Andreas Kyriakou, Advocate & Legal Consultant at NIKOS NEOPHYTOU LAW PARTNERS article at Great Britain – Cyprus Business Gazette
The Rental Control Law (law no.23/1983) is generally accepted by the legal circles of Cyprus (and not only), that it is completely anachronistic which results in the creation of major distortions in the real estate market in Cyprus.
This law was enacted after the 1974 invasion with the ultimate goal of protecting refugees, who were forced to flee to the free territories, from potential advantageous owners. Similar laws were enacted in some other European countries after wars or catastrophes- «Acts of God».
The two main provisions of the above law that create distortions are:
1. The amount of the maximum increase that may be required by institutional tenants, which is set every 2nd April by the Council of Ministers. Unfortunately, the decisions of the respective Ministers’ cabinet are not based on purely economic criteria and the prevailing market, but rather on other external factors and / or political expediencies that have significantly reduced rent increases in rental properties. Anyone can notice this in the large gapin rentals of identical properties that do not fall under the above Law.
2. Until the recent amendment of the Law, the conditions under which an owner can regain possession of the property by terminating the lease and in connection with the slow pace of proceedings before our courts, is almost impossible (unless the tenant do not appear to the court and file his defense) for an owner to recover his/her property for any reason in less than five to seven years.
The consequence of the above was that properties under the Rental Control Law, which account for about 50% of the total number of properties for rent in cities, are rented with much lower rents than other properties, creating owners, tenants and two-speed properties. Furthermore, due to this differentiation and categorization of properties (in rental controlled and non-rental- controlled), there was a significant increase in rents, which was recently presented in non-rental – controlled properties due to the fact that half of the properties have gone out of market and therefore all demand was concentrated in the other half.
On 31/01/2020, the amendment of the Rental Control Law was published in the Government Gazette.
The positives of the modification are:
- For the first time, the Parliament dared to touch the “sacred cow” called theRent Control Law.
In the ways of service, the electronic service of documents was added to the defendants / applicants for rent, which facilitates and accelerates the legal / judicial process.
- The acceleration of the legal procedure for eviction of a tenant who does not pay his rent. Defendant’s/ Applicant for Rent is responsible for proving that he/she has paid his rent in order to be able to defend his case in the Court. If the Registry of the Court is not convinced that the lessee
paid the dues due then the owner’s action / application proceeds at a rapid pace, in the absence of the lessee, which means that the Court’s order to expel him will be issued.
However, despite the above amendments, which at first are judged with a positive eye, some questions arise:
1) In case the tenant pays the due rents and registers his defense, what happens if he stops paying the remaining rents until the lawsuit is heard? Will the landlord remain exposed without the rental income until he succeeds in issuing a court order and enforcing it?
2) The notice given by the court to the tenant to deliver the possession must not be less than 90 days but may provide up to 12 months. In other words, it is up to the Judge to decide whether the owner will lose the rent and how much would that loss be?
3) What will happen to tenants who owe rent that precedes the amendment of the Law? The transitional provision of Article 37 of the law in short, obliges landlords who their tenants owns them rents before 31/01/2020 to wait for 12 months so that they are entitled to claim all due dues by applying the amended law.
4) Property owners who do not belong to the rental controlled law- lease on the tenants should wait 5 to 7 years in order to be able to issue and enforce a decision of the District Courts;
Another concern is that, over the time, it is likely that there will be some difficulty in proving whether a property falls within the jurisdiction of the Court of Rental control. In the recent decision of the Supreme Court on the political appeal number 30/2019 Fysentzidis v. K&C SNOOKER & POOL ENTERTAINMENT dated 06/06/2020, the Supreme Court agreed and adopted the interpretation of the term given to the first instance judgment of the District Court of Famagusta in Konstantinidis v. Vrachimi, no. 567/1991, dated 30.6.1993 stating that “immovable property” means «a building under or for rent for a residence or shop located within the limits of a controlled area and completed by 31 December 1999 » and emphasizing that in order for a property to fall within of the Rental Control Law must be proved to have been offered or was for rent before 31 December 1999.
Over the time it will be very difficult to prove whether a property was rented or offered for rent before 31/12/1999. For example, if someone buys a property in 2020 from someone who in turn bought it from someone else in 2010 and then later from someone else and so on, it is almost impossible to provide safe evidence that the specific property was rented or offered for rent before December 31, 1999. Perhaps the above decision is the starting point for the abolition of the Rental Control Law.
According to the above, it is understood that the Rental Control Law, even after its amendment, still creates tenants, owners and two-speed properties within the same market.
In addition, I would like to reiterate that in 2020 it is not meant for the state to decide on the maximum increase that an owner can claim from his tenant.
It is the position of the author that a radical change must be made regarding the Rental Control Law so that this separation of real estate and litigation can be stopped and each owner and tenant can be equal before the Law and at the same time justice can be attributed with speed and reliability.
For further information and consultation contact Andreas Kyriakou, Advocate & Legal Consultant at NIKOS NEOPHYTOY LAW PARTNERS at [email protected]
The content of this article is intended to provide general information only. It is not to be substituted for legal advice or taken to be as legal advice.