Are there risks associated with buying North Cyprus property?
Buying a property in North Cyprus used to be a risky business, but there have been significant legal changes to the Construction Business regulations, making it a safe area to buy now. The new “Estate Agents Bill” protects the buyer by requiring that the contract of sale be registered with the North Cyprus property registry within 21 days after signing.
Foreigners buying property in North Cyprus have historically been the subject of a variety of purchasing scams. People struggled to understand the criteria and procedures because most foreigners do not speak Turkish. Property building standards have been strengthened as a consequence of previous hitches, making it far more difficult for a builder/developer/property agent to sell a false property or resell the property to multiple persons.
Before construction begins, construction companies must demonstrate that they have the funds to complete the project, and building designs are scrutinized more extensively, with requirements to provide appropriate amenities such as parking spaces, access, and so on. Purchasing from a plan is no longer a risk if you buy from a reputable builder and use an independent (not the builder’s) architect. If you are not in the country, it is recommended that you keep an eye on the development of your property through the selling agent or friends. If the builder has not included penalty terms in their usual contract, ask your solicitor to introduce them.
Following the island’s separation in 1974, North Cyprus adopted its own rules and regulations, and the Turkish Cypriots established a separate legal system in connection to the conveyancing procedure. There are various distinct types of deeds in North Cyprus.
Pre-1974 Turkish Cypriot or other foreign ownership: these title deeds are deemed completely secure. Turkish or British/Foreign Ownership Deed. Prior to 1974 properties are constructed on land that was formerly owned by Turkish Cypriots or British nationals before 1974, and the rights to the title deeds predate the island’s division in 1974. There can be no claim or property loss resulting from the construction of structures on this land. Many people still regard “Pre 74 Turkish Title” as the gold standard, and properties with this type of Title fetch a little premium.
TRNC Freehold, commonly known as Esdeger or Exchange Land, was owned by Greek Cypriots before 1974. This is land that the TRNC government gave to Turkish Cypriots in compensation for land that they lost on the island’s south side when it was partitioned. All deeds are rectified and renamed as TRNC deeds under the 1983 TRNC Constitution, and they are freely transferable to foreigners. TRNC TMD Land is land that was granted to mainland Turks as a reward for their military service in the TRNC.
Leasehold — Properties held by the TRNC government and available for 49-year leases. Properties in Karaman (Karmi) are leasehold because they were formerly Greek-owned and might be restored to their original owners in the case of reunification. When you buy a home in Karaman, the purchase price includes the cost of transferring the lease into your name. Many individuals feel that because the island was divided in 1974, a pre-existing deed would appear to substitute your TRNC title deed if the island was reunited. This is a misconception, and houses in North Cyprus built on Pre-74 and Exchange Title Deed land are safe.
The deeds issued for new homes erected since 1974 on land that was not developed previous to the island’s separation are referred to as “TRNC Title Deeds.” The government of North Cyprus is behind these deeds. The question of compensation for ‘lost’ land by former Greek Cypriot and Turkish Cypriot landowners is a major sticking point in the unification talks. However, it is quite unlikely that any agreed-upon solution will involve individual present landowners paying compensation.
In compliance with the European Court of Human Rights judgments, the Immovable Property Commission was established in 2005 under the Immovable Property Law (No 67/2005). The purpose of this body is to create a viable domestic remedy for claims involving abandoned properties in North Cyprus. This body has been in operation since 2006, and the European Court of Human Rights formally recognized and supported it in 2010.
According to the provisions of Law No. 67/2005, the Immovable Property Commission reviews requests for restitution, compensation, and exchange. Its decisions are founded on the principles of bi-zonality and bi-communality, which have been agreed upon as the foundation for any reunification deal.
As of August 20, 2020, the Commission had received 6,694 applications, 1,213 of which had been resolved by peaceful agreements and 33 through formal hearings. Over £312 million has been paid out in compensation, yet the Commission has only ordered repayment in five cases. Note that foreigners will not be given a Permission to Purchase if the property is located near a military facility.
When you identify a home that you want to buy, it is a good idea to put some important issues into consideration. First, make a physical examination of the property, making a note of any issues you see and asking whether they will be addressed before the sale is finalized. Check the property’s location, access, and borders – has the vendor showed you the property’s boundaries and ask if there are any concerns. If this is not possible, inquire about the property’s access arrangements.
Also, inquire about a copy of the title deed. Examine the sheet plan, plot references, and site plan that are attached to the title deed. Examine the site plan for its shape and bounds, and see whether they correspond to the information you have been provided with. Inquire whether the vendor double-checked the plans after the 2019 boundary review and whether the new borders are in line with the kocan plans. Inquire whether building permits have been obtained (from the State Planning Office) – especially if the property has been extensively changed or enlarged. Inquire about service delivery and whether there are any concerns.
Inquire whether the property has a septic tank and, if not, what the sewage arrangements are. If there is a well on the property, find out if it is serviceable and if the water quality has been checked recently. If your developer has agreed to add extras to the purchase price, compile a list of them and ensure that they are included so that you know exactly what is included. Make sure your conveyancing solicitor is aware of any difficulties or worries when you meet with them, and urge them to double-check any possible issues.
If your solicitor is aware of any possible concerns ahead of time, they may double-check them before moving through with the deal, or ensure that remedies are clearly included in the Contract of Sale. Notify your solicitor of any extras you have decided to include in the sale price so they can be included in the Sales Contract.
