Buying a property overseas can be confusing and costly, especially if you have nobody to rely on for advice. There are many steps to owning a property in North Cyprus and different stages gives you different rights on the property and property related eligibilities like residency.
A tip to avoid overpaying real estate taxes:
The buyer receives ownership rights when the contract of sale is registered to the Government. This costs around 0.5% in stamp duty. Usually investors, who intend to obtain passive income as rent for a relatively short period of time and re-sell the property within 5-10 years; hold the rights to the property with the contract of sale and avoid going through the title deed transferring process which would incur further 3-6% of the sale price in transfer tax/ fees . When doing the contract of sale, if the buyer ensures that the developer allows this to happen and does not state a deadline for the title-deed transfer, the investor can increase their Return on Investment by reducing the initial expenses incurred. This transfer fee is then passed onto the next buyer when the property is sold. This also allows the buyer to obtain multiple properties as an investment or primary residency. This does not affect the ownership, inheritance, or residency rights of the buyer and is a secure and common business practice that benefits the investors.
Once a buyer determines, what property they like to invest in and have done their due diligence or had reliable and reputable people and organisations handle these for them, there are a number of government related formalities to complete.
The buyer can put down a small deposit on the property of their choice, usually in exchange for a receipt or a reservation contract with the seller. The next step is the Contract of Sale. The contract must include all the details to the agreement, including the payment terms, late delivery penalty clause, title deed copy, site plan copy, and the list goes on. The buyer is strongly advised to work with a trusted local lawyer at this stage that will handle the details professionally and protect the buyer’s rights. To avoid conflict in interest, the lawyer chosen is advised to be a third party and does not represent the realtor or the developer, to act in best interest of the buyer. You can get recommendations from realtors on the best real estate attorneys that operate locally.
Once the details of the contract is agreed on by the seller and the buyer, the contract then must be registered to the District Land Office and stamped by the Government. There are 21 days from signing for the parties to do this, if you use a representative attorney some does this service for you.
Registering the Contract of Sale
At the time of the sales contract, the buyer usually pays 30-60% of the sales price as the down payment depending on the stage of construction the property is at. For these payments, the buyer can use the client account of the local lawyer to avoid the need to obtain a local bank account. If the property is ready for key-handover or a resale, then usually the full sale price is paid at the time of title deed transfer.
Next, the sales contract should be deposited to the District Land’s Office within 21 days of signing. At this stage, the stamp duty of 0.5% is also paid to the Government. Registering the sales contract to the Government Land’s Office secures the property under the buyer’s name and is legally binding. Registering the contract ensures that you are protected from the property being sold or transferred to a third party and from any subsequent liens being placed on the property.
If the property is complete, the buyer does not need to wait until the purchase permission application is finalized. The buyer can take possession of the property once the sale contracts are exchanged between the partied and registered at the Land Registry, the buyer will acquire beneficial interest and contractual rights of the property.
Should the buyer decides to re-sell the property before obtaining permission to purchase, unless otherwise stated on their contract of sale, they can re-sell with no limitations.
Following the Sales Contract Registry:
After the sales contract registry and down payment, the remainder is paid according to terms set out in the contract. If buying preconstruction, installments are the typical payment plan. For resales, the buyer will be expected to remit full payment when the title deed is transferred.
Permission to Purchase Application
Non-Cypriot citizens must then request permission to acquire the property. To acquire the immovable property, foreign nationals and companies are required to obtain ‘Permission to Purchase’ which also requires a clean criminal background check from their local Police Department. This step is a formality. You will also be required to submit bank reference letters and several other documents. The buyer’s lawyer can make the application for a purchase permit on their behalf to the Council of Ministers and follow it up until the completion. It can take up to a year to complete the process, but you can use the property as you wish in the meantime. In the rare event that this request is denied, you can reapply, inheritance rights will not be affected.
The obtaining of permission to purchase is a protracted procedure and can take up to two years or longer but this does not mean that the buyer will be unable to take possession of the property once sale contracts have been exchanged.
The buyer can also sell the property with a sales contract even if the titling is not yet transferred to their name. The title can be transferred directly to the next buyer’s name hence the first buyer can avoid paying the Title deed transfer fee which is 3% on the buyers first purchase (have been reduced to 1% to attract investment during the Pandemic) and 6% on the second or more purchases.
Soylem Coli
Broker Assistant, Avertiss Real Estate
March 11, 2021. Kyrenia, North Cyprus.
Mediterranean Condos by Soylem Coli 