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NEW PROPERTY LAW Last Updated 2 Oct 2024

As I'm sure you are all aware that there was a change in property purchase legislation that came into force on 21st May. The main concern is that this law is retrospective and covers a number of our members who are already going through the purchasing process or having difficulties obtaining the relevant documents. This law therefore may be detrimental to them financially.

We are aware that although the legislation is in place that the working practices of the law are changing almost on a daily basis. We have also taken advice from our legal representative.

We are aware that a legal challenge has been lodged with the Constitutional Court and we await the outcome.

Our Chairman Julian, Deputy Chairman Mike and Government Liaison representative Hakan, are currently engaged in a number of legal meetings and will be considering the society's options on how we can help and support our members, but at the present time if any individual member needs to know what they should be doing, we are advising them to seek legal advice from their solicitor or other legal body.

The BRS cannot get involved in individual property issues as we are not resourced or financially able to deal with such diverse issues.  Like residency, every individual's circumstances are different.

The following information has been supplied by the Society's legal advisor.

2024 – NEW RULES ON PURCHASING IMMOVABLE PROPERTY FOR FOREIGNERS (TRNC)

On 21st of May 2024, the TRNC Legislative Assembly passed significant amendments to the law on Acquisition of Immovable Property and Long-Term Lease (Aliens Law) No. 52/2008.

These changes have a notable impact on property transactions.

This article summarizes the amendments to help you understand how they affect both new and existing property owners who have not yet obtained title deeds in their names.

A NEW DEFINITION OF “FOREIGNER” AND “FOREIGN LEGAL ENTITY”

• Under the new amendments, a “Foreigner” is defined as an individual who is not a citizen of the TRNC and includes a foreign legal entity. The trustee of a foreigner is considered to be a foreigner for the purpose of this law.
• A “foreign legal entity” is a company registered in the TRNC with a foreign shareholder, regardless of the share percentage owned by foreigner(s). It also includes companies where the majority of directors are foreigners or persons acting on behalf of a foreign person or entity.
• Previously, a local company was considered “local” if 51% of shares were owned by TRNC citizens. Now, to qualify as a local legal entity, all shareholders must be TRNC citizens, and the majority of directors must be TRNC citizens.

TRUSTEE AGREEMENT

It was common for foreigners and foreign legal entities to make Trustee Agreements with TRNC citizens in order to purchase immovable property.

According to the amendments, Trustee Agreements that relate to buying more than one immovable property or agreements that do not meet the requirements stipulated in the Law No 52/2008 will be considered invalid.

All Trustee Agreements made before May 21, 2024, must be registered at the District Lands Office within 75 working days or they will become null and void.

RESTRICTION ON IMMOVABLE PROPERTY ACQUISITION

The Amendments introduced stricter limits for foreigners and foreign legal entities to buy or lease long-term immovable property in Northern Cyprus, according to which foreigners and foreign legal entities cannot buy:

• Agricultural land (“tarla”) and forest land.
• Immovable Property in areas deemed undesirable by the Council of Ministers in terms of national security, public interest, and public order (except through inheritance). Any registration of a Contract of Sale for the property that contradicts the above, will be deemed invalid.
• More than 7% (seven percent) of a district's surface area, and in total more than 3% surface area of Northern Cyprus.

The Council of Ministers may restrict the rights of a certain foreigner or foreign legal entity, or its directors, shareholders, or members of a foreign legal entity, to purchase or rent, due to their special status or due to national security or public safety concerns. Any registration made in the relevant District Lands Office that is contrary to the above rule will be deemed invalid.

