Alexandros Alexandrou: Before you buy, rent or sell a property, take your precautions!

The Lawyer and Managing Director of the law firm “Alexandrou & Papatheodorou LLC”, Alexandros Alexandrou, through this interview that gave to us, analyzes issues relating to the Cypriot real estate market, always in light of our legal framework.

Which legal “loopholes” protect statutory tenants and in what ways a landlord can “defend” themselves. Why, unlike in other countries, is the hire-purchase principle not successful in Cyprus? When and under what conditions can a tenant be evicted and when is this considered to violate his rights? How often can a rent increase be implemented and at what rate, by law? Is it “prohibitive” to purchase a property whose title deed has not been issued?

These are just some of the questions you will get answers to if you keep reading.

Interview: Nicola Karatzia

Translation: Stephie Karagiorge

Mr. Alexandrou, I would like to start with an issue that seems to be a “burning” one for a lot of people. That of statutory tenancy. When is someone considered a statutory tenant?

The term “Statutory Tenant” is defined in the Law on Tenancy, Law 23/1983, article 27, which provides that the tenant, while he/she maintains possession of the house or shop, and observes the terms and conditions of his/her last tenancy agreement, even if this has expired, continues to be entitled to its benefits.

In essence, in order to for a tenant to become a statutory tenant, the following must be met cumulatively:

  • The property must be in a controlled area (the areas are defined by decrees of the Council of Ministers)
  • The property must have been built before the year 2000
  • The property is still occupied by the tenant on the basis of a written or oral rental agreement
  • The first tenancy must have expired and the tenant must still occupy the property.

Further, in the decision “Civil Appeal 30/2019, Fysentzide v. K&C SNOOKER & POOL ENTERTAINMENT“, the Supreme Court mentioned and added another criterion. According to this, for a tenant to become a statutory tenant, the premises must as on 31.12.1999, have been either under rent or up for rent as a dwelling or a shop.

Therefore, in order for someone to be a statutory tenant, the expiry or termination of the rental agreement must be a primary and necessary element.

Essentially, what “privileges” does the statutory tenant enjoy?

If someone becomes a statutory tenant, they benefit from the protection of the law in three main ways:

  • They can own the property for as long as they want, as long as they pay rent
  • If they are late in paying rent, they are still protected as eviction is not immediate, instead a specific procedure must be followed to achieve it
  • The rent increase is determined by law and not by the property owner.

Are there “loopholes” in the law that a property owner can exploit to protect themselves from statutory tenancy?

The framework of the rental contract should, in fact, prevent the above conditions from being triggered. That is to say, the tenancy agreement must contain such terms as to ensure a specific time frame and expiry date.

At the same time, an additional safeguard would perhaps be a written declaration by the tenant, in which they waive the rights that would render them statutory tenants, although, of course, it should be noted that in any case what prevails is the provisions of the legislation itself.

When and under what conditions can a tenant be evicted and when is this considered to be a violation of his/her rights?

Tenant eviction may occur when material terms of the tenancy agreement are breached, such as those relating to non-payment of rent and damage to the property. What constitutes an essential term is, of course, explicitly stated within the contract. Furthermore, there are circumstances in which a tenant may lose possession of the property. This is the case when issues of constitutional protection arise, which, in the balance of interests between landlord and tenant, outweigh in favour of the former.

On the other hand, a violation of the tenant’s rights occurs when whilst the tenant complies with the terms and provisions of the contract, the landlord abusively demands their eviction. For example, before the expiry date under the contract, the landlord may demand that his tenant leaves the property because he had an offer for a higher rent, which he wants to accept.

Is it legal to ask a tenant to leave the property temporarily or permanently in order to renovate the property?

It should be mentioned here that what is considered to be legal or not could not be exhaustively listed. Let me explain this by saying that if a landlord makes a statement that he/she wants to undertake renovations to his/her property – which he/she is in any case entitled to do, then again, the existence of an immediate need to do so should be put under the microscope of proportionality. For example, if a building has been declared dangerous, it is understood that the tenant will have to leave. In this case, clearly the tenant, having left, is not obliged to pay rent.

However, in most contracts there is a clause under which the tenant allows the landlord to inspect the property, in order to prevent any damage but also to allow for immediate corrective action where and when needed. The observance of this provision helps to minimise the need for the tenant to leave for renovation, while at the same time safeguarding the rights of the landlord.

At what intervals is the rent increase legally enforceable and at what percentage? In order to be valid, is it necessary for it to be stated as a clause in a contract signed by both parties from the outset?

Here we should mention again the distinction of the year 2000. With regard to properties of the year 2000, the allowable increase is set every two years by the Council of Ministers. The current increase under a decree dated April 13th 2023, is set at 6% for the period 21/04/23 to 21/04/25.

With regard to properties after the year 2000, an increase is foreseen that is determined by agreement of the parties – without limitation, as long as both parties have agreed to it.

Is the professional contribution of a lawyer always necessary before signing a contract to rent or buy a property or is, in some cases, the use of ready-made contracts held by the interested parties sufficient?

