North Cyprus – Should I or Shouldn’t I ???????

EMAIL RECEIVED BY ABAG  FROM BRADUS WITH A REQUEST FOR PUBLICATION

Not surprisingly many people are thrilled at the thought of owning a holiday home or making a permanent move to North Cyprus. It really is a chill out zone and the local community must be one of the friendliest people anywhere. Many have purchased properties without any problems and are extremely happy with their new home and lifestyle.

Unfortunately for others it’s been a stressful and costly experience. I write this information in response to AJ’s challenge to constructively highlight the dangers associated with property purchase in the TRNC without becoming personal or vindictive. For this reason I have chosen NOT to name many of the builders guilty of the scenarios I have identified, despite the fact that it would have shown the extent of the property problem or to name the many buyers that have experienced these problems. It will be their choice should they wish to share their experience. For people considering buying I hope that the following information helps you with your decision making.

If you decide to buy then I hope you use this information to reduce the risks. I would have liked to have said eliminate all risks but as you will see this is impossible because of a lack of robust laws within the TRNC and the unwillingness of the Government to introduce new laws. I would advise all purchasers to read all the valuable information on the HBPG web site and call in at one of their Tuesday sessions at the Pia Bella. They are best placed to share with you the do’s and don’ts of buying in North Cyprus and guide you through the whole process. I am not going to discuss any problems associated with buying disputed Greek Cypriot Property. There is ample information on this subject matter and all I would say to new buyers is research the history of Cyprus and make sure you chose your sources wisely.

Certainly the spin given by many Estate Agents will be extremely biased so as to encourage you to buy. There are many helpful members on Cyprus44 that will recommend some good balanced sources. It goes without saying that I sincerely hope that most buyers will never find themselves in the situations identified but this is wishful thinking on my part. There is always a dilemma when new comers post requesting information about buying in the TRNC. Not surprisingly those that have experienced severe financial losses, ended up homeless and attended numerous court cases and are still without closure are bitter and angry. This is understandable but it can cloud judgement.

Decisions should be respected as long as they are informed decisions. Similarly the positive posters who dismiss the existing problems can unknowingly create a false sense of security allowing buyers to let down their guard and make ill-informed choices. I regularly suggest that people do not recommend their Advocate or Builder until they have PTP and deeds. Yet I notice the same old people making glowing recommendations, knowing that they have never received their deeds despite being in residence for up to 5 years. Others recommend builders and particular sites that are at a very early stage. Even more worrying is that some postings come from known Estate Agents!

 Click on the poster’s name and you see hundreds of advertisements for properties to buy and rent. They are therefore hardly going to give new buyers a balanced view. In short seeking information on the forum may not get you a balanced view. With this in mind perhaps the best course of action is therefore to investigate the sort of problems that have occurred and as a group (I don’t want it to be just me) suggest solutions to them? I therefore welcome all contributions to this thread.

Buying in the TRNC is not without its problems. The legal system, despite Advocates and Estate Agents, reassuring prospective buyers, that it is similar to British Conveyancing laws, fails miserably to give adequate legal protection to foreign buyers. The main difference between TRNC law and UK law is that unlike in the UK where your solicitor only hands over your money upon receipt of unencumbered deeds in your name, in the TRNC you are expected to pay in full for a property and then can wait months or even years, to hopefully receive your deeds. Unbelievably there is no legal obligation under TRNC law for the builder to actually handover deeds despite having been paid in full and this can result in expensive and lengthy court battles. Sadly the conveyancing laws of the TRNC are full of loop-holes that unfortunately play straight into the hands of unscrupulous builders and developers.

During the building boom years many locals jumped on the bandwagon without the necessary acumen to successfully run a building business. As a result bankruptcy has become a real problem and unfortunately it is often the foreign buyer that pays the price when this happens. The buyer becomes at risk of being legally responsible for all the builder’s debts secured on the property. In the worst possible scenario this has meant that the houses, many which have been paid in full for, have been auctioned or threatened with auction, to pay off the builder’s debts. There are currently 1400 homes with memorandums or mortgages in place. People are desperately working with their Advocates, the HBPG and site owner groups in an attempt to safeguard their homes by getting the memorandums lifted. They may be successful but it will undoubtedly mean digging even deeper into their pockets not to mention the associated stress and effect on their well-being.

