Specific Legal and General Notes on Real Estate, Real Estate Treatment & Property Administration Fees in Cyprus

TABLE OF CONTENTS
1.0 INTRODUCTION
1.1 General
1.2 Cyprus

2.0 CYPRUS IN INTERNATIONAL LAND MARKET
2.1 Foreign Investments in immovable property
2.2 Price of land
2.3 Legal assistance

3.0 LEGISLATION RELATED TO IMMOVABLE PROPERTY
3.1 General Legislation
3.2 Specific Legislation
3,3 Double Tax Treaties

4.0 BRIEF REFERENCE TO SOME ASPECTS OF LEGISLATION CONCERNING FOREIGN INVESTMENTS
4.1 The Constitution of Cyprus
4.2 The Contract Law and the Civil Procedure Law
4.3 The Stamp Law
4.4 The Wills and Succession Law, The Administration of Estates Law, the Probates (Re-Sealing) Law and the Estate Duty Law
4.5 The Trustees Law
4.6 The Exchange Control Restriction Law and the Central Bank of Cyprus Law.
4.7 The Immovable Property (Tenure, Registration and Valuation) Law
4.8 The Sale of Land (Specific Performance) Law
4.9 The Acquisition of Immovable Property (Aliens) Law
4.10 The Immovable Property Tax Law and the Immovable Property (Towns) Tax Law
4.11 The Capital Gains Tax Law
4.12 The Rent Control Law

5.0 CONCLUSION

ANNEX 1
FEES FOR LEGAL SERVICES RENDERED BY THE REAL ESTATE & PROPERTY DEPARTMENT


1.0 INTRODUCTION

1.1 General
Nowadays the world population is growing rapidly and so is the demand for land. The need for land is not limited to the residential sector; it occurs in the agricultural, industrial, commercial and tourist sectors as well. Land is a finite material and therefore its value worldwide is constantly increasing.
This increase in value is aggravated by inflation and by the instability of the monetary systems and fiscal policies of the countries that lead the race in the financial field, thus making investment in the safer sector of immovable property more attractive. The great technological progress in communication, transportation and international trading has made investment in this field easier and more accessible than in the past.
Man's affinity with the land stems from time immemorial and it is easy to understand why land has always been considered as one of the most precious commodities, closely connected with social and economic stability and progress, and why the various legal systems have always tried to regulate in detail the rights of possession, occupation and ownership of immovable property.

1.2 Cyprus
Cyprus is no exception to the rule. The economic and social evolution that has taken place in recent years and the sophisticated methods of cultivation and industrialization, together with the absence of alternative forms of investment, have diverted capital both from home and abroad to land ownership and land transactions.
This trend has necessitated the establishment of a suitable legal framework whilst allowing the involvement of Cyprus in the international land market, protects the social, economic, agricultural and industrial interests of the island and its people.
Cyprus has achieved this task. Despite its troubled history, it has managed to develop a constructive legal system for immovable property that is as efficient as similar systems in other advanced countries. It is operated through a series of laws which are regularly amended to meet everyday demands and balance conflicting interests in this vital sector of the economy.

2.0 CYPRUS IN THE INTERNATIONAL LAND MARKET

2.1 Foreign investments in immovable property
The location of Cyprus in the eastern Mediterranean at the crossroads of Europe, Asia and Africa, the safe and protective legal system, the perfect infrastructure, coupled with regular communication with all parts of the world, the relatively low cost of living, its excellent climate and the friendliness and hospitality of its people, are just some of the reasons that have made Cyprus attractive to foreign investors for over 20 years now.
Foreigners who seek to invest in immovable property in Cyprus may be classified in the following four main categories:
(a) Retired residents
These are people who settle permanently in Cyprus upon retirement. A series of incentives is given by the Cyprus Government to retired people, including duty-free facilities and very low taxation of their income which emanates from abroad. These people may also enjoy, under certain circumstances, the benefits of the Double Taxation Treaty of their country of origin with Cyprus, if there is one. Cyprus has signed 26 such treaties, regulating in effect tax relations with over 40 countries.
(b) Employed residents
This category includes foreigners who live indefinitely or for a fixed period of time in Cyprus as employees, either of their own offshore company or of a local or offshore firm, and who choose to purchase their own property in Cyprus rather than live in rented premises.
In this category are also included offshore companies purchasing houses for their Directors.
(c) Holiday Makers - Speculators
These people purchase properties in Cyprus as holiday homes or for possible permanent places of abode upon retirement, or for the sale thereof with a reasonable profit at a later stage.
Profits realized by foreigners from the sale of immovable property may be expatriated under certain restrictions.
(d) Business investors
These are foreign individuals and companies who acquire property in Cyprus for touristic or industrial purposes, making use of the location and climate of Cyprus, the excellent infrastructure and the various incentives offered for these purposes, especially in the area of taxation. To this end, the Free Trade Zone structure of Cyprus offers great inducements ranging from the provision of all modern facilities to low tax or tax incentive status.

