Property  

Introduction

After the 1974 Peace Operation, Turkish administration was consolidated in the north of the island. In 1975 an exchange of population agreement was reached between Turkish and Greek leaders. The UN supervised the exchange. After that, Turkish Cypriot leaders wished to solve the property problem globally. They believed that, when an exchange of populations takes place, global exchange of properties could be the only way to follow. Turkish leaders were hoping to follow the peace model achieved between Turkey and Greece in 1922.

Exchanging populations and properties simultaneously was a solution adopted then. During inter-communal negotiations Turkish leaders pressed for global exchange of properties. However Greek leaders had different ideas. They wished to turn the clock back and re- establish pre-1974 conditions on the island. Therefore they refused any kind of agreement.

In 1983 Turkish leaders lost hope of reaching a settlement and the TRNC was founded. In 1985 a referendum took place and a new Constitution was accepted. The Constitution took into consideration that the property issue could not remain unsolved forever and started to implement the global exchange of properties principle unilaterally. Therefore all properties left by the Greeks in the North were declared Government properties. It was declared that Greek property owners would be compensated with the Turkish properties left in the South. This could be done after an agreement with the consent and help of the two Governments. After 1985, the TRNC Government started to give title deeds to those who left properties in the South. These properties were called “Esdeger”. It means a property with equal value.

Later title deeds were given for social reasons. Colloquially they were called “TMD” lands. The Greek Cypriot Government ignored any law made on the Turkish side. Needless to say they did not recognise any of the new titles given by the TRNC Government. They declared that property rights cannot be violated and everyone has the right to return back to his home. However they started to confiscate most of the valuable Turkish lands left on the Greek side, but refused to pay any compensation to the Turkish owners. They declared that compensations would be paid after the solution of the Cyprus problem. The rest of the Turkish lands were put under the control of the Greek Government.

When we observe these developments we can say that the principle of global exchange of properties was implemented directly on the Turkish side and indirectly on the Greek side. The two countries applied their laws separately and independently from each other. Later in 2004 a new legal situation emerged. The Greek Government was accepted into EU representing the whole island.

The Greek Cypriots then forced the EU to accept the Regulation 44/2001. According to this regulation, court judgments in one of the EU countries could be executed in another. Greek Cypriots were quick to make use of this Regulation. As many of us know the "Orams" became a test case. The Oram’s family was sued by the original Greek owner at the Greek Court. The Greek Court applied its own laws. The judgment was given without allowing Orams to make a defence. Then the Applicant tried to execute the judgment in England. The European Court of Justice with its judgment given on 28 April, 2009 approved this procedure. The Greek side achieved remarkable success in Orams case.

After the judgment of the European Court of Justice, Properties in the North fell into different categories.

Pre 1974 English or Turkish title

These properties had always been owned by an English or Turkish person. No Greek person had any claim on them. So they were immune from Oram’s like procedure. They are the most reliable of properties, if we can say that anything is reliable.

"Esdeger and TMD titles"

Both these titles could face some difficulty if and when the original Greek owner challenged them in a Greek Court and ask for execution in another EU country. Some people think that Esdeger land is more valuable than TMD land, because if and when the Greek original owner challenges the new owner in a Greek Court, Esdeger land owner may put forward stronger defences. He may say that his property is connected with a property in the South. Then the Greek Court would be obliged to give him back at least one of these properties. Taking into consideration that properties are more valuable in the South, Esdeger properties could be more secure. However these were all hypothetical considerations created by the Oram’s case. No one tested them and now it is impossible to test this procedure.

Accordingly the principle adopted by the European Court of Justice in the Orams case, was that all lands in the North with an original Greek owner became unreliable. However this principle did not last for a long time. On 1 March, 2010, the European Court of Human Rights (ECHR) gave quite a different judgment. The ECHR ruling said “that there is not a principle that Greek people have a right to return to their original properties, not only original Greek owners but possessors of the houses in the north also have human rights”. Greeks having any claim for their properties in the North should apply to the Immovable Property Commission established in the North.

The Immovable Property Commission was founded in 2005 and has been functioning since then. According to the ECHR judgment, decisions of Immovable Property Commission were satisfactory and in line with human rights. Thus the ECJ judgment at Oram’s case was overruled. The Greek Government was not happy with the ECHR judgment and tried to avoid it, but had no success. Therefore it seems that the ECHR judgment is going to remain as the rule of the country until, and if, a settlement is reached.

