Purchase Property in Cyprus – Buying Process

1. Republic of Cyprus

 1.1. Introduction

 Cyprus is an island in the Mediterranean Sea and covers an area of 9,250 square kilometres, with a population of approximately 865,900 inhabitants. Cyprus’s capital is Nicosia and it is the third largest island in the Mediterranean after Sicily and Sardinia. Cyprus was a British colony until 1960, when the island became an independent republic. The form of state is a Presidential Republic. As a result of British Rule, the English legal system was introduced in Cyprus and many laws were enacted in an effort to import the doctrines of common law and equity in Cyprus. After independence in 1960 the English legal system was largely preserved. English jurisprudence is closely followed and all statutes regulating business matters and procedures are based essentially on English Laws.

2. The current applicable laws are:

• The Constitution of the Republic of Cyprus
• The laws retained in force by virtue of Article 188 of the Constitution
• The principles of Common Law and Equity
• The Laws enacted by the House of Representatives 

Cyprus has been a full member of the EU since 1 May 2004 and there- fore European law supersedes Cyprus law in cases of conflict. Since 1 January 2008, Cyprus has used the Euro as its official currency. Cyprus is also signatory to many international Treaties and Conventions.

2.1. Real estate ownership

 Different forms and types of ownership: 

  Land registration in Cyprus is controlled by the Department of Lands and Surveys, the Government Department which provides services related to all rights associated with immovable property, land surveying, registration, transfer and mortgage of immovable property, ownership of land and evaluation of immovable property.

The Immovable Property (Tenure Registration and Valuation) Law, Cap. 224 is the main law regulating the rights over immovable property, provides for and recognizes the following forms of ownership:

2.2. Freehold

 The freehold interest includes immovable property which according to section 2 of the Immovable Property (Tenure, Registration & Valuation) Law, Cap. 224 is defined as follows: 

1. Land
2. Buildings and other erections, structures or fixtures affixed to any land or to any building or other erection or structure
3. Trees, vines, and any other thing whatsoever planted or growing upon any land and any produce thereof before severance
4. Springs, wells, water and water rights whether held together with, or independently of, any land
5. Privileges, liberties, easements and any other rights and advantages whatsoever appertaining or reputed to appertain to any land or to any building or other erection or structure
6. An undivided share in any property hereinbefore set out

A registered person is considered to be the undisputed owner and his title to ownership is absolute, subject to the Lands and Surveys Department Director’s power to correct errors or omissions and to the inherent power of the courts to order an amendment. The land and any buildings on it are registered together and are inseparable for title purposes, specifically, the owner of the land owns any buildings on it.

Further, private ownership of immovable property extends to the surface of the land, beneath the surface and above the surface to the extent that it is reasonably necessary for enjoyment of the land. However, ownership does not extend to minerals.

 As stated above, immovable property may consist of one or more plots and be held by two or more persons in undivided shares. Each undivided shareholder is entitled to sell his undivided shares subject to the other undivided share holder’s option to purchase his shares at the price achieved. The property may be partitioned upon agreement reached between all co-owners. The partition, either by division of the plots in smaller parts without a breach of the provisions for minimum extends provided by the Law, or by partition of the whole plot, may be registered in the names of the co-owners with the Department of Lands and Surveys which shall then issue a separate title to each co-owner for the property or part of the property allocated to him/her.

2.3. Leasehold

 In Cyprus there are two broad categories of leases, (a) the contractual lease, the terms of which are freely negotiable between the parties; and (b) the statutory lease which relates to properties controlled by the Rent Control Law, No. 23/83.

 There are no legal restrictions in regards to the length of lease and this is usually determined in the lease agreement between the parties. The same applies with any renewals thereof. Upon signing of the Lease Agreement and during the term of the lease the tenant has the possession, occupation and enjoyment of the premises, provided that he complies with the terms of the said agreement. The tenant is usually responsible for paying the utility bills, and the landlord the taxes and levies imposed to owners of properties. Upon termination or expiration of the Lease Agreement, the tenant is obliged to deliver the free possession of the premises in the state and condition they were at the commencement of the tenancy, unless the owner accepts any conversions and/or alterations of the said premises. Any sublease of the leased premises without landlord’s consent is prohibited.

 2.4. Commonhold (commonly owned buildings)

 According to the provisions of Law 6(1) of 1993 that amended the Immovable Property (Tenure Registration and Valuation) Law, Cap. 224, “a jointly owned building” is a building consisting of at least five units, even if it belongs mainly to one owner. Every commonly owned building is registered as such with the Department of Lands and Surveys. A commonly owned building consists of the units and the commonly owned property.

 According to Law 6(1) of 1993,”Unit”means a storey or part of a storey, a room, an office, an apartment, a shop or any other part, or space of a commonly owned building which may be appropriately and conveniently possessed and enjoyed as a complete, separate and self-contained unit for any purpose. Every unit of a commonly owned building is reg- istered separately as a private property with the Department of Lands and Surveys.

 Further,” commonly owned property” means every part of a commonly owned building which has not been registered as a unit (it includes, among others, the common parts of the building such as common-use areas, staircases, roof, electrical installation, plumbing system, engine room and lifts) and belongs to, is possessed by and enjoyed by all the unit owners in undivided shares.

