Buying a new house is a thrilling moment in one’s life, yet the unknowns of the process shouldn’t deter you from getting your dream home in Northern Cyprus.
Whether you are planning to acquire property for living, vacation or rent, you might be interested in learning about formal processes and additional costs associated with buying and owning. Unfortunately, contract related information is usually available in a specific language which may be difficult to understand for a person without legal background. At the same time, it is the customer who needs to know the most about contract, and these are the customer’s rights and interests which have to be protected at the first place. Therefore, this article will describe processes of buying real estate property in Northern Cyprus, providing you with necessary tools for dealing with signing a contract, hiring a lawyer and paying necessary taxes.
How to safeguard your interests: legal advisor’s responsibilities.
Northern Cyprus legal system is similar to the British and is based on common law. Since common law is not typical for many countries, a licensed lawyer has to assist contract negotiations and signing in order to facilitate real estate deals and safeguard customers’ interests. The country does not allow hiring a legal advisor from outside, because various processes and steps specific solely to Northern Cyprus are involved in real estate deals. A lawyer inexperienced in TRNC’s property buying and selling may simply not be able to help.
Overall, legal advisor’s typical responsibilities include but are not limited to:
- Preparing the Contract of Sale
- Minimizing the possibility of disputes and compromising interests of buyer and seller
- Facilitating transaction legitimacy verification
- Facilitating property registration
- Verifying title deed before purchasing
- Represent buyer and obtain specific documents and permissions in buyer’s absence
- Obtaining Permission to Purchase (P2P) from the Council of Ministers
A Power of Attorney has to be issued for allowing a lawyer to represent a buyer. Setting it up is a free, and easy process and the only document needed is buyer’s identity proof. It is also easy to find a lawyer and verify his qualifications and efficiency. Occasionally, investors are buying property in Northern Cyprus without even visiting the island.
An important part of legal advisor responsibilities is ensuring that the property you are planning to buy is “clean”, as far as there are several types of property in Northern Cyprus and not all of them are available for sale.
Then, he? applies to Council of Ministers for purchase permission and title deed for the new owner. The whole procedure takes from six to eighteen months and finishes by granting the permission in almost 100% of cases. The rare case is denied when a buyer has committed a serious crime in his home country. Even before granting P2P, the buyer can take advantage of owning a house in Northern Cyprus, as well as lend or sell it.
The lawyer’s service costs around £1500 with the full amount paid in time of contract signing.
Contract of Sale: what has to be specified?
- Sale Contract is the document confirming the deal on buying and selling the real estate property. It is prepared and signed with obligatory assist of legal advisor of the buyer in three copies in Turkish and a buyer’s native language.
- Contract of Sale includes information about buyer and seller, all the rights of new owner, such as living, lending or selling the property, and information about the property, such as registration number and address.
- Prepaid amount, which is usually 3% of the full price but no less than £1000, is specified in the contract together with payment schedule and other conditions of sale. Therefore, Contract of Sale de jure confirms the transfer of funds.
- Contract has to specify that property is not pledged to or claimed by third parties.
- A number of special paragraphs has to safeguard interests of the buyer and penalties to the seller in case of buyer’s right violation
- Contract has to indicate whether the utilities are already installed or not. In case they aren’t, responsibility for its’ installing is assigned to the developer, and all terms and conditions are specified in the contract. Costs of installing are assigned to the buyer and usually make up between £1000 and £2500 depending on existing infrastructure.
- In case the property needs partial reconstruction or renovation, parties agree on who is responsible for it and specify responsibility, terms and detailed description of work to be done.
- Contract of sale enters into force since the date when buyer fully executed his obligations to the seller.
- Contract of sale is registered at the District Lands Office within 21 days of being signed and the Stamp Duty is paid at the rate of 0.5% of the property price.
- Since registration of the contract took place buyer is protected from the property being sold again, transferred to a third party, and from any liens being placed on the property.
- Contract of Sale is the basis for obtaining a residence permit in North Cyprus.
Taxes: what has to be paid to government?
Contract of sale has to be presented to Tax Office before transfer of title where the purchaser has to pay VAT of 5%. In addition Transfer Fee is paid of 3% to Land Registry Office. Ensuring appropriate accomplishment of these procedures is also responsibility of the lawyer.
In addition, there is a yearly tax imposed on property which is calculated as 1TL for 1m2.
Total costs: an example.
Assuming a typical turnkey, fully furnished, 120m2 villa in Kyrenia or suburbs, price of £100 000, will receive next costs incurred:
- Lawyer’s service = £1500
- Stamp Duty 0.5% * 100000 = £500
- VAT 5% * 100000 = £5000
- Transfer Fee 3% * 100000 = £3000
- Yearly tax = 120TL