Whether a proponent of Brexit or not, you will agree that Brexit has brought up a number of changes, one of which the ‘stripe-off’ from UK citizens of the ‘European’ citizenship status.
This might not seem as a great concern. After all, the UK passport is ranked among the top five based on the number of destinations their holders can access without a visa.
Sometimes however, a strong passport does not guarantee the destination. Cyprus is an island preferred by many UK nationals. Until Brexit, UK nationals could acquire immovable property in Cyprus as any other EU national.
In the post-Brexit reality this is now changed. Change is not necessarily for better or for worse. In this short article, the authors reflect on acquisition of immovable property in Cyprus by third country nationals.
Acquiring immovable property in Cyprus as a third country national
Third country nationals can acquire immovable property in two ways: either personally or through another vehicle, typically a Cypriot company or a company registered and existing in a country of the EU or the EEA.
A third country national wishing to personally own property in Cyprus must acquire a permit from the Council of Ministers (a power now vested in the District Administration Offices), under the Aliens Law, Cap.109.
The permit does not allow for the acquisition of an indefinite number of properties. It restricts the acquisition to up to two units (indicatively two housing units, a housing unit and a shop up to 100m², a residential unit and an office up to 250m², a plot of land up to 4,000m² if it is intended for the construction of a private residence).
The procedure is straight forward, requiring among others the filing of information on the applicant (and their spouse, if any), proof of financial standing and the details of the property and is typically completed within one month.
The absence of a permit does not prevent the buyer to sign and enter into the sale and purchase agreement (SPA). The third party national may enter into the SPA and deposit the SPA with the Land Registry thereby securing their rights over the property but, will not be able to have the property registered in their name (and obtain title in their name) until the permit is secured and filed together with the transfer of title request with the Land Registry.
The permit requirement does not apply where the purchaser is a Cypriot company or a company incorporated in an EEA jurisdiction.
What to expect when acquiring immovable property in Cyprus
There are many properties currently on the market. Before a buyer is swept away by the looks of the properties, it is advisable to look for its substance. The list of matters to be aware when acquiring immovable property is nothing out of the ordinary and is fairly limited. The three matters we would place on top of the list are the following:
- Burdens over the property: is the property subject to any mortgages or other encumbrances? This should not be a deal breaker provided that such burdens are released before the property is delivered to/registered in the name of the buyer. Any action the buyer is willing to undertake to release such burdens should (and as a matter of fact, must) be calculated towards the purchase price (namely, the purchase price to be reduced accordingly).
- Title deeds: new properties do not tend to have separate title deeds for either the plot on which they are built or for the property itself, until sometime after the delivery of the property to the buyer. This is not a matter of great concern, provided that the SPA includes express provisions addressing this matter and the property is developed and constructed in accordance with planning and building permits.
For existing properties, this is not usually an issue, although caution should be exercised when dealing with older properties. Such properties may have not been constructed in accordance with planning and building permits and thus the issuance of a title deed in the buyer’s name would be unlikely. There are ways to protect the buyer’s interests provided of course that the buyer enters into the transaction in full knowledge of all risks and benefits (one of the benefits is expected to be the reduced purchase price).
The transfer/issuance of separate title deed in the name of the buyer requires The filing with the Land Registry of a tax clearance certificate. The tax clearance certificate confirms that all taxes/VAT up to and including the transfer date are settled. The obligation to obtain the tax clearance certificate is on the seller. The Land Registry will also require confirmations that all utilities for the property are paid. All of these take some time to complete. Express provisions regulating these matters are typically included in the SPA. - The content of the sale and purchase agreement and statutory obligations: it may seem obvious but really, it is not. Real estate agents will typically provide template documents in the interest of time. As with every transaction, it is advisable that the contract be tailored to the specific transaction and reflect the commercial agreement of the parties.
Buyers should exercise caution when it comes to the description of the property, the provisions regulating the release of burdens over the property, agreed timelines and payment obligations, termination and force majeure clauses as well as statutory obligations.
Statutory obligations are an important aspect of transactions for the acquisition of immovable property.
Buyers should secure their rights over the property as soon as the SPA is signed in accordance with its terms. This is typically done with the deposition of the SPA (which must also be stamped) with the Land Registry (within six months from its execution). The deposition creates an encumbrance over the property ranking in accordance with its turn of deposition. Earlier depositions rank over later ones.
It is worth noting that a clause in the SPA prohibiting the deposition of the SPA is void even if the purchase price is not paid in full.
Buyers are advised to be as proactive as possible in terms of their legal and tax/VAT position when dealing with immovable property.
Acquiring immovable property is an important decision as well as stressful. Acquiring immovable property in Cyprus is no exception to that whether the buyer is an EU national or a third country national (or as Cypriot legislation likes to call them ‘an alien’).
Brexit might have changed the status of British citizens to ‘third country nationals’ but as far as acquisition of property in Cyprus is concerned, the benefits continue to outweigh any added procedural inconvenience.
Note
In this article, references to third country nationals do not include individuals who are eligible to acquire Cypriot citizenship by reason of their years of stay in Cyprus (or by any other means).