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Αντώνης Λοΐζου, FRICS

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Freehold or Long Leasehold Home?

16 October 2017

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Residential Real Estate Contract

As we say in Cyprus, a Cypriot eats too much as if it is his last time alive and builds a home as if he will live for ever. This is an alternative.

We are surprised by the response of an article we wrote in the Greek press regarding quality retirement homes with full facilities based on the American model. In our article we referred to that this type of housing units may take a period of 10-15 years to come about for locals in Cyprus, since the family ties are not what they used to be and parents/children may not have time for each other to the extent that they had before. However based on the local readers response it seems that our estimate of 10-15 years time, is far too late and it appears to be more of an immediate/2-5 years hence term. Families seem to be disintegrating from the extent that, we thought, especially now during the crisis.

From what that we know there are certain parameters for the success for such projects which we enumerate below.

  • Compact and fully furnished units of high quality, in complexes of not less than 30 units facilities to include gardens, a heated pool (one level maximum 1.30 m. depth), common room(s), a bar/snack bar to go, snooker room, card playing, grass ball etc etc.

  • Units to have large door opening for wheel chairs where required, ground floor preferably, but provision for lifts could be an option. Units to be of one or two bedroom (2 bathrooms) large enough to accommodate where required living in service personnel of the tenant.

  • Doctors, taxis, grocery facilities to be offered (on line) for payment and use of private cars allowed.

  • Fully gated and managed, including lets during vacant periods (if tenant so wishes) with restrictions.

  • The units are not to be sold freehold (not necessary) but leasehold and the lease period to relate to the life expectancy that the tenant estimates (on average for men 79 years old and women 83 years old - plus 5 years to be on the safe side).

  • If the tenant wishes to terminate the lease (or he dies) he can sell the remainder of the lease to someone else, who will use the remaining period/or extend it.

  • Considering a furnished 2 bed unit in a well run complex has a sales price of approximately €150.000 + furniture etc say €160.000 a lease for say 20 years with an upfront rent of €100.000 is equivalent of €8.000 p.a. for 20 years, plus running cost of approximately €500 p.m. plus common expenses. This makes good financial sense. No transfer fees, no VAT, no property taxes etc.

  • This is not an old people’s home with the prevailing establishments being of a very low quality and with no/limited facilities, but it is suitable even for much younger people who are either on their own and others who seek a companionship and new friendships when nearing the life’s end.

This approach is not directly related to time sharing, since we are talking of single ownership and at a cost of less than 1/3rd of the freehold alternative.

As we reported the article brought up a lot of interest by the older generation mainly around 60-70 years old with whole families wishing to participate (e.g. 4 brothers over 65 with their wives thought it was a good idea). This family informed us over the phone mind you said that “we can sell our homes for at least €300.000 each and out of this we will buy a 30 years old lease for €180.000 and we will be left with spare cash to do what we like”). Obviously it needs a lot of detail financial work, but at this point of time when many people are short of cash, this could be of an appeal to investors/hotel operators for touristic villages/ hotel apartments (we have eyed 2 tourist villages on the beach at Pafos for the purpose to place the idea in practice).

As we say in Cyprus, a Cypriot eats too much as if it is his last time alive and builds a home as if he will live for ever. This is an alternative. |

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