Introduction
Investing in Real Estate can be a lucrative venture, offering potential financial rewards and long-term stability. However, like any investment, there are associated risks that require careful consideration. This article examines the legal landscape and potential risks of investing in Real state in the northern part of Cyprus. In 2023, around five thousand permits for the acquisition of property were issued.
Background
The Republic of Cyprus in the south and the Turkish Republic of Northern Cyprus (recognized only by Turkey) in the north have created a unique situation for Real Estate investors. The division has led to a range of legal issues and uncertainties that investors should be aware of.
The north of Cyprus has been a region marked by historical and political complexities, stemming from the division of the island in 1974. As a result of the Turkish invasion of Cyprus on the 20th of July 1974, and the continuous illegal occupation of %36.2 of the island from the invading Turkish forces, around 170.000 Greek Cypriots and 45.000 Turkish Cypriots have been displaced and forced to leave their homes behind.
Disputed or unsure property rights
The political situation in the occupied part of Cyprus has given rise to property disputes and litigation. Investors may encounter legal challenges related to property boundaries, ownership rights, and unresolved claims. Engaging in legal proceedings in a politically sensitive environment can be time-consuming and costly, making it crucial for investors to be prepared for potential legal battles.
One of the primary concerns for Real Estate investors in Northern Cyprus is the issue of property ownership and title deeds. The division of the island has resulted in competing claims to land, with some properties having unclear ownership status. At the time of the invasion, around %78 of all private owned land belonged to Greek Cypriots, which means that the majority of new properties being built can be disputed. In many cases the "government" in the north of the island may issue new title deeds for these properties and investors may believe that they are legal.
Not recognised internationally
The international community does not universally recognize the Turkish Republic of Northern Cyprus, and as a result, there may be legal and practical challenges related to the recognition of property rights. This lack of recognition can impact the enforceability of contracts and legal protections for investors. Warnings on this matter have been issued by foreign governments such as Australia, Austria, Belgium, Canada, Denmark, Estonia, France, Germany, Hungary, Ireland, Netherlands, Romania, Russia, Spain, Sweden, UK, and USA among others.
Criminal Code
According to the law of the Republic of Cyprus, the use of immovable property that is registered in the name of another natural person is a criminal act. The perpetration of this criminal offence can lead to a prison sentence of up to seven (7) years.
The amending law of 130(I)/2006 the Criminal Code Law Cap. 154 introduced the punishment of fraudulent transactions of Real Estate that belongs to another individual.
Specifically, article 303A states that any individual, with the intention of fraudulent transactions, trades in Real Estate that belongs to another person is guilty of a felony.
Attempt to commit the offence can be punished with a prison sentence of up to five (5) years.
The above provisions are applied to the cases when an individual purchases, rents, mortgages or gives possession of the property. Additionally, the advertisement or promotion of sale, rent or mortgage or use from another person and/or enters into an agreement to sell, rent, or mortgage.
In addition, the application of the Criminal Code has been expanded in 2006 to include offences that were committed outside of the Republic of Cyprus by any individual if the offence is connected to Real Estate that is in the Republic of Cyprus.
Investors in the Northern part of Cyprus may face exchange control restrictions and currency risks. The use of the Turkish lira as the official currency in the north can expose investors to fluctuations in exchange rates and potential economic uncertainties.
Case Law
The Greek Cypriot legal owners of the property in the occupied part of Cyprus are able to take legal measures against the usurpers of their property to the competent courts in the Republic of Cyprus. There have been many types of these cases presented even before the European Court of Justice.
The case of Apostolides v Orams is a landmark legal dispute that significantly impacted the Real Estate landscape in Cyprus. This case involved a property dispute between Greek Cypriot Meletis Apostolides and British couple Linda and David Orams. Apostolides claimed ownership of land in the Northern part of Cyprus and sought the enforcement of a Greek Cypriot court judgment against the Orams, who had purchased and developed property on the disputed land. The European Court of Justice (ECJ) rendered a judgment in 2009 that recognized the authority of the Greek Cypriot court judgment and required the Orams to demolish their property and return the land to Apostolides. This ruling underscored the importance of acknowledging the legal complexities and potential risks associated with Real Estate transactions in Northern Cyprus, emphasizing the need for thorough due diligence by investors to avoid becoming entangled in property disputes with cross-border implications. The Apostolides v Orams case serves as a cautionary tale for investors, highlighting the challenges posed by the political and legal intricacies of the region.
In addition to the Apostolides v Orams case, another notable legal precedent is the case of Titina Loizidou v Turkey. This case involved the property rights of a Greek Cypriot refugee, Titina Loizidou, whose land in the Northern part of Cyprus was occupied by Turkish forces in 1974. The European Court of Human Rights (ECHR) ruled in 1996 that Turkey was liable for the violation of Loizidou's property rights and ordered compensation. This case underscores the broader human rights dimension of property disputes in the north of Cyprus and highlights the potential legal ramifications for investors. Understanding the implications of cases such as Titina Loizidou v Turkey is essential for investors navigating the intricate legal environment of Real Estate in the region.
Conclusion
While investing in Real Estate can offer significant returns, it is imperative for investors to approach any market with a thorough understanding of the associated risks. Legal complexities, unresolved property ownership issues, and political considerations means the risks far outweigh the possible rewards from the Real Estate of this region. Finally, the possibility of a solution to the Cyprus problem in the coming years cannot be completely ruled out. If that were to happen, the question arises, what would happen to the property that has been purchased by foreign nationals?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
