My 10 Com­mand­ments and what you should know about sales con­tracts

Financial Mirror (Cyprus) - - FRONT PAGE -

Be­cause I have ob­served var­i­ous prob­lems which are re­lated to the is­sue of sales con­tracts, which are ei­ther drafted by the sell­ers them­selves, or by lawyers, I would like to present my own opin­ions of what should ad­di­tion­ally com­prise an ideal sale doc­u­ment in or­der to pro­tect the buyer. I be­lieve that my 36 years ex­pe­ri­ence in the real es­tate sec­tor has given me suf­fi­cient ex­pe­ri­ence in this field which is why I would like to present my own 10 Com­mand­ments for re­flec­tion and dis­cus­sion.

• 1: You must check

if there

is at

least plan­ning per­mis­sion or even bet­ter a build­ing per­mit. Sev­eral projects are sold with­out a per­mit, which is not guar­an­teed to be de­liv­ered not even upon com­ple­tion, as a re­sult of which the units are pow­ered by gen­er­a­tors (since the EAC does not pro­vide elec­tric­ity with­out per­mits). Dur­ing the check, one should also de­ter­mine if the per­mits have been re­newed as these ex­pire ev­ery three years. There­fore, be­sides the ini­tial per­mit, to check if there is a re­newal.

• 2: Check if the prop­erty is sub­ject to charges, such as mort­gage fees, etc. If there is a mort­gage ask for a “re­lease” (to free the mort­gage on the prop­erty pur­chased) from the lender. If the seller can not pro­vide this “re­lease”, then do not even bother to en­ter into such a deal.

• 3: The doc­u­ment of sale should men­tion when it is ex­pected to get the fi­nal ap­proval cer­tifi­cate. De­pend­ing on the dis­trict, this pe­riod could also vary. Usu­ally, it is 3-5 years af­ter com­ple­tion (if the project is large) and around 1-2 years in case of an in­di­vid­ual de­vel­op­ment or hous­ing.

• 4: The sale con­tract should also in­clude the ex­pected is­sue of the ti­tle deed. Once again, this varies by dis­trict. If, for ex­am­ple, the project is in Par­al­imni then 5-6 years is con­sid­ered a rea­son­able pe­riod (!), while in the case of Stro­vo­los, it could be 2-3 years.

The 3rd and 4th com­mand­ment will prob­a­bly not be ac­cepted by the seller in the ab­sence of a ti­tle deed and so it is con­sid­ered highly risky for the seller un­der the present state of the in­dus­try, what with the long de­lays, etc. Then again, if re­fer­ring to the 3rd and 4th com­mand­ments, even and there is no com­mit­ment by the seller, any Court will con­sider a ‘rea­son­able pe­riod’. What de­ter­mines a ‘rea­son­able pe­riod’ will de­pend on the ef­fort and cir­cum­stance of each case, such as the short­com­ings of mu­nic­i­pal­i­ties and the Town Plan­ning of­fice in each dis­trict that may even ex­ceed ten years.

• 5: You must in­sist to in­clude the term of the right of the buyer in case of the ab­sence of a ti­tle deed, to be able to re­sell the prop­erty at any time to a sec­ond buyer, thus can­celling the orig­i­nal doc­u­ment of sale with the seller and the seller to sign a new con­tract with the new (sec­ond) buyer. This way, there is some way to the buyer to exit the deal in the ab­sence of a ti­tle deed. This process needs se­ri­ous le­gal and ac­count­ing ad­vice (en­sur­ing a tax pay­ment cer­tifi­cate from the In­come Tax of­fice for the first pur­chaser, with­drawal of the orig­i­nal con­tract of sale from the Land Registry, cov­er­ing the expenses of the seller; prob­a­bil­ity that the seller has an ad­di­tional tax bur­den, etc.). This is a goo con­di­tion to en­sure is in­cluded in the sales con­tract.

• 6: Some sell­ers take ad­van­tage of the buyer’s en­trap­ment and may de­mand up to 10% tax or com­mis­sion on the new sale price, to ac­cept the con­di­tion for the right of the buyer. I be­lieve that if there are no tax pa­ram­e­ters, the seller’s fee (eg. EUR 2-3,000) must be de­ter­mined at the ini­tial stage of the agree­ment, so as not to have any doubts in the fu­ture, in ad­di­tion to the re­spon­si­bil­ity of the orig­i­nal buyer for any ad­di­tional taxes be­ing added on top. The con­ces­sion of the con­tract of sale does not re­quire the per­mis­sion of the orig­i­nal seller.

• 7: Agree to the value of the prop­erty as at 1/1/1980 ei­ther through val­u­a­tion, or by a rough cal­cu­la­tion of 1/4 to 1/5 of the sale value (where that is not de­ter­mined by the Land Registry). This way, dur­ing the pe­riod be­tween the de­liv­ery of a unit and the ti­tle deed is­sue (which de­ter­mines the value as per 1.1.80) there is no room for doubt. Dur­ing the trans­fer, there should be the set­tle­ment of the ex­act amount.

• 8: If it is a new build­ing, to de­mand a pe­riod of war­ranty of at least 12 months for good con­struc­tion (whereas the struc­tural part is the man­u­fac­turer’s re­spon­si­bil­ity and is de­ter­mined by open-ended pa­ram­e­ters).

• 9: If the build­ing is ready, have a civil engi­neer to make even a rudi­men­tary check for the struc­tural de­sign of the build­ing. An ex­pe­ri­enced eye of a civil engi­neer may find weak­nesses that each buyer will not ob­serve.

• 10: Your sales doc­u­ment should be stamped within a pe­riod of one month (if you are late, it is not the end of the world, but there is a small fine) and de­posited with the Land Registry within six months from sig­na­ture. In ad­di­tion to the se­cu­rity for the buyer, if the doc­u­ment of sale is not de­posited, the buyer will not be en­ti­tled to any re­fund of the prop­erty tax (as at 01/01/80) and there is a risk that the Lands Sur­veys Dept. to de­mand trans­fer fees at the date of trans­fer, in­stead of the sale fees. Also, the de­posit of the sales doc­u­ment is al­lowed un­der cer­tain con­di­tions of the Lands Sur­veys to re­lease po­ten­tial trou­bled mort­gages and al­low the trans­fer of the ti­tle deed.

I felt the need to re­fer to these ad­di­tional pa­ram­e­ters in the case of ti­tle deeds, be­cause of the on­go­ing protests, mainly by for­eign­ers, who of­ten give bad pub­lic­ity to Cyprus, mainly in the Bri­tish press.

I also hope to have trou­bled all in­volved stake­hold­ers, both in­dus­try pro­fes­sion­als and po­ten­tial buy­ers with these 10 Com­mand­ments, for the ben­e­fit of the con­struc­tion in­dus­try and to help smoothen out doubts that will help this sec­tor re­cover its rep­u­ta­tion.

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