 The owners of all units contained in the commonly owned building participate in the expenses, which are necessary for the insurance, maintenance, repair, restoration and management of the commonly owned building. The proportion of the share of each joint owner in the expenses is prescribed by the Regulations which provide for the control, operation, management, administration, use and enjoyment of the units. The regulations are deposited at the Department of Lands and Surveys of the District where the commonly owned building is situated. Where no Regulations have been prepared, the standard regulations provided in section 38KA of Immovable Property (Tenure Registration and Valuation) Law, Cap. 224 apply.

 According to the Law, every commonly owned building must have a Management Committee for the regulation and management of its affairs that acts on behalf and for the benefit of the owners of the units.

 The committee has legal capacity and may enter into contracts with regards to any matter concerning the maintenance and management of the commonly owned building. It can also sue and be sued with regards to any matter concerning the commonly owned building.

2.5. Easements, charges, covenants, liens and mortgages

An easement is a right granted to a person over a property owned by another person and is usually acquired: 

• Upon grant from the owner of the property: the owner (the grantor) can give another person an easement over his property. Such grant requires an agreement between the parties and the grant must be made in writing including the details of the parties involved, the particulars of the properties and detailed description of the right so grant An application for the registration of the easement can be filed at the Department of Lands and Surveys and the right will be recorded against the title of the property
• By reservation upon the transfer of property: upon selling of a property from one person to another, the seller may withhold such right (in the form of life interest or occupancy of a property) for Such reservation shall be stated in writing and it will be recorded against the title of the property upon registration of the transfer of the property
• Upon compulsory acquisition of a right of way: where a property is for any reason surrounded completely by other properties in such a way as to be deprived of the necessary access to a public road or where the existing access is insufficient for the proper use of the property, the owner may claim to obtain a right-of-way through the adjacent properties upon on payment of reasonable compensation. The Director of the Department of Lands and Surveys then decides, based on the particularities of each case and his decision may be contested by each of the parties, via an appeal procedure. The Director of the Department of Lands and Surveys has the power to determine and/or vary the position and/or direction of any existing right-of-way, channel, watercourse, stream or any other similar right upon submission of an application by the owner of the servient or dominant property. An easement ceases to exist if is not exercised for a continuous period of 30 years or where it has been abandoned  by the beneficiary. Further, if a new public road is registered or any other access is created after registration of a right of way then the owner of the servient or dominant property is entitled to request the abolition of such right

 With regards to charges, covenants, liens and mortgages, the terms Encumbrances and Prohibitions (as referred to in the Immovable Property (Transfer and Mortgage) Law 9/65), are used to describe all impediments which render impossible the transfer of a property. The most common are the following:

• Deposit of Contract of Sale of Immovable Property under The Sale of Land (Specific Performance) Law N 81(I)/2011): the deposition of the contract of sale with the Registry of the Department of Lands and Surveys is deemed as an encumbrance to the land because the Seller (who is the owner of the land where a specific property is constructed) is actually barred from selling the said property to any other purchaser or using it for his own benefit
• Registration of an Interim Order issued under the Civil Procedure Law, 6: this order can be issued by any Court upon application by a Plaintiff in a legal action for recovery of debt or damages, prohibiting the Defendant in such an action from alienating and/ or charging the whole or a part of his immovable property that is sufficient to satisfy the claim of the Plaintiff in case he obtains a final judgment in his favour. The said interim order may remain in force until the issuance of a final judgment or for as long as the Court may decide and may be cancelled or amended only upon an order of the Court. It can be also withdrawn by the applicant
• Registration of a judgment made under sections 53 – 62 of the Civil Procedure Law, 6, (known as a Memo): where a creditor has obtained a Court judgment against a debtor ordering him to pay a specific amount of money to him, then the creditor can apply to the Department of Lands and Surveys and register a charge against any immovable property registered in the name of the judgment debtor so as to secure payment of the judgment debt; a Memo remains in force for 10 years from the date of first registration of the judgment and may prolonged by a Court Order for a further period not exceeding 10 years each time
• Mortgage on property created under the Immovable Property (Transfer and Mortgage) Law 9/65: a mortgage is a voluntary, temporary and conditional encumbrance of a property as a security for the performance of an obligation or repayment of an existing, future or contingent liability. It is to be noted that mortgages are accepted only if the property/ies to be mortgaged is/are free from encumbrances. An unlimited number of subsequent mortgages may be constituted. Mortgage registration fees are calculated on the amount of the mortgage debt. The mortgaged property may be released from the mortgage upon payment of the debt. It is also possible for a share in the said property to be released against partial payment of the mortgage debt. The mortgagee may transfer the mortgage registered in his favour to another person, provided that this is not prohibited in the contract of mortgage.

2.6. Protection of ownership, proof of ownership and registration

The protection of ownership is safeguarded by the provisions of the Constitution of Cyprus, as one of the fundamental human rights. Non- Cypriots who own property in Cyprus enjoy all property rights which are available to Cypriot citizens. All transactions with regards to immovable property are conducted through the Department of Land and Surveys which has exclusive responsibility and provides means and instruments, amongst others, for the ownership, registration, transfer, and mortgage of immovable properties. The Registry of the said Department is unique in that by its function all rights in land are defined and secured and all transactions relating to immovable property are protected. In Cyprus, Title Deeds (also known as Certificates of Registration of Immovable Property) issued by the Department of Land and Surveys are a definite proof of ownership. Title Deeds contain information with regards to the registered owner the size and location of the property  and its unique file number.

