BUYERS GUIDE
Choosing the right location
The Turkish Republic of Northern Cyprus (TRNC) enjoys a typical Eastern Mediterranean climate with long hot summers and short winters. The northern coastline which borders the Girne (Kyrenia) mountain range is undoubtedly one of the most beautiful areas in the world in which to live. The natural beauty of the island, the lovely climate, the warmth and generosity of the Turkish Cypriot people and the abundance of fresh foods make Northern Cyprus an unspoilt and uncommercialised heaven.
With over 300 days of sunshine each year, uncrowded beaches and warm unpolluted seas, North Cyprus is a dream holiday destination for many Western Europeans. It is also an ideal location for property investment, whether you're looking for a second home, somewhere you can buy-to-let, or a place to retire in the sun.
But why should you choose to invest in property in Northern Cyprus over other destinations such as France or Spain ? Put simply, property prices are significantly cheaper in Northern Cyprus, compared to anywhere else around the Mediterranean . Whereas a detached 3-bedroom villa overlooking the Mediterranean on the Spanish coast might set you back 180,000 euros or more, a similar villa in Northern Cyprus is available for under 100,000 euros. Even prices in Southern Cyprus are 50%+ higher than in Northern Cyprus !
North Cyprus is an ideal location for Property Investment. Not only is property in Northern Cyprus good value for money, but it is a sound investment too. The area is currently experiencing a property boom, with growth potential over the next decade set to offer a good ROI. There are no restrictions on renting out property in North Cyprus either, and with the incumbent TRNC Government backing the development of tourism in North Cyprus, letting out your property to increasing numbers of sun seekers should be a breeze. |
If this isn't reason enough to invest in North Cyprus property, the cost of living here is one of the lowest of any country bordering the Mediterranean Sea . Prices of fresh fruit and vegetable supplies and organic produce are substantially less than in the UK , and are of comparable or better quality.
Warm sunny weather, bargain property prices & phenomenal growth potential - what more do you need?
Northern Cyprus is the ideal location to invest in property!
The next step
You have decided to purchase a property in Northern Cyprus , what is the next step?
The Conveyancing procedure is different in the TRNC to that in the UK , it is important that you have a good understanding of the legal process involved.
Make sure that both the estate agent and the vendor/developer are reputable.
When purchasing a new construction, make certain the builder is experienced and if possible view some properties previously constructed to see the quality and standard of their work.
You must employ the services of a good impartial lawyer, who has adequate knowledge of English and is experienced in dealing with land sales to foreign purchasers.
Standard practice involves carrying out Land registry searches on the property to ensure that the vendor is the registered owner and has selling rights over the property and there are no mortgages, charges or other encumbrances affecting the property.
For new constructions, the lawyer should also make certain the relevant building permissions have been obtained and the plans have been approved and stamped by the city planning office.
Your lawyer will draft a contract of sale and the terms of the agreement should give you maximum protection. In the example of new constructions payments should generally made upon completion of the varying stages in the construction process.
It is recommended that a small sum be held back until the title deeds are transferred into your name. Ask your lawyer about safeguarding yourself against the event of your builder becoming bankrupt.
All non-TRNC citizens that wish to purchase property in North Cyprus must obtain permission from the Council of Ministers before the property can legally be transferred into their names. Your appointed legal representative will apply for your purchase permit on your behalf and keep you updated with its progress. The process involves searches being carried out by the Land Registry, Immigration and the Military and can be a lengthy and drawn out process, taking anything from twelve to twenty four months to be approved.
Foreign purchasers are entitled to have only one property per household registered in their names. For this purpose, Husband and Wife are classed as one household. The property must not exceed one dönüm in area.
It is often the case with new constructions that the property is finished before the purchase permit has been approved. Upon completion of the property and prior to making the final payment under the contact terms, consult your lawyer to ensure that when you take possession of the property, all relevant safeguards are in place and all documents are in the possession of the lawyer. Make certain any items of 'snagging' are dealt with swiftly. In some cases, it may be necessary to prepare a supplementary contract between yourself and the vendor to confirm the remaining obligations between both parties.
Upon the purchase permit, being granted your lawyer will complete the relevant Land Registry forms on your behalf. The Land Registry will then value the property and the taxes will be payable based on that valuation. The Land Registry transfer fee/satmp duty is in almost all cases paid by the purchaser and is currently 6% of the Land Registry valuation. However, a new regulation gives an option to pay just 3% of the Land Registry valuation; this option can only be used once.
