The property market in Cyprus may be recovering from the economic downturn but it is still plagued by the historic title deed scandal which is now set to take another 10 years to resolve, according to a new report.
Tens of thousands of people who bought property in Cyprus, including overseas buyers of holiday homes or a place in the sun to retire to, still do not have their title deeds. The most common reason was a scandal where developers mortgage properties to the banks. In some cases the banks’ claim on the property forbid the transfer of the deeds to the buyer.
The European Commission, which has been carrying out a survey of the nation’s finances and standing, says that the reform of the system of title deeds transfers remains constrained by lack of support from private stakeholders.
A substantial number of property buyers, despite having paid the full purchase price, still have not yet received their title deed although the report says there has been positive progress as the adoption of the legacy cases law for property sales up to end of 2014 created some momentum.
Out of the 13,642 applications received as of end March 2017 linked to legacy cases, almost 5,700 title deeds were issued which led to approximately 2,000 transfers of titles. But it points that that following numerous legal actions taken by banks against the transfer of titles, a court ruled in May 2017 that the legacy law is unconstitutional.
The report points out that, pending a possible appeals of the court decision, the application of the law is now uncertain and ‘substantial efforts’ are necessary to engage stakeholders to agree on a new system for the transfer of future title deeds.
‘There is general agreement that a future system should ensure that buyers who pay the full purchase price will get their titles quickly and have no possibility to refuse them, for example to avoid paying overdue taxes,’ the report says.
‘The Ministry of Finance continues to examine proposals, but with little apparent progress in recent months, in part due to the political sensitivity of this issue. There is still considerable work to be done to address the backlog of issuance of new title deeds. At the current rate of title deeds issuance, it would take approximately 10 years to address the backlog of unissued title deeds,’ it adds.
About 30,000 titles were pending as of the end of March 2017 when the Commission carried out its inspection. The report explains that the Commission is providing technical assistance in terms of training staff and the streamlining issuance procedures.
It is hoped that the transfer of title deeds where relatively minor breeches of planning conditions have occurred can be moved forward more quickly but the main bottleneck appears to be the local government’s ‘low capacity to face their obligations, notably regarding the issuance of certificates of approval,’ the report point out.
‘This problem might be solved through the proposed reform of local governments, but more immediate action appears warranted,’ the report adds. But the reform of local government has stalled as the draft bill has not been approved by the House of Representatives and the implementation deadlines remain vague.
‘The local government reform affects the delivery of local public services, and could notably improve the issuance of title deeds by streamlining the issuance of building permits and certificates. The reform could also improve public finance management since it foresees the implementation of a common accounting and reporting framework for all local government,’ the report points out.
Overall the report says that Cyprus is currently benefiting from robust growth and improving conditions in the financial sector. Growth is becoming more broad-based, driven by private consumption, investment and strong tourism.
However, while labour market conditions have improved overall in 2016, the unemployment rate remains high, particularly among the young and real GDP growth is expected to be 2.5% in 2017.
‘However, limited productivity-enhancing investment, insufficient structural reforms, and the persistently high level of private debt continue to weigh on growth prospects. Growth picked up in 2016 and is expected to remain strong in 2017, while moderating thereafter,’ it concludes.