 According to the Immovable Property (Transfer and Mortgage) Law 9/65, every title of immovable property can be transferred by a voluntary act from one person to another provided that receipts of payment of Immovable Property Tax, Capital Gains Tax, Sewerage Board Tax, Town Rates and Communal Rates for the property under transfer are produced to the Department of Land and Surveys. Both parties must appear either in person or by agent. The procedure for acceptance

is completed upon the calculation and the payment of the transfer fees by the purchaser to the Lands and Surveys Department. 

With regards to transactions where the seller is not allowed to immediately transfer the acquired property into the name of the purchaser even though payment of the consideration has been made, the Sale of Land (Specific Performance) Law 81(I)/2011 applies and safeguards such a purchaser. According to the provisions of this law, by lodging a copy of the contract of sale with the Land and Surveys Department’s Registry within a specified time limit of six months from its signing, the purchaser has the right to seek “specific performance” of the terms and conditions of the contract. The term “specific performance” means the registration of the property in the name of the purchaser, with a Court Order, issued when the seller refuses or fails to comply with her/his contractual obligations. By lodging the contract with the Land and Surveys Department, the Purchaser is deemed to be the Beneficial Owner of the specific property that is described in the Contract of Sale. This means that the Seller is barred from selling the said property to any other purchaser or using it for his own benefit. Furthermore, the fact that the deposited Contract of Sale can only be withdrawn with the purchaser’s consent offers maximum security.

3. Purchase and sale of real estate

3.1. The sales agreement

 The sale of properties with deeds in Cyprus is regulated by the Immovable Property (Transfer and Mortgage) Law 9/65. For the sale of a certain property, a Contract of Sale is signed between the parties, providing for the sales price, time of transfer etc., and as soon as the Seller produces to the Department of Lands and Surveys receipts of payment of Immovable Property Tax, Sewerage Board Tax, Municipality Tax and Capital Gains Tax, and the Purchaser pays the relevant transfer fees, the transfer of the property is completed.

With regards to the sale of properties without title deeds (mainly properties that form part of a development where the issuance of separate Title Deeds for the specific properties is not yet completed) the Sale of Land (Specific Performance) Law 81(I)/2011 applies. According to the provisions of this law, a contract of sale will be signed between the parties without the need to provide any receipts to the Department of Lands and Surveys in order for the transaction to be completed. There will not be an immediate transfer of the property due to the lack of separate title deeds. Instead, the Contract of Sale shall be duly stamped and lodged with the Registry of the Department of Lands and Surveys within a time limit of six months from signing for specific performance purposes and the provisions of the to the Sale of Land (Specific Performance) Law 81(I)/2011 will apply.

Properties with title deeds may be re-sold following the procedure regulated by the Immovable Property (Transfer and Mortgage) Law 9/65 as described above.

With regards to the re-sale of properties without title deeds this can be affected in two ways:

• Cancellation and Release Agreement: this procedure was mainly followed before the enactment of the Sale of Immovable Property (Specific Performance) Law, N81(I)/2011 and required the cooperation of the original vendor in order for the procedure to be completed. The first purchaser has to cancel his contract of sale with theVendor by signing a Cancellation and Release Agreement. The said Cancellation and Release Agreement must include the sale price and also the name of the new purchaser, and to stipulate that the sales price is to be received by the first purchaser. Then, the new purchaser has to sign a new Contract of Sale directly with the original vendor (who is the registered owner of the land where the property sold is situated and the only one eligible to sign a contract of sale).The first purchaser shall pay any Capital Gains Tax Finally, the Contract of Sale between the vendor and the first purchaser will be withdrawn, and the Contact of Sale between the vendor and the new purchaser, duly stamped, shall be simultaneously lodged to the Lands and Surveys Department Registry. According to section 3(1)(c) of the Sale of Immovable Property (Specific Performance) Law, No. 81(I)/2011 the time for lodging the new Contract of Sale to the land registry is limited to six months from signing. Following this procedure, the new purchaser is deemed to be the Beneficial Owner of the property sold and as soon as the separate title deeds are issued to the property, it will be transferred to his name
• Assignment Agreement: the enactment of the Sale of Immovable Property (Specific Performance) Law, N 81(I)/2011that entered into force on 1 August 2011 replaced the previous legislation, regulating the specific performance of Sale Contracts and aims to expedite the procedure of sale of such properties. According to this law, the first purchaser may assign his rights deriving from the Contract of Sale to a third person, either with or without consideration, by signing an Assignment Agreement. This Assignment Agreement can be concluded without the consent of the original vendor and should be lodged with the Lands and Surveys Department Registry within two months of its signing, provided that the original contract has already been lodged at the Registry.
• The Assignment Agreement is binding on the original vendor and by lodging it at the Land Registry Department the Assignee is granted the same protection as that provided by the Sale of Immovable Property (Specific Performance) Law, No. 81(1)/2011  to the first purchaser. According to this law there is no obligation on the first purchaser to pay any transfer fees. The transfer fees will be paid directly by the second purchaser as soon as the title deeds are issued. The only obligation of the first purchaser is to pay any Capital Gains Tax arising from the sale.

