What Is Mortgaged Property in Cyprus?

What a Mortgage on Property in Cyprus Means

A property mortgage is registered with the Department of Lands and Surveys. The entry appears in the land register and shows that the property serves as security for a debt. Until the mortgage is discharged, the owner cannot freely sell the property without the creditor’s consent or repayment of the debt.

Mortgages are not limited to individuals who have purchased a home with a loan. Land and apartments are often mortgaged by developers to banks to finance construction.

Types of Encumbrances

In addition to a mortgage, the register may contain other entries (memos, charges, prohibitions) that affect the transaction:

• Mortgage. The property serves as security for a loan.
• Court restrictions. A prohibition on disposal imposed following a claim by a creditor or another party.
• A sale agreement deposited by a third party. The property may already have been sold to another buyer.
• Easements and other third-party rights. For example, a right of way or a right to install utilities.

The buyer’s lawyer identifies all encumbrances through a search at the Department of Lands and Surveys, which is a mandatory part of the transaction.

How Mortgaged Property Comes onto the Market

If a borrower stops making payments, the creditor is entitled to enforce the mortgage against the property. The sale of mortgaged property is governed by the law on the transfer and mortgage of immovable property. The procedure includes notifying the debtor, publishing a sale notice and conducting an auction.

Sales take several forms:

• Auction. The property is offered for sale through a public notice. Auctions are largely conducted electronically, with the terms and date specified in the notice.
• Direct sale. A bank or asset management company sells the property through a catalogue or agents, often without an auction.
• Sale through an asset management entity. Loan portfolios are often transferred to specialist companies.

Recent legislative amendments have strengthened debtor protection during the sale of mortgaged property. They introduce additional periods for complaints and debt restructuring negotiations, so auction procedures and the range of properties reaching auction are changing. Before participating, you should check the current version of the law and the terms of the specific auction.

Who Sells Mortgaged Property in Cyprus?

Properties are offered by various sellers:

• Banks, such as Bank of Cyprus, which has a Real Estate Management Unit (REMU), and other credit institutions.
• Loan portfolio management companies, such as Altamira and Gordian, selling assets transferred to them by banks.
• KEDIPES. A state-owned company managing assets of the former Cyprus Cooperative Bank.
• Private creditors, where the mortgage is registered in their favour.

The terms and sale procedure depend on the seller, so information should be requested directly from them or through a lawyer.

Why These Properties Attract Buyers

The main attraction is that auction prices are often below market value. However, a discount is not guaranteed, and its size depends on the particular property, its condition, location and competition at auction. Some properties sell at close to market value, while others remain unsold.

Buyers consider this type of purchase for investment, resale and rental purposes. However, a low price does not remove the need to assess the property’s actual value and potential additional costs.

The “Trapped Buyers” Issue

A separate issue in Cyprus concerns “trapped buyers” — purchasers who have paid for a property but have not received a title deed. This happens because the developer mortgaged the property to a bank and did not discharge the mortgage. The legislation addressing this issue has changed several times, and some provisions have been declared unconstitutional. This highlights the importance of checking for an existing mortgage before making payments, particularly when buying from a developer or during construction.

How to Check a Property Before Buying

1. A land registry search. Confirmation of the owner, mortgages, memos and court restrictions.
2. Permit checks. Planning permission, building permit and Certificate of Final Approval.
3. Debt checks. Municipal charges, utility bills and communal maintenance fees.
4. Inspection and technical assessment. With a valuer or engineer where possible.
5. Price analysis. Comparison with similar properties in the area.
6. Auction terms. The deposit amount, payment deadlines and consequences of withdrawal.
7. An independent lawyer. They check the documents and assist with registration.

Purchase Costs

The usual transaction costs are added to the property price:

• transfer fees on resale property: 3% up to €85,430, 5% on the amount between €85,430 and €170,860, and 8% above €170,860, subject to any applicable reductions or exemptions; different rules apply where the sale is subject to VAT;
• VAT, if the property is sold as new and is subject to the tax;
• stamp duty: 0.15% up to €170,000 and 0.20% above that amount;
• legal fees and registration of the sale agreement;
• renovation costs, settlement of debts where these pass to the buyer, and utility connections.

Annual immovable property tax in Cyprus was abolished in 2017.

Can Foreign Nationals Buy Mortgaged Property?

The rules for foreign nationals are the same as the general property purchase rules. EU citizens purchase property on the same basis as local buyers. Third-country nationals generally require permission from the Council of Ministers, and the number of properties they may acquire for personal use is limited. The requirements should be checked with a lawyer before participating in an auction.

Can You Buy Mortgaged Property with a Mortgage?

Yes. A buyer can purchase a property using a loan, but the bank will assess both the borrower and the property, while auction deposit requirements and payment deadlines are usually stricter than in a conventional transaction. If financing is needed, arrangements with the bank should be made before the auction.