REQUIREMENTS FOR ACQUIRING IMMOVABLE PROPERTY BY FOREIGNERS OR FOREIGN LEGAL ENTITIES IN NORTHERN CYPRUS

• Foreigners and foreign legal entities are entitled to purchase ONE immovable property under the following conditions and subject to obtaining permission to purchase from the Council of Ministers:
• If land is being purchased, such land must be in compliance with building regulations, not exceed 1,338m2, and only one residence can be built on it;
• If an Apartment is to be purchased, only one apartment is allowed. ‘Kat Irtifak' title deed (pre-registration of floors for apartments to be built) or separate individual title deed must be provided in order to purchase.
• However, foreigners who are citizens of the states that recognise the TRNC as an independent state (i.e. Turkey) can buy up to 3 apartments.
• If a Detached House is to be purchased, the surface area cannot exceed 3,300m2 and no additional house or apartment can be built on the land.
• Foreigners are not allowed to buy an immovable property on shared title deeds unless it is a detached house or apartment. A maximum of 3 (three) foreign persons can buy such a shared title deed.
• If the property to be purchased is an apartment, less than half of the total apartment units built or to be built on the same plot can be purchased by foreigners of the first-degree relatives or foreigners of the same nationality.

In any case, 20% of such developments must be sold to citizens of TRNC or to the citizens of the states that recognise the TRNC (i.e. Turkey).

The above rule does not apply to developments where permits were obtained and/or necessary applications were made prior to this amendment coming into force. However, land projects that are based on trustee agreements are excluded from this rule.

WHO MUST APPLY FOR PERMISSION TO PURCHASE?

• Foreigners.
• Foreign legal entities, their shareholders, and directors if the majority of the Board of Directors consists of foreigners.
• Should the foreign legal entity wish to transfer its shares to another foreigner or foreign legal entity and/or to change the foreign directors or trustees, Permission from the TRNC Council of Ministers must be obtained. (Applicable to foreign legal entities that have an immovable property in their name).

APPLICATION FOR PERMISSION TO PURCHASE

Application for permission to purchase must be made online. The documents related to the property particulars and Police Clearance Certificate from the country of the applicant's citizenship must be uploaded to the system. The Ministry will reject the application if the applicant has any criminal record.

PTP APPLICATION FEES:

• First application – half of the gross minimum salary wage (i.e. as of 21.05.24 -17,035TRY);
• Second application (same property) – double of the application fee (i.e. one gross minimum salary wage).

TRANSFER OF THE TITLE DEED

After the Permission to Purchase is approved, the transfer of the title deed MUST be effected within 6 months.  If not completed, the permission to purchase will become invalid.

If the sale price is paid in instalments, the six-month period starts from the last payment date.

However, although the transfer of the title deed has to be made within 6 months of the last instalment paid to the vendor, the taxes (i.e. remaining transfer fee, VAT (if applicable), and stoppage tax) have to be paid within 60 days after the permission to purchase is granted and published in the Official Gazette. Otherwise, the permission to purchase will become invalid.

If the permission to purchase becomes invalid due to the reason stated above, the purchaser has the right to reapply for permission to purchase and pay double the fee. However, the same foreigner or foreign legal entity cannot re-apply a third time for the same property.

PENALTIES & FINES

• If the vendor and/or foreign purchaser do not comply with the rules stated above, a fine of 500 minimum salary wages will be imposed, particularly in the following cases:
• If the vendor sells agricultural or forest land to a foreigner or foreign legal entity;
• Those who exceed acquisition limits (i.e. more than one property or the square meter exceeds the limits)
• If the contract of sale is made without the vendor obtaining a separate title deed or “Kat Irtifak” title deed.
• If the vendor sells the property with the shared title deed and the amount of persons on such title deed exceeds three.
• If the vendor offers to sell more than half of the apartment units on the same plot to foreign relatives of the first degree or foreigners of the same nationality.
• If the trustee agreement is made for the purpose of exceeding the acquisition limit specified above.

TRANSITIONAL RULES REGARDING THE EXISTING CONTRACTS OF SALE

These TRANSITIONAL RULES are related to sales transactions that were commenced before the date of the amendments coming into force.

Everyone who had made the contract of sale before 21st of May 2024 must register their contract of sale with the District Lands Office and apply for permission to purchase within 6 months.

