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Property Matters

LEGAL PROCESS FOR PURCHASING PROPERTY IN NORTH CYPRUS

The process of purchasing property in North Cyprus may be different from other countries and has its own features.

Please bear in mind that wherever in the world you are buying a property, it will always be safer for you to buy with the assistance of an independent lawyer who has no fiduciary relations with the seller and who will represent you (and you only) in checking the property, the documents and safeguard all your rights from the start to the end. We assure you that it will be worth the money that you will spend for this purpose.

If you decide to choose our firm to represent you, and as soon as you select the property to be purchased, we will ask you to sign a power of attorney in favor of our legal firm. This will make further work much easier because a potential buyer may not permanently stay in Cyprus in order to sign all relevant documents, and sometimes not all of the clients are ready to make decision during their stay. The Power of Attorney (PAO) will allow us to start legal search for the property which the client has chosen and also to prepare the draft Contract of sale. This draft contract will be forwarded to you and then to the Seller for review and approval.

Apart from the need of a POA the client will be asked to fill out an Application form and obtain and send to us a Police report from his country of origin (in English) which will show whether any criminal record against the client exists or not. This report together with the application form shall be used for applying to the TRNC Council of Ministers and obtaining the “Purchase permission” needed to buy and register the property in the name of the client. Such “purchase permission” is normally granted within 3 to 5 months from the date of submitting the application to the Ministry by the Lawyer

Purchasing property may be through a construction company or through an Estate Agency, and either for a new property under construction or a re-sale property

 

a) Purchasing property through a construction company.

As soon as the price and purchase conditions of the chosen property are agreedwith the Vendor, the lawyer will prepare a draft contract of sale incorporating the agreed conditions, rights and obligations of the parties, delivery date, price, payment plan and all other factual and legal conditions and will forward a draft of it to the client for his approval.

Once contracts are agreed and signed the Purchaser shall be asked to make the first payment for the property as per the contract which may be 20 or 30% of the agreed sale value, lawyer’s fees, Stamp duty at 0,5%, contract registration fees of 200-GBP up to 300-GBP and administration fee of 25-GBP.

After signing of the contract and payment of the Stamp duty the solicitor will register the contract of sale at the relevant Land registry office within 21 days of signed. Registration of the contract of sale protects the client and the property purchased against any illegal activity of the Vendor such as re-selling, mortgaging, etc.

All foreign nationals buying property in TRNC has to obtain a “Purchase permission” from the Council of Ministers of the TRNC (as stated above) before transfer of the Title can be effected.

Necessary package of the documents:

  • Lawyers letter of application;
  • Copy of the contract of sale;
  • Application form;
  • Copy of the passport ;
  • Police clearance report from the home country of the Purchaser;
  • Copy of the title deed;
  • Copy of the site plan of the land.

Rejection reasons for Purchase permission:

  • Location of the property. If the purchased property is within a proximity of 500 meters from an army base
  • The Purchaser has already purchased property in TRNC and transferred a Title deed in his/her name
  • The plot of allocated land of the property is more than 1 donum
  • There is a criminal record against the Purchaser

Taxes and costs for Vendor’s transferring and for Purchasers taking transfer of title deeds

Vendor’s tax liability: in transferring the deeds of the purchased property to the client:

Sales tax (Stopaj) at the rate of 6,25% from the sale value as per the contract of sale

Purchaser’s tax liability:

  • Stamp duty at 0,5% from the sale value of the property, shall be paid at the time of signing of the contract of sale + £25 administration fee
  • 5% VAT, payable at the keys delivery. There will be no VAT payable for already registered re-sale properties
  • 6% (registration tax on the land) payable at the time of transfer of the Title deeds into the Purchaser’s name. For the first time purchasers this tax automatically decreases down to 3%.

b) Purchasing property from private persons

The process is similar to buying property from a construction company except that if the re-sale property is already registered in the name of the person selling, there will be no VAT payable and as soon as the client obtains the Council of Minister’s “purchase permit”, title deeds will be transferred without any delay. If the re-sale property is in the name of a company or a person who is classed as “professional”, VAT will still be payable.

Clients are therefore warned to check before committing themselves, to see if the re-sale property deeds are in the name of an individual who is not a professional or company. If in doubt our legal firm will check and inform you about this issue.

c) Expenses to be expected at the time of transfer of deeds (Conveyance stage)

  1. Conveyance fees payable to the lawyer ………………………………………………………………….. £400 GBP
  2. Transfer tax……………………………………………………………………………………………………….. 3% of contract value
  3. Municipality tax …………………………………………………………………………………………………. 0.25% of contract price
  4. VAT (if not already paid) ……………………………………………………………………………………… 5% of contract price
  5. Currency exchange difference ……………………………………………………………………………… £100 GBP approximately
  6. Administration fees ……………………………………………………………………………………………. £25 GBP approximately

Other information that may be helpful to bear in mind:

  • Paying deposit: We advise that you pay the requested deposit to your lawyer who will be able independently to advise whether your purchase is safe or not.
  • Will ( Testament ): Please see our “WILLS” section on this web site
  • Insurance: Get an insurance for your property after taking possession of it.
  • Trusts: Please see our “TRUSTS” section on this web site.
  • Residency: Once you buy a property, residency visa will be easily obtainable.
  • Bank Account: Our firm will assist you to open one or more bank accounts.
  • Imports: Once you own a property in TRNC, you may import your goods, furniture, your car etc. Our firm will supply you with the required documentation.
  • Formation of a company: for whatever purpose you need to form a company, our legal experts will be happy to assist you.
  • Doing business in Cyprus: Once you buy a property you may obtain a residency permit and by registering with the Tax office, you may do a business here.
  • Transferring money: You may transfer the money needed to buy one or more properties here in Cyprus and when you sell you may transfer the funds to any country you like without any limitation. Please bear in mind that for whatever purpose you transfer money to Cyprus, the receiving bank here will have to deduct 0.08% of the funds arriving as tax or 21-GBP minimum whichever is greater.

The Land Registry will not however accept to register a contract unless such contract is first stamped by the Tax Office. The stamping cost is 0.5 % of the sale value as shown in the Contract of Sale and although stamping of the contract can be done within one month from the date of its signing the Land Registry will not accept to register such contract if registration is attempted after the expiration of 21 days from the date of signing of the contract. It is therefore advised that as soon as the contracts are signed and you are informed by your lawyer of this, you put the lawyer in sufficient funds to pay for the stamping of your contract as well as registration.

Registration of the Contract of Sale with the relevant Land Registry operates as an important security for your purchase in that the Vendor cannot thereafter to re-sell the same property to any other person or gift it and will not be able to e.g. mortgage the property in order to obtain credit from a Bank or otherwise if the property is already mortgaged or has already any impediment on it, the Land Registry will immediately inform your lawyer and ask him whether he still wish to proceed with registration. No doubt your lawyer should refuse this and advise you immediately in order to stop any payment being made to the Vendor.