It is important to appreciate, that, according to the law 67/2005, which established the Immovable Property Commission, only properties, without any owner in the North can be returned to the Greek original owner or can be exchanged. This means that a property, according to TRNC laws cannot be taken away from an owner. The original Greek owner will be compensated and the Government will pay the compensation. Therefore we can conclude, that all titles esdeger” or “TMD land” are safe in TRNC. However this security is only for registered properties.

Unfortunately when a foreigner buys a property in TRNC it takes a long time before it is registered. A period of insecurity passes between the purchase and the registration. In the beginning it was quite difficult to secure the rights of the purchaser. This is the reason why a lot of purchasers entered into difficulties.

Later in 2008, TRNC Government accepted the Estate Agency Law. One of the objects of this law was to make property buying more secure in North Cyprus. It enabled the purchasers to register their contracts at the Lands Registry Office. This meant that the dangers of any “interim period” action that infringed legal rights would be avoided.

Recommended Purchasing Process

Under the laws of the TRNC, non-TRNC Citizens are entitled to purchase only one property with a maximum area of 5 donums per household (one donum = a third of an acre) providing that the property only consists of one dwelling (previously this was 1 donum).

Building permission will not be granted to build further dwellings after permission to purchase has been granted. For the purposes of this law, husband and wife count as one household.

Before title deeds to the property can be registered in your name, you will need to have permission from the TRNC Council of Ministers.

Be aware that properties, within 500 metres of “army” land i.e. occupied by the Turkish army are problematic as permission to purchase may prove difficult to obtain.

It is now possible to obtain permission to purchase within 3 to 6 months of filing of your application. The Undersecretary to the Minister of the Interior advised in 2005 that "no one should enter into any Property Sales Contract or pay any deposits on properties until they have received their Permission to Purchase (PTP) from the Interior Ministry". The Undersecretary also advised that potential purchasers should submit and expedite their own Application and that the services of an Estate Agent or Lawyer/Solicitor are not required for this process. This service is provided free by the TRNC government.

Be aware that some lawyers who apply for PTP’s do not progress individual applications once submitted, and may add costs if they are willing to do so. This lack of progressing frequently explains the delay in waiting for a PTP, sometimes up to two years.

Buyers should bear in mind that a property sales contract does not give legal title to a property and that they will only own the property once the Kocan has been issued by the Ministry of the Interior. ( The Kocan is the “title deed” ) It maybe that buyers will be asked to sign a property sales contract and to make many stage payments, or indeed all your payments before receiving your PTP. You must decide whether or not to wait until but remember, if you do not wait, you could be refused PTP. If that happens, even if you have paid for the property in full, you can never own it.

It is our recommendation that buyers only sign and register a property sale contract in order to secure the purchase so as to prevent the resale of the property while applying for PTP and conducting proper investigations of the property; e.g. obtaining surveyors and building reports. Buyers can agree to pay only a small deposit to secure the purchase.

Buyers may be advised to sign a property sale contract if they are unable to take title to the property yourself because, for instance, the property is too close to a military base or because they own another property or cannot get title due to a criminal conviction in the UK. If buyers do decide to buy the property using this method, they risk not being able to get the Kocan. At present, buyers cannot sue a seller of a property and force the seller to give the Kocan. If the seller has declared bankruptcy, died or left the country, buyers may find it is impossible to recover monies paid for a property. In these cases buyers may wish, instead, to have the Kocan registered in the name of a nominee or trust company.

When a buyer or a buyer’s lawyer applies for PTP, the Council of Ministers will take searches from the land registry, the military and the immigration authorities. Buyers will need to provide disclosure of any criminal convictions in the UK. If there are no issues, the permission will be granted.

Buyers must accept that there is a risk attached to purchasing without obtaining PTP and there is a possibility that PTP could be refused. It is normal practice to negotiate the insertion of a clause in the sale contract allowing the buyers to resell the property before getting a Kocan. It is also possible to live in a property and rent it before obtaining a Kocan. In the event that a buyer’s application for PTP is refused, the buyers can nominate any other person to take title to the property on their behalf and hold the property in trust. Another safeguard would be to have a clause in the contract specifying that in the event that the purchase permit is refused, the vendor will refund the purchase price but this could prove to be problematic.

