Understanding the law

Don't be put off from buying property in North Cyprus because of complicated laws. Once you've got to grips with the legalities and understand the risks, opportunities abound. Mike Stock asks top international property lawyer, Naomi Mehmet, to unravel the complexities of buying in northern Cyprus...

By Mike Stock

What do you need to know when you are buying a property in North Cyprus?

"Firstly, as a foreigner you are only allowed to buy one property, with a maximum of one donum (one dekare) of land per household. Husband and wife count as one. If you want to buy more than that, you need to appoint a trustee or form a TRNC company.

"It may take two years or longer to get the title deeds to your property, but you can still take possession as soon as you have completed on the purchase. There is stamp duty and various other taxes to be paid during this process, like the land registry transfer fee at 6% (although you have a one-in-a-lifetime exemption, where you only need to pay 3%). VAT stands at 5% and stamp duty at 0.5%. If you sell your property as a private individual there is no capital gains tax, but if you are deemed to be a professional vendor, the tax will go up to 6.25%."

Naomi grew up in North London, were she studied law at University College London and the College of Law. After passing her exams with distinction she went on to work for a prestigious off-shore company in Liechtenstein. In 2003 she moved to northern Cyprus and was employed in a large law firm in Kyrenia. There she gained invaluable experience, and after being called to the TRNC bar in 2005, she set up Naomi Mehmet & Partners, now one of the leading international law firms in North Cyprus.

Please explain the title deeds and land issues connected to buying northern Cyprus property...

"After the military intervention in 1974, properties were abandoned on both sides of the border. The government in North Cyprus dealt with this in two ways. Firstly, those who lost land in the south were given land in exchange, which was of equal value to the land they lost. This is known as Esdeger or Exchange Land. The government also issued land to other people, usually as a reward for military services. This is known as Gift Land or TMD. Then there is the land that was owned by a Turkish Cypriot or foreigner before 1974. This is known as Turkish Title, Pre-1974 Title and Foreign Title."

What happens if someone makes a claim on your property?

"At present, Cypriot claims can only be made through the new Immovable Property Commission, which has been set up by the TRNC Government. There are currently over 300 cases pending there. Any compensation awarded by that commission will be paid for by the TRNC Government, out of a special fund set up for this purpose. The government has issued various statements to the effect that it will offer a ‘state guarantee' on all TRNC title deeds.

"How this will be dealt with in the event of a political solution in Cyprus, no one knows for sure, but it is widely expected that the UN-backed Annan Plan will be a base for any future settlement. So if you have made significant improvements to the property or land, ie, a new building, it won't be given back to Greek Cypriots, whatever the title. Exchange title has also been given a separate category of protection. Therefore, the issue may be some element of compensation. It is possible to speculate that the government will pay this in the event of a solution. Also, most property experts predict that property prices in the North would increase dramatically, so if you had to pay some compensation, your property would still be worth more than the original price and the compensation put together."

Can you still find out what title deed a property holds?

"In the past it was possible for us to carry out a simple search to find out what title a property held. This is no longer possible as the land registry, on instructions from the Home Office, has stopped revealing this information. The official stance is that all title deeds are of equal status under the laws and constitution of the TRNC, and therefore, people do not need to know this information. But sometimes the type of title can still be seen from the title deeds. It will only show one or two of the previous owners of the land, but if those are the first people who acquired the property after 1974, then we will still be able to tell the type of title. If, however, the land has changed hands several times, it will not be possible to see this. The TRNC just classifies all title deeds now as ‘TRNC title deed', without distinction."

What about TMD land? Is this safe to purchase? If you can't find out what the title deeds are, doesn't that make it very complicated?

"Yes, this is a tricky area because the Anna Plan does leave exposure for TMD land with no significant improvement. However, as I talked about earlier, the government is preventing you from knowing what type of title you are buying. Therefore, if a purchaser were ordered to pay compensation or return a property, they would have to make a claim against the TRNC Government for issuing them with the title deed to the property and preventing them from discovering any possible problems."

If you want to live in North Cyprus, what sort of papers do you need?

"Some people choose to enter on a three month tourist visa, then go to Turkey for one day and get a new three month visa. If you don't want to do it this way, you need to get a residency permit. To get that you will have to prove that you have a TRNC bank account with sufficient funds to sustain yourself without working, and you also need a health check to prove you don't have any infectious diseases. If you do want to work, you need a work permit or a permit to set up a business. You can't get a citizenship unless you are married to a Turkish Cypriot or one of your parents is of Turkish-Cypriot origin."

What taxes are you liable to pay when you own a property and what about inheritance tax?

"There are annual property taxes (emlak vergisi), which are paid to the local municipality. The amount varies and depends on the size of the house, but is usually around 200YTL ( 80£), per year. If a person rents their property out, they must pay tax on the gross rent at 10%. For inheritance tax, there is currently an exemption of 30 times the annual minimum wage, which equates to around £100,000. After that, taxes are payable on the amount, with the upper band being 25%. There is no spouse-to-spouse inheritance tax exemption, as there is in the UK. It is also important to make a will in the TRNC, as the inheritance laws are different to those in the UK."

If you are interested in more info: www.nmplegal.com