Exchange of Contracts
Upon acceptance of the offer by the owner the next step in the process is to exchange contracts of sale. This normally takes place within two weeks following formal acceptance of the offer. Your lawyer will have completed searches and investigations of the property and will have arranged with the owner the procedure of the cancellation of any outstanding debts. The private contract of sale will reflect all the agreed terms of the offer and sale and set out the date for final completion. At this stage it is usual for the buyer to pay a 25-35% deposit of the purchase price. The amount of the reservation deposit is subtracted from this first installment payment on the purchase price.
Appointing a Lawyer
Kensington Development Group can recommend several trusted lawyers in North Cyprus. Your lawyer will provide the legal guarantees for the purchase of the property ensuring that North Cyprus legal requirements are met and that the property is bought free of encumbrances, charges, liens or debt and is up to date in all its payments of local contributions and community charges etc. Lawyers will tell you in advance what their fee will be – these vary from £1,000/£1,250.
The Legal process
Under the laws of the Turkish Republic of Northern Cyprus (TRNC) non-TRNC citizens are entitled to take title to only one property up to a maximum area of 1 donum per household.
For the purposes of this law, husband and wife count as one household. Before the title deeds to the property can be registered in your name, you will need to have permission from the TRNC Council of Ministers.
If you wish to take title to more than 1 property, or a property over 1 donum in area, we can give you advice on using trustees or setting up a TRNC company to hold the title to the property for you.
The first step will be an initial meeting with you and your choosen solicitor to obtain information about the property you have chosen and any informal agreements you have made with the vendor regarding price, payment schedule and included items.
This stage may also involve taking a power of attorney from you to ensure that we can act on your behalf to sign documents if you are away from Northern Cyprus for long periods of time.
A Contract of Sale will be prepared, that will include all important terms such as plot number, plot size, price, payment schedule, completion date with penalty clauses for late completion. All floor plans and specifications will be attached to the contract to ensure that the vendor is bound to carry out the construction work in accordance with these.
After reviews and signature of the contract, you will be given the option to pay the stamp duty.
Under new regulations, the Tax Office are requesting to see a copy of the contract of sale prior to transfer of title with all stamp duty paid up.
Stamp duty is payable at 0.5% of the contract price if paid within 1 month of the contract date. If it is not paid within this time, it increases to 1.5% if paid after 6 months.
Your Solicitor will conduct the necessary land registry searches on your behalf to ensure that the vendor is the registered freehold owner of the land and that there are no mortgages/charges, injunctions or other encumbrances on the property. Building permission for the construction will also be checked. Then the application to the Council of Ministers for your permission to purchase will be made.
The permission process can take a long time to complete, the current estimation is around two years. However, this will not prevent you from moving into the property or leasing the property or possibly even selling the property.
Whilst processing your purchase permit application, the Council of Ministers will take searches from the land registry, the military and the immigration authorities and provided that these are positive, the permission will be granted.
In the unlikely event that your application for permission is refused, you will be able to nominate any other person to take title to the property on your behalf and hold the property on trust for you.
Once your purchase permission has been granted, you will be notified and then asked to fill out all of the necessary land registry valuation forms for the valuation of the property. It is usually at this point that taxes will be payable.
Taxes
The taxes are calculated based on the land registry valuation and are currently at the following rates:
Land Registry Transfer Fee – 6% (however, every purchaser has a once in a lifetime option to reduce this fee from 6% to 3%. At the time of transfer, you will be asked whether you wish to use your option and if you do, you will only pay 3%).
VAT – 5%
Stamp Duty 1.5% (if this has not already been paid – see above)
The taxes will be paid and the title deeds will be registered in your name. If you have left your solicitor with power of attorney, all of this can be dealt with without you being required to travel to the TRNC. Your solicitor will then collect and keep the title deeds for you until you are ready to collect them.