Acquisition of Commercial Real Estate- Part IV – CYPRUS
Aliant Guide on Acquisiton of Commercial Real Estate was created by Aliant’s Real Estate Practice Group, where our experienced and well established lawyers from France, Italy, Finland, Cyprus, and Lithuania have answered some fundamental and up-to-date questions on how to acquire commercial real estate in their jurisdictions. If you are interested in Commercial Real Estate in any of the beforementioned countries please follow this five part series.
1) Are there any restrictions under your country’s legal system with regards to ownership when acquiring a commercial real estate?
There are no restrictions to Cypriot citizens. However, there are restrictions when a thirty-country national (alien) is interested in purchasing residential or commercial immovable property in Cyprus. The Acquisition of immovable Property (Aliens) Law, Cap. 109 states that an alien must obtain the Council of Ministers approval before purchasing immovable property (plots) in excess of approx.. 2.700 m². The new permanent residence permit by investment programme provides that:
a. The applicant may purchase up to two (2) housing units (apartments or houses), provided that the total market value meets the provisions of the programme.
b. The said purchase must relate to dwellings sold for the first time by a development company, unless the purchase took place before 07/05/2013. Sale contracts related to resale of dwellings and have been submitted to the Department of Lands and Surveys before 07/05/2013 (the date of filing of the sale contract will be confirmed by the said Department), will be accepted for the purposes of this policy.
2) What types of ownership structures exist in your country with regards to acquisition of commercial real estate?
A purchaser/investor can purchase commercial property in Cyprus either personally on his/her name or under a legal entity of which he/she is the sole owner.
3) What is country’s tax system that governs commercial real estate ownership and the transfer thereof?
Owners of commercial property in Cyprus pay every year the immovable property tax, garbage tax and sewage tax.
With respect to the taxes that a purchaser will need to pay upon the transfer of the title deed of the commercial property to his name, these are calculated on the market value of the property to District
Lands & Surveys Office as per the below table:
|Value of Cyprus property:|
|From €||Up To €||Transfer Fee Rate %||Accumulated Transfer Fees €|
|170,001||And above||8||To be calculated|
Also, it is important to note that there are currently no transfer fees when the immovable property to be transferred is subject to VAT. In case the property is not subject to VAT, the transfer fee will currently be reduced by 50%.
Transfer of immovable property can be treated as a gift between relatives up to the 3rd degree of kindred. In these cases, the value of the property is as it has been determined at 1 January 2013.
Mortgage registration fees amount to 1% of the market value of the property.
Nil transfer fees and nil mortgage registration fees are payable in case of immovable property transfer due to a company reorganisation.
No transfer fees are payable in case of loan restructuring.
4) Which parties (aside from seller and buyer) are usually involved in commercial real estate acquisition? Please briefly describe their duties and roles.
Usually, bank institutions that will eventually mortgage the commercial property, lawyers, estate agents and authorised attorneys.
In the event where the purchaser will seek financing for the purchase of commercial property, the bank will need to first make an evaluation of the property and advise the purchaser of the amount that the bank is willing to finance. Provided that the purchaser will accept the terms of the bank, the bank will need to prepare the relevant documentation and be present at the District Lands & Surveys Office on the day of transfer.
Lawyers are usually commissioned to check the documentation of the property in question and advise the purchaser of any risks that the purchase of the said commercial property involves. The lawyer will also assist with the drafting or review of the Contract of Sale and assist with the transfer process at the District Lands & Surveys Office.
A real estate agent is usually involved at the very beginning of the purchase of the property and is usually the one responsible providing the purchaser and the lawyer with all the relevant documentation of the property.
5) Please describe how and on what basis in your country parties mentioned in the previous question are to be remunerated and how to be informed in advance about the range of theirs fees?
Lawyers are free to make any contractual agreement they wish with the purchaser for their legal fees.
Real estate agents are paid from the seller and their fee is most of the times set between 3-5% on the purchase price.
Please follow these series for the final Part V where we will discuss key aspects on acquisition of commercial real estate in France.
If you would like to know how commercial real esate aquisition works in Italy, Lithuania, Finland and Cyprus please see the full questionnaire here.
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