With the lack of titles for many properties, those people who have bought and wish to sell their property, but have no titles, find themselves trapped, in the sense that they cannot realize/liquate their investment. This is especially important now with many people being affected by the economic recession, requiring an easy/speedy sale, in order to cover themselves for their financial obligations (other reasons apart).

This unfortunate situation has been exploited by a number of developers, known and unknown. A Pafian developer for example (quite known) requires a fee of 17% on the sales price, in order to consent to a cancellation/new agreement (thieving in all its glory). Others are more moderate charging 5% (still thieving) on the sales price. Other developers/owners will not consent unless it is themselves who sell the property (for a commission – thieving again).

In order to cover yourselves, at the stage of the original sales contract, we suggest that you add a clause stipulating that you have the right to ask for a cancellation agreement and resale (by the developer) to a third party stipulating a fixed fee (say €4.000-€5.000) being a reasonable fee, provided the developer does all the legal work and the sales value is around €300.000. What one must consider is, that in the event of a resale (i.e. the sale of the property from the original buyer to another) the original buyer saves himself on the transfer fees, which, on average being 6%-7% it is a considerable amount.

This original buyer must also take into account that:

1. All dues to the developer etc must be paid off prior to a resale.

2. Common expenses, property tax, sewage tax etc, must also be covered by himself between the period that he took delivery up to the date of resale.

3. He must secure a capital gains tax release, prior to a resale, since if there is a capital gains obligation, he must pay for it.

The new buyer must bear in mind upon signing this “resale” contract with the original owner/developer that he must:

1. Pay the deficit of the previous buyer (if any)

2. He is buying as built with most probably the 12 month guarantee on building that the original buyer had, has lapsed so he has no claim on the developer.

3. If he requires finance and the original buyer owes nothing to the original owner/has no Bank loan, it will be up to the developer/original owner to consent, since he will be a guarantor on the loan repayment of the new buyer (the developer has nothing to gain – i.e. it is not his sale).

This extended practice on resales, we hasten to add, is not a 100% secure. Firstly there is no official stand that the Lands Office will not require two transfer fees (i.e. the fees which the first buyer ought to have paid). The Income Tax also is not certain that it will accept non-payment of income tax from the first buyer on his sale.

So there is a certain “risk” involved firstly to the first owner/developer and secondly to the second buyer (the first buyer gone and nowhere to be found who will pay the first transfer fees?). For this reason the existing (illegal) practice is for the new buyer to pay to the original buyer the same amount (reported as such in the first sales contract) and any difference in the excess sales price is paid by the second buyer to the first “under the table” (quite illegal of course).

Nevertheless it is this sort of thing that separates a correct and an incorrect developer and buyers. The first takes a certain risk, but he accommodates the first buyer, since he (the developer) has not managed to issue titles. It is a bit of give and take, but having said that, the developer “gives” more than the original buyer, but, then, 17% commission!!

These resales agreements are now more common than before, due to the fact that a larger percentage than before (especially with regard to foreign buyers) are having difficulty in meeting their mortgage payments etc. For those who are in such a position, we do suggest that provided you have found an “able buyer”, negotiate with the financing bank the repayment of your loan, negotiate in particular any excess interest charges etc. You will find that most local financiers are willing to offer discounts on their charges, rather than undertake a long drown and complicated/legal procedures on defaulting clients. Also in case of improvements that have been carried out by the original buyer, bear in mind that these are tax-deductible (in case you are called upon to pay capital gains tax - see our past article on this).

www.aloizou.com.cy

www.aloizou.ro

www.aloizou.ru

ala-HQ@aloizou.com.cy