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Cyprus

Auditor general describes bad government land deal as a lemon

Auditor general Odysseas Michaelides

The auditor-general has called ‘scandalous’ a prior government decision to swap state land with a parcel of private land, pointing out that the state got a raw deal.

In 2005 a developer purchased private land in Ayios Athanasios, Limassol, for the purpose of building seven building blocks with 78 apartments.

However the company was prevented from developing the land after the Water Development Board said development would adversely impact the existing river bed in the area.

A hydrological study stated: “Unless drastic measures are being implemented in restoring the natural river bed, rainwater will still be accumulated in the area and the proposed development will face severe flooding problems.”

In July 2010 the company sued the state on the grounds that local town planning authorities had by then ‘unlawfully’ failed to issue them a permit to develop. The developers were demanding compensation for the delays.

Limassol district court dismissed the application, on the grounds it had no jurisdiction, but the plaintiffs – the developer – pursued the matter with the supreme court.

After much back-and-forth, in November 2016 the cabinet approved the transfer of state land to the developer in exchange for the private land which had remained in limbo. The state land was 13,500 square metres, while the private land was 7,570 square metres.

The offer was made on condition that the developer withdraw all legal claims. In March 2017 the developers withdrew their application with the supreme court.

It allowed the land exchange to take place.

In the interim, however, the department of lands and surveys had rejected the developer’s application for a development permit in Ayios Athanasios, finding that developing the area would endanger the structural integrity of the buildings proposed to be constructed there. This was chiefly due to hydrological considerations.

It was also recommended that the surrounding area in general be designated as a protected zone.

At the time the land switch was decided, authorities had estimated the value of the state land to be given to the developer to be worth €1.125m. The value of the private land, given to the state, was estimated at €1.134m.

Authorities therefore concluded that the swap was not detrimental to the state.

However, following an anonymous complaint filed to the auditor-general, who investigated the case, it transpired that the state land – now privately owned by the developer – is currently valued at €2.207m, whereas the land in Ayios Athanasios is worth €927,800.

The value of the land in Ayios Athanasios – which the state now owns – has since dropped because it cannot be developed due its morphology.

In a statement, the auditor-general concluded that the state has been left with a ‘lemon’ and that the government, through its inept handling, got a bad deal.

All this might have been avoided, the auditor-general added, had the government at the time not opted to swap the land – which was a deviation from the normal practice of appropriating private land and then simply compensating the private owner.

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