Those who fail to comply with the above section will be considered as having committed an offence and will be charged with a fine of 500 times the minimum salary wage.

However, if one can provide that he/she was abroad during this time that will be a valid defence in Court.

Foreigner and foreign legal entities who obtained permission to purchase immovable property from the Council of Ministers before the 21st of May 2024, and the vendor who sold immovable property to them, must complete the transfer of the title deed at the relevant District Land Registry Office within 6 (six) months from 21st of May 2024. Those who fail to comply with the above section (whether it is a vendor or purchaser or both) will be considered as having committed an offence and will be charged with a fine of 500 times the minimum salary wage.

If at the time the foreigner and foreign legal entity is granted the permission to purchase, the final approval of the immovable property has not been received and/or its division has not been completed and/or its separate title deeds have not been issued before 21st of May 2024, the vendor and the purchaser must pay all taxes and fees (i.e. remaining transfer fee, VAT (if applicable) and stoppage tax) within 60 (sixty) business days from the date of publication of the Council of Ministers decision to grant the permission to purchase.

Trustee Agreement that was made before the 21st of May 2024, must be registered with the relevant District Lands Office within 75 (seventy-five) business days starting from 21st of May 2024. If such an agreement is not registered within the above specified period, it will become null and void.

If the above rules are not complied with, the decision of the Council of Ministers to grant permission to purchase will become invalid and the registration of the contract of sale at the DLO will be automatically deleted and deemed invalid.

If the vendor does not have a separate individual title deed or “Kat Irtifak” title deed, the purchaser can apply for permission to purchase provided that the building permit (insaat ruhsati) is obtained. This rule is in the force until 21st of May 2025.

If the transfer cannot be carried out due to an ongoing lawsuit, the transfer has to be made one month from the date when the court decision becomes absolute.

SELLER'S TAX OF 2.8% OF THE SALES PRICE

We are endeavouring to try and get a definitive understanding of how the above tax is going to be applied. The most straightforward but still unclear explanation from the Tapu Land Registry is as follows

Previously this tax was only due on the sale of properties exceeding 1 Donum but has now been extended to include ALL property sales irrespective of size.

Although there is no written guidance regarding the stoppage tax recently implemented, we have been informed by the Tax Office that according to the directive they have received from the Head Office, a person who resided in the TRNC for 6 months or more during the last tax year will be entitled to use their option right, not to pay 2.8% stoppage tax (Sellers tax).

If the vendor has not resided in the TRNC for 6 months during the last tax(calendar) year, then they will have to pay the 2.8% stoppage tax on the valuation that will be made by the District Lands Office.
 
We are not currently aware of how the 6 months is calculated. Whether it is,

1. Six consecutive months within the last 12 months of the Tax year, but not necessarily the six months immediately before the property is sold. Or
2. A total of six months (180 days) made up of multiple varying lesser periods during the last 12 months of the tax year that total up to six months (180 days)

For clarity purposes, the TRNC Tax Year is the Calendar Year (1st January to 31st December)

We will clarify the situation once we have the confirmed information.

CHANGE IN COSTS OF TITLE DEED TRANSFER TAX

This information will be applicable to all purchasers of property who have not yet transferred Title Deeds into their own names, and the Purchase Contract was dated prior to the 6th February 2023, and had also been registered at the Tapu Land Registry by that same date. Regardless of whether the purchaser is in possession of a Permission to Purchase (PTP) or not.

For all purchasers of property after the 6th February 2023 the contents of this notification already apply.

We have learned that the TRNC Government have just introduced a change in the level of Title Deed Transfer Tax and have backdated the change to Monday 12th February 2024 at the same time.

Previously there was an exemption for all purchasers of property, who were in possession of a Purchase contract dated and registered at the Tapu Land Registry before the 6th February 2023. This exemption has now ended.
That exemption allowed for the previous level of Title Deed Transfer Tax which was increased on the 6th February 2023, and was at that time before the increase 6% of the property value, as determined by the Tapu Land Registry at the date of transfer, reduced by 50% to 3% of the property value, in the case of the property being the first property purchased in the TRNC, to remain available to all purchasers of property, provided that the criteria in the first paragraph above was applicable.

