The developer just isn’t getting on with your villa.
You’re keen to see it finished, but days, weeks and months are passing with nothing happening.
So what’s the problem?
The story goes along these lines.
You get excited about having a holiday home in the sun in Cyprus.
You agree to buy a brand new villa, off-plan. In other words, the developer shows you the plans of the finished villa and the plot where they’ll built it.
As you negotiate the purchase contract for your villa in Cyprus, you come across the concept of “stage payments”.
On the face of it, perfectly reasonable. The construction of your villa in Cyprus is broken down into a series of logical stages, and you pay for each stage as it’s completed.
The developer will try very hard to get you pay for work up front, and they’ll also try to skew the stage payments so you pay more for the earlier stages than the later ones.
In the case of our own villa, the developer’s opening position was they wanted us to pay 75% of the total cost of the villa up front. Not unusual. (We laughed at them and reduced it radically.)
The Scam Evolves
So the developer is now sat with a big pile of your hard earned cash, and you’ve got nothing. Except a signed Contract that says what they’ll do.
Work probably starts on your villa (though I’m sure there’s cases where even that doesn’t happen), and the developer starts to call in the stage payments you’ve agreed in the Contract.
Until a point is reached when you owe the developer less to finish the property than it’ll cost them to do so.
And that’s when work stops.
Say your dream villa is going to cost €400,000. You agree to pay 50% up front, and the remaining 50% in five 10% stage payments.
Work starts and as well as paying the up front element, you also make the first three stage payments as work progresses.
You’ve paid a total of 50% up front (€200,000) and three of the 10% stage payments (€40,000 each) – a total of €320,000.
If you’re villa finishes, you’ll owe the developer a further €120,000.
But the problem is your villa is at best 60% complete.
So logically, it’ll cost the developer €160,000 to finish it.
That’s €40,000 more than he’s going to get from you, so work stops. Probably forever.
Sadly, there’s probably none.
You think you’re protected by the Contract. Sorry, no you’re not. Whilst legally you’ll have a watertight case, no Cypriot lawyer will take your case on.
And even if you can find one that will, it’ll take years to get to Court. Don’t think about using a UK lawyer, they’d never be able to get a case into the Cypriot Courts.
And even if you get your case to Court and go on to win, your chances of getting your money back are almost nil. The developer will just vanish into thin air.
Don’t believe it? Elias Elia – the guy behind e-Clear (the company behind FlyGlobeSpan and XL Airways debts) – disappeared with over €100m of creditor’s money.
If he can vanish in Cyprus with €100m, what chance have you got to get your €320,000 back?
And the really sad thing is, in the vast majority of such cases, you end up with nothing.
That’s because the developer hangs on to the Title Deeds of ‘your’ land – so it remains his. You end up with nothing. And nobody will lift a finger about it.
Title Deeds Are The Solution
If you have the actual Title Deeds in your name for the land on which your part finished villa is built, you can terminate the Contract with the Developer.
But then you’ve got a part-finished villa you’ll need to get finished.
And from the example above, that’ll probably cost you €160,000 to finish it. So your villa will have ended up costing you a total of €440,000.
But you will have got off lightly. Most people will end up with nothing at all because it’s very rare for the developer to part with the Title Deeds.
Is There An Answer?
If you’re already caught in trap, not one we know of.
If you haven’t bought a villa in Cyprus yet and you’re planning to, here’s our advice:
- Don’t buy off plan. Only buy a finished villa that you can see, feel and touch.
- Only part with money in exchange for Title Deeds. If there are any excuses at all why this can’t happen, WALK AWAY. Don’t believe the “It’ll get transferred when the development is complete” story. It won’t.
- If you want to buy off plan, break the transaction into two. One Contract for the plot and one Contract for the construction. And only pay for the plot in exchange for the Title Deeds. Again, no Title Deeds, WALK AWAY.
- When you’re negotiating the Construction Contract, make sure it has a final date in it. A date when the Contract is deemed breached by the developer if they haven’t finished your villa.
- When you’re negotiating the Stage Payments, make them relate to the actual cost of the build.
- As work progresses, only pay for completed work, not for work to start. And get a qualified surveyor to sign off each stage before parting with any money.
Hard To Believe
You may be reading this thinking it’s just not possible.
It is, it happened to us. And it’s happened to lots and lots of other people we know. Nice people who didn’t believe they’d be ripped off.
Cypriot developers are just so charming and helpful, until they’ve got your money.
Fortunately, we’d done most of things we recommend above, so we were one of the lucky ones. Our villa only cost us €40,000 more than we expected.
Amongst property developers in Cyprus, corruption is endemic and dishonesty is on a scale you just can’t imagine.
You will be told bare-faced lies – the scale of which you just cannot believe.
Remember, Cyprus is the country in which Elias Elia vanished with €100m.
If you think the above is scaremongering, or anybody tells you it’s not true, check out the Cyprus Property Action Group and Lying Builder.