a lower offer, is illegal in Cyprus. They threatened us with two options; cancel it, and to sell the property back to them as "they didn't want anyone else living there/within the complex" (the developer has bought back a number of properties in the complex from UK owners he sold to) and asked how much we wanted... - OR - that we would have to "pay the whole amount" if we didn't sell back to them and that we would get "way less than what he wanted".

I explained this to the lawyer and estate agent who advised me to ignore the developer's bullying tactics to sell the property back over to them, and they said that the developer would have had us "over a barrel" if we had sold the property back to them. Of course we don't have our title deeds, hence why we are now going through the trapped buyers application.

Now we are at the 45 days stage; and I fear that the developer will object on the basis that my father "has not fulfilled his contractual obligations" and drag his heels, there is a clause on his Contract of Sale that states verbatim; The Purchaser shall be liable for the payment of all immovable property or other taxes, charges, including sewage, levies, insurance premiums etc., in respect of the purchased property which charges the Vendor will pay to the appropriate authorised and/or companies until the property is transferred into the name of the Purchaser.

Is there a difference between transferring the property into the name of the Purchaser and transferring the title deeds to into the name of the Purchaser or are they the same thing? The grammar of the above clause is not very clear; does it state the Vendor will pay to the appropriate authorised and/or companies until the property is transferred into the name of the Purchaser i.e. until the title deeds are transferred in to the name of the Purchaser? - OR - is it basically saying that The Purchaser shall be liable for the payment of all immovable property or other taxes, charges, including sewage, levies, insurance premiums etc., once they take on possession of the property? I can't work this one out - so if you can help decipher this clause, that would be great. When I spoke to my father, he mentioned that developer never asked him to pay for any of the following within that clause since he took on the property in 2001. Even when the title deeds were issued (not sure when) the developer never contacted him and said they were available to transfer them in to my father's name?

The neighbour next to our property, told us that she had her title deeds and managed to get them but it cost her in the region of €6,000 (with use of a lawyer) back in 2007, and it's the developer who has them, so I know they are able to be got hold of.

Assuming the clause means that we owe the IPT, then if the developer did not pay IPT to the tax department prior to the title deeds being issued, then we (the Purchaser) will have to pay those unpaid IPT taxes (quite aware of that) which we'll pay based on the 1980's property value. If the developer had paid some IPT, but not all, then we'll have to pay the outstanding IPT to the tax department and also monies to the developer for when he paid some IPT on the plot - however, we'll only owe him a % of that tax he paid because developers were charged IPT on their entire plots, not individual properties.

I might be worrying over nothing, and I am sure that the lawyer will go through anything that is claimed to be owed to the developer with a fine tooth comb should they object. I just fear that, because the developer didn't get their hands on the property, they will make life difficult by charging extortionate amounts to withdraw any objection to transfer and delay the transfer.

Nigel, would be great to hear your thoughts on the matter/questions I've raised, and if you had heard of similar cases to ours? Of course if anybody else would like to throw their two pennies worth in. Feel free.

Many thanks,

blueprintz

Hi blueprintz and welcome to the forum.

From what you say we know that the Title Deed is available and ready to be transferred to your father. Currently, the Title Deed to the property will be registered in the name of the vendor.

To reach this stage in the process your father will have supplied all the necessary information to the Land Registry, including payment of any property-related taxes according to the strict implementation of the law.

Had your father not provided evidence that these taxes had been paid, he would have received a notice from the Land Registry asking him to pay them to the relevant authorities (Tax Department, Sewerage Board and Community/Municipality) and provide receipts confirming these taxes had been paid.

But having said that I know that one Land Registry office in particular does not check that these taxes have been paid and waits for the vendor to object to the transfer. They then ask the purchaser to settle their account with the vendor and provide a receipt confirming payment.

The clause "The Purchaser shall be liable for the payment of all immovable property or other taxes, charges, including sewage, levies, insurance premiums etc., in respect of the purchased property which charges the Vendor will pay to the appropriate authorised and/or companies until the property is transferred into the name of the Purchaser" means that from the year you father took possession of the property he became liable for paying all the property related taxes and insuring the property.

The query I have is on the word "authorised". From the context I would say this word should be "authorities" otherwise the clause doesn't make any sense. I suggest you get the opinion of the lawyer who is handling the case as this will make a difference to what your father has to pay.

There are two possibilities:

1. Your father has to pay the taxes to the vendor.
2. Your father has to pay the taxes to the authorities.

The main difference is that the vendor (developer) pays more tax because the total value of the properties registered in his name means that he has to pay Immovable Property Tax at a much higher rate (the highest rate was 1.9%). In this situation the taxes owed are paid to the developer. With the assistance of the vendor, the purchaser then applies to the Tax Department to recover any legitimate tax overpayments (typically the registered owner of a single property pays tax at less than a tenth of that paid by a developer.)