 Either of the two alternatives may be followed as per the parties’ choice. The differences between the two procedures are:

• in the case of the Assignment Agreement, the first purchaser may assign all his rights and obligations under his Sales Contract with the original vendor to the new purchaser, without seeking the permission of the original vendor, something that was not possible prior to the enactment of the Sale of Immovable Property (Specific Performance) Law, N 81(1)/2011 when the cooperation of the original vendor was a prerequisite in order for the transaction to be completed and (b) the new purchaser will acquire the property with the same legal status when it was initially purchased by the first purchaser. This means that the Assignment Agreement will have priority over any encumbrances registered against the property after the deposition of the initial contract of sale. Accordingly, the assignment of rights is most preferable between the parties as it offers more security to the Purchaser than the previous regime.

3.2.  Agricultural real estate 

The acquisition of agricultural land in Cyprus is, in principle, similar to the purchase of any other piece of land. 

3.3. Acquisition of immovable property by foreigners

The Acquisition of 1mmovable Property (Aliens) Law, Cap. 109, deals with the acquisition of immovable property in Cyprus by aliens. According to Section 2 of the above law, an “alien” means any person who is not a citizen of the Republic of Cyprus, and includes alien-controlled companies, foreign companies and a trusts in favour of an alien, but does not include:

• A non-Cypriot citizen
• An alien wife of a citizen of the Republic, not being separated from her husband under a decree of a competent Court
• A citizen of a member state of the European Union
• A corporate body formed in accordance with the law of a member state and having its registered office, central administration or principal place of business within a state of the European Union

According to Section 3 of the Acquisition of Immovable Property (Aliens) Law, Cap. 109, no alien may acquire immovable property in Cyprus, other than by reason of death (mortis causa), without the prior permission of the Council of Ministers, after written application has been made on a specified form. The authority of the Council of Ministers to grant permits is vested to the District Officers to whom the relevant applications are submitted.

 3.4. Grant of permission is required for the following:

• The purchase of freehold property
• Leases exceeding 33 years
• The acquisition of shares in a company which is duly registered as a legal entity in Cyprus and which owns immovable property in the Republic, if such acquisition itself or in conjunction with other shares already held by aliens in that company, would turn such company into an “alien controlled” company
• The formation of a trust in favour of a an alien which involves, wholly or partly, the leasing of immovable property under the provisions of a lease for a period exceeding 33 years or a shareholding in an alien controlled company.

It should be noted that the above-mentioned legal exception, “other than by reason of death,” means that an alien may acquire immovable property in Cyprus without permission from the Council of Ministers, if they has inherited it as a legal heir or if it has been bequeathed to them as a legatee in a Will.

Normally permission is granted to bona fide aliens to acquire a flat or a house or a piece of land not exceeding three donums (about 4000 m2) for the erection of one house for use as a residence only by the purchaser and his family. The application should be submitted after the contract of sale is signed and must be accompanied by certain supporting documents. In the meantime, the purchaser can take possession of the property without restriction and live in it or rent it out as he is the legal owner of the property according to the law.

3.5. Key points that a seller should consider

 Despite the fact that the law does not regulate how expenses are allocated between the contracting parties, it is custom that the seller completes Form N.270 (Declaration of Transfer of Immovable Property), and also pays the Capital Gains Tax, the Sewerage Board Tax, the Municipal Tax or Communal Rates, and presents all relevant receipts to the Department  of Land and Surveys on the day of transfer. The seller is also obliged to release the property from any mortgage or other encumbrances. The Purchaser has to pay the Stamp Duty for the Contract of Sale, the fees for lodging the same to the

Registry of the Department of Land and Surveys, the VAT or the transfer fees upon acceptance of the transfer by the Land and Surveys Department. Any remaining balance from the purchase price (in the case of staged payments) must be paid simultaneously with the completion of the transfer.

3.6. Powers of Attorney

All transactions with regards to immovable property in Cyprus can be done in person or by proxy. Any person may appoint an agent to perform acts on their behalf. With regards to acts relating to immovable property, a power of attorney must be presented. The signature of the Principal (the person granting the power of attorney) must be duly certified by any Certifying Officer or the President of the Community Council or the Mukhtar. If it is signed abroad, it must be certified by  a Consular Officer of the Republic of Cyprus. The power of attorney musty also be duly stamped. The Stamp Duty payable for a special power of attorney (granting power for specific transactions) is EUR 1.71 and for a general power of attorney (it can be used for any transaction) is EUR S.13. A power of attorney is valid as long as the principal is alive, mentally competent and has not revoked it.

Disabled persons such as mental patients, and all other persons, who by law have been deprived of the right to execute legal acts (minors, bankrupts, companies under liquidation etc) are under lawful agency and their agents are determined by law and/or appointed by a competent Court. Any such guardian and/or agent may act on behalf of the disable person provided that he/she presents a Court Order for his/ her appointment.

4. New construction, rebuilding and renovation.

4.1. Construction zones and construction permits:

 The Streets and Buildings Regulation Law, Cap. 96, in conjunction with the Town and Country Planning Law, 90/1972, defines the development and building control system of Cyprus. The promotion and control of development in Cyprus is achieved through the implementation of the following four types of published Development Plans that are provided in the Town and Country Planning Law, 90/1972: 

• The Island Plan is a statement of the broad national strategy in the area of regional spatial planning with strong links to overall national economic and social policy and refers to the whole of the To date, no Island Plan has been published due to the continuing Turkish occupation of a large proportion of national territory
• Local Plans cover all major urban and urbanised areas of the island and contain, a broad range of provisions which refer to a wide variety of types of development, infrastructure networks, standards, quantitative limitations and intensities of development, as well as areas of exceptional importance and areas lagging behind in terms of physical and economic development
• Area Schemes are more detailed Development Plans and contain policy measures and pro They define special measures, projects, opportunities, sets of incentives and other provisions, and directing major new development to specific locations
• The Policy Statement for the Countryside is a legally binding document which defines the planning strategy and detailed policies for the control of development and the protection of the environment. It concerns the entire territory of the State where neither a Local Plan nor an Area Scheme is in forc The British Sovereign Bases areas and the part of Cyprus under Turkish military occupation are also excluded
• The Ministry of Interior is designated by law as the competent Planning Authority for the preparation of Local Plans and Area There are offices of the Planning Authority in every major town of the island.

