By Barry Spender
Greece can be a bureaucratic nightmare but certain elements of the buying process are a marked improvement on similar systems elsewhere
Whether you are Greek or German, British or Bulgarian, buying a property in Greece begins with a dream. The dream is like a film played in fast forward. It starts with the desire to own a home, continues rapidly with the viewing process when you fall in love with the perfect residence and then skips forward to the moving in and cocktails on the balcony while you watch the sun dip into the Aegean - or some such romantic vision.
All well and good, but the practicalities of buying a home in Greece mean that between the viewing and the celebratory cocktails there is a maze of red tape that, at best, will take the sheen off the glazed cherry and, at worst, scupper the entire transaction.
In many aspects of life, Greece can be a bureaucratic nightmare but, contrary to popular belief, the buying system is not the maze of thorns and dead ends that most people expect. Certain elements of the buying process here are a marked improvement on similar systems elsewhere.
For example, the purchaser is protected against "gazumping", the underhand system in England where the vendor can sell to another buyer at any stage of the process until contracts are exchanged - even when he/she has already accepted an offer.
So how do you get the process moving?
The key to a comfortable passage is a good, independent lawyer who will be thorough in chasing up the paperwork and in protecting you every step of the way. If you do not speak Greek then it is important that you have someone who speaks your language. Reassurance is vital, especially if you are conducting the transaction from any distance.
How do you find a good lawyer? Many people already have a "family" lawyer who will be able to recommend someone well-versed in property law. If you don't have one of these, then the agent who is selling the property will usually recommend a few lawyers in the area.
Some people might raise their eyebrows about using an agent's choice of lawyer, but usually they will only recommend them because they have found them to be competent in the past. Any doubts and you can ask for recommendations. If they give you a list of people who have bought property using their services make sure you call two or three of them to find out about their experiences.
In order to avoid endless trips to offices it's a good idea to make the lawyer your proxy. He will then sign documents on your behalf, which is another good reason to have one who speaks your language.
To buy a property in Greece you will need a tax number (the AFM). Citizens and residents will already have this but foreigners will need to register. This should be the first job that your lawyer does. If the property is being bought jointly each of the purchasers will need his or her own tax number.
Although you will only hand over the final payment at the end of the procedure when you sign the contracts, it is important to make sure that the money is in position as early as possible (and that you know what budget you are working within). Usually you will need a deposit of around ten percent once your offer has been accepted. There are also taxes and fees to bear in mind (see below).
Many people deal in cash. This is the simplest form of transaction and has remained popular because for many years Greek banks have been so backward in offering mortgages. Now the banks are getting their act together so getting a mortgage is becoming more common. The purchaser will need proof of employment or income. If self-employed they will need to see previous tax returns.
If the purchaser is a non-Greek, then the bank may still require a Greek guarantor. But if you are looking to use a Greek bank, again you should start the process early.
Once the purchasers have had an offer accepted they will need to pay a deposit - usually around ten percent. At this point a pre-contract agreement is drawn up by the lawyers, which will prevent the vendor from dealing with another agent or selling to another purchaser.
If the searches expose information not previously known (for example that it's an illegal building) then the purchaser can withdraw from the sale and get the deposit back. If, however, he pulls out for no reasonable cause then he loses the deposit.
On the other hand, if the vendor pulls out without reasonable cause, he is liable to repay to the purchaser the deposit (or double in some cases).
One of the things you will pay your lawyer for is the gathering together of all the relevant paperwork. You need four items:
The deeds of ownership: an obvious and straightforward requirement establishing that the vendor is indeed the owner of the property.
- A topographical plan: an important safeguard for the boundaries of the property. Your lawyer will get a surveyor to do this properly.
- A planning permit: this is to make sure that the house you are buying is actually legal.
- A Forestry Commission certificate: if you are looking to buy a property outside the local building zone you will need this to confirm that the plot you are intending to buy is not considered forestry.
If there are no problems with the paperwork the whole of this process should take between a fortnight and a month. Occasionally, however, there may be a delay on a piece of paperwork.
Multiple owners: usually this is not a problem, as multiple owners will normally appoint one or two of their number to act for all of them. If one of the owners starts to cause problems, it is probably wise to walk away from the deal.