2.2 Prices
The relatively small area of Cyprus and the great demand for immovable property, especially in recent years, have led to a considerable increase in the cost of land and accommodation in Cyprus. However, despite the increase, the prices of land and accommodation in Cyprus, as well as the cost of living, are still comparatively lower than those of most European countries or holiday resorts.

2.3 Legal assistance
The complexity of the legislation on immovable property and the formalities which need to be considered when dealing in relevant matters render it necessary, especially when foreigners wish to invest in immovable property in Cyprus, to seek and obtain from the start reliable and efficient legal advice in order to avoid unpleasant results and future undesirable consequences.

3.0 LEGISLATION RELATED TO IMMOVABLE PROPERTY

Many laws in Cyprus regulate matters affecting immovable property and transactions related thereto either directly or indirectly. Such legislation may be divided into two categories, namely General Legislation and Specific Legislation.

3.1 General Legislation comprises those laws which, although not regulating matters of immovable property directly, do contain provisions applicable to rights in immovable property and to transactions related thereto. The main laws in this category are as follows:
(a) The Constitution of Cyprus
(b) The Contract Law, Cap. 149
(c) The Civil Procedure Law, Cap. 6 and Rules
(d) The Stamp Law, Cap. 228
(e) The Wills and Succession Law, Cap. 195
(f) The Administration of Estates Law, Cap. 189
(g) The Probates (Re-Sealing) Law, Cap. 192
(h) The Estate Duty Law, Cap. 319
(I) The Trustees Law, Cap. 193
(j) The Exchange Control Restriction Law, Cap. 199
(k) The Central Bank of Cyprus Law, No. 48/63

3.2 Specific Legislation includes all the laws and regulations referring particularly to immovable property and are as follows:
(a) The Immovable Property (Tenure, Registration and Valuation) Law, Cap. 224
(b) The Sale of Land (Specific Performance) Law, Cap. 232
(c ) The Acquisition of Immovable Property (Aliens) Law, Cap. 109
(d) The Immovable Property Transfer and Mortgage Law, No. 9/65
(e) The Immovable Property Tax Law, Cap. 322
(f) The Immovable Property (Towns) Tax Law, No. 89/62
(g) The Capital Gains Tax Law, No. 52/80
(h) The Rent Control Law, No. 23/83

3.3 Double Tax Treaties
Cyprus has entered into 26 Double Tax Treaties, certain provisions of which affect directly or indirectly the possession, ownership and disposition of immovable property especially in matters of taxation.

4.0 BRIEF REFERENCE TO SOME ASPECTS OF LEGISLATION CONCERNING FOREIGN INVESTMENTS
A brief analysis and reference is attempted herein below on some aspects of the above legislation of Cyprus, in relation to the protection of ownership and the rights pertaining to immovable property, the regulation of relevant transactions and the developed policy in similar matters especially where foreign investments are concerned.

4.1 The Constitution of Cyprus
The Constitution of Cyprus establishes the equality of all persons irrespective of their nationality and includes provisions for the protection of human rights of all persons without discrimination. Any violation by an administrative authority of a person's fundamental rights entitles such person to request this authority to remedy the situation. The administrative authority in this case has a period of 30 days during which it must give a prompt answer to the petitioner.
Furthermore, such person has free access to any competent Court in Cyprus, as well as the European Court and Commission on Human Rights.
The right of ownership of immovable property is considered as one of the fundamental human rights under the Constitution of Cyprus and as such it is clearly and absolutely protected. According to section 23 of the Constitution, compulsory acquisition or imposition of restrictions on immovable property by the Government is regulated by the Compulsory Acquisition Law, No. 15/62, whereby the Government may acquire, in the matter of public interest and by giving just cause, property with payment of immediate compensation to the owner at the present market value. This law also provides that properties acquired as above should be returned to their owners if the purpose for which they were acquired does not materialise within three years from the date of acquisition.
Therefore foreigners who own property in Cyprus can also enjoy all those rights pertaining to property which are available to the citizens of Cyprus and can be assured that their property is absolutely protected.