4.2. Planning Approval

Before the commencement of any development it is necessary to obtain a planning approval from the Planning Authority. The same applies for the conversion of premises and/or the relevant building/construction works.

In accordance with the Town and Country Planning Law 90/1972, development is defined as:

“The carrying out of building, engineering, mining or other operations in, on, over or under immovable property, or the making of any material change in the use of any building or other immovable property”.

In certain cases prescribed by the law, the Planning Authority is obliged to ensure that the submission of an application for planning approval has been adequately publicised. The relevant procedure intends to inform the public and in particular those citizens who may be affected by any proposed development in a timely and reliable manner so that any views and representations may be submitted to the Planning Authority before decision making.

 The Planning Authority has the power to examine, in certain cases, an application for planning approval through a departure from the provisions of the Development Plan. Such cases are an exception to the rule and the use of such a procedure will need to be adequately justified.

 Every citizen has the right to appeal against a decision of the Planning Authority within a period of 30 days from the date of notification of the planning decision, in the following cases:

• Refusal of planning
• Granting of planning approval with conditions attached which in the applicant’s view are onerous or unnecessary
• Failure to take a decision with respect to an application and to notify the decision to an applicant within the specified time period
• Serving of an enforcement notice, provided that the terms specified by the Law are met
• Refusal to grant a certificate of commencement of works

The right to appeal ensures a person’s right to have her/his application reviewed, by a body other than the one which took the initial decision. The Planning Appeals are examined by a Ministerial Committee based on the provisions of the applicable Development Plan and other material considerations related to the development. If the decision of the Ministerial Committee is not to the applicant’s satisfaction, the latter has the right to lodge an appeal before the Supreme Court of Cyprus.

4.3. Building Permit

 Once a Planning Approval has been issued and the Planning Permit is issued, an application needs to be submitted to the relevant Building Control Authority (normally the Municipalities or the Community Councils) for the issuance of a

Building Permit. Applications for a Building Permit should in general be in conformity with the issued Planning Permit, the provisions of the Streets and Buildings Regulation Law, Cap. 96,relevant Regulations, and the Building Authority. Through this application, the structural

stability of the building, the provision of public services, health and safety, the fire adequacy of the building, sewage and drainage, energy performance of buildings etc. will be checked.

4.4. Partition Permit

 Simultaneously with the application for the issuance of Building Permit, an application for the issuance of a Partition Permit should also be submitted. It is normally sought when more than one unit is going to be built in a certain plot and it enables the relevant authorities to sub-divide the specific properties in order for a Title Deed to be issued for every property comprising the development.

4.5. Final Approval Certificate

 Once the construction of the premises is finished, an on-site inspection by the Building Authority and several other governmental authorities, is carried out to inspect whether the premises have been built in accordance with the Town Planning and Building Permits issued for their construction. If the premises are not built according to the permits, a revised Building Permit Application shall be filed. The same applies for the conversion of premises and/or the relevant building/ construction works. In cases where any changes were done on the premises and those changes are not included into the Building Permit, then an application for a Cover Permit must be filed in order to cover those changes that were or will be done. Following the inspection, a Certificate of Final Approval is issued by the Building Authority.

In cases of development of multiple units a Certificate of Approval for the Partition Permit is also required, once the Partition Permit has been issued. The procedure is similar to the the issuance of the Certificate of Final Approval.

4.6. Title deeds

 Soon as the Certificate of Final Approval (and Certificate of Approval of the Partition Permit where applicable) is issued, an application should be submitted to the Department of Lands and Surveys for the issuance of Title Deeds for the premises.

 It should be noted that if building works are commenced without a Planning and/or a Building Permit,or in the case of severe discrepancies with the terms of the said Permits, then a Demolition Order may be issued by the Court, upon application by the relevant authorities, requiring the demolition of the building.

 5.0       Rental and tenancy

Property leases in Cyprus are normally governed by the provisions of Contract Law, Cap. 149. According to article 77 (1) of the Contract Law, Cap. 149, contracts relating to leases of immovable property that exceed one year are valid and enforceable only if they are expressed in writing and signed by the parties concerned in the presence of at least two witnesses who are competent to contract and subscribe their names as witnesses. Oral lease agreements are valid for tenancy periods less than one year. 

However, if a building was constructed prior to 31 December 1999 and is situated within a controlled area designated in the law then the lease is governed by the provisions of the Rent Control Law 23/1983 that aims to protect tenants against eviction under certain circumstances. When the initial rental period has expired or was terminated by the landlord but the tenant still occupies the premises, The becomes a stat- utory tenant and can only be evicted when the grounds specifically stipulated in the law are met. The Rent Control Law 23/1983 does not apply to non-Cypriots renting properties in Cyprus (EU members are treated as Cypriots). It should be noted that there is no VAT payable on the leasing of immovable property in Cyprus with some exceptions on commercial units based on the law passed by the Parliament on November 2017.

