Purchasing real estate in Cyprus is an attractive investment, but it requires a careful approach. Encumbrances on property can lead to unexpected issues and additional expenses. In this guide, we will discuss how to check a property before purchase and protect yourself from potential risks.
Contents
What Are Encumbrances and How Do They Affect a Purchase?
An encumbrance is a legal restriction that can impact the use or sale of a property. In Cyprus, encumbrances can arise from various reasons, such as mortgages, legal disputes, or third-party claims.
There are different types of encumbrances:
- Mortgages or liens may be placed on properties used as loan collateral.
- Legal restrictions occur when a court imposes a ban on transactions until a case is resolved.
- Co-ownership rights can limit your actions regarding the ownership or sale of the property.
- Discrepancies between actual property data and official documents may result in legal complications.
- Previous illegal transactions might lead to annulment of ownership rights.
- Partial state ownership may restrict property usage.
All these encumbrances are registered with the Cyprus Land Department. Therefore, it is essential to confirm that no restrictions exist before making a purchase.
Risks Associated with Encumbered Properties
Discovering an encumbrance unexpectedly can be a significant problem for a buyer. Delays in closing the deal, the need to gather additional documents and consents, and legal obstacles can prolong the process. In some cases, encumbrances make a purchase impossible, resulting in a canceled transaction. Additionally, ownership rights may be annulled in court, leading to financial losses and legal disputes.
To avoid such risks, it is crucial to conduct a thorough property check before signing any agreements.
How to Check a Property Before Purchase
Consult a Qualified Lawyer
The first step is to hire a lawyer specializing in real estate. A professional will conduct a legal review of the documents, examine the property’s history, and identify any potential risks. The lawyer will also help draft contracts that comply with Cypriot law.
Investigate the Property’s History
Carefully examine the property’s history. Request information on previous owners and transactions from the Land Registry. This ensures the legality of all ownership transfers and highlights unresolved disputes or violations.
Verify Actual Property Details Against Official Documents
Ensure that the physical characteristics of the property match those in official documents. Discrepancies in size, layout, or boundaries can lead to legal issues or disputes with neighbors or government agencies.
Check with the Land Department
Visit the Cyprus Land Department and request an up-to-date property search report. Confirm that there are no liens, court orders, or other encumbrances. Obtain an official certificate verifying the property’s legal status.
Confirm Absence of Debts
Check whether the seller has any outstanding debts related to the property, such as taxes, utility bills, or other obligations. Debts can transfer to the new owner, creating additional financial burdens.
Advantages of Purchasing New Real Estate
Buying newly built properties in Cyprus offers several advantages. New developments typically have no encumbrance history, reducing risks for buyers. Modern construction standards ensure quality and the absence of hidden defects. However, it is still advisable to involve a lawyer in the transaction. The lawyer will verify whether the developer’s land is free from encumbrances.
Legal Changes in Cyprus to Protect Buyers
As of December 12, 2023, Cyprus implemented legal changes to enhance buyer protection. It is now mandatory to provide a Land Registry certificate confirming the absence of encumbrances when signing a sales agreement. This document must be current and issued no more than five business days before the contract date.
For properties with mortgages, special declarations are used:
- Declaration Type A informs buyers about existing mortgages and is signed by the seller, buyer, and mortgage holder.
- Declaration Type B allows the transfer of ownership after 95% of the purchase price is paid, even if the mortgage is not yet lifted.
- Declaration Type C is used when the buyer agrees to proceed without Declaration Type A.
These legal updates make the purchasing process more transparent and minimize risks for all parties.
Purchasing real estate in Cyprus is a significant step that requires a responsible approach. Thorough property checks, professional consultations, and understanding legal nuances will help you avoid many issues. New properties offer additional benefits, including easier residency applications and guarantees of no encumbrances.
Be diligent at every stage of the transaction, and your investment will be reliable and profitable. Remember, the time spent on due diligence will save you money and stress in the future.
