WHEN DEMAND for holiday homes in Cyprus was at its peak, everyone who owned a couple of plots of land decided to become a developer and make an easy buck. Holiday villas grew like mushrooms all over the island, financed by banks which had ample funds to lend. They gave loans to the developers, loans to buyers and everyone was happy, for a brief period. But inevitably things began to go wrong as the world recession arrived and demand nose-dived.
Suddenly all types of problems begun to appear. Thousands of buyers were left without title deeds for properties they had paid for in full because the developers had used the properties as collateral for their next project, which meant the bank still had ownership. Others, in their hurry to cash in, had built blocks of flats without securing all necessary permits and were unable to secure final approval from the Town Planning Department, which is a requirement for the issuing of title deeds. We have reported stories about holiday homes without electricity supply because the developer had not made the necessary arrangements with the Electricity Authority.
As a result of this shoddiness, there are currently some 30,000 foreign home-owners without title deeds for their properties, which, legally speaking, are owned by the banks. There are also 100,000 Cypriots without title deeds, but seem to accept that this as normal practice; many consider it a bonus as they are not obliged to pay transfer fees and other taxes. For foreigners, however, this uncertainty is unacceptable and, understandably, they feel that they had been cheated.
Lobby groups have been demanding action from the government, but despite the best intentions of ministers, they have been unable to come up with a solution, as there is no way the banks will surrender the security they have for loans to developers. The legitimate grievances of foreign buyers have been receiving a lot of publicity abroad – the matter was even raised at the European Parliament – which has proved disastrous for the holiday home market. The dramatic fall in sales in the last two years could not be blamed exclusively on the recession, the bad publicity also playing a big part. This bad publicity would affect the property market in the coastal resorts long after the economic recovery arrives.
Given the desperate situation, we would have expected the authorities to do everything in their power to gradually re-build Cyprus’ tarnished reputation. Yet this week, the chairman of the House Legal Affairs Committee announced that new legislation governing title deeds, aimed to “strike a balance between the rights of the buyer and the seller, but also guarantee the rights of the mortgagee.” Deputies were talking about the buyer paying the bank instead of the seller for a property that was mortgaged and being issued a title deed. It is as if we have learnt nothing from the mistakes of the past and the harm they have caused the country.
Instead of cleaning up our act and preventing a repeat of this mess, deputies are still looking at ways of keeping the old, discredited system alive to keep developers happy. A rational law would stipulate that as soon as a buyer pays for a property he should be handed a title deed; failure to do so would entitle the buyer to have his money returned and claim damages from the seller. With such a provision, developers would not start a project without securing all the necessary licences and permits from the Town Planning Department. Failure to secure these permits before construction work begun should also carry a big penalty. The Town Planning Department should also be made much more efficient and issue the necessary permits much quicker than it does now, contributing to the creation of the problems.
The politicians must understand that it is an imperative for us to clean up our act and not make cosmetic changes to the law that has allowed developers to destroy the island’s reputation. They have to understand that there are still huge numbers of holiday homes that remain unsold, despite a 20 to 40 per cent fall in selling prices. Bargain prices are unlikely to attract foreign buyers if the legal obligation to provide them with a title deed on signing the sale contract does not exist. Such a law would push small developers and the cowboys out of the market, but it would be no bad thing, as they have caused enough harm.
We might not be able to correct the wrong done to the 130,000 home owners without title deeds, but we must ensure the new law gives full protection to the buyer. It is the only way to revive the holiday home market.
