Last year there was a 24% increase in the number of property transactions (sale and purchase) compared to 2016. The forecast for 2018 is also positive. In April 2018 alone, the total amount of housing/commercial property and land transactions was 29% higher than the one recorded in the same period of 2017. The figure keeps growing.
Half of Cyprus’s real estate sold between January and April 2018 was obtained by foreigners. The statistics have been provided by the local Department of Land Resources and Surveys. In this article, we speak about the details high net worth individuals should know about purchasing real estate in Cyprus.
The procedure of purchasing real estate in Cyprus
The whole process of obtaining property in Cyprus lasts for about 2 months. There are several main stages of the deal:
- Choosing and reserving an object. At the first stage, the customer pays a deposit for the chosen object. The deposit amount ranges from 1% to 10% of the total cost of the selected property and is specified for each particular case. At this stage, the customer and the owner sign a preliminary sale-purchase agreement, with the seller taking an obligation to withdraw the object from the market. The reserve is kept for 1.5 months.
- Object check by a lawyer. Within this 1-1.5 months period (the object reserve term), the lawyer representing the customer’s interests conducts a thorough check of the documentation related to the selected property. The lawyer is also preparing the main sale-purchase agreement during this period. Every clause of the agreement is to be approved by all the parties of the transaction.
- Signing the agreement. After all the checks have been carried out by the lawyer, the customer and the seller sign the sale-purchase agreement. At this stage, the customer pays about 40% of the price, an additional stamp duty and carries out the document deposition at the Land Committee.
NOTE! All the immovable property in the territory of Cyprus owned by you must be registered in the national Department of Lands and Surveys. This way the customer’s rights will be thoroughly protected. After this procedure has been completed, the property cannot be used as a deposit, sold or transferred to a third party, reconstructed, leased either for a short or a long term without the due written permission of the property owner.
- Getting the purchase permission from the government. Foreigners who want to buy housing, commercial property or land in Cyprus have to receive a special permit from the Council of Ministers. This document is usually provided to those who have successfully passed the due diligence procedure.
- Paying VAT. At this stage, one fills in the reduced VAT application. As of today, the VAT rate in Cyprus is 19%. On June 8, 2012, a new law came into effect. It provides for the reduced 5% VAT rate on real estate purchase. It allows the customer to substantially save money. When buying a resale property, one does not have to pay VAT.
- Final stage. The customer carries out the remaining payments to the seller and becomes the full owner of the property receiving the ownership title and the key to the object.
The number of sale-purchase agreements submitted to the Department of Land Resources and Surveys of Cyprus from 2010 to 2017
Ensuring deal transparency upon purchasing real estate in Cyprus
A certified real estate agent must be involved in the deal. The agent is fully responsible for the legality and transparency of the sale-purchase operations. In case of negligence from the side of the real estate agent in relation to his/her obligations, the agent’s license covers legal expenses in the amount of €170,000. The licensed agent also possesses all the information about the object, developer and property owner.
Moreover, an experienced agent will help you not to get lost in the variety of offers available in the real estate market. The agent can also save your time and show you the most appealing investment options.
As for the lawyer, you are not obliged to but highly recommended to involve one. According to the legislation of the jurisdiction, the lawyer participates in the process. There are several statuses assigned to property owners in Cyprus. By paying 1% of the deal cost to the lawyer, you will receive full assistance throughout the whole process from the very first stage to the final step of taking possession of property.
NOTE! Seek the assistance of professional certified experts when choosing the lawyer. In this case, you receive rights protection by the law of Cyprus. Unlike in Russia, the duties of a lawyer and a real estate agent are delegated here.
Legal questions to consider in relation to Cyprus real estate
How do you prove ownership of the property?
Ownership title serves as the proof, it is issued by the Department of Land Resources and Surveys. In case the title cannot be provided on the date of the object sale, one can request information at the Department.
Where do you register the right to property?
All the real estate deals in Cyprus are under control of the Department of Land. Here you register sale-purchase agreements and get the ownership title issued/re-issued.
How many times should you visit Cyprus throughout the property purchase process?
You can sign a power of attorney for the lawyer to act on your behalf. In this case, you will need to visit the island only once. If the customer wants to manage the deal without signing the power of attorney, the customer will have to be present at signing of the preliminary agreement, the main sale-purchase agreement and at receiving the ownership title.
It is worth noting that the system of the Republic of Cyprus is based on the English legal model, which ensures comprehensive customer’s rights protection.
Purchasing real estate in Cyprus is not only a reasonable investment allowing you to enjoy a vacation at the seaside at any time of the year, but also one of the ways of getting European citizenship under the accelerated program. Having invested at least €2,000,000 in housing or commercial property, you will be able to apply for citizenship and thus legally obtain the country passport for yourself and your family just in 5-6 months.