Cyprus Designated "No Buy Zone" By MEP
SNP MEP Alyn Smith has today published a guide to buying property across the EU, and warned Scots not to buy property in Cyprus at all after receiving a flood of complaints from constituents about their dealings in the country.
While many people do purchase and enjoy overseas property, complaints are on the rise and the legal process is often slow when things go wrong, so Smith's guide should at least help people to ask some tough questions as they make plans.
Smith has drawn the conclusion that Cyprus has a particular problem with dubious property deals and the Cypriot authorities have clearly dragged their feet on resolving the thousands of outstanding cases. It is estimated that 40,000 overseas buyers are awaiting formal legal ownership of their properties in Cyprus, despite having paid in full for the property and received the keys. Title Deeds, which are officially referred to as "Certificates of Registration of Immovable Property", are the most important evidence of property ownership, but with so few people receiving the documents after paying hundreds of thousands of pounds for houses and apartments, confidence from potential buyers is at an all time low.
Last year, Smith raised a question in the European Parliament on the subject of Cypriot legal and property rights. Smith has also written to the President of Cyprus, Demetris Christofias, asking for his assistance in this matter and had suggested that the President may wish to consider establishing a foreign investor advice service, or an impartial ombudsman to assist in such cases. After 2 letters and 6 months Smith has never heard a word back from the Cypriot President, and now advises Scots considering buying property in Cyprus to look elsewhere.
"Buying property abroad to live, work or retire is one of your key freedoms of EU citizenship, and many folk have a great time and good luck to them. However, it can go wrong, and folk need to be prepared and take proper advice.
"Problems are clearly on the rise, and a lot of folk have clearly signed up to deals that aren't half as good as they looked. Loads of folk have come to me for help and some stories of exploitation and fraud are pretty hair-raising but the fact is there is little I or anyone else can do. There can be dodgy property deals anywhere, but as with deals at home asking the right questions in advance can save a lot of heartache later so the guide might save some folk some problems.
"I'm afraid I have concluded Cyprus has a particular problem, and I think people should steer clear of the place. I contacted the Cypriot President to try and resolve some of these problems and I did not even get a response, and I'm just not convinced the Cypriot authorities are treating this with any urgency at all."
The text of the guide is available below:
A ROUGH GUIDE FOR SCOTS BUYING PROPERTY ABROAD
Foreword by Alyn Smith MEP
During my seven years as a Member of the European Parliament, my inbox has been flooded with queries, questions and concerns on many of the same issues, and none more so than of problems that have arisen from Scots buying property abroad.
Buying property in another country whether as a holiday home or to permanently emigrate is more popular than ever. It is one of the key rights you have as an EU citizen, and in the past decade there has been a surge in the number of Scots who own a home abroad. The majority of Scottish buyers are in their late 40s and 50s and many intend to retire overseas. However, being unprepared and unaware of local laws means their dream of living abroad often becomes a nightmare, and there is little I or anyone else can do to assist.
In 2009, after a number of constituents came to me for help, I teamed up with the Cyprus Property Action Group to intervene on behalf of Scots home owners in the country who had found themselves in difficulties. I wrote, very positively, to the President of Cyprus raising the issue with him and suggesting he establish a foreign property advice centre, but sadly did not even receive a response despite repeated follow up letters. The volume of people having property related difficulties in Cyprus has led me, with much regret, to advise against buying property on the island at all.
More recently in the European Parliament, I have signed a Written Declaration on the violation of the right to own property represented by the Ley de Costas (Law on Coastlines) on the Costa Brava in Cataluña.
It is, of course, not all bad, and a number of folk manage to buy and enjoy property in various places, and good luck to them. However there are pitfalls, and this guide may hopefully identify a few of them. It is a rough guide only, many of the points seem obvious but all are drawn on our experience of the sort of problems people can encounter. It should be merely the start of your research. You must seek legal advice and remember; every country (and even region) is different. The decision to buy property abroad is not one which should be taken lightly.
Alyn Smith MEP
Many people come across properties while on holiday, and often don't allow themselves time to think about the practicalities of their potential new home. It is easy to fall in love with a new place, but have you considered your options and circumstances? Before you start seriously looking at properties it is worth asking yourself a few basic questions, which although simple, could save you time, money, and perhaps a few tears in the long run:
- How well do you know the country you want to move to? The language? The culture?
- How well do you know the local laws? The local taxes?
- How good are the local health and social services?
- Will you have a pension? Will it be sufficient for your needs?
- How much time are you hoping to spend at your new home? Would a time-share be more suitable?
- If your new home would be a holiday home, would you tire of visiting the same place?
- Do you have adequate health insurance/do you qualify for free healthcare?
- How easy would it be for you to meet people in your new area?
- How easy/cheap is it to travel to Scotland? Are you likely to have visitors?
- Are flights readily available should there be a family emergency at home?
- How adaptable are you to living in a warmer climate?
- If your property is for retirement, would it be suitable if you have limited mobility?
- How much work, and money, are you willing to put in to your new property?
- Do you know the costs of insurance? Local trading costs?
Do your Homework
Research all legal issues and costs involved. This will take some time but if you fail to do so, you could find yourself in trouble. For instance, did you know that if you're buying in Spain you'll need to make out a will in Spanish before buying, or you can inherit debts from a previous vendor? If you die, is your Scottish will capable of transferring all property, wherever situated, to those you intend to inherit it? Would Scottish law be applied to the winding up and division of your estate?
Your solicitor/lawyer will advise and assist you but before you have decided on a property it is imperative that you are fully aware of the legal process and regulations involved in your purchase.
Seek professional advice. Both in Scotland, and in your chosen country, seek the advice of experienced lawyers and estate agents. Only negotiate with ones that are officially registered, hold a licence and have experience of dealing with expats. Unless you are fluent in the local language, ensure those you work with have an excellent command of English. Seek recommendations from expats who have settled in your chosen area.
Sort out your Finances
Be well prepared with your finances; taxes can be high when buying. Being able to afford the advertised price of your new home is simply not enough. Will you be liable for tax in Scotland also? Have you accounted for potential labour costs, lawyer's fees, bills from your estate agent and furnishing your new home? Will you be paying from a Scottish bank or a new foreign bank account? Will you rent your property if it is empty? Bear in mind, advertising in Scotland for a property abroad could result in tax demands from both the Scottish and foreign authorities. Have you looked into inheritance tax? In Spain, for example, inheritance tax can be as high as 81.4 per cent where the estate passes to anyone other than a close relative. In France, rates can be as high as 60 per cent, and buyers may find they can't stipulate who inherits their property. It is even possible for a property overseas to be taxed twice – in the Scotland and abroad.
Buying a new property can be exciting but you must remain sceptical. Don't be fooled by claims of huge capital growth and rental yields when viewing a property. A property is a place to live, not an investment. Before deciding whether it is a good buy, factor in the likely costs of maintaining the place and get to know the area. Take the time to view properties in person too rather than getting serious about properties as seen from your laptop in Scotland. If it sounds too good to be true, it probably is.
Law Society of Scotland
26 Drumsheugh Gardens
Edinburgh EH3 7YR
Tel: +44 (0) 131 226 7411
Simon James House,
17 Mill Lane, Welwyn,
Herts AL6 9EU
Tel: +44 (0) 1438 841 293
Association of International Property Professionals Clements House,
27-28 Clements Lane,
Tel: +44 (0) 20 3207 9095
National Association of Estate Agents
6 Tournament Court
Tel: +44 (0) 1926 496800
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