WIRE MAGAZINE MYKONOS - A LEGAL ADVICE

The solicitor has a very important role during the process of purchasing a property in Greece. Because of this, we have interviewed Mr Dorotheos Samoladas – Managing Partner at Sarantitis Law Firm - who gave us a general overview about the legal rules during the purchasing process of a Greek property.

What are the steps a buyer needs to take when purchasing a property in Greece?

The procedure of purchasing a property in Greece usually has the following steps:

- finding the property, usually with the assistance of an estate agent;

- before signing any contract, the buyer should appoint a lawyer

- specialising in real estate - to complete the legal due diligence of the property;

- the legal process usually starts with a preliminary contract where the buyer is typically requested to pay a deposit to the seller between 5% and 10% of the agreed purchase price, which will then be deducted at the time of the finale transaction;

- the buyer will also need to secure a Tax Authentication Number from the Internal Revenue Service and designate a Greek resident to receive all relevant correspondence while the buyer is out of the country;

- afterwards, the buyer must open a Greek bank account and complete the purchase or pay the seller from a foreign bank account;

- the buyer has also to appoint a notary public to prepare the contract deed;

- buyer and seller must submit with the competent Tax Office, the property transfer tax return that is drafted by the notary;

- both parties must sign the contract deed in the presence of the notary who will verify and register the transaction in public records;

- the registration of the transfer title and the change of the property’s ownership in the buyer’s name takes place, either at the Land Registry Office or at the Hellenic National Land Registry (cadastre);

- finally, the buyer also needs to register the property online with the tax authorities and annually declare the property when submitting his/her income tax.

What are the main legal aspects one has to know during a purchasing process in Greece?

An investor has to know that the Greek Law provides certain restrictions which should be taken into consideration. In fact, according to the Hellenic Constitution, the use of the land in areas characterised by the State as forest, cannot be changed. Specific conditions exist also for the acquisitions in zones close to military bases and sensitive border areas or close to the coastline; in areas where antiquities or historic monuments are located or where there is a special environmental protection regime. In addition, a buyer has to know that there are two different registration systems in Greece; the system of the Land Registry Office and the system of the Hellenic National Land Registry (cadastre). The first system is based on registration of individuals, while the second system is based on listings of real estate. Currently, both systems operate in parallel but the purpose of the State is to terminate the first system and replace it by the newer cadastre.

What is the lawyer’s role in the purchasing process?

Employing the services of a lawyer is highly advisable to carry out a control of the ownership title, that the property is of the proprietorship of the seller and of possible burdens on the real estate. The lawyer will work in case of any title objections arise and will ensure that the buyer will receive clear title to the property upon completion. The lawyer will help the buyer to comply with the tax legislation and will further ensure that the property in question follows government planning regulations, as well as that all taxes due by the seller have been paid. [S]he will oversee the whole purchase procedure until its finalization - collecting the necessary legal documentations on buyer’s behalf and ensuring that the Notary has correctly drawn up the contract deed. The engagement of a lawyer will help the buyer to avoid errors, omissions, potential pitfalls and traps, as well as disputes which can be difficult and costly to resolve. [S]he will further assist the buyer to understand the whole process, the financial limitations and the commitments [s]he is undertaking.

What are the legal costs one has to face when purchasing a property in Greece?

- Transfer Tax: all property purchases in Greece are subject to taxation. It is obligatory for the purchase tax to be paid prior to signing the contract. The transfer tax is charged at 3% of the “objective value” of the property or of the value agreed in the contract. If the purchaser buys a property from a developer – it means a newly built house or apartment – a tax of 24% + VAT needs to be paid. On the contrary, if the property is not newly built its transfer is subject to transfer tax, which is 3% of the “objective value” of the property or of the purchase price agreed.

- Land Registry Fees: Land registry fees include registrar’s rights, certificates, and  stamp duty. Registration fees are 0.475% plus 24% VAT where the Land Registry Office system operates and 0.575 % plus 24% VAT, where the Hellenic National Land Registry operates.

-Notary Fees: the notary fee is calculated in most cases at 0.8% - 1% (plus 24% VAT). Additional fees are usually payable for power of attorneys, tax declarations, certificates and legal copies.

- Legal Fees: there is no minimum amount of remuneration for any property transaction for lawyer’s fees. It is upon the mutual agreement between the buyer and his lawyer and is usually between 1-2% of the purchase price, plus 24% VAT. The Lawyer’s fee is determined by the extent of the service provided by the lawyer. For example, additional fee usually applