Published on 14 February 2006 at 04:55 pm
Filed under: Europe:- Northern Cyprus Property Guides » Northern Cyprus Property Buying Guide
The main key to successfully navigating the property buying process in Northern Cyprus is understanding the different types of title deed that various properties and parcels of land can have.
If a potential property investor takes the time to understand the entire property buying process in Northern Cyprus before they enter the marketplace they will avoid any potential issues relating to land disputes; furthermore they will save themselves a great deal of time and effort that is so often wasted by investors unsure of what it is they are looking for or looking at!
Because the whole island of Cyprus was in British hands for many years the legal system in the Turkish Republic of Northern Cyprus borrows a great deal from the British legal system - this at least makes the actual buying process more straightforward especially for buyers heralding from the United Kingdom.
However, even if an investor feels confident about the legal process involved in securing property in North Cyprus they should not proceed to contract closure without first instructing a lawyer to act on their behalf. A lawyer can be drafted in to assist from the outset of a property investor’s search for suitable land or property in North Cyprus or at the very latest their assistance should be enlisted before any preliminary contract to buy is signed – this is because it is critical that title deeds are searched and permission for the investor to buy in North Cyprus is sought by the lawyer from the Council of Ministers.
Before detailing both the freehold and leasehold property purchase processes in TRNC here’s a breakdown of the different types of title deed available in North Cyprus: -
1) Internationally recognized title deeds: -
There are two types of title deeds available in Northern Cyprus that are recognized by the international community and they are either ‘Turkish Title pre 1974’ or ‘Foreign Title pre 1974’ – basically if land or property for sale was owned by Turkish Cypriots or foreign nationals other than Greek Cypriots before the 1974 division of the island the real estate in question will have internationally recognized title deeds.
There are actually very few parcels of land or pieces of real estate with either type of title deed and real estate that holds these types of title deed are often valued far higher. Any real estate listed as having either type of title deed should not be accepted as having it, rather a lawyer should be instructed to thoroughly research the validity of such title deed claims.
A foreign property investor who wishes to purchase real estate with ‘foreign title pre 1974’ is not restricted in the amount they can own whereas they are restricted to one donum of land per person (or per married couple) if they buy real estate with Turkish title deeds or real estate with any of the below listed title deeds. One donum is roughly one third of an acre.
2) Government guaranteed title deeds: -
Following the 1974 division of the island many Greek Cypriots fled Northern Cyprus and many Turkish Cypriots fled Southern Cyprus. At the time it was agreed that those who left their homes and land could sign over their title deeds to the government to be held until a settlement in Cyprus was reached. In exchange for real estate abandoned in the south, Turkish Cypriots were given land and property in the north of Cyprus - in exchange for real estate abandoned in the north Greek Cypriots were given land and property in the south of Cyprus. Each respective government acts as the guarantor for the land and property that was exchanged.
The majority of new properties for sale in Northern Cyprus are on ‘esdeger’ or ‘tahsis’ land that was formerly owned by Greek Cypriots and these properties have title deeds guaranteed by the government of Northern Cyprus; these title deeds are also referred to as Kesin Tasarruf Belgesi or Absolute Possession Documents.
The difference between esdeger and tahsis land in a nutshell is that esdeger (also known as exchange land) was given to Turkish Cypriot refugees who fled the south, and tahsis land (also known as TMD land) was given to mainland settlers. For more specific and detailed information about the differences in land an investor should speak to their lawyer in Northern Cyprus.
3) Potentially contentious title deeds: -
Certain properties in Northern Cyprus do not have international or government backed title deeds and are considered to have Greek Cypriot pre 1974 title. Occasionally these properties come onto the market and seem appealing and attractive because they are offered for sale for a very small cost – these properties should really be avoided as land disputes could easily ensue at any stage in the future. If an investor finds such property and wishes to make a purchase they should not do so without first seeking legal advice.
Other properties are known as contractual property or are referred to as ‘cases pending’ - these types of property have yet to receive government guaranteed title deeds and again an investor should tread incredibly carefully before considering purchasing such real estate.
The Freehold Property Buying Process in Northern Cyprus
The majority of property for sale in Northern Cyprus is offered for sale freehold – this includes new properties and off plan property.
Foreign investors are restricted to the ownership of one donum of land and one property unless they either purchase through a local limited company structure or buy land or property with foreign title pre 1974. To establish a local limited company structure an investor has to have a Turkish Cypriot partner who is the majority shareholder. It is quite simple to establish the limited company and remove the effective voting powers of the majority shareholder and most lawyers in North Cyprus can assist an investor with this setup.
Once an investor has identified land or property that he wishes to purchase in TRNC it is normal to sign a preliminary conditional contract and to pay a small deposit. The contract should be conditional to various things such as the lawyer checking the title deed to ensure it is clean of mortgages, debts and claims for example. An investor considering purchasing older properties can also make the contract conditional to a satisfactory survey being carried out on the structure.
Because escrow account structures are not recognized in Northern Cyprus all payments made go directly to the vendor or developer – for this reason an investor should not go ahead with the purchase until they are 100% satisfied that all is in order with the real estate they are considering buying.
Once all conditions for the sale have been met the investor - or lawyer if he has been given power of attorney - can sign the final contract. Depending on the type of property the investor has bought all or some monies will be due at this point. If the investor is buying land or completed real estate then the final purchase price will become due on the day the final contract is signed. If the investor is buying off plan it’s usual to have a payment plan written into the contract and stage payments will then be due at fixed points during the build process.
An investor buying off plan property in Northern Cyprus should always hold a percentage of the purchase price in reserve until the finalized property has been checked for completion and any snags have been fixed.
Often those foreign buyers who purchase property in Northern Cyprus when on holiday or on a viewing trip to the island only sign one conditional contract for the purchase. This contract is both the conditional preliminary contract and the unconditional final contract. The way it works is that if any of the conditions of the contract fail to be met within a set timescale the contract is terminated and monies paid are returned to the investor – however, if all conditions are met within the timeframe the contract stands as final.
All foreign buyers of freehold real estate in Northern Cyprus have to have the permission of the Council of Ministers to own the real estate - as this is usually a formality that is handled as part of the normal property buying process by the investor’s lawyer, this does not hold up the transfer of property even though the whole permission process can take many months. Those who buy off plan property in TRNC usually have their permission in place by the time their property is completed.
The Leasehold Property Buying Process in North Cyprus
Both the government of the Turkish Republic of Northern Cyprus and certain property developers have some real estate for sale leasehold. Properties offered leasehold from the government are usually in need of renovation and are available for up to 50 years. The only real difference to the freehold property purchase process is that foreign buyers need the permission of the Ministry of Tourism rather than the Council of Ministers to own the property. The process to own properties being offered for sale leasehold by developers in North Cyprus is actually the same as the freehold purchase process detailed above.
In terms of the main additional fees and charges that an investor will likely incur when buying investment property in Northern Cyprus these include lawyer’s fees which should be agreed in advance and will range from GBP 750 to GBP 1,500, VAT which is 5% of the purchase price and transfer tax which is 3% of the rateable value of the property for the first property and 6% for any other properties – the rateable value is almost always less than the purchase price. Stamp Duty is 0.5% of the contract price if it is paid within a month of signing the contract - otherwise it goes up in increments to 1.5% after 6 months (for some reason most solicitors and agents fail to tell you this!). Capital Gains Tax is 3.5% and paid by the vendor, taxes are also applied to gifts of property for no consideration and transfers of property between family members. There are various service connection fees and small charges payable and if an investor budgets for an extra 10 - 12% on top of the purchase price they should find themselves well covered.
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