The truth about the Troika me­moran­dum and real es­tate

Financial Mirror (Cyprus) - - FRONT PAGE -

The me­moran­dum /bailout deal is a sim­ple 42-page agree­ment be­tween our govern­ment and the Troika with abun­dantly clear and spe­cific clauses.

As var­i­ous in­di­vid­u­als have made com­ments left and right about the deal, cre­at­ing con­fu­sion, let’s look at the clauses con­cern­ing real es­tate, so that ev­ery­one knows what to ex­pect.

In the first chap­ter (1.28) con­cern­ing re­form of the bank­ing sec­tor, un­der the head­ing “The Le­gal Frame­work for the Re­struc­tur­ing of Pri­vate Loans”, (bank loans) there is the fol­low­ing ref­er­ence:

The le­gal frame­work in re­la­tion to fore­clo­sures and the forced sales of mort­gaged property will be amended in con­sul­ta­tion with the Troika, and adopted by end-June 2014, with im­me­di­ate ef­fect for all mort­gaged prop­er­ties ex­cept pri­mary res­i­dences (for which pro­vi­sions will en­ter into ef­fect by endDe­cem­ber 2014, in line with the adop­tion of the in­sol­vency act), to al­low for pri­vate auc­tions to be con­ducted by mort­gage cred­i­tors, with­out in­ter­fer­ence from govern­ment agencies. Fore­clo­sure time for pri­mary res­i­dences can be ex­tended to 2.5 years, whereas for other prop­er­ties to 18 months.

In the third chap­ter (3.6), con­cern­ing “Fis­cal-Struc­tural Mea­sures” un­der the head­ing “Rev­enue Ad­min­is­tra­tion, Tax Com­pli­ance and In­ter­na­tional Tax Co­op­er­a­tion”, the fol­low­ing is spec­i­fied:

To re­in­force the ef­fec­tive­ness of rev­enue collection the pow­ers of the tax au­thor­i­ties must be strength­ened, giv­ing them author­ity to pro­hibit the alien­ation of as­sets, in­clud­ing property (we are specif­i­cally con­cerned with property tax pay­ers), and bank ac­counts by tax pay­ers. Re­gard­ing bank ac­counts, no pre­vi­ous court or­der is needed to block funds, but the tax­payer is given a brief grace pe­riod dur­ing which they can con­test the de­ci­sion.

The is­sue be­comes abun­dantly clear. More specif­i­cally, in the same chap­ter, head­lined “Im­mov­able Property Tax Re­form”, the fol­low­ing re­mark is made:

Tax au­thor­i­ties must re­struc­ture the property tax so that the break­down is more fair and sim­pler and with a lower ad­min­is­tra­tive cost for the state. For this rea­son, the fol­low­ing mea­sures must be taken:

A new gen­eral val­u­a­tion of prop­er­ties must come into ef­fect by 30/6/2014 so that the real val­ues are re­flected (val­ues as of 1/1/2013).

Property tax for 2015 (does not spec­ify for 2014) must em­ploy the new gen­eral val­u­a­tion and se­cure an in­come at EUR 75 mln over and above the amount col­lected in 2012 by al­ter­ing the ex­ist­ing tax brack­ets (i.e. about EUR 100 mln in to­tal).

By the be­gin­ning of July 2014, new leg­is­la­tion must be adopted in co­op­er­a­tion with the Troika, en­sur­ing the fre­quency of re­vi­sions of the val­u­a­tions ac­cord­ing to in­ter­na­tional norms by 31/3/2015. A com­mu­ni­ca­tion strat­egy must be es­tab­lished by 30/6/2014 to in­form and en­lighten the pub­lic of the aims of the tax re­struc­tur­ing.

An­other strat­egy to be agreed would be that of how to han­dle ob­jec­tions re­gard­ing the new val­u­a­tions

Also, by 30/6/2015 the sug­ges­tions of the study for the collection and man­age­ment of com­mu­nal/mu­nic­i­pal property taxes must be adopted

A study must be car­ried out to de­ter­mine the use­ful­ness of shift­ing the collection of some taxes and fees from the real es­tate trans­ac­tions to an an­nual property tax (hold­ing tax).

Fi­nally, the pos­si­bil­ity of re­duc­ing the trans­ac­tion cost for forced sales of non­per­form­ing loans must be stud­ied by 30/6/2014.

The fifth chap­ter (5.3) head­lined “Goods and Ser­vices Mar­kets” re­gard­ing the “Hous­ing Mar­ket and Im­mov­able Property Reg­u­la­tion”, the fol­low­ing ob­ser­va­tion is made:

The au­thor­i­ties must take ac­tions to re­store de­mand for property, the ef­fi­cient seizure of col­lat­eral and the swift is­sue of per­mits and trans­fer of prop­er­ties. Spe­cial men­tion is made to the dan­gers from le­gal pro­ce­dures aris­ing from in­com­plete doc­u­men­ta­tion of own­er­ship and the slow pace of ju­di­cial pro­ce­dures. More specif­i­cally: By 30/6/2014, au­thor­i­ties must set time lim­its for the is­sue of ti­tle deeds, if fi­nal cer­tifi­cate for com­ple­tion ex­ists.

Fur­ther­more, by 30/9/2014 a time limit must be set for the is­sue of com­ple­tion cer­tifi­cates by the su­per­vis­ing en­gi­neers.

By 31/12/2014 we must safe­guard that the num­ber of prop­er­ties with­out ti­tle deeds, for which the pro­ce­dure has been on­go­ing for more than a year, are less than 2000.

In the mid­dle of July, and ev­ery three months, the num­ber of prop­er­ties with­out a ti­tle must be an­nounced.

All state de­part­ments and fi­nan­cial in­sti­tu­tions must have elec­tronic ac­cess to records of ti­tle deeds, mort­gages, sales documents and Lands & Sur­veys Dept plans by 31/12/2014.

Fi­nally, court pro­ce­dures re­gard­ing property dis­putes must be ac­cel­er­ated.

In con­clu­sion, there’s am­ple work to be done by the govern­ment, with the con­tri­bu­tion of the House of Rep­re­sen­ta­tives and the At­tor­ney Gen­eral’s of­fice, so that new leg­is­la­tion is sim­ple and eas­ily en­forced.

We should have re­sorted to the above mea­sures at our own ini­tia­tive to aid the Cyprus econ­omy and our­selves. They are now forced upon us by the Troika.

Let us not for­get that people in key po­si­tions (govern­ment, po­lit­i­cal par­ties, MPs) had only to gain from all the mess and con­tinue to re­sist these changes. Are we go­ing to let them?

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