According to the provisions of Sections 65A – 65IE of the Immovable Property (Tenure, Registration & Valuation) Law, Cap. 224, any agreement for the lease of immovable property with an unexpired term of at least 15 years may be registered with the Department of Lands and Surveys. The registration should be made within three months from signature of the contract of lease. Upon signing of the leasehold and throughout its duration,the lessee holds the right of possession of the property and the landowner holds only the naked ownership of the property. Third country (non-EU) nationals may not take a lease of immovable property for a period exceeding than 33 years without prior permission from the Council of Ministers.

6. Successions and gifts

The law of succession in Cyprus is comprised in the Wills and Succession Law, Cap. 195, which deals with both Wills and intestacy; the Administration of Estates Law, Cap. 189, which deals with execution of wills and administration of estates; and the Probates (Re-Sealing) Law, Cap. 192, which deals with the sealing of probates or letters of administration granted by a court in the UK or any other Commonwealth country by Cypriot courts.

Cypriot succession law, irrespective of whether a person was domiciled in Cyprus (i.e. his permanent residence was in Cyprus and he had an intention to spend the rest of his life in Cyprus), does not regulate any immovable property which is situated outside Cyprus, but regulates the immovable property which is situated in Cyprus irrespective of where the domicile of the deceased is found. It also regulates all the movable property anywhere in the world of the deceased who has a Cypriot domicile.

On the death of a person, his estate will pass as a whole to his heirs. According to Section 21 of the Wills and Succession Law, Cap. 195, a person may distribute his estate according to the law of succession, or by drafting a Will. It is to be noted that persons domiciled in Cyprus may not dispose of the whole of their estate by Will if they have a surviving spouse, children or both. This restriction does not apply to any person if he or his father was born in the UK or in most other Commonwealth countries apart from Cyprus, as they are allowed to dispose the whole of their estate as to their wishes. The restrictions on the freedom of testamentary disposition were imposed for the benefit of the family of the testator. he disposable portion is calculated as follows: (a) if the deceased leaves a spouse, children or both, the disposable portion is ¼ of the net value of his estate; (b) if the testator has no children or descendants of children but leaves a spouse or parent then the disposable portion is ½ of the net value of his estate and (c) if the testator has no children, no descendants of children, no surviving spouse or a parent then the whole of his estate may be distributed according to his Will. 

In order for a Will to valid the testator must be over 18 years old and of sound mind and understanding. Both criteria must be satisfied otherwise the Will is considered to be void. Furthermore, the Will has to be in writing and attested by two competent witnesses. According to Section 37 of the Wills and Succession Law, Cap. 195, a Will may be revoked by:

• A subsequent Will expressly revoking the former one
• By a subsequent Will inconsistent with the provisions of the former one
• By burning, tearing or otherwise destroying the same by the testator or by some person in his presence and by his direction, with the intention of revoking it

 If a person dies intestate, then his estate will be distributed to his heirs by operation of law. The surviving spouse, if the deceased also left a child or a descendant of a child, is entitled to a share in the statutory portion of the deceased equal to the share of a child or descendant of a child. Where no child or descendant thereof has been left but there is an ancestor or descendant thereof within the third degree of kindred to the deceased, then the share of the surviving spouse is equal to ½ of the statutory portion. If no child nor descendant thereof, or any ancestor or descendant thereof within the third degree of kindred to the deceased has been left, but an ancestor or descendant thereof within the fourth degree of kindred to the deceased, the share of the surviving spouse is equal to ¾ of the statutory portion. Finally, if no child nor descendant thereof, or any ancestor or descendant thereof within the fourth degree of kindred to the deceased has been left, the surviving spouse is entitled to the whole share of the statutory portion.

 There are no succession taxes as the Inheritance Tax has been abolished by the Estate Duty (Amending) Law 74(1)/2000 concerning any person who passed away after 1 January 2000.

 In Cyprus it is possible for immovable property to be donated and it is treated as a transfer for all intents and purposes. Donations from parents to children, whether married or not, between relatives or between persons related within the third degree of kindred, whether married or not, are exempted from the payment of Capital Gains Tax and reduced transfer fees rates exist.

 When immovable property is transferred by way of gift to a company of which the only shareholders are related to the donor within the third degree of kindred, then after a lapse of five years from the day of transfer and provided that sufficient proof is submitted to the Director of Department of Lands and Surveys that the only shareholders of the company are the donor and his relatives, the amount of transfer fees paid at the day of the transfer is returnable to the company. According  to Section 9 (2) of the Department of Lands & Surveys Law (Fees and Charges) Cap. 219, a sum equal to 4% on the assessed value of the property is deducted from the returnable amount. It goes without saying that the immovable property continues to be registered in the company’s name at the time of return of the transfer fees.

7. Taxes and charges

7.1. Stamp duty payment

 Upon the signing of a Contract of Sale, the purchaser is liable to pay a one-off stamp duty which relates to the contractual purchase price and payment is due within 30 days of signing, otherwise a fine will be imposed according to the Stamp Law 19/1963.

