Central Bank of Cyprus simplifies financing for apartments in buildings without a full set of permits

A new Central Bank directive has been published in the Government Gazette of Cyprus, changing the procedure for granting new loans and reviewing existing ones for the purchase of properties in jointly owned buildings.

The main change: under certain conditions a credit institution may now accept an updated separate title to the property without requiring the building permit and planning permit for the whole building. Previously, banks generally required the full set of original permits, even if a specific apartment already had a separate title.

The relaxation does not apply automatically but only when a specific condition is met. At the time of transfer, the property must have an updated title.

What must not appear in that title is also important: it must not state any restriction on voluntary transfer of ownership or on mortgaging. If such a restriction is registered in the title, the simplified procedure does not apply.

A separate requirement applies when the property is provided to the bank as security for a loan. In that case the bank is obliged to obtain a valuation of the property.

The valuation report must take into account a special plan held at the relevant District Lands Office, which reflects the current actual state of the property. In other words, the valuer relies not only on the title but also on the current documentation for the building.

The directive separately addresses the situation where the purchase of a whole building is financed with subsequent demolition of the existing structure and construction of a new one.

The relaxation does not apply here: before the bank releases loan funds for the construction work itself, the developer or buyer must present the permits already obtained for the new construction.

The change may simplify some transactions involving apartments that have a proper separate title but lack the full set of original building permits for the building: obtaining a mortgage for such properties will become more realistic than before.

However, the directive does not mean that a bank is obliged to approve a mortgage, and it does not remove legal due diligence of the construction documents as such. In supporting such transactions it is still necessary to separately check the content of the title, any restrictions on transfer and mortgage, how current the property plan is, and the specific requirements of the chosen lender, which may differ between banks.