As a result of the latest change backdated to Monday 12th February, an exemption no longer exists, unless an amount equivalent to 6% of the purchase price had already been paid to the Tapu Land Registry, upon the signing and registration of the Purchase Contract. In which case we are informed no further payment is required.

If the first payment consisting of 6% of the property value had not been made before Monday 12th February and an official receipt issued, then all purchasers of property will now be liable to pay the full 12% Title Deed Transfer Tax. This payment being split between 6% due for payment at the time the Purchase Contract is signed and registered at the Tapu Land Registry, with the remaining 6% payable at the time the Title Deeds are transferred into the purchasers own name.  

A copy of the official notification in Turkish language is enclosed for reference purposes.

Permission to Purchase Last Updated 4 Mar 2023

Over the past few years, the TRNC government has worked towards reducing the time it takes for foreign buyers of property to obtain Permission to Purchase (PTP)  At one time, it took over a year and longer. This resulted in a number of problems for buyers who were asked to pay for their properties but who could not take title.  The solution to this was the use by lawyers acting on their behalf to use a Sale Contract which provided various guarantees and assurance in exchange for the sale proceeds. The purchaser was then allowed to reside in the home even though the title remained in the name of the vendor, pending receipt of permission to purchase and the issuing by the Registry Office of a Kocan.

The consequence of this practice has been, for many buyers of property in the TRNC, disasterous because it allowed vendors to remortgage their properties to banks and incur heavy loans and interest charges which were registered against the properties even though the buyers had moved in to them.

It is now possible to obtain a verbal confirmation that PTP has been granted within a matter of less than two months and to obtain formal permission within three months. This development now allows purchaser of property in the TRNC to buy without having to pay for the property at the time they sign a Sale Contract.  It is now possible to set realistic dates for applying for PTP, conducting searches and obtaining building and land survey reports prior to completion of the sale.

The application for permission to purchase a property has to be done online now. Your contract of sale must have the stamp duty paid on it before it will be accepted.

With this in mind and to assist our membership the BRS has had prepared a sample contract ( available in the Property section) for use in property purchases. This contract provides for the deposit to be held in trust pending completion and allows an agreed time for obtaining PTP and conducting other relevant enquiries. The agreement provides that, should issues arise within that period of time, which the vendor does not wish to remedy, the agreement can be brought to an end, the deposit returned or there can be a renegotiation of the purchase price.  The agreement provides that, should the purchaser, at the expiration of this time period, wish to proceed with the purchase, the agreement is final and binding EXCEPT that the purchaser will not have to proceed if the Kocan cannot be issued.  The agreement allows for the extension of time for obtaining the Kocan should its issue have been delayed.

This agreement contemplates that PTP will have been granted and a search conducted prior to completion so that there is no risk that the vendor will have registered a mortgage or taken other steps to affect the title to the property.  It is only if the Kocan can be issued that the sales proceeds are paid to the vendor.

The agreement is intended as illustrative.  Anyone buying land in the TRNC should consult with a solicitor and professionals to ensure that they get what they are paying for.  Many Turkish Cypriots, who do not need PTP, do not use lawyers to purchase property and simply make the relevant enquiries prior to paying for the property.  However, it is not unheard of that these purchasers also find that they have not made the appropriate enquiries and are left with similar problems.

 

Property Purchase/Renting Last Updated 3 Nov 2024

When buying a property in the TRNC you should ensure that you are protected by a contract of sale which ensures that all searches of the title to property are completed, you have permission to purchase and been able to conduct any other surveys or enquiries you and your lawyer consider necessary.  You should not part with any monies, including a deposit, until and unless you have an agreement in place which properly protects your interests and ensures you that you will receive your Kocan when you pay the purchase price, and that any deposit will be returned if the sale falls through.