One of the real stumbling blocks to safe buying is most definitely waiting for and getting Permission to Purchase. Again the Advocate and Estate Agent will say it is merely a formality and that this will always be approved unless you have a criminal record or purchase property next to a military establishment. This is not strictly true; you will not get permission to purchase if you, as a foreigner, buy Pre 74 Turkish Title Deed.

http://www.hbpg-trnc.net/documents/Press/CT271010_opinion_ptp.html

 There will be people on this forum who have secured PTP on this deed but in all probability these will be for purchases made before 2007. I can understand why the TRNC Government might want to retain all Pre 74 Turkish Title property in Turkish Cypriot ownership given the history and politics of the island. However what I do object to is foreign buyers not being told of this “covert” policy, allowing them to pay in full and then on PTP refusal, dismissing and oversimplifying the problem by suggesting putting the property into a Trust. What a wonderful idea to buy a property and then have to put it in someone else’s name because you don’t and won’t ever own it! This is going to cost you an awful lot more money both initially and ongoing, due to the tax implications and administration fees. Yet if you do not chose this option you cannot secure your deeds and you leave the window of opportunity for memorandums to be placed on your property. This is a real threat because the construction industry is almost on its knees; certainly people are reluctant to buy off plan because of the bad publicity associated with buying on the island of Cyprus. This has resulted in many companies declaring bankruptcy or just not having the available finances to complete their projects. Hence all the blots on the landscape; empty unfinished shells.

The other problem relates to the time-scale associated with waiting to be granted Permission to Purchase. It has improved but there is still a need to speed up or review this process. Until you have your PTP you cannot exchange deeds. Until you have deeds, the builder still owns the property. Yet again we have a waiting period that offers another window of opportunity for memorandums, double selling or for the developer to suddenly become involved in conflicts with the land-owner, a frequently occurring scenario. It would appear that even though most buyers’ contracts contain a statement that the developer will keep the property free from mortgages, liens or encumbrances, this is no safeguard.

Some hope came with the introduction of the Estate Agents Law and the Registration of Contracts. This has certainly provided some protection from developers and land-owners taking out mortgages on the properties they have already sold. This is of course dependent on the efficiency of the Advocate. We are unfortunately hearing of people that paid their Advocate to register their property and this was not done, resulting in the builder being able to take out a mortgage. More worryingly is that Registration of Contract does not take precedence over memorandums (I hope it is soon to be tested) so yet again we see a newly introduced law that still fails to safeguard the buyer’s assets. The persons most protected and set to benefit from the current system are the developers who built using credit from trade warehouses or bank loans but bought cars and other luxuries with the buyers’ stage payments, rather than paying their increasing debts. When the bank and traders take the legal route to recover the money owed from the builder, it appears that your house finished or not, is used as “his” assets to pay of this debt.

Having criticised the current law, some responsibility must be placed on the buyer, Estate Agent and Advocate too. The Government has stated that buyers should not enter into a contractual agreement until permission to purchase is confirmed. So why are the Advocates, Estate Agents and buyers not adhering to this law? Is it because in the past it was a ridiculous proposal, unworkable given that most builders would not, and rightly so, have waited for the ridiculous time scale of 2-5 years, just to confirm a genuine sale?

Recently we are informed that the process has been speeded up and is now taking only 3 months. So the way forward has to be to follow the laws of the land and not enter into a contractual agreement until you have your PTP. If all buyers adhered to this Government Policy, then you could buy using the no deeds, no money approach. Surely by now purchasers recognise that ignoring this requirement is the start of leaving themselves vulnerable to exploitation from the very beginning? The builder is in a win, win situation, as is the Estate Agent and Advocate but the buyer no longer has any safeguards for ensuring exchange of deeds having not followed TRNC law..

