Subsidence and compensation
The subject of subsidence has troubled the Cyprus real estate market for several years with no easy solution to be found. In a previous article, I raised the issue who was responsible for the damage. The developer, the contractor, the supervising architects/engineers and/or the government who approved the development plans? Not an easy subject to address and at the end if those who bear the burden, the buyers, are the least at fault, then who is?
We came up with one solution of compensation, but with the main goal to offer some sort of compensation/relief to the unfortunate buyers, but without any major cost to the government.
(i) The houses to be demolished retained by the existing buyers.
(ii) The building density that the existing plots have, to remain in the ownership of the buyers, who can sell it as such to any location in Cyprus.
(iii) No capital gains, etc. to apply in such cases in the event of a sale.
(iv) The density to be transferred as is with no adjustments in the sales value giving those buyers a head-start against others (preserved buildings, etc).
(v) If redevelopment is undertaken by a new buyer, who will be called upon to finance the repairs/reestablishment of the land and build a new house, the new buyer to be exempted from local property taxes for five years.
(vi) Legal issues regarding the developers/architect’s negligence etc (save that of the Government) to be an additional right of the original buyer.
It needs a lot of discussion, but it is a start.
The above assumes that the buildings are erected based on an issued building permit and any illegal structures/extensions are to be ignored.
So, in a case that the house plot is around 200 sq.m. and the building on it is 150 sq.m. we will have the following financial picture (a theoretical example).
(a) Land plot to remain in the buyer’s ownership say at a
but
the
land
to
be
value of EUR 50,000 (as is).
(b) Sale of 150 sq.m. of building density at a fixed rate of
In this way the government will possibly give a solution to a chronic subject, which touches a humanitarian problem. As we have recorded, this is a start since there are a lot of circumstances to consider, such as if a project accommodates ten units but only three of them are damaged, but if the infrastructure is destroyed how is the compensation going to be calculated? Who will pay for the infrastructure cost etc. If a house is partly developed (?).
Food for thought?