Whatever your reasons for buying a property this is probably the first time that you have bought a property in Cyprus, or even abroad.
We have put this guide together to help you understand a little more about the process of buying in Cyprus
This guide is aimed at providing some basic information about buying in Cyprus and tries to answer the majority of the common questions that we are asked about.
Although we hope that you will find it useful it is important to remember that it doesn’t cover all legal issues involved and certainly isn’t a step by step DIY guide to buying in Cyprus. It is still recommended that you seek advice from a professional before proceeding – after all we do this every day and have been doing so for many years and therefore know all the tricks and pitfalls that you may come across.
We also know the practical solutions to the problems that exist and also know how Cypriot Law interacts with UK law.
Buying property in Cyprus faq’s
Is the legal system in Cyprus the same as the UK?
The Cypriot legal system is based on British law so unsurprisingly there are similarities between the two systems. However, there are differences, but there remains an interaction between them when you buy a property in Cyprus. As an example, in Cyprus the contract to buy a property is deposited at the Land Registry when it is signed, which doesn’t happen in the UK.
Do I need a lawyer to help me buy in Cyprus?
Surprisingly this is the most common question that we get asked. No, you don’t – just like you don’t necessarily need a lawyer when buying in the UK. However, in reality you would always use a lawyer when buying in the UK so what is so different about buying in another country where you probably don’t have experience of buying before?
I have heard that there are problems with buying property in Cyprus. What is the situation?
Certainly there are potential problems when buying in Cyprus, just like there can be in any country including the UK. Most of the potential problems that you read about can be avoided by using common sense and by instructing an independent lawyer to advise and guide through the necessary steps of the purchase. We often see people with problems with their property and they invariably tell us that they didn’t use a lawyer or used the lawyer given to them by the seller or estate agent.
Are the costs more in Cyprus than in the UK?
Yes, the total costs in addition to the purchase price are higher than you will be used to in the UK. It is therefore important to factor these into your budget from the beginning. Luckily property prices are currently rock bottom which not only reduces some of these costs but also makes the purchase price much cheaper.
The total cost of buying in Cyprus is slightly higher than in the UK.
When you buy a property you will have to pay VAT (applicable on new properties, not re-sales) Stamp Duty and Transfer Fee as calculated below. Capital Gains Tax is payable by the seller.
- Up to €5,000 - No Stamp Duty payable
- From €5,000 to €170,000 Stamp Duty is at €1.50 per €1,000
- Over €170,000 Stamp Duty is at €2 per €1,000 up to a maximum of €20,000
Department of Lands and Surveyors Transfer Fee;
- Up to €85,430 payable at 3%
- From €85,430 to €170,860 payable at 5%
- Above €170,860 payable at 8%
There are two ways of financing your purchase in Cyprus through a mortgage.
The first is to release equity from your UK assets to buy the property in Cyprus. The second is to mortgage the property in Cyprus. Each has advantages and disadvantages but getting it wrong can cost you dearly so take advice on this.
If you wish we can put you in contact with mortgage brokers either in the UK or in Cyprus. We do not receive a commission for doing so and are not tied into a particular broker – we simply recommend them because they have given our clients good service in the past.
Obtaining a mortgage in Cyprus is more difficult than it has been in the past. If you are buying a property in Cyprus that already has a mortgage on it then it may be possible to take over that mortgage from the current owner. This is often seen as an easy way of obtaining a mortgage but you should be aware that that mortgage might have been the right one for the seller but may not be the best one for you.
It is common for mortgage institutions to register the mortgage at the Land registry although this is not compulsory.
If you are buying a property we would always recommend that you obtain a survey. If you obtain a mortgage the valuation carried out for the mortgage company will only look at whether the property is worth the amount you have negotiated.
Any defects in the property which do not affect the value will not normally be shown on the report. A survey will rate the condition of all permanent structures and will highlight any important problems that could affect the property value. Depending on the survey this may also give advice as to future maintenance. The survey should reduce the chance of discovering any nasty surprises with the condition of the property once a purchaser has bought the property. If there are any defects the survey will help the buyer negotiate the price or require certain works to be carried out before the property is purchased.
The survey may also reveal that certain works have been carried out or highlight rights that are necessary for the property which we can investigate before the property is purchased.
Buying any property involves a lot of money.
When you are converting from one currency to another the difference between one exchange rate and another can literally make a difference of thousands of pounds on your purchase. We know people who have sold properties and have made more money on the exchange rate difference than they have on the sale of their property.
Currency dealers have increasingly sophisticated products. You can agree rates for the future. You can get them advising you when to buy or agreeing to buy for you when the rate hits a certain level. You can even agree a fixed rate for longer periods of time if you make regular payments abroad (for example for a mortgage or moving your pension money).
We work with Smart Currency who can give you a good exchange rate for your purchase and whom we have known for years. We will normally receive a commission for introducing them to you. This does not cost you anything more as they are simply paying us part of what they make. This commission is costed into our overall charges for providing our services.
When buying a property in Greece , the buyer must be in a position to verify the source of the money corresponding to the purchase price. In order for your income in the UK to be considered as valid evidence for this purpose, certain formalities need to be taken care of upon transferring money from the UK to Greece.