Let me start by stating that every contract, whether it refers to the purchase of real estate, or to any other type of commercial or other transaction, reflects, beyond their legal points, structured with the right terms and clauses, the spirit, the type of agreement as well as the obligations of each party. Thus, it is easy to see how agreements may change, either substantially or slightly, depending on the situation.

My position is therefore that the contribution of a lawyer becomes necessary, as it will convey all that the parties wish to have governing the agreement between them in their contract, thus safeguarding their rights and obligations. It will crystallize issues that may create misinterpretations and/or ambiguities, ensuring the smooth execution of the agreement.

In other countries the institution of hire-purchase is considered a common practice in the real estate market, unlike in Cyprus, where it is not applied. Is this due to legal obstacles and if so, what are they?

Indeed, in many other countries the institution of hire-purchase is a common practice. In Cyprus, there is – allow me to mention – an obsolete legislation of 1966, Law 32/1966, which while it governs the hire-purchase framework, “a contract under which a person receives certain property on a lease with a right to purchase”, it also places some restrictions. As such, it is not a widespread practice, perhaps because the law in question has not evolved and/or been modernised, since it has not been modified in any way since 1966 to keep pace with modern commercial practices.

As a result, there are many loopholes and legal ambiguities, which are capable – to a complete extent – of preventing the application of hire-purchase, since the parties cannot have the required security in their commercial transaction.

Is it “prohibitive” to purchase property whose title has not been issued or transferred in the name of the current owner?

My view, in order to avoid legal issues, is to buy properties that have a title, thus ensuring high ownership.

Are there exceptions where it is worth overlooking the absence of a title, since the issue can easily be addressed?

Indeed, there are some exceptions in which the absence of a title is worth overlooking. An example is the transfer of rights on a purchase and sale document to another buyer, provided of course that the credibility of the “seller” is ensured.

What exactly is the Sales Document, when is it needed and to what extent does it fully secure the buyer’s rights?

The sales document is the agreement that contains the terms, obligations and rights of each party, buyer and seller. It is my position that every time a property is sold, a purchase and sale document should be drawn up. This is because within the agreement, all those terms which will surround and protectively secure the rights of a purchaser may be included.

What does the legal inspection of a property comprise of and is it always necessary before a contract can proceed?

A legal check consists of an investigation during which you can, among other things, check whether the property is in the seller’s name, whether it is subject to any encumbrance such as a mortgage or whether there are other previous purchase and sale agreements (double sale). This investigation can be carried out not only by a lawyer, but by anyone who has a reason to carry out such a check – after the owner’s consent, of course.

What criteria must be met and what documents/assurances must a European citizen provide in order to become a permanent resident of Cyprus and to proceed to acquire property for owner-occupation?

Nationals of Member States of the European Union, by virtue of the principles governing its law – in particular freedom of movement and residence, work and provision of services, without discrimination and restrictions – have the right to reside in the Republic of Cyprus.

Nevertheless, some rules still apply to them. For example, those who stay in Cyprus for more than three months will have to register with the Civil Registry and Migration Department. If they avoid to do so, this will be in conflict with the law and they may be subject to the relevant penalty.

Similarly, what procedure is followed by interested investors who are not EU nationals, in order to be able to make purchases?

For non-EU nationals, a permanent residence permit in Cyprus can be obtained in three different ways. However, for the purposes of this interview, we will limit ourselves to the first two, which include securing residence.

Option 1: Known as Application Regulation 6(2).

The conditions are as follows:

  • Purchase of a new residence in Cyprus, sold for the first time, for at least €300,000 excluding VAT (the percentage varies). An amount of at least €200,000 must be paid at the time of purchase
  • Deposit in an account with a financial institution in Cyprus, of an amount of at least €30,000, which will be blocked for a period of at least three years. This amount must be verifiably sourced from abroad
  • Proof from the applicant that he/she has an insured annual income of at least €30,000, which derives from abroad (plus €5,000 for each dependent family member included in the application and €8,000 for each dependent parent of the applicant and/or his/her spouse)
  • Declaration by the applicant that there is no intention to work in Cyprus. Owning a Cypriot company and receiving dividends from it is of course allowed, as is any other passive income
  • Possession of a clean criminal record and absence of their name from the official EU sanctions lists.

Option 2: Known as a “Category ST” application.

The conditions are as follows:

  • Buy or rent a residence (house or apartment) in Cyprus. There is no limit to the value of the property
  • Be able to declare and prove that the applicant has an insured annual income of at least €10,000, derived from legal sources outside Cyprus (plus €5,000 for each dependent). Be in a position to provide evidence that the declared income is reasonably secure and stable, and that for the foreseeable future, he/she will be able to support himself/herself and his/her family financially
  • Declaration by the applicant that there is no intention to work in Cyprus. Owning a Cyprus company and receiving dividends from it is of course allowed, as is any other passive income
  • Possession of a clean criminal record and absence of their name from official EU sanctions lists.

To conclude, what should the interested buyer and the seller check in general, so that neither of them falls into traps?

As I have said, the necessity of a contract is irrefutable and non-negotiable. This is because everything that can potentially amount to “pitfalls” in a real estate purchase, with a properly drafted contract, any risks are minimized or even eliminated. Of course, the so-called KYC (know your client), as well as a survey on the issues concerning the property in question are also essential.