Some developers add penalties imposed by the Tax Department for late payment of tax and expect the purchaser to pay. The purchaser must resist paying these penalties as they are not responsible for the failings of the developer. (Looking at your post I expect your neighbour who paid €6,000 was charged penalties by the developer.)

I should also add that if the property is sold before the Tax Department pays any tax overpayments, the purchaser will not receive the money as he will no longer be the registered owner.

I can't say what will happen in your case, you'll need to wait to see if the Land Registry receives any objections from the 45 day letter.

Transferring the property and transferring the Title Deeds into the name of the purchaser are the same thing.

As for the memos, these will not cause problems unless they were deposited with the Land Registry before you father's contract of sale was deposited. If they were deposited after your father's contract, they could complicate matters.

Do you have details of the memos? If you have the Land Registry search document let me know and I'll send you my email address so you can send it to me. I can see if the memos are a potential problem and also see what the Immovable Property Tax liabilities could potentially be.

Regards,

Hi Nigel,

Many thanks for your response!

To reach this stage in the process your father will have supplied all the necessary information to the Land Registry, including payment of any property-related taxes according to the strict implementation of the law.

Well, his lawyer (also his POA) did this on his behalf, but the last email I have from the lawyer is they are proceeding to send the notice for 45 days.

Had your father not provided evidence that these taxes had been paid, he would have received a notice from the Land Registry asking him to pay them to the relevant authorities (Tax Department, Sewerage Board and Community/Municipality) and provide receipts confirming these taxes had been paid.

That they did, our Lawyer emailed me stating. "We have received a notice from the land registry to pay all outstanding taxes relating to the property in order to proceed with the application. We will contact the Muktar to find out the balance and let you know", and thus our lawyer (my father's POA) contacted the Muktar of the village and they sent across the total amount owed for (water consumption,refuse collection fee, annual rates, surcharges) and it was paid. Once the amount was paid, the lawyer must have received a tax clearance certificate so she could proceed with the land registry.

But having said that I know that one Land Registry office in particular does not check that these taxes have been paid and waits for the vendor to object to the transfer. They then ask the purchaser to settle their account with the vendor and provide a receipt confirming payment.

Hmmm, which Land Registry would that be please? As stated above, the Paphos Land Registry are proceeding with the 45 days notice...surely it wouldn't do so if it didn't meet all the 3 basic conditions, including payment of any property-related taxes? Anyway, the Land Registry had already given notice to the lawyer to pay all outstanding taxes on the property to progress the application earlier on?

EDIT: Nigel, you mentioned that the clause "The Purchaser shall be liable for the payment of all immovable property or other taxes, charges, including sewage, levies, insurance premiums etc., in respect of the purchased property which charges the Vendor will pay to the appropriate authorised and/or companies until the property is transferred into the name of the Purchaser"

means that from the year you father took possession of the property he became liable for paying all the property related taxes and insuring the property"

. - BUT (and with the greatest respect as I know you are only trying to help), you contradict yourself by later saying

Transferring the property and transferring the Title Deeds into the name of the purchaser are the same thing.

- so which is it that the clause refers to? If it means the latter, then yes my father will then owe the IPT to the developer (who has paid/or not paid) to the Tax Department... but if it means the former quote, then he will owe the IPT 2001-2016 directly to the Tax Department, correct?

Thank you for the answers to the subjects I raise. I am fairly confident that my father's lawyer is on top of everything. She will have read the Contract of Sale to see if there were any potential problems - she also sent the developer a letter asking him for a statement of what was owed, but the developer never replied to her.

In the official letter to the developer, the lawyer asked him to give her a final statement of account for outstanding amount owed to him by my father. She said if there were any illegal charges, she would let me know. Regarding the charges, (assuming clause mentioned earlier means we pay the developer) the lawyer said he may charge IPT (year 2000-2011 for IPT 0.4% on the value of 1980, year 2012 for IPT 0.8% on the value of 1980 and if he paid the year 2013 to the government 1.9% on the value of 1980), council taxes of the village around 0.15% per annum, any communal expenses of the common ares and if any, insurance policy premiums (according to clause 11 of his contract of sale agreement) - as I say, no such response form the developer? Any reason why that could be?

p.s. the 1980's value is €21,357.52 and the 2013 value is €165,200 if that helps work our what the maximum IPT liability could be, assuming the developer doesn't include the late payment penalties should he eventually response via objection or directly contacting my father's lawyer.

As for the MEMOs, I think the lawyer would have spotted if they were lodged before the Contract of Sale was lodged at the Land Registry - the lawyer has the LR search document. All she said was "Unfortunately the search that I have obtained from the land registry shows that there are MEMOs on the property from the tax department regarding taxes owed by the developer and also one MEMO from one company L.C.A. Domiki Limited for monies owed by the developer again.


Many thanks for your reply and I look forward to hearing from you shortly.

blueprintz

Hi blueprintz

I've replied to your PM and will send you the historical IPT rates shorty.

Regards,