7.2. Transfer fees

On transfer of the title deed of the freehold property and registration in the purchaser’s name, the Land and Surveys Department will charge a one off transfer fee, which is based on the market value of the immovable property at the time of purchase and is always paid by the Purchaser. The rates are on a graduated scale and are calculated as follows: 

The Director of the Department of Lands and Surveys has the right to dispute the declared value (in the Contract of Sale) and adopt a market value of the property with the adopted valuation date being the date of purchase. For properties owned in joint names e.g. of a couple or two individuals, transfer fees are charged on 50% of the property value for each, providing an advantage for any property value exceeding EUR 85,430.07.

It is to be noted that sale-purchase contracts which are subject to VAT will be exempt from the above transfer fees and those not subject to VAT will be eligible for a 50% exemption from the above transfer fees (subject to conditions). 

7.3. Capital gains tax (Capital Gains Tax Law, No. 52/80)

Capital gains tax is levied at a fixed rate of 20% on both individuals and companies on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own such immovable property in Cyprus and are not listed on a recognized Stock Exchange. 

The capital gain is calculated after deducting from the sales proceeds the initial acquisition cost and any additional expenditure or the market value as at 1 January 1980, whichever is the higher, inflated by the official Retail Price Index in Cyprus.

The following disposals of immovable property are not subject to capital gains tax:

• Transfer by reason of death
• Gift between relatives up to third degree of kindred
• Gifts to a company where the company’s shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after the day of the transfer
• Gifts by a family company to its shareholders (where all of its shareholders are member of the same family), provided such property was originally acquired by the company by way of donation. The property must be kept by the donee for at least three years
• Gifts made for educational or charitable purposes to a local authority or to any approved charitable institutions in Cyprus
• Transfers as a result of reorganisations
• Expropriations
• Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws
• Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property

The law provides for lifetime exemptions applicable only for individuals (not for legal persons) that are used for reducing / eliminating the taxable gain as follows:

The above exemptions are granted only once for each taxpayer and not for each disposal. An individual claiming a combination of the above is allowed, subject to conditions, a maximum of EUR 85,430.

7.4. VAT payable on property

Since Cyprus access to the EU on 1 May 2004, VAT on properties was introduced. Properties for which an application for a town planning permit was filed before this date are exempted of VAT.

 A reduced VAT rate of 5% applies to all contracts which were concluded as from 1 October 2011 onwards and which relate  to the acquisition and/or construction of residences which are to be used as the primary and permanent place of residence for the next 10 years by the applicant (residents of the Republic or/and other EU member states). All contracts which were concluded before 30 September 2011 are subject to the current standard VAT rate and an eligible person should apply for a grant from the Tax Commissioner. VAT is not added on the sale price for the purposes of calculating the property transfer fees.

The application for a grant can be submitted to the Ministry of Finance in relation to residences for which a planning permission application has been submitted after 1 May 2004. Individuals who are citizens of the Republic of Cyprus or of any other EU Member State, who reside permanently in the Republic of Cyprus and who have reached the age of 18 at the time of application are entitled to this grant. As from 8 June 2012 eligible persons include residents of non-EU Member States, provided that the residence will be used as their primary and permanent place of residence in the Republic.

The grant can be given for any residence no matter what its size is. However, the reduced rate of VAT will only apply on the first 200 square meters of the residence and the remaining portion will be under the normal rate of VAT which is 19%. (For families with more than three children, the allowable total covered area increases by 15 square meters per additional child beyond the three children) and depends on the type of the property and on whether the house was constructed or purchased. The relevant legislation provides that the level of the grant will be adjusted annually for the increase in the Retail Price Index.

A person who ceases to use the residence as his primary and permanent place of residence before the lapse of the 10 year period must notify the Tax Commissioner, within 30 days of ceasing to use the residence, and shall pay the difference resulting from the application of the reduced rate and the standard rate of VAT attributable to the remaining period of 10 years for which the property will not be used as the main and primary place of residence.

Persons who make a false statement to benefit from the reduced rate are required by law to pay the difference of the additional VAT due, are guilty of a criminal offence and, upon conviction, are liable to a fine, not exceeding twice the amount of the VAT due, or imprisonment up to three years or may be subject to both sentences.

7.5. Inheritance tax

There is no inheritance tax since it was abolished by the Estate Duty (Amending) Law 74(1)/2000 concerning any person who passed away after 1 January 2000.

 7.6. Local authority taxes and rates

 Owners are also liable for other taxes imposed per annum to immovable properties such as municipal or village taxes, refuse collection, sewerage etc. depending on the size of the property, the area etc. 

8. Immigration law and tax residence

8.1. Immigration law: 

EU Citizens may enter, leave, travel and live in Cyprus and may also engage in any economic activity, under the same conditions as Cypriot citizens. With regards to non-EU citizens that seek to enter the Republic, for reasons other than immigration, an entry visa permit is required, to enter once or several times with the duration of each visit not exceeding three months in any half year, starting from the date of first entry. If the applicant needs to travel frequently to Cyprus for business purposes, for example, a multiple entry visa may be issued for a year, and in some cases for more than a year, but total visits must not exceed 90 days, starting from the first visit during each six month period.

Non-EU citizens that visit Cyprus for long-term purposes shall obtain special temporary permit, commonly referred to as a “Pink Slip”. This type of permit can be issued for a period from one up to four years with the limitation of a total absence period of not more than four months. A non-EU citizen, who owns immovable property in Cyprus, automatically obtains “Pink Slip – Visitor” status. However, engagement in any form of business occupation is prohibited under the said status.

