Buying Off plan with Title deeds

General questions & discussions on Cyprus property related matters
Post Reply
celadon
Posts: 10
Joined: 25 Oct 2008 10:33
Contact:

Buying Off plan with Title deeds

Post by celadon » 03 Dec 2008 23:24

Hi

I am just in the process of buying an off plan 4 bed villa in Tala. The villa is a 4 bed with 4 bathroom on large plot at 207sq metre covered area at around 440k euros. It is a single plot with a reputable developer ( I have done my due diligence, met the developer and checked other builds).

Problem is i seem to be the only person in the world looking to buy a villa in Cyprus at the moment!! Press and blogs full of doom and gloom. However, i am looking to invest in a property with a USP and long term investment.

The bank originally agreed my mortgage (following a 30% deposit) but has now said they cannot proceed due to lack of Bank funds.

To help me proceed i have suggested to the developer that if i purchased the land separately ( helps with vat and gaining title deeds) I can then approach the bank who have stated with title deeds they would entertain my application.

The developer has provisionally agreed.

Has anyone done this double contract purchase which looks good to me and benefits financially as long with obtaining title deeds now!!

However, I would appreciate anyone's experience to help me understand whether to progress.

Colin



Nigel Howarth
Site Admin
Posts: 2499
Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
Contact:

Re: Buying Off plan with Title deeds

Post by Nigel Howarth » 04 Dec 2008 09:59

Hi Colin,

I don't know if anyone else on this forum has done this - apart from me. We bought our land separately and then had our house custom built by a local building contractor. A couple of years ago I was advising a woman living at the Eastern end of the island. She eventually bought her land and her house using separate agreements though the same developer - she saved around CYP16,000.

I think in the present climate, developers will entertain anything that helps them achieve a sale.

Basically you'll have two contracts - one for the land and one for the construction of the villa. The main advantage is that you should only pay Property Transfer Fees on the price you pay for the land - as it's this contract that is lodged with the Land Registry.

The second contract, for the construction of your villa is just like any other commercial contract, it's not lodged with the Land Registry.

You should also get your Title Deeds much quicker - assuming that the developer has already sub-divided the land and had Title Deeds issued for each plot on which he's building.

One thing you need to bear in mind is that if you have the Title Deed to your land and then take out a mortgage for the construction, the Land Registry will want 1% of the mortgaged amount to register the mortgage (I've just been speaking to someone else on this subject and it seems the Land Registry may want 1% of 120% of the mortgage - I'm waiting clarification).

I mentioned that you should only have to pay Property Transfer Fees on the price you pay for the land. But I have heard from someone else that as a planning application had already been filed when they bought the land, they ended up having to pay Property Transfer Fees based on the total value of the land and the house.

But IMHO this is still a good way to proceed as you will not run into any of the Title Deed problems. And do make sure your lawyer checks out there isn't a mortgage on the land - or any other problems.

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
Read the latest Cyprus property news

Pantheman
Posts: 592
Joined: 26 Jan 2008 14:44
Location: Famagusta District
Contact:

Re: Buying Off plan with Title deeds

Post by Pantheman » 04 Dec 2008 13:56

Hello,

Yes this is a novel way of getting the title deeds sooner and paying less fees. I know others who have done this. Infact if you buy the land first make sure you set the construction price with the developer before you sign anything as the land purchase maybe conditional on using the same developer to build it. This way you avoid letting him get you over the barrel.

Good luck


For all your property needs, we offer Trust, Integrity, Honesty.
FSB Properties Ltd
Registered and Licensed Real Estate Company Co. Reg. No. 795, Lic. No. 250/E
Member of ETEK Registration No. A201999
https://fsbproperties.com

celadon
Posts: 10
Joined: 25 Oct 2008 10:33
Contact:

Re: Buying Off plan with Title deeds

Post by celadon » 10 Dec 2008 01:21

Thank you both for your thoughts. I am looking to progress but also intrigued whether you are aware of the vat slant. When offering to buy villa at €406k + vat total price is €476. If Land bought separately at lets say €140k at non vat (until Jan anyway) the rest €266 is vat able which saves money. This is if 2 contracts are arranged.

