For the locals, it is common to own shares of real estate. This form of shared freehold ownership comes about mainly through inheritance as parents pass on one propert to multiple children and so on. It is worth noting that registering real estate in shares is permitted only for Cypriots and EU nationals and not for others. So, if a non-Eu national wants to buy real estate in shares, transfer will not be allowed by the land registry unless a separate title is issued.
Having real estate transferred in shares, as opposed to a whole share title, has increased considerably in recent years as a result of the lack of title deeds. For example, in a ten-unit project with no title deeds, buyers are convinced by the developer to have the property transferred to them as a one-tenth share and co-owners agree which unit is whose. In such an event the co-owners must sign what is known as a ‘distribution agreement’ which makes clear which share belongs to whom and is deposited at the land registry.
Of course, it is better than nothing and at least an ownership in shares is better than a deposited contract at the land registry. A share can be sold to others, passed on to children, mortgaged and so on. It is a way out for those who are enclaved in this unhealthy no titles situation, but it entails problems which might outweigh this.
Once you have agreed to a share transfer and notwithstanding the obligation of the seller to proceed with issuing the title deed for the whole, which is stipulated in the contract, 99 per cent of the time it does not happen, with unwilling buyers, developers and sellers choosing to ignore it.
If you decide to sell your share, you must offer first to the other shareholders under the same terms/price you can get from a prospective buyer for your share. There are some ways to get around this, but it is not clear cut.
Since the ownership is in undivided share, in the event of a mortgage foreclosure on one of the shreas belonging to someone else, the new buyer may make a claim against your own property if there is no distribution agreement.
When one of the owners wishes to make changes to their property, all of the other shareholders would have to sign the application for a permit as well. Imagine if they are deceased, their share is mortgaged of have numerous beneficiaries. In the end, most carry out their extensions or alterations regardless, making the issue of title more difficult.
If one shareholder does something without approval, then all the other shareholders cannot secure the final certificate of approval and title deed. So, it only takes one of the owners to mess up the whole procedure, though under the new laws a partial certificate of approval and title issue can be secured.
A share value is less valuable, of course, than a title deed for a whole property. Usually banks or valuers adopt a 10 per cent reduction from the value with a title deed, but it could be much more depending on the circumstances and share percentage.
If you are afraid that your developer or seller will go under, perhaps it would be better to have the shares transferred and undertake the responsibility and cost of getting the title deed issued rather than insist on waiting.
Not a healthy situation but as we have said before it is better having a share rather than nothing registered on your name.
Antonis Loizou & Associates EPE – Real Estate Valuers, Estate Agents & Property Consultants, www.aloizou.com.cy, [email protected]27/4/2022