Also, payable by the purchaser is VAT (KDV). This is currently set at 5% of the Land Registry valuation. Once all taxes have been paid, the transfer of the title deeds can take place. If your lawyer has been given power of attorney to act on your behalf, they will sign all the forms on your behalf at the Land registry. The property is legally registered in your name from the date of transfer, however the Land Registry usually require at least one month to issue the new title deed to the land in your name.
TRNC Title deeds explained
A concern of foreign buyers of property and land in North Cyprus is the safety of purchasing property built on land with TRNC title deeds. These are deeds for land that was owned by Greek Cypriots prior to 1974, but which was appropriated by the North Cyprus authorities after civil unrest led to the movement and subsequent separation of the Turkish Cypriot and Greek Cypriot communities into Northern and southern Cyprus respectively.
When considering the consequences of purchasing property built on TRNC title, a purchaser has to consider both the type of TRNC title deed in question and what impact a settlement of the land issue in Cyprus is likely to have on such title. Any settlement made will be based upon the Annan plan.
The Greek Cypriot community rejected the Annan plan in April 2004; it was accepted by the Turkish Cypriot community and unanimously approved by the international community. The United Nations has made it clear that any future settlement must be based upon the Annan Plan. The plans central observations cannot be renegotiated.
Solution of the land issue under the Annan plan aims to create two federal constituent states in Cyprus in which each respective community forms the overwhelming majority of the population. Bi-zonality is achieved by restricting the number of people from the opposite community settling in the north and south of the island respectively. This means that Greek Cypriots who owned TRNC title deed land pre '74 would not generally be entitled to return of such land.
There are two types of TRNC title deeds, 'Esdeger' and 'Tahsis'.
Esdeger (Exchange)
Esdeger title is land that prior to 1974 was Greek Cypriot owned. Title deeds were issued by the Turkish Cypriot government after 1974 to a Turkish Cypriot refugee from the south on a 'points' basis in compensation for land abandoned in the south. Esdeger is widely known as exchange land. This reflects the fact that the Turkish Cypriot refugee has effectively swapped land left in the south because of civil conflict for equivalent value land abandoned by a Greek Cypriot in the North under similar circumstances.
Under the guidelines, set out in the Annan plan there is almost complete protection for an owner of 'Esdeger' title. Any person purchasing Esdeger land is now considered to be in the exact same position as the original Turkish Cypriot refugee who 'swapped' his land after 1974. Therefore, the Annan plan acknowledges there can be lawful dealings in such title.
The current owner of the Esdeger land that includes non-TRNC citizens is protected in two ways. Firstly, the current owner cannot lose the land to a Greek Cypriot who owned the land prior to 1974, if its value does not exceed the value of the land the Turkish Cypriot left in the south in 1974 by more than 50%. Secondly the current owner cannot lose the land if it has been 'substantially improved' since 1974. This includes the construction of a building. The purchase of a house built on such land since 1974 is therefore automatically protected.
Tahsis (TMD)
'Tahsis' title deed land is more commonly known as 'TMD land'. A Greek Cypriot previously owned the land prior to 1974. The title deeds were issued by the North Cyprus government (post '74) to a Turkish mainland settler as opposed to a Turkish Cypriot refugee. Tahsis land is often situated in the most beautiful areas of Northern Cyprus .
Under the terms of the Annan plan there is substantial protection for the owner of Tahsis title land. The current owner is protected from losing the land to the pre 1974 Greek Cypriot owner, only if it has been 'substantially improved' since 1974. Tahsis land does not benefit from the comparative land value protection. However as construction of a building is considered as 'substantial improvement' the purchase of a house or apartment built on Tahsis land is protected under the Annan plan as much of those purchasing Esdeger land.
The difference in the two types of TRNC title deed should only concern those considering purchasing just land as opposed to a property.
Cyprus Island Homes are happy to advise clients to which type of title deed a property has. Cyprus Island Homes would like to take the opportunity to point out to potential buyers that there is only a very remote risk of a current owner losing property built on TRNC land, however if there is ever a settlement between the two sides, compensation
Might still need to be paid to the pre '74 owner. This is something covered in the Annan plan. It is something that unscrupulous estate agents in North Cyprus fail to mention to clients.
Compensation is likely to be modest. It will be based upon the value of the land in 1974 with index-linked enhancement. As a guideline, compensation is likely to be approximately 8% to 15% of the value of a typical villa or apartment.
There is a very strong chance compensation will be paid by the TRNC government rather than the individual private owner. At the end of June 2003, the government in North Cyprus set up the compensation commission for immovable property to meet the claims of pre-1974 Greek Cypriot owners of TRNC title.
If the government meets a compensation claim it is done on condition the pre 1974 Greek Cypriot owner waives any future claims he may have in relation to the land.
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