The BRS has now prepared a draft sample contract which provides for the holding of the deposit in trust, provides an adequate period of time for purchasers to conduct necessary enquiries into the property and allows for a timely completion when all of these enquiries are completed. 

Typically, local advocates have used a contract of sale which provides for the transfer of the full purchase monies without permission to purchase (PTP) having been granted. The reason given for this is that it said to takes 18 months to two years for PTP to be granted and that no vendor will wait that long to complete. This leaves purchasers with possession of a property which they do not have full legal title to and having to find the vendor who in many cases has left the country and can delay renovation works and cause additional costs of architect's fees for building approvals.  In fact, PTP applications are being processed in under two months so that a verbal confirmation of permission can be obtained within that time and a completion date set which is no longer than it would be for a purchase in the UK.  Further changes to the PTP process are rumoured which may make this process even shorter.

Included in the Property section of this website is a sample contract which we would suggest anyone considering purchasing property takes to their advocate and reviews it with them prior to signing a deposit agreement.  We  would urge anyone buying a property not to sign a simple deposit agreement provided by an estate agent as these invariable envisage the forfeiting of the deposit prior to any searches of title or permission to purchase application being made.  Nor do they provide any protection in respect of obtaining a Kocan in exchange for the purchase price.

 If you are renting make sure you have a formal contract agreed by your Advocate or aide which details the maximum rent and period, and who is responsible for which repairs and taxes, or you may end up having to pay for the lot.  Also ensure that any deposit is held by a third party agent in trust to avoid forfeiture of the deposit if the landlord refuses to return it. This is a common practice in the TRNC and the cost of taking this type of case to court means there is no effective remedy against unlawful retention of the deposit.

 

Tax On Renting A Property Last Updated 17 Nov 2024

If you are renting your property in North Cyprus, you are obligated to pay taxes.
Any rental contract must be registered with the tax office. Registration incurs a fee of 350 Lira and is conducted directly at the tax office of your respective district.
The tax rate for any rental income is from 10% to 13% subject to the currency shown in the rental contract. When making payment at the tax office, you will also be required to complete the V.D.91 form, which will be provided on-site.

According to the tax office currently the tax must be paid by the 15th of the subsequent month after the contract is signed. Alternatively, for the entire rental period, payment can be made immediately upon contract registration.
***But from the 1st January 2025 onwards, all rental payments for either business or residential premises must be paid via a bank (this includes paying cash into a bank, a cheque, EFT, by card, credit card or through internet banking.  ***

You must notify the tax office if any rental contract is terminated before its full term. Otherwise, any unpaid tax will continue to accrue. In addition penalties will be imposed for non-payment.

Copies of both the
  1)     A Declaration of Rental Income Landlords Details
and or a
  2)    A VD 91 Form to be completed when making a Tax payment
are available from your local tax office.

Property Purchase - Sample Contract Last Updated 21 Feb 2021

To view the Property Purchase Sample Contract, please click here

DISCLAIMER: Forms are created with a view to identify and satisfy general needs. The pre-set portion of any Form is complex and can be difficult to understand. It is important and mandatory to understand that the use of a Form does not apply to every circumstance and extreme care should be exercised in that respect. Everyone is encouraged and it is recommended that everyone seek and obtain professional advice to ensure a complete and accurate understanding of any Form and not rely on the explanations contained herein. TAKE NOTE THAT EVERY PROPERTY TRANSACTION IS UNIQUE AND THE BRITISH RESIDENTS SOCIETY DOES NOT WARRANT AND IS NOT LIABLE OR RESPONSIBLE IN ANY WAY FOR THE ADEQUACY, SUFFICIENCY, APPLICABILITY, ACCURACY OR SUITABILITY OF ANY OF THE  PROVISIONS HEREINAFTER SET OUT.

TRNC Property Purchase Flowchart Last Updated 21 Feb 2021

To view the TRNC Property Purchase Flowchart, please click here