Third country nationals (non-EU citizens) can obtain immigration permits in the Republic of Cyprus provided certain criteria are satisfied. The most popular and attractive is the Category F immigration permit (under Regulation 6(2) of the Aliens and Immigration Regulations). This permit offers permanent residence in Cyprus and exempts the applicant from immigration entry procedures (there is no need to obtain any visas, residence permit renewals or re-entry permits) and is granted for an indefinite duration. The applicant needs to provide evidence that they have a secured annual income (such as a pension, dividends from investments, interest from deposits, rents etc.) of a sufficient amount to support themselves and their family whilst in Cyprus. If approved, the applicant will not be allowed to engage in any form of business profession or occupation. In cases where an applicant who satisfies the criteria of Category F additionally purchases immovable property

in Cyprus at the price of EUR 300,000 or more, the application is fast-tracked and examined favourably by the authorities as the purchase proves the intention of the applicant to reside permanently in Cyprus.

The immigration permit category covers, besides the applicant, his spouse, parents of the applicant and his/her spouse and children under the age of 27. The applicant and his family included in the Immigration Permit must visit Cyprus at least once every two years or else this status will be revoked.

8.2. Citizenship-by-Investment

 Under Subsection (2) of Section 111A of the Civil Registry Laws 141(I)/2002, it is provided that the Council of Ministers may, under any conditions it determines as appropriate, allow the naturalization of foreign entrepreneurs. Therefore, according to the decision of the Council of Ministers dated 13 September 2016, a non-Cypriot citizen, who meets one of the economic criteria set in the above decision, may apply for the acquisition of Cypriot citizenship through Naturalization by exception. Acquiring Cypriot citizenship is similar to acquiring citizenship of any other EU country. As a Cypriot citizen, you have the right to live, work, and study in any of the 28 EU countries. he applicant must comply either with a single criteria or with a combination of the criteria. The investment, if made alone, must have a total value of EUR 2 million. In every case the applicant must have a clean criminal record and own a permanent privately-owned residence in the Republic, the purchase price of which must be at least EUR 500,000 plus VAT. The investment value can in some cases be only EUR 2 million, including the permanent privately-owned residence if the investment is solely made on residential immovable properties.

 For a single application, the economic criterion is an individual investment of at least EUR 2 million in:

• Α.1 Investment in real estate, land development and infrastructure projects:
• Α.2 Investment in financial assets of Cypriot companies or Cypriot organizations:
• Α.3 Investment in Alternative Investment Funds or financial assets of Cypriot companies or Cypriot organizations that are licensed by CySec :
• Α.4 Combination of the aforementioned investments

Within this criterion (combination of investments) the applicant may purchase special government bonds of the Republic of Cyprus, up to EUR 500.000, which will be issued by the Public Debt Management Office of the Ministry of Finance

8.3. Tax residence

All Cyprus tax resident individuals are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. The tax year in Cyprus is the calendar year. Annual tax returns are filed by 31 December following the tax year.

 Individuals and companies resident in Cyprus are liable to income tax in accordance with the Income Tax Law 118(1)/2002  in respect of their worldwide income. An individual is tax resident in Cyprus if is present in the Republic for a period exceeding 183 days in a tax year. Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus. However, non- tax residents having a permanent establishment in Cyprus may elect, if it is to their benefit, to be taxed in accordance with the provisions applicable to tax residents (the said choice may be made year- on-year). A company is resident in Cyprus, if its management and control are exercised in Cyprus.

 A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.

With regards to individuals the following income tax rates apply:

The corporation tax rate for all companies is 12.5%.

The Law stipulates for various exemptions and deductions, provided certain conditions are satisfied.

Further, all companies registered in Cyprus must pay an annual levy of EUR 350 by 30 June of each year. In cases of group companies the total amount payable is capped at EUR 20,000. Non-payment of the levy may result the strike-off of a company of the Cyprus Company Registry.

 8.4. Double Taxation Treaties

Cyprus has Double Taxation Treaties with many European and other countries. The main purpose of these treaties is the avoidance of double taxation of income earned in any of these countries.

9. Checklist: Real estate in Cyprus 

• Legal Advice should be sought prior proceeding to any transaction 
• An official search report with regards to the legal status of the purchased property shall be obtained by the Department of Lands and Surveys
• In case of an existing mortgage, a waiver from the Bank should be sought (i.a letter provided by the Bank stating that the mortgage creditor will remove the mortgage)
• Issuance of planning, building permits and final approval certificate should be checked
• In case of purchase of land then its possible development should be inquired 
• A contract shall be signed containing provisions for the purchase price, terms of payment, full description of the property, date of delivery of the property, refund provision in case certain terms are not satisfied, warranty period (in case of new development), transfer date for the title deeds
• The Contract of Sale shall be duly stamped and lodged to the registry of the Department of Land and Surveys within six months from signing, for specific performance In case of Assignment Agreement this should be lodged within two months from signing
• In case of non-EU purchasers an application along with all necessary supporting documents for obtaining the permission of the Council of Minister shall be submitted
• Capital Gains Tax and any other fees, dues or taxes in respect of the property until the date of delivery of possession to the purchaser are exclusively paid by the seller
• Stamp Duty payment, VAT and transfer fees are paid by the purchaser

Taken from the International Real Estate Handbook, 5th  Edition, by Christian H. Kälin and Andrew J. Taylor, 2015. ISBN 978-0-9927818-3-5.