Lease deal scholarship foundation ‘scandalous’

Lawmakers on Thursday said the matter of a building in Aglandjia, owned by the State Scholarship Foundation, rented out for a meagre €500 a month, will be resolved either amicably with the current tenant or else end up in litigation.

The issue came up at the House audit committee, after earlier in the day daily Politis ran a story alleging a ‘scandalous’ arrangement between the foundation and the tenant, who since 2013 has been renting out the building for €500 – whereas it could fetch as much as €3,000.

It transpires the tenant happens to be the foundation’s former lawyer, who in 2013 got the lease contract after the foundation had rejected other offers.

The real estate itself occupies a space of 511 square metres and has been valued at €385,000 for tax purposes.

In 2000, the original owner donated the building to the foundation, under the agreement that the proceeds from its use to go toward funding scholarships.

The foundation’s current board says it’s still saddled with the lease contract entered into by the previous board back in 2013 – in what they described as a lopsided deal. But legal complications prevent them from canceling the lease contract.

In parliament, MPs heard that in 2009 the then board of the foundation assigned its law firm to find a tenant for the building. The offers made were deemed to be unsatisfactory, and at that point the law firm itself proposed that it rent the premises.

The current chairman of the board at the State Scholarship Foundation, Giorgos Skalias, explained that the lease contract signed with the law firm effectively turned the tenant into the owner, as it permitted the tenant to renew the contract without any annual increase in the rent, while also giving the tenant the right to sub-let.

Attorney Artemis Artemiou, of the same law firm now holding the lease, told MPs the agreement stipulated that he – as the tenant – would undertake to renovate the building. He estimated the total renovation cost close to €300,000.

The low rent is a tradeoff in exchange for renovating the building.

For his part, Auditor-general Odysseas Michaelides pointed out that the tenant himself alleges that renovation expenses are paid in specie.

For example, the law firm would hire contractors, electricians and plumbers to do the work, paying them not in cash, but by providing them with legal services.

According to the auditor-general, no documents or receipts for this exist.

Weighing in, Zacharias Koulias, chair of the House audit committee, said this amounted to illicit activity as anyone paying for construction or other works must issue a receipt – even where the transaction involves the exchange of services, as appears to be in this case.

Coming back on this, Artemiou said the law firm has not provided the foundation with the receipts for the work carried out on the building.

But, he insisted, the receipts do exist and would be presented in court should the matter end up there.

Speaking to media after the committee session, Skalias said the issue may be resolved in one of two ways – either the tenant agrees to a substantial hike in the rent or “we will go to court.”

The foundation’s current legal advisor, attorney Chris Triantafyllides, opined that the only way to void the lease contract would be to demolish the building and have it rebuilt. This idea had been proposed in the past, but went nowhere.

Akel MP Irini Charalambidou said discussion of the matter will continue, and that the people sitting on the board of the foundation who signed the 2013 lease contract should be summoned to parliament to “explain themselves.”

According to Politis, normally the building in question should bring in €3,000 a month from rent – instead of the €500 now.

The attorney-general is aware of the case, with reports saying he might greenlight a criminal investigation.