Powers of attorney
A Power of Attorney is a document which allows somebody to do something on your behalf.
If the sale agreements are not being signed in the UK then often clients prefer to grant a Power of Attorney to somebody to sign the purchase documents on their behalf.
This has several advantages;
- You are normally busy and haven’t time to go out to Cyprus to sign the paperwork
- Signing various contracts is not particularly exciting and most people prefer to use their time off enjoying the property rather than signing pieces of paper
- It normally works out cheaper than you going out to Cyprus to sign
- You should only give a Power of Attorney to somebody that you trust as they allow that person to do things legally on your behalf
- In Cyprus Powers of Attorney have much wider faculties than we are used to in the UK and often have very general clauses in them “just in case”. We try and limit the Powers of Attorney down as much as possible whilst still allowing the person appointed the freedom to do what you need them to do
Fractional Ownership is not a new concept and has been around for many years – although back then we called it Co-ownership.
Put simply Fractional Ownership is where several people buy a property together. This can be members of a family, friends, work colleagues or even complete strangers.
You buy a share in the property and also share the running costs.
The best Fractional Ownership schemes are those where the cost of buying is closest to the value of the actual share in the property – i.e. the ones where there are not huge margins built into the sale.
Timeshare is a type of Fractional Ownership but Fractional Ownership is not necessarily Timeshare as there are strict definitions as to what Timeshare is.
The buyer of the property will obtain title deeds in accordance with the terms agreed under the contract of sale. Usually this happens when the buyer has paid the full purchase price.
The transfer of the title deeds from the seller to the buyer takes place once an application is made to the Land Registry and once all the prescribed transfer fees have been paid. However it is necessary to mention that:
- Title deeds may take up to 5 years to be issued for a new property
- Even if the property does not have title deeds, the owners are safeguarded by depositing the agreement at the Land Registry
- Re-sale can still be achieved even in the absence of title deeds
Who should own the property?
This is probably the most important decision that you can make. Getting this right can save you thousands in costs and taxes. Getting it wrong can be an expensive mistake.
The way that you would buy a property in your home country is not necessarily the best way to buy in Cyprus so don’t assume that you can adopt what you have done here to your purchase in Cyprus.
There are many options – ranging from personal ownership to company ownership but there is no “one size fits all” solution that works for everybody.
Your circumstances and priorities are different from the next person. We are able to look at your circumstances and your priorities and advise you who should own the property based on that information. The solution may not necessarily be immediately obvious.
When deciding on the best form of ownership we would need to take into consideration both Cypriot and UK tax and also a range of other circumstances such as your plans for the property in the future.
If you are buying in a complex then there will be a Community of Owners. We would need to make sure that all Community charges have been paid up to date before you buy.
Water and Electricity
It is important to check that there is a connection and that the charges are paid up to date.
If you are buying a new property we will need to check that the property has the appropriate Habitation Certificate which allows the services to be connected.
All land and properties in Cyprus are now registered.
We would obtain a search at the local Land Registry for office copy entries of the previous owner’s deed which will show who the registered owner is and whether there are any charges or incumbrances on the title.
Checks should be made at the local Town Hall to make sure that the Council Tax has been paid up to date.
Just like back home you will need to arrange to have the utilities and services in your name and often have to set up a direct debit at your Cypriot bank to pay the bills. You also need to inform the local Council and the Residents Association that you own the property.
Cypriot inheritance laws are probably very different to those that you are used to in your home country.
We can advise you on the various different options regarding your Cypriot Will. It is possible to have two wills – one in the Cyprus covering your Cypriot assets and one in the UK covering your other assets.
Both Wills need to be drafted carefully to make sure that they do not revoke each other.
You can leave your assets in Cyprus to somebody with a UK will but this doesn’t make sense – the cost of the subsequent inheritance will be more and it is possible that you will inadvertently cause inheritance tax problems.
The cost and extra complications of leaving no Will at all is a potential headache and should be avoided.
Whilst as a foreigner you do not have to follow the same rules that Cypriot people do in terms of who you have to leave your property to, it often makes sense to do so as this can save your beneficiaries huge amounts in tax.
A Cypriot Will can be prepared and signed in your local area or in our offices – there is no need to go to Cyprus.
The Cypriot Will can be signed in the UK or Cyprus.
Cypriot Inheritance Law states that when you pass away your property will be shared among your heirs according to the law of your residence. It is a common misconception that as a foreigner you have to leave your assets in accordance with Cypriot law, which imposes certain “forced heirs”. A “foreigner” can make a Cypriot Will leaving his own property to the person of their choice. This Will must contain a declaration that their personal law is governed by the principle of free disposition of property by testament. This is then acceptable to the Central Wills Registry in Cyprus. Generally speaking a valid Cypriot will is sufficient to dispose of the estate as you wish.
If a foreign resident dies domiciled in Cyprus the estate will be distributed according to Cypriot law. Domicile is not the same as Tax Residence. If a foreign resident dies resident in Cyprus the estate will be distributed according to Cypriot law if they haven’t left a Will but in accordance with their own national law if they state that this is what they want to happen in their Will.
