Guy came to me with a parcel he wanted to buy, before any agreement had been signed on it and before a single euro had been transferred. “I found a great plot in Cyprus. The price is right, the location is right, I want to start planning within a month.” He had already agreed on the terms with the seller in principle, but hadn't yet signed anything, and that is exactly the stage at which he turned to me.
Before Guy signs any purchase agreement, and before he transfers a cent, as in every deal I accompany, I asked to receive the original ownership documents and not only what the agent sent. Within a few days we received the official plan from the Cypriot Land Registry, and something in it didn't match what had been presented to Guy.
The land was not registered as full ownership. It was registered as a leasehold right.
Guy didn't understand how that could even be. He is a veteran developer, has built several projects in Romania and Bulgaria, and knows the routine thoroughly - first due diligence, and only after it a purchase agreement, building permits, execution, sale. In all the markets he knew, land was land and ownership was ownership. That confidence, by the way, wasn't problematic - it was justified in most cases. The problem is that Cyprus, although it sounds like just another ordinary European market, has a legal institution that Guy simply hadn't encountered before. “How could I have almost closed on a plot like this without knowing at all that something wasn't right?” he asked, even before I managed to give him the full answer.
I explained the difference to Guy, because it wasn't clear to him at that moment. In Cyprus the situation is complex: a not insignificant part of the land in the country - especially land originating in state ownership, in institutional-religious ownership, or transferred in the past under long-term leases - is not sold as full ownership (freehold) but as a leasehold right (leasehold) for a fixed term, which can last decades and even longer, but is nonetheless a time-limited right and not absolute ownership.
“So I'm not buying the land?” Guy asked, in a voice that combined astonishment with mild anger. “I'm renting it? We agreed a buyer's price for that?”
I told him that this was exactly the question we needed to answer before going further, and that it had no immediate answer, because it doesn't depend only on the dry legal definition of the right. It depends on what Guy is planning to do with it.
We stopped before signing. We didn't cancel the deal - we simply signed nothing and paid nothing until we understood exactly what was on the table. I asked Guy for time to check several layers at once: what the exact terms of the lease are and how much of the term actually remains; whether the right can be transferred to a third party without specific approval of the original landowner on every transfer; what happens at the end of the lease term - whether there is a regulated extension option, or whether the land and what is built on it revert to the original owner; and how all of this squares with what Guy actually wanted to do there - build a residential project and sell units in it to Israeli investors.
That was the most sensitive point of the whole examination. An Israeli investor who in the future buys an apartment from Guy in this project would not be buying property in the sense he knows from Israel - he would be buying a leasehold right to an apartment. And a leasehold right, unlike full ownership, may be restricted in future transfers between buyers or in inheritance, limited in the time remaining to it, and sometimes also harder to finance through a bank - an issue Guy cannot afford to ignore if he wants to sell to individuals most of whom need a mortgage.
It took us almost a month to get clear, well-founded answers on each of these layers. Guy didn't like the delay. “Every week that goes by, someone else buys parcels in the area,” he told me more than once, and each time I felt he was truly considering giving up the check and moving ahead.
I answered him what I always answer in moments like this, and not only to Guy: a delay that stems from understanding is not a delay - it is preparation. The difference between the two only becomes clear in hindsight, when the developer who waited knows exactly what he has in hand, and the developer who didn't wait finds out from his buyer.
At the end of the check, the picture became fully clear: the remaining lease term was long enough to justify the planned project, the right could be transferred to unit buyers and inherited subject to an approval already anchored in advance in the registry, and the financing restrictions did exist in practice but were manageable, on condition that the sale agreements with the buyers were drafted correctly in advance, with full disclosure that it is a leasehold right and not ownership, and with a mechanism that explains in simple language exactly what happens at the end of the term.
Only then, with all the answers in hand, did Guy sign the purchase agreement and transfer the first payment. He acquired the land. Not because the problem disappeared; it didn't disappear and it won't. It simply became understood. He knew exactly what he was buying, what the implications were for planning and for sale, and what he must disclose to every future buyer before they sign. That is what made him a developer able to sell this project with a calm mind, without fearing that a buyer would discover on their own, at signing or, worse, a year or two after the purchase, that they hadn't bought exactly what they thought they had bought.
The question I would ask in your place
- Do I know for certain whether the right I am acquiring is full ownership or a lease, and what does the difference mean for what I plan to do on the land?
- If I sell to other buyers in the future, can I transfer the right without third-party approval, and what happens if that approval is delayed or refused?
- What happens at the end of the lease term, and what do the buyers from me need to know about it before they sign?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית