It is customary for local residents to own shares of real estate. This form of joint ownership arises mainly from inheritance, when parents pass on one property to several children, and so on. It is worth noting that the registration of real estate for shares is only allowed for Cypriots and EU citizens, and not for others. Thus, if a non-EU citizen wants to buy property in the form of shares, the land registry will not allow the transfer unless a separate title is issued.
The transfer of real estate in the form of shares, rather than the entire ownership of the shares, has increased significantly in recent years due to the lack of documents confirming ownership. For example, in a project with ten apartments without title deeds, the developer convinces the buyers to give them the property as one-tenth share, and the co-owners agree which apartment is whose. In such a case, the co-owners must sign a so-called “distribution agreement”, which clearly specifies which share belongs to whom, and which is transferred to the land registry.
Of course, this is better than nothing, and at least the ownership of shares is better than a contract deposited with the cadastral chamber. The share can be sold to other persons, transferred to children, pledged, and so on. This is the way out for those who are stuck in this unhealthy situation without titles, but it entails problems that may outweigh that.
Once you have agreed to the transfer of the share, and despite the seller’s obligation to proceed with the issuance of a title deed for everything stipulated in the contract, in 99% of cases this does not happen, with reluctant buyers, developers and sellers choosing to ignore it.
If you decide to sell your share, you must first offer it to other shareholders on the same terms/price that you may receive from a potential buyer for your share. There are several ways to get around this, but it’s not clear.
Since the title is in an indivisible share, if a mortgage is foreclosed on one of the lands owned by someone else, the new buyer can sue your own property if there is no division agreement.
When one of the owners wishes to make changes to their property, all other shareholders must also sign an application for permission. Imagine if they died, their share is mortgaged to numerous beneficiaries. After all, most of them make extensions or changes anyway, which complicates the question of ownership.
If one shareholder does something without approval, then all other shareholders cannot receive a final certificate of approval and title deed. Thus, one of the owners is enough to spoil the whole procedure, although under new laws a partial certificate of approval and the issuance of a title can be provided.
The value of a share is, of course, less valuable than the title deed to the entire property. Usually banks or appraisers accept a 10 percent discount on the value with title deeds, but it can be much more depending on the circumstances and stake.
If you are worried that your developer or seller will go bankrupt, it might be better to transfer the shares and take on the responsibility and costs of issuing a title deed rather than insist on waiting.
An unhealthy situation, but as we said, it’s better to have a share than not have anything registered in your name.
Antonis Loizou & Associates EPE – Real Estate Appraisers, Real Estate Agents and Real Estate Consultants