Other well documented problems associated with buying in the North of Cyprus are not obtaining building permits prior to construction, building substandard, unsafe properties which do not confirm to regulations and have been condemned as unsuitable for habitation. Unfortunately the builders rarely take any responsibility to correct faults or compensate the buyers. Sites are left unfinished; even though buyers have paid in full and construction companies often move on to start on yet another site before completing the ones already started. Demanding additional money for electric, water or roads is well reported. It’s sad to hear that some people are left living on a building site. Withholding deeds until the buyers pay the builders taxes or more money is now a common occurrence. Property scams in the South of the island are also well documented. The North tends to mirror the same scams and vice versa. One frequently reported scam in the South, which has not yet been perpetrated in the North (as far as I know) is that when the buyer decides to sell but unfortunately their deeds are still held by the builder, commission on the sale price is frequently demanded by the builder. I wouldn’t be at all surprised to see this taking off in the TRNC………….all legal and above board of course.

Property nightmares happen in many other countries, Cyprus is not alone in receiving such condemnation. Spain for many years failed to take constructive action in response to relentless negative press coverage and pressure groups within the country. Not until the property bubble burst in Spain hitting the economy extremely hard, was major reform introduced, aimed at winning back the trust and confidence of foreign buyers. Some argue that this was a little late as considerable damage has been done and the reluctance of the Government to act earlier has contributed to Spain’s current state of affairs. A quick literature search identifies the considerable number of job losses within the construction industry and housing market. However, newly introduced reforms are generating much needed publicity and interest. Property amnesties, fast tracking of deeds, Government guarantees and umpteen other regulations, including a recently introduced system called, The EU Cross Boarder Electronic Conveyancing, means you can buy within the framework of English law and do all the conveyancing from Britain and with a British Lawyer. Obviously home sales to expats are slowly improving and confidence being restored.

When people run into property difficulties in North Cyprus, they need even more safeguards than those listed above and a fair and efficient legal system is essential as there is limited protection from the EU and because of the North’s “unrecognised” status.

My observations however, together with some very well publicised cases, convinces me that seeking legal redress through the courts is fraught with uncertainties and is far from the professional and reputable service most would expect. It can take several years before your case actually gets before the courts. When your case is finally heard many of the court hearings are adjourned time and time again, often due to the non-appearance of the defendant, a change of advocate by the defendant requiring further delay or other excuses such as frequent illnesses, family deaths etc. Whilst this would be seen as contempt of court in most International Courts it seems to be totally ignored by North Cyprus Judges.

According to the HBPG in many of the court cases none of the parties acting for either the plaintiff or the defendant have visited the site to gain accurate and truthful information regarding the reason for the litigation. During the many, many court hearings, judges often change and you have several judges listening to snippets of the case rather than deliberating on the whole case.

 More worryingly, it is well documented that some purchasers have been awarded Court Judgements which have not been acted upon. Many of the developers have returned to England or Turkey so how in this instance do you make them accountable for their actions or enforce the court judgements?

The result of ignoring the above problems and they have been ignored for several years now, is that Cyprus has the worse overseas property market in Europe. There is relentless negative media coverage, initially within Cyprus but now internationally. Buying off plan is a definite NO, NO, and the construction industry struggles to survive. Property values have dropped significantly. People that once called for recognition of the island now feel that the TRNC should not expect their human rights to be recognised, when they so openly and blatantly violate the rights of others.

Creating chaos and forcing court action often stemming from advocate and builder negligence has been financially rewarding for Advocates and some of the more unscrupulous developers but in the long term it is no more than a get rich quick fix, for a small proportion of the community. It will not improve the North’s economy, encourage investment, promote employment and offer a real improvement in the standard of living for the local population.

Like many I would like to see business flourish and a buoyant property market that achieves the above. I was lucky enough to have an excellent builder and why should honest, decent, hardworking, reputable builders suffer because of the poor reputation, fraud and corruption of others? Action needs to be taken that limits the amount of property victims. Responsibility needs to be put firmly where it belongs. For too long the focus has been on blaming victims for not having done their homework, for being naïve, for not using the right Advocate or Estate Agent. The truth is it’s the fault of a system that allows corruption to flourish and that has no intention of introducing new robust laws that protect buyers and would restore trust and confidence. It’s a home grown disaster.

Given the years of negotiation with numerous Government officials, media publicity and the sterling work of the HPBG changes to the current laws are unlikely. So each buyer must be responsible for safeguarding their own purchase and making an informed choice about buying in the TRNC. There must be awareness that buying is a gamble and you could lose substantial sums of money, not get the house you thought you had paid for, not to mention the stress involved and the toll this can have on your health.