Typically, you would set up an initial appointment with your solicitor to go through the details of the property you want to buy and any informal agreements you have made with the vendor about the purchase price, payment plan, and any other items included in the transaction. The solicitor should go through the steps you will need to take, as well as the taxes and fees you will have to pay. Your lawyer will conduct preliminary investigations on your behalf in order to guarantee that the transactions are completed safely and effectively.
Solicitors will usually present you with a document that details the legal services they will undertake on your behalf. You will usually be required to sign an agreement authorizing them to act on your behalf, as well as pay a portion of the conveyancing fees upfront. If you do not intend to stay in North Cyprus, they may require you to sign a power of attorney so that they can act and sign documents on your behalf if you are unable to do so in person.
A conveyancing solicitor’s services include:
Your lawyer should do a land registry search at the appropriate Land Registry Office to ensure that the seller is the registered freehold owner of the immovable property and that it is free of any liens, charges, and encumbrances. They will go over the documentation to make sure they have all of the necessary building licenses, construction clearances, and approvals.
Your lawyer will design a Contract of Sale for you or evaluate the Vendor’s draft Contract of Sale and modify it to your unique needs, outlining the terms of the sale, the completion dates, the parties’ obligations, and default penalties and compensation clauses. The contract will be reviewed by both you and the seller, and if both of you are pleased with the contents, the contract will be signed.
If the search results are satisfactory and both parties sign the Contract of Sale, the contract will be registered at the District Land Registry office. All contracts of sale for the acquisition of immovable property must be registered at the District Land Registry office within 21 days of signing the contract, and stamp duty of 0.5 percent of the property value must be paid before registration can take place. By registering the contract, you ensure that you are protected from the property being sold or transferred to a third party, as well as any later liens.
Non-TRNC citizens are authorized to claim title to just one property up to a maximum area of 5 donums per household under North Cyprus laws, as long as the property only has one home (unless you form a company or constitute a trust with a local person). The Turkish Republic of Northern Cyprus’s Immovable Property Acquisition and Long Term Lease (Aliens) Law (52-2008) mandates that every non-TRNC person get Permission to Purchase from the TRNC Council of Ministers before the title to the property may be recorded in their name. Your lawyer should submit an application for a purchase permission. Note: Currently, a husband and wife are only allowed to own one property each.
Permission to Purchase (PTP) – The Council of Ministers will conduct appropriate searches, including land searches, military searches, and immigration searches. The Council of Ministers would also want to know if you are a good character with no criminal history. Permission to purchase will be granted if they are suitable. Once your permit has been granted, your lawyer will contact you and complete the relevant land registry valuation paperwork. Your lawyer will then initiate the transfer of the title deeds into your name when the taxes owing on completion are paid. In each property sale or buy process, there are four key taxes to consider.
The Vendor is normally responsible for paying Capital Gains Tax (Stopaj) to the Tax Office, however, this may be varied by the parties through an express stipulation in the Contract of Sale.
Prior to the transfer of title, the Tax Office needs a copy of the Contract of Sale to be given to it. The Capital Gains Tax will then be calculated based on either the Assessed Value or the Contract Value of the property, whichever is higher and is presently 4%.
Before the transfer of title, the Tax Office needs a copy of the Contract of Sale to be produced. The VAT will then be calculated using either the Assessed Value or the Contract Value, whichever is higher. V.A.T. is presently set at 5%. Whether or not a transaction is subject to VAT determines whether or not VAT must be paid. This is dependent on whether the Vendor (the individual who holds title to the property, not just contractual ownership or possession) is considered a ‘Professional Vendor’ by the Tax Office (i.e. whether the transaction is of a commercial nature or for profit). The transaction will be liable to VAT if the Vendor is assessed to be a Professional Vendor.
The transaction will not be liable to VAT if the Vendor is a private individual rather than a Professional Vendor. If the transaction is subject to VAT, the buyer is usually responsible for paying the VAT, which is determined by the conditions of the Contract of Sale. The purchaser normally pays the transfer fee, which is now 6% of the property assessed value or the contract price, whichever is higher, to the Land Registry Office right before the transfer of title. When you buy a home in North Cyprus for the first time, you can get a 3 percent tax break.
Legalizing your contract
Before transferring title, the Land Registry will examine the Contract of Sale to determine the property’s worth, and the Transfer Fee will be based on the higher of the assessed value or the Contract price. The Purchaser is usually responsible for the Transfer fee, however, the parties can always agree to a different amount through an express stipulation in the Contract of Sale. Stamp Duty is a tax that is paid to the government and is based on the property’s contract value. In most cases, the Purchaser is responsible for paying Stamp Duty, which is determined by the conditions of the Contract of Sale.
All contracts of sale must be registered at the District Lands Office within 21 days after signing, and the Stamp Duty (0.5%) must be paid before the contract can be registered. To get the Title Deeds for a property, all foreigners must apply for Permission to Purchase. After you have signed the contract of sale, this process begins. It is a simple procedure that is usually handled on your behalf by your lawyer. Permission to Purchase may take many months to be granted; but, if you pass a police check in your country of origin, there is no reason to suppose Permission to Purchase will be denied.
Concerns that PTP may not be granted are unjustified if you are purchasing a new house from a reputable developer with a track record of delivering deeds and the legalities of the property have been reviewed by a respected lawyer. Because foreigners are only permitted to hold one title deed per person if you wish to buy more than one property as a couple, you should place one in one person’s name and the other in the other’s name. There are a few instances where injunctions or barriers prevent the buyer from receiving the title deed. When the deed is shared with another property, this might happen. Before you make an offer on a home or before your reservation deposit money is transferred to the seller, make sure your solicitor checks for a legitimate title deed.