REAL ESTATE IN GREECE – A SHORT GUIDE

By Bettina Richter

 

A. LEGAL FRAMEWORK

Acquisition of ownership

The rights on real property may differ in extent and kind (full ownership, usufruct, bare property etc.). This outline is restricted to offering information about the transfer of full ownership either absolute or joint.

The basic way to acquire ownership of real property is through a contract between the owner and the acquirer that for a lawful cause (e.g. sale, gift) the ownership is transferred to the acquirer. The contract is necessarily vested the form of a notarial deed and needs to be registered in the competent Land Registry, failing which there is no legal transfer of title.

Other ways to acquire ownership on real estate is by succession, auction or through positive prescription. In case of positive prescription, it is necessary for a person and/or his legal successors to possess the property with the intention to being its owner(s) for a period of more than twenty years (good faith is not required). It should be noted that there are still cases of properties, usually outside the town plan, in which the title of ownership is through positive prescription rather than through inscribed notarial deeds.

Registration of contracts

The registration of contracts for the transfer of ownership is made with the local Land Registries on the basis of the names of the persons who are the contracting parties. To ascertain if a person is the legitimate owner of a property, one should normally examine the status of the inscriptions existing under his name as well as those of his legal predecessors. The protection granted to the persons acquiring rights following the inscription of a contract for the transfer of ownership (and to third parties who have made searches of the relevant books of a Registry) is based on the rule of the priority in time. If a contract for the transfer of ownership is signed before another contract, but the second contract is registered first in the Land Registry, it is this second contract which has been inscribed first that will prevail.

In the last years, Cadastre Offices (Ktimatologia) have started being formed in Greece. The Cadastre offices include a geometric description as well as the status of ownership of each property. The Cadastre offices which in most cases now work in parallel with the existing Land Registries, will finally replace the latter and will be the only competent services for the registration and maintenance of the titles of ownership on real property. Attention should be brought to the fact that the long inactivity of an owner to register his property with the Cadastre Offices as well, in the areas where the same have started operating, may result in the loss of his rights in favour of the State.

Last, it should be also noted that apart from the titles of ownership, encumbrances and legal actions in connection with the property must also be inscribed in the local Land Registry (or Cadastre Office) in order to be legally effective.

Possible restrictions on real estate

Certain restrictions may apply either to acquisition or the development of the property.

Restrictions on acquisition may apply in case of real estate that is situated in areas of outstanding natural beauty or near coastline or at the border. Greek and EU citizens are exempted from the restrictions applying to properties situated at border areas while it is also possible for non-EU citizens to buy such property following a special permission granted by the competent authorities. The restriction does not apply in case of inheritance succession.

Restrictions on development of real estate may apply in forest areas or in areas where antiquities have been located. Also there might be buildings of historical, artistic or architectural heritage which the owner is not allowed to demolish or remodel in a way departing from their initial form and structure.

B. THE PROCEDURE STEP BY STEP

• The first step that an investor should take, is to appoint a lawyer who will conduct an investigation with the local Land Registry (or Cadastre Office), in order to ensure that the seller is the legitimate owner of the property and that the property at issue is free of encumbrances and claims of third parties. More particularly, the lawyer should ensure that the rights of the seller are based on a duly registered title and that there is lawful succession of previous titles, each one of them based on the immediately previous one. He should further ensure that the property is properly described in the titles and is free of liens, easements, foreclosures, mortgages and claims of third parties. In case that he will trace any defects and irregularities, he may ask for their rectification by the seller prior to taking any further step and if the seller fails or can not rectify them, the lawyer should advise his client accordingly. In order for the lawyer to start his search, he should be normally provided with a copy of the last title of ownership and a topographical diagram of the property.

• The investor is entitled to appoint a Notary Public of his choice, who in cooperation with his lawyer will prepare and certify the proper execution of the contract of sale and purchase.

• Depending on the occasion, it may be advisable for the investor to appoint a civil engineer who may inspect the current condition of the building under sale or advise whether a plot of land is buildable and on what terms.

• A condition precedent for any investor entering into any notarial deed in Greece, is to have acquired previously a Tax Registration Number (AFM) from Greek Revenue. The relevant procedure for obtaining one, can be carried out by an authorized attorney.

• The investor can grant a notarial Power of Attorney to his lawyer or other individual, authorising them to carry out all formalities and/or execute the contract on his behalf before the Notary Public, if he can not be present in person. The power of attorney may be executed before any Greek notary public or any competent consular office of Greece at the state of residence of the authorizing person. Powers of attorney certified by a foreign notary public are also acceptable in Greece, provided that they have been apostilled according to the Hague Convention of 1961.

