Cyprus Update on Recent Changes to Property Law: Q&A
What is a cancellation agreement in Cyprus?
This is a common question in Cyprus as many properties used to be sold without title deeds. This is a serious dilemma as even when people have rightfully paid for their homes, legally they are not the owners. If a property does not have title deeds, a cancellation agreement can be drawn up that effectively cancels the contract between the developer who still holds the deed and the seller.
A new contract can then be drawn up between the rightful purchaser and the developer. A fee is charged for the existing contract to be cancelled however this is the cost of accidently purchasing a property in Cyprus without deeds.
What are the costs associated with cancellation agreements?
The cost of cancellation agreements in Cyprus are commonly 3% of the original purchase price however varies depending on the developers standing. If you bought a property without deeds in Cyprus you may be able to cap a future potential cancellation fee at around 500 euros in your contract when you purchase.
What the new regulations on agricultural land in Cyprus, will it make it harder to get planning permission or affect building rights?
Yes it is very difficult to secure a permit in Cyprus at the moment. The interior minister announced that new rules will apply when discussions with the local municipalities and authorities are settled however this is not going to be in the near future. Read more information here.
What is the current situation with the EU forcing Cyprus to charge on VAT on land sales?
More news will be announced in January 2018. VAT will be applied to development land as well as for rents that refer to commercial buildings (i.e. offices, shops etc). Currently everything is still in the preliminary stages however the government is doing everything it can to mitigate the price of the introduction. Bearing in mind that VAT is tax deductible on certain occasions, this should not affect business premises. Read more about government efforts to mitigate costs for purchasers in Cyprus.
What is the initiative to purchase a plot of land in Cyprus which will bear a 19% additional VAT charge, if one can buy a house that already includes 5% VAT?
The VAT charge can be deducted from any VAT paid if you are currently operating as a business. In addition owners may be permitted to have the property transferred without transferal fees; however the government has to confirm this.
What is an AX Number?
An AX number is a unique reference number issued by the Cyprus Land Registry when an application is made to acquire the Title Deed. The Land Registry will issue your developer an AX Number when he submits an application for Title Deeds to be issued for yours and other properties covered by his planning application. If your developer has applied for Title Deeds to be issued in Cyprus, he should be able to advise you of the application’s AX reference number. This is important when selling a property.
For help with any property matters, contact us, Eltoma Property has local legal experts on hand to assist you with any Cyprus property legislation changes.