01.08.2022
The prevailing conditions in the real estate market will accordingly affect the rental value of the property. Determination of fair rent under statutory rent, in accordance with the clause 8(4)(a) of the Rent Control Act, is determined by examining the average and market rent in the surrounding area. If the rent for the property is below 90 percent of medium , it may be increased to this percentage if the tenant is not a refugee, in which case the percentage cannot exceed 80 per cent.
Determining a fair rent requires the preparation of a report by an expert appraiser, either private or court-appointed. In this case, two years must elapse from the date the tenant takes possession of the premises or from the date of the last increase or decrease in rent.
Article 8(5) of the law provides that the market and average rent for the area must be calculated, and all circumstances (other than personal) must be taken into account, including the age, size, location and condition of the property and, in the case of architectural monuments whether the work was carried out and at what price, as well as the services provided to the premises.
The legal framework and procedure for determining fair rent was clarified in a decision handed down by the President of the Rent Control Court on 30 June. The landlord demanded to determine the rent for his store. The Court emphasized that while paragraph (a) of Article 8 contains a provision for the determination of the fair rent in percentages to be “determined every two years by the Council of Ministers”, there is a different provision in the immediately following paragraph (a clause of this Article). This disclaimer refers to the “average rent in the surrounding area” used to determine rent.
The Court stated that it was clear that the percentage of the first section of Article 8(4)(a) remained zero from 21 April 2013 in an attempt to limit the effects of the 2013 economic downturn and thereafter. However, in the case of reservations, the situation is different. The provision on determining the rent based on the average rent may be changed or repealed only by a legislative act. The Court noted that while Cyprus was in recession, various proposed bills were introduced in Parliament to remove the Article’s second section clause. However, none of them received majority support, and the provisions remain unchanged to this day.
The Court concluded that, therefore, the market was now left to the State to regulate rents. The Rent Control Court will freely apply the stipulations of the clause in cases of motions for fair rent. The appraiser of the land register of the area in question helps the court to find out the average and market rent in the area, and if the parties do not agree with the appraiser’s report, they have the right to appoint their own and submit their own report.
The Court disagreed with the tenant’s argument that rent increases for statutory rents are prohibited, stating that with the zeroing of the percentage of the first section of section 8(4), the only mechanism for determining rent is the average surrounding rent. He accepted the proposal contained in the land registry appraiser’s report and decided that the increase in the store’s rent was justified by issuing an order to determine the fair rent for the store retroactively from the date of application.
George Coucounis is a lawyer practicing in Larnaca and founder of George Coucounis LLC, Advocates & Legal Consultants, info@coucounis.law