• The agreed purchase price is normally paid either by a bank’s draft upon execution of the contract or by a wire transfer which will normally be completed at a later point in time. In the last case and in any other case that the price consideration is not collected upon the execution of the contract, the seller will normally ask for security in a form to be agreed (a right to register a mortgage, an annulling clause if the money are not received until a deadline etc.) covering the risk of not receiving eventually the funds though he will have transferred the property. Any other way of payment can be of course agreed by the parties (e.g. by instalments or following bank financing etc.).

• It is a common practice, for the parties to sign a preliminary contract in the form of either a notarial deed or a private document with the view to binding each other until the execution of the primary contract. In such preliminary contract, the basic terms of the future transaction are set out (purchase price, way of payment, deadline for concluding the transaction etc.) and an advance payment (earnest) is usually made to the seller. Attention should be given to the fact that a private preliminary contract (which is usually preferred by the parties as they avoid thus the cost and formalities that a notarial deed involves) as opposed to a notarial one, is not actually binding in the sense that the Seller can be forced to proceed with the conclusion of sale, but it can rather be considered as a letter of intent. The benefit therefore of making a private preliminary contract apart from creating a moral obligation to the parties, is basically that it can facilitate the recovery of any expenses made or earnest paid by the innocent party in anticipation of the sale, if the sale were eventually cancelled by fault of the other side.

• The parties have to file a joint application with the competent tax office for the assessment of the transfer tax, which has to be paid before execution of the deed of sale (for the tax assessment see below).

• The seller must normally provide the investor with a full series of ownership titles and other documents (e.g. the construction permit of a building etc.) and take care also of issuing a number of certificates that are required for making the deed of sale (e.g. certificate that the building is compliant with the building regulations in force or that any irregularities have been legalized, certificate of energy efficiency of the building, certificate of settlement of all previous State and Municipality taxes and duties, certificate that a plot of land is buildable etc.) and which certificates, depending on the case, may take some time to be prepared.

• Last, the investor must take care of inscribing the deed of sale with the competent Land Registry (or Cadastre Office at the places it has started operating) once the same has been properly executed.

C. TAXATION

Transfer tax

The transfer tax is assessed on the higher rate between the objective value of the real estate and the consideration provided in the contract and is born by the buyer. The rate has been currently set at 3.09 % of the price. The objective value and the transfer tax arising therefrom, is calculated by the competent tax office on the basis of the application filed by the parties (see above) in which the basic features of the property (surface, location etc.) are stated. In case of a new building sold by a constructor, instead of the above tax the investor may be obliged to pay VAT which currently amounts to 24%.

Recurring Taxes and Charges

The ownership of real estate in Greece is subject to an annual tax (ENFIA) which is calculated on the basis of the objective value of each property in conjunction with the total value of real estate that one may have under his ownership. This kind of tax applies to both natural persons and corporations regardless of whether they are resident and/or have their registered seat in Greece. The ownership of buildings within the town may also give rise to an obligation of owner to pay duties to the Municipality for the services of lighting and cleaning the surrounding area (roads etc.) as well as other minor charges.

Property income

Persons that own real estate in Greece but reside abroad are not obliged to submit annual tax returns unless they collect income from such property, as it usually happens to be the income from renting it out. Natural persons are subject to a taxation of 15% for total rent income up to € 12,000, such rate being increased for higher amounts of rent income. Domestic corporations are subject to taxation of 29% of their profits (the Government has announced a gradual reduction up to 26% within the next years depending on the development of National Economy) irrespective of its source or quantum. Corporations however are allowed to deduct from their gross income all operation expenses while natural persons can not. Natural persons who rent out their property can only deduct a percentage of up to 5% of their respective income for expenses of repairs, maintenance or renovation of their property. If therefore the investor intends to rent out his the property to third parties, he should better consult with his legal advisor in order to decide whether in the circumstances, it would more advantageous to do it directly as the lessor or through a domestic corporation that he will establish for that purpose.

D. OTHER COSTS

Apart from the transfer tax and the purchase price, the investor will incur the cost of registering the contract in the Land Registry (or Castrate Office) which amounts to 4.75 ‰ of the purchase price plus VAT plus minor amounts for duties.

The investor will naturally incur the cost of his lawyer which can be freely agreed by the parties taking into consideration the difficulties, the value at stake and the amount of work required for accomplishing the transaction.

He will also incur the fee of the Notary Public which is calculated on the basis of the purchase price in accordance with specific rates provided for by the law.

Both parties may also need to pay commission to any estate agent if they have employed one for the transaction.

Closing remark

Though rather self-evident, it should be always born in mind that each transaction with regard to real estate, presents unique features and elements that can hardly be covered by a short outline.

                                                                                                                                                                   

The present article should not be regarded as a substitute for professional advice and the author will not accept any liability for any information provided or views expressed. Copyrights reserved.