RED TAPE in the issuing of building permits and title deeds is costing homeowners dear, according to property developer Andreas Lordos.
Lordos said recent revelations of more than 55,000 homeowners not being handed title deeds for their homes by developers were due to shortcomings in the law and delays in issuing planning and building permits, causing financial headaches for developers.
“In order to start construction of a project, a developer has to get a planning permit, a process that last three months.
“With the planning permit in hand, you then apply to the district office for the issue of the building permit. This is supposed to take another three months, bringing the waiting time up to six months, but the reality is that developers sometimes have to wait for up to one and a half to two years for the building permit to be issued.”
Lordos told the Cyprus Mail that structural weaknesses in a system struggling with heavy demand forced developers to plough ahead with construction.
“If a a permit that should have taken six months is taking more than a year, then a company will find itself in financial dire straights,” Lordos said.
“If you haven’t even seen your planning permit in one year, how can you start paying the bank and with what income?”
Lordos said construction without a building permit was illegal and warned of penalties that people were not always aware of.
“It’s illegal and nearly everybody who is part of this procedure, including the buyer, the architect, the supervising engineer and the contractor, are liable,” he said.
Lordos said the problem was that there were too many people, too many projects and a system that was too slow.
“The non-issuing of the building permits causes the financial performance of the developer to deteriorate, and that makes them more inclined not to proceed with the completion of the title deeds,” he added.
But Lordos said there were also other reasons why developers chose not to issue title deeds.
“If the contract is not submitted to the Land Registry Department for specific performance purposes, then even if you pay for the property that you have bought, and if you have a contract that ensures that you will get your title deed upon payment and the developer changes his mind, that means at least a three-year procedure in court and it’s likely the agreement will be cancelled and the money returned,” Lordos said.
“In a period of rising prices, a developer may be tempted, if he has the appropriate legal advice, to cancel the deal and re-sell the property at a higher price.”
If you want to re-sell your property without a title deed, you cannot do so unless you involve the developer in the transaction or if you cancel the agreement.
“If there is no title deed and the cancellation agreement goes ahead, you don’t have to pay transfer fees, you collect the difference from the increase in the price, you don’t pay any taxes, and the developer will come and ask you to share the benefit of not paying the taxes,” Lordos said.
“And in reality the owner of the house has no option, because the other option is to do a new agreement between himself and the new buyer and to pay the taxes.
“At the end of the day the loser is the state which is not collecting its income.”
Developers also choose not to issue title deeds to avoid settling bank loans in order to use the money to finance other projects.
Lordos said the Central Bank was trying to change the way commercial banks were practising their business by demanding that loans be repaid on time and granted and settled on a project basis.
Lordos said the government should amend current legislation so that the ownership of part of the land and part of the property comes into the hands of the buyer.
“Such an amendment would make the developer liable against the state for not coming up with the title, so that if the developer goes under the buyer will not be affected,” he said.
“As things stand, if a developer goes under then the buyer is affected and if the developer doesn’t come up with the title deed then it’s the buyer’s problem and not the government’s.
“Considering the difference in size between the average developer and the average buyer I thinks the odds are against the buyer.”