Therefore why we do pay vat on whole of villa when land is not vat able. Is this a developer scam to obtain a higher price but only paying vat on building not land?

Your advice is much appreciated.

Celadon



Pantheman
Posts: 592
Joined: 26 Jan 2008 14:44
Location: Famagusta District
Contact:

Re: Buying Off plan with Title deeds

Post by Pantheman » 12 Dec 2008 19:03

celadon wrote:Thank you both for your thoughts. I am looking to progress but also intrigued whether you are aware of the vat slant. When offering to buy villa at €406k + vat total price is €476. If Land bought separately at lets say €140k at non vat (until Jan anyway) the rest €266 is vat able which saves money. This is if 2 contracts are arranged.

Therefore why we do pay vat on whole of villa when land is not vat able. Is this a developer scam to obtain a higher price but only paying vat on building not land?

Your advice is much appreciated.

Celadon
Hi,

Not quite sure how this gets calulated, but did they actually ask you for €476K ?

Is it possible they will just add the VAT content of the house? Notwithstanding that, you can claim the VAT (or 10% on the 130m2) of it, so I guess you get it back anyway.

This has always been unclear to me, but I will ask the question next time I am with the right people.

Good luck


For all your property needs, we offer Trust, Integrity, Honesty.
FSB Properties Ltd
Registered and Licensed Real Estate Company Co. Reg. No. 795, Lic. No. 250/E
Member of ETEK Registration No. A201999
https://fsbproperties.com

Nigel Howarth
Site Admin
Posts: 2499
Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
Contact:

Re: Buying Off plan with Title deeds

Post by Nigel Howarth » 12 Dec 2008 21:00

celadon wrote:Therefore why we do pay vat on whole of villa when land is not vat able. Is this a developer scam to obtain a higher price but only paying vat on building not land?
There's a quirk in the system.

Most people buy the land & the dwelling using a single contract - in this situation, the buyers pays VAT on both the land and the dwelling.

However, if you buy the land and the dwelling using two contracts, no VAT is payable on the land.

I know it sounds crazy, but this is Cyprus!

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
Read the latest Cyprus property news

celadon
Posts: 10
Joined: 25 Oct 2008 10:33
Contact:

Re: Buying Off plan with Title deeds

Post by celadon » 14 Jan 2009 09:32

Hi All

Thank you for your advice so far it is much appreciated.

Events have moved on and due to the fact i now cannot get a mortgage for love nor money (at least at the terms i would be looking for ) the developer understanding the risk of no sale at all now has agreed to sell me the land with title deeds with no attached contract to build. Therefore releasing me to dictate build / developer if i was to use someone else, and more importantly at this time the ability to dictate timings of build.

However, before i progress i wanted to check current land prices to check the deal is attractive.

I understand it is difficult to assess but would appreciate anyone's thoughts on the deal as well as ideas of where to go to check recent land sales and websites to visit to give me a better view of land prices past present and trends.

The property is as about 470sq m in Tala, paphos walkable to village center. Quiet residential road on hill side with sea vies and mountain views, where all properties are complete apart from an adjacent plot so no problems on future builds blocking views etc

As vat may be added in due course ( due jan 2009) this seemed as good a way to proceed currently.
Any thoughts much appreciated.



Colin



Nigel Howarth
Site Admin
Posts: 2499
Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
Contact:

Re: Buying Off plan with Title deeds

Post by Nigel Howarth » 14 Jan 2009 14:19

Hi Colin,

I'm sorry to hear that you cannot get a mortgage - you're not the only one I can assure you! The banks are being extremely cautious at the moment.

But it's good news that the developer is prepared to sell you the land with the Title Deeds without you having to go back to him at a later date to build. Building land is in short supply - back in 1992 we paid CYP 14,000 for our building plot - prices have rocketed since then.