Warning! Should a buyer buy a property using only a sale contract and have paid all of the purchase price, the buyer may find that the vendor requires a further payment when the buyer is able to apply for a Kocan. For example, it is not unusual for a seller to insist that the buyer pays his taxes on the sale or VAT on the construction of the property. If the buyer has already paid the purchase price and has moved into the property, there is very little the buyer can do to avoid paying these demands.

If buying a property which has yet to be completed, the buyer may find that the seller has entered into a loan agreement which allows the seller’s creditor to take possession of the property either through foreclosure or receivership and the sale contract may not protect the buyer against losing the property.

The buyer may also not be able to obtain an individual Kocan if the property has not been built properly or if other properties on your development have not been completed properly. Additionally, the buyer’s solicitor may not have performed properly the searches or enquiries necessary to ensure that the property is free from problems. The buyer may then be asked for further fees to obtain this information and to attend at the Registry Office when the buyer signs the application for the Kocan.

If the buyer has obtained the PTP and is happy with the decision to buy, the buyer does not need a lawyer to attend Registry Office as all forms required for the transfer of the Kocan are prepared by the Registry Office. Only the purchase funds and the buyer’s passport are required.

The BRS strongly recommend that buyers follow the advice of the Interior Ministry and do not pay for a property until the PTP has been obtained and all necessary enquiries and searches have been conducted.

Experience shows that the PTP processes will be faster if progressed personally through the government offices. This is not a difficult task and can save legal costs. Buyers can check the progress of applications by phoning the Interior Ministry. If a lawyer is used, the granting of PTP is published in a Gazette which is circulated to TRNC lawyers. The TRNC planning office also provides information free of charge.

A sale contract must be registered within 21 days with the District Land Office (DLO) for the contract to be legally binding. It is also necessary to have the vendor register the contract at the same time.

After purchase permit is granted, the final step in the process is the completion of the land registry valuation forms for the valuation of the property. The taxes due on transfer of title will be paid and the title deeds will then be registered in the buyer’s name. Once the valuation has been agreed by the government, the buyer will be able to attend the Registry Office with the seller and sign the application to have the Kocan transferred to the buyer. The buyer will pay the balance of the purchase price to the seller and pay the taxes on the transfer at the government’s Vaklifar Bank.

Warning! When transferring funds from the UK to the TRNC, do not transfer them to a third party account, including that of a lawyer/advocate. Only transfer money between your own account in the UK and your own bank account in the TRNC. Purchase funds are required to be paid by banker’s draft from a TRNC account.

Once taxes have been paid, the buyer will be given a receipt by the Registry Office which will have a file reference. The Registry Office will then prepare the Kocan which the buyer will be able to collect after about 6 weeks. In the meantime, the Registry Office receipt is proof that that the buyer has been granted a Kocan.

The taxes currently due in any property sale and purchase transaction are:

Items a-d are paid by the Purchaser, unless something different is negotiated in the contract. Where a property is a “resale” and the vendor has the title deeds, there will usually be no VAT payable. All taxes are currently payable as a percentage of the contract price. Lawyers can advise on the current rates.

In addition to the transfer fee, there may also be a nominal local municipality tax. Buyers should also ensure that outstanding water and electric bills are paid and make the usual adjustments for any other services, such as gas supply to the property.

Capital Gains Tax is usually paid by the vendor. The amount payable is determined on whether the vendor is a ‘Professional’ or a ‘Private’ individual as defined under the relevant legislation. Typically, on a re-sale, it would be normal to have an exemption for a house and a building plot, but on any land over this description will be liable for the tax.

Generally vendors require the VAT to be paid on the date that the purchaser takes possession of the property as per a directive of the Ministry of Finance. Stamp Duty must be paid within 21 (twenty one) days of the contract signature date, before registration takes place.

Buying a property in the TRNC can be very simple and straightforward. Despite delays, the Registry Office is a modern, computer-based service and all land dealings are recorded using satellite imaging and surveying methods. If a buyer can agree a sufficiently lengthy completion date it should be possible to obtain PTP and make necessary enquiries about the property prior to paying the purchase price. Buyers may wish to have a solicitor negotiate a suitable completion date to enable this to happen and a sample sale contract is available on this website to assist you. The BRS have drafted a sample contract that affords buyers with the right protection. You can go to the Sample Contract page to download this sample. It is advisable to ask your lawyer to use this contract. Should they refuse ensure you receive a satisfactory explanation for their refusal.

The BRS regrets that it is unable to get involved in advising on individual property transactions, nor is it able to recommend any particular legal or house purchasing agency.