So knowing of the pitfalls, what can buyers do to reduce the risk of becoming yet another victim? Firstly do not rush into buying. It’s easy to be seduced whilst on holiday but one or two weeks in not nearly enough time to commit to such an expensive purchase and get to grips with the buying process. Make several trips and get to know the different areas. Speak to as many people as possible and do, as mentioned before, go along to the HBPG. They are not just there to help those that have run into difficulty but to assist those buying too. Consider who will maintain the property and at what costs if this is to be a holiday home. This might help you decide on whether you should buy an apartment or villa. If you are contemplating a permanent move why not rent first? Lots of good value properties available allowing you to test the waters first before making such a huge commitment.

Don’t buy off plan; it really is just too risky. Begin looking for fully completed houses and sites and make sure all essential services are connected. Avoid those using builders electricity and only buy from a seller that has his named deeds.

By all means use an Estate Agent but remember they are but a “shop window”, under no circumstances should you send money to them or be cajoled into signing a contract that appears from beneath the desk. Don’t believe anything they say, check all the information yourself. They are going to be unbelievably friendly but don’t mistake hospitality for honesty. They are working for the developer who will be the one paying the commission so their loyalty is with him. It is their employer’s needs they are striving to meet. You’re just a person that can help them to do that. Do not use an Advocate recommended by the Estate Agent or Developer. Nepotism and cronyism is rife on the island of Cyprus and you need an independent representative. For this reason use an Advocate from outside the area you have purchased in. In other words if you are buying in Girne use one from Lefkosia.

Think carefully about Advocate recommendations, you will get a mixed review. There are some who deal effectively with straight forward conveyancing and they are good at this but should you run into problems they’ll then refuse to act for you and they do not have the necessary skills to deal with any form of litigation. Remember that a TRNC Advocate is not at all like a UK Solicitor and by their own admission they do not owe you a duty of care. You need to state exactly what you want them to do or chances are it might not get done and important documentation might not get checked. Furthermore you need to actually view all documentation to make sure your Advocate has everything in order.

Yes I know why do we pay them? Luckily the HBPG have compiled information that identifies the paperwork you need to see. Don’t pay your Advocate until successful completion.

Read your contract several times, really scrutinise it, not a quick scan in the Advocates office, take it away with you and never be afraid to add to it and negotiate changes. If you have been brave (or foolish) enough to buy off plan check your stage payments. Break them down further if necessary and make sure the biggest stage payments are towards the very end of the build. This is when the most expensive part of the build is because of costly bathroom, kitchen, bedroom fittings, infrastructure etc. There is no incentive for the builder to finish if it is going to cost £15000 to complete but the next stage payment is only £5000. If the builder does not complete, you will also have retained a decent sum of money, to do your own completion. Get an independent representative to confirm the builder has completed the agreed stages before sending your stage payment. This should not be your Advocate or the Estate Agent. All payments should go to your advocate and it goes without saying you should be able to trace every penny sent. Avoid cash deals you need a bank trail for all money paid. Never fall for the massive cash discounts that ask you to pay all or most upfront. I know of people that have paid the full cost of the house and have had nothing but a foundation slab. It’s much too risky.

What you must do is get your PTP as soon as is possible. Hand over no money other than a very small deposit which should be refundable should your PTP be refused? You can apply for PTP yourself rather than paying expensive legal fees. If you do it yourself you are also certain that it has been done. You need to chase this up frequently because the office will not contact you to inform you of refusal or approval. As soon as you have approval you can then sign your contract which should  stipulate that there will be a simultaneous change of money and deeds. This action will mean that the seller will have to change deeds if he wants his money and that there is no window of opportunity for memorandums to be secured on the property. It is the only way you have, other than expensive court battles, of getting your deeds and preventing those all too frequent memorandums.

At this stage I have to say that following my above advice is not going to go down well with the Estate Agents, Advocates and developers. There will be opposition. The current system has allowed them to be paid well before your sale has been completed; most Estate Agents taking their fee out of your first instalment. This alternative way means the very opposite, the fees will only be paid when the sale is finalised. What an incentive to actually ensure your sale actually goes through? If your Advocate objects to the way you want to proceed you should ask why? Are you not paying them to safeguard your interests?

It will not affect the Advocates workload and it is how most of the local community do business.

No deeds, no money!