I've managed to find a couple of ads for land in Tala, I've listed the details below:

Tala - Paphos - Residential Plot 733 sqm - €305,000 - Building Factor: 30% - Cover Factor: 25% - Main road - Electricity, Water, Telephone

Land For Sale Tala Paphos (Pafos) Cyprus Real Estate - 1000 sq.m. plot near ravine with uninterrupted views to Peyia & Coral Bay, level land with all services in quiet cul-de-sac. District: PAPHOS Area: Paphos & Suburbs Location: Tala Type: Land/Plots Plot area: 1000 m2 Foto avaliable More Photos Features & Amenities Close to amenities Sea views Mountain views Walking distance ... € 162,317

These are asking prices - but it does give you an idea.

There really isn't a critical mass - properties are priced at what the seller feels buyers will pay.

Pan's in the business - he may be able to give you a better idea.

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
Read the latest Cyprus property news

celadon
Posts: 10
Joined: 25 Oct 2008 10:33
Contact:

Re: Buying Off plan with Title deeds

Post by celadon » 15 Jan 2009 10:25

Hi Nigel

Thank you once again for your support.

Another question, I believe there is a time limit to how long building permission is live on a plot once granted. ie after a certain time it needs to be reapplied for. Is there a risk where it may be refused obviously reducing the value and use of the plot?

Many thanks


Colin



Nigel Howarth
Site Admin
Posts: 2499
Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
Contact:

Re: Buying Off plan with Title deeds

Post by Nigel Howarth » 15 Jan 2009 11:00

You're welcome Colin,

A Planning Permit is valid for 3 years and if work hasn't begin within that 3 years you have to re-apply.

Building Permits are valid for one year and if substantive work has not been done within that time you have to re-apply.

In Paphos I understand that it's taking the authorities 6-9 months to issue a Planning Permit, assuming there are no problems, and 12-18 months for a Building Permit. But these times may be coming down as the number of applications being submitted is reducing.

If your in a residential zone, it's highly unlikely that a Planning Application will be refused. But you may be required to modify the plans to comply with the regulations - similarly with the Building Permit. (To get our Planning Permit, we had to shave a metre or so off the width of our garage block). Incidentally, if you do have to change the plans you have to start from square one and submit the application again.

Cheers,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
Read the latest Cyprus property news

Pantheman
Posts: 592
Joined: 26 Jan 2008 14:44
Location: Famagusta District
Contact:

Re: Buying Off plan with Title deeds

Post by Pantheman » 15 Jan 2009 16:12

Hello Caledon.

I would not want to comment on the land without seeing it. There are a number of characteristics that I would need, to be able to give an assessment.

re, you questions about prices, you can get an idea of its worth from the land registry. If you have a copy of the topografic and title deed they will give you their assessment. Bear in mind that land registry values are usually higher than actual as they use this to calculate the transfer fees. (hence get more from you!)

Before you do purchase, make sure you chek it out at the planning office, the zone it is in, the build densities, max heights and so on. being a 407m2 it sounds like a build plot but you need to check the detail. You wouldn't want to buy it only to find there is a problem.

Again you would have to go with the above paperwork and ask. This would only be a verbal opinion, but you would know from this if you could or couldn't build. If you wanted a written response you have to make application, with a letter from the owners, 3x official copies of the topografic, copy of the title deed, photos and wait 3 - 4 months.

May i suggest a solocitor to check it for you before you buy it, that way he can check for any conditions on the title (written in greek) like rights of way, access, easements and so on. At worst case if he said it was ok, but wasn't you could have some recourse, otherwise you have yourself to blame!

It all sounds so cumbersome, but if you think, when you buy a house in the UK, the solicitor does just that and takes 8 weeks or so to do it.

Anyway good luck and do lets us know the outcome.


For all your property needs, we offer Trust, Integrity, Honesty.
FSB Properties Ltd
Registered and Licensed Real Estate Company Co. Reg. No. 795, Lic. No. 250/E
Member of ETEK Registration No. A201999
https://fsbproperties.com

Post Reply