4.2 The Contract Law and the Civil Procedure Law
These laws are to a large extent modelled on their English counterparts and they regulate all kinds of transactions, including those relating to immovable property and the court procedures in resolving disputes arising there from.
It is advisable that contracts referring to immovable property be made in writing, duly stamped and properly signed and witnessed.
All disputes arising from transactions concerning immovable property are governed by the laws of Cyprus and are subject to the jurisdiction of the courts of Cyprus. The parties, however, may in some circumstances agree concurrent jurisdiction of other courts or refer any dispute to arbitration before resorting to court proceedings.

4.3 The Stamp Law
The Stamp Law defines the revenue stamps payable on contracts in accordance with the purchase price as follows:
(a) For a purchase price up to CY,100.000, the revenue stamp is CY,1.50 per thousand.
(b) For a purchase price exceeding CY,100.000, the revenue stamp is CY,2.00 on every thousand over CY,100.000.
Thus, the revenue stamp on a contract for CY,150.000 will be CY,250 i.e. CY,150 for the first CY,100.000 (0.15%) and CY,100 for the remaining CY,50.000 (0.20%).
The absence of the revenue stamp does not render a contract null or void but it cannot be used in Court proceedings or for the transfer of ownership of property in the Land Registry. Unstamped contracts may be used as above if properly stamped at the time of such use, in which case a fine is also imposed according to the value and the time of execution of the relevant contract.

4.4 The Wills and Succession Law, the Administration of Estates Law, the Probates (Re-Sealing) Law and the Estate Duty Law.
These laws are modeled on their English counterparts and they deal with the rights of persons as regards the disposition of their properties after death and the relevant procedures.
Cypriots cannot dispose by will of the whole of their estate if they have a spouse or children. The undisposable portion is one half of the estate if the deceased leaves a surviving spouse but no children and two thirds if he leaves children. British subjects, however, are exempt from this rule and they may dispose by will of the whole of their estate. The law applicable in all respects is the law of Cyprus.
As to wills made in Cyprus by other foreigners, the law applicable with regard to the formality of such wills is the law of Cyprus, i.e. wills should be in writing and attested by two competent witnesses and they should reflect clearly the free and true wishes of a sane and competent testator. With regard to the essence and legal effectiveness of these wills the law applicable is, for provisions referring to immovable property, the law of the country or countries where such immovable property is situated (lex rei citae) and for provisions referring to movable property, the country where the deceased was domiciled at the time of death (lex domicilii) which may not necessarily be the country of residence.
Wills may be deposited with the Probate Registrar of the District Court who issues a receipt to this effect, or may be entrusted for safe custody with lawyers.
It should be noted that upon the subsequent marriage or divorce of the testator his will should be renewed, as it will, in most cases, be automatically revoked. Testators should also seek legal advice if the executor or any beneficiary changes his name or dies or becomes incompetent to act, or if any property in the estate is subsequently sold or changes its nature, otherwise his wishes may not take effect.
It is advisable that an executor or executors be appointed in the will to carry out the wishes of the testator.
Foreigners may set up a trust by will and bequeath the whole of their estate to appointed trustees to hold the same in trust for the benefit of certain beneficiaries and to manage and dispose of it in accordance with the instructions of the testator.
If a person dies intestate or does not appoint an executor in his will, the court will appoint an administrator of his estate. If there are heirs under disability the court will appoint at least two administrators.
The administrator administers the estate according to the law, pays the debts of the deceased, collects and distributes the assets amongst the heirs and accounts to the Court. The surviving spouse inherits in equal shares with the children.
The Probates (Re-Sealing) Law makes special provisions for persons who die in the United Kingdom or in any British Dominion or in any country of the British Commonwealth and who, at the time of their death, also had property in Cyprus. According to this law, the Grant of Probate or the Grant of Letters of Administration issued by a competent Court of such country may be re-sealed in Cyprus and an administrator may be appointed by the Court to administer their estate in Cyprus. The intended administrator should accompany his relevant application to the Court for a grant of probate with copies of the Grant of Probate and will or of the Grant of Letters of Administration, certified as true copies by the Court issuing the Grant and a power of attorney of the executor/s or administrator/s appointed by such Court and upon completion of the administration he should file with the court final accounts of his administration, accompanied by a declaration of the foreign executor/s or administrator/s that the administration in Cyprus was carried out to their satisfaction.


Continued at Related Page "Legal Notes (Part B)"