- Outstanding debt on the property: this can cause delays but need not be terminal if arrangements are made by the vendor to pay money to the bank at the same time as the contracts for the property are signed. The purchaser will need to trust the judgement of his lawyer.
- Tax clearance: the vendor needs a tax clearance form from the tax office to show that he does not owe tax to the state, as well as an E9 form to prove he has declared his property.
- Irregularities on planning permits and topographical plans: in the past, planning laws have been routinely ignored with owners building a house of, say, 120 square metres when they only have permission to build 100 square metres. This makes the property illegal. In order to proceed with the sale, the owner will need to legalise his building by applying for planning permission and paying the penalty incurred. The legalisation process takes about three or four months. Sometimes a building can't be legalised because, for example, it may have been built too close to a neighbouring building or because it has been built higher than the local authority permits. In these cases consult your lawyer.
- Ownership disputes: because there is no complete land registry, there can be disputes about who actually owns the land, especially as squatting for 20 years effectively gives the squatter the right to ownership. Sometimes when properties have been handed down through families for generations, no deeds actually exist. In this case the vendor needs to legalise his ownership with the public notary through a xrisiktisia (a document signed by him and witnessed by neighbours to prove that he really does own the property).
- An aera: This usually occurs in towns and cities when the vendor sells the building rights to the possible floors above you: this point of law is a personal choice for the purchaser.
The contract is drawn up by the public notary. It will usually be signed by the lawyers for each party at the notary's office. The notary will witness the contract.
The purchaser can attend and sign if he wishes. If he is a non-Greek he is obliged to have the contract read to him in his own tongue by an interpreter which his lawyer will arrange. For a fee of between 80 and 200 euros he can also have it translated.
The original is kept at the public notary's office, a second is sent to the registry office and the purchaser takes a third copy.
The purchaser is liable to pay purchase tax on the property he buys. As per applicable law, in the areas where there exists a fire department, the tax rate is set at nine percent for a value of up to Ä15,000 and at 11 percent for values above this amount. The lawyer should inform you at the start of the process what the figure will be.
This may depend on a number of things. If you are a Greek first-time buyer then the property is effectively tax-free because of the allowances permitted. This can also vary depending on family circumstances.
The tax you pay will also depend on whether the purchase price in the contract is entered as the actual price (the amount of cash that changes hands) or the taxable price (the amount that the local authority says it is worth).
There can be a major difference between these two prices which must both be entered on the contract. It has become standard practice to enter the taxable price as the actual price: whether this is tax avoidance or tax evasion is a grey area in the law and purchasers who want to enter the lower price may find that their lawyer declines to sign the contract on their behalf. In which case, they have to sign themselves.
The government recently announced that VAT would be applied to newbuild properties from 1 January 2006. Other tax changes are in the air so purchasers are advised to clarify the tax situation with their lawyer as early as possible in the process as it will considerably affect the final financial outlay.
There is no Capital Gains Tax in Greece at the moment so profit made on the property stays with the vendor.
Apart from paying tax on the property, the purchaser will also face a number of other costs in completing the deal. These are:
- Lawyer: around $1,500-2,000
- Surveyor: around $500
- Public Notary: around two percent of the purchase price
- Lawyers' Association: 1 percent of first $44,000 and 0.5 percent of the remainder of the purchase price (eg on a property whose purchase price is $100,000, the fee will be $440 plus $280 - a total of $720)
In the event of the owner's death, the property will automatically revert to their next of kin. Death duties may be payable depending on the value of the property although this can be avoided if the property is made a Parental Gift to children. If there are no children then a will should be made.
Cocktails on the balcony
Best served chilled: shaken not stirred.
* Compiled with the help of Mary O'Connor, a partner in O'Connor Properties in the Peloponnese (www.oconnorproperties.gr)
(Posting date 2 November 2006)
Readers enjoying these articles may wish to subscribe to the Athens News by visiting the website and following online directions at http://www.athensnews.gr.
HCS readers can view other excellent articles by the Athens News writers and staff in many sections of our extensive, permanent archives, especially our News & Issues, Travel in Greece, Business, and Food, Recipes & Garden sections at the URL http://www.helleniccomserve.com./contents.html
All articles of Athens News appearing on HCS have been reprinted with permission.