Inheritance tax was abolished in Cyprus in 2000. However, the property or assets also have to be declared back in the UK although due to Double Taxation Laws you can offset the tax paid in Cyprus against the tax payable in the UK. Obviously when there is no tax payable in Cyprus then the full amount will be paid in the UK. Having said that, there is a transfer fee on the transfer of assets on an inheritance.
The rate of the transfer tax depends on the relationship between the deceased (the person who has died) and the beneficiary (the person inheriting. Current rates are;
- From parents to children - 4%
- Between spouses - 8%
- Between third degree relatives (cousins etc.) - 8%
After you buy a property in Cyprus there are ongoing obligations that you need to meet;
It makes sense to insure your property and contents.
This is normally paid annually in one lump sum. The amount will depend on the location, size and age of the property.
Non payment of Council Tax can lead to legal proceedings being taken against you and an embargo on the property.
You will be responsible for the utility charges – electricity, gas, water sewerage, rubbish collection etc. from the time that you buy the property.
You should pay these otherwise the property can be confiscated and auctioned in order to settle the debt.
If you are non-resident you must declare any income you have earned in Cyprus. This applies even if you receive this income by renting out to people from your home country and the money never touches Cyprus.
You will also normally have to declare this income in the country where you are tax resident but can normally offset the tax paid in Cyprus through Double Taxation Treaties.
The taxes that you pay when you buy a property in Cyprus will normally depend on whether you are tax resident there or not.
Tax residence is a determined by a number of factors;
- How long you spend in that country? Is it 183 days or more a year (not necessarily continuously). If so you are likely to be tax resident there.
- Is your main home there? If it is then you are likely to be tax resident there
- Is your immediate family (spouse and dependent children) based there? If so you are likely to be tax resident there.
- Is your main economic interest there? If so you are likely to be tax resident there
- If you do become tax resident in a country then you will normally stop paying taxes in your home country and start to pay taxes in the new country
- Do not be tempted to have selective amnesia when it comes to declaring taxes the authorities in both Cyprus and the UK are clamping down on people who do not do not do things properly
- Sometimes you should declare something for tax purposes in one country and also in another. Cyprus and the UK have a Double Taxation Treaty which means that you don’t normally pay tax twice and can offset the tax paid in the other country against the tax that you would otherwise pay in your home country
Our charges. We charge 1% of the purchase price subject to a minimum of £1,500 + VAT. If the property title is defective or unexpected additional work is required then there may be additional charges. We would inform you before incurring this cost.
Our charges include;
- Legal advice on the terms of your offer to purchase
- Searches at the Town Hall
- Searches at the Land Registry
- Obtaining certificate from the Community of Owners (if appropriate)
- Checking the legal status of the property and the seller’s right to sell
- If appropriate checking the guarantee provided by the vendor
- Preparing a report on our searches and advising you on the purchase
- Arranging the signature of the title deed
- Arranging payment of the relevant taxes
- Arranging registration of the property at the Land Registry
- General hand holding and advice throughout the transaction
Buying in Cyprus checklist
|1||Decide what you are buying, where and why. If necessary take advice on this.|
|2||Instruct your independent lawyer (hopefully Judicare)|
|3||Look at the cost of buying. Fix a budget. Stick to it.|
|4||Investigate finance and think about how to finance deposit.|
|5||Learn about the process of buying|
|6||Look at who should own the property|
|7||View properties / choose a property. Be honest with the estate agent about what you are looking for – that will save a lot of time for you and them.|
|8||Survey and valuation|
|9||Send any contract to us to review prior to signature.|
|10||Speak to currency dealer about getting the best rate for your purchase|
|11||If it is a reservation contract pay a small reservation fee|
|12||Lawyer carries out checks on the property and advises you on whether it is safe to proceed with the full purchase contract|
|13||Payment of Full purchase deposit|
|14||Lawyer deals with purchase|
|15||If you are moving to Cyprus arrange removal company|
|16||Arrange Power of Attorney if needed|
|17||Arrange insurance – contents / buildings / health|
|18||Signature of title deeds and registration at the Land registry|
|19||Make a Cypriot Will and review your English Will|
|20||Arrange for Fiscal representation|
|21||Enjoy a well deserved holiday in your new property|
Why use Judicare?
A highly experienced Cypriot legal team.
We are Solicitors
We are a UK based firm of Solicitors regulated by the Solicitors Regulation Authority and who specialise in international legal issues.
We understand both sets of laws
Because we understand both sets of laws we understand the difficulties that come when two sets of laws meet.. This is particularly important when it comes to issues involving ownership, taxation and inheritance.
We are members of AIPP
The Association of International Property Professionals was set up to improve standards of professionalism in a largely unregulated overseas property market.
Our Cypriot team has many years of experience dealing with a whole range of legal issues with Cyprus.
We speak your language
You need a lawyer who can speak your own language. More importantly you need somebody who can explain and discuss often complicated issues in terms that you understand.
We are independent. We are not allowed to act for the buyer and the seller at the same time. We are not linked with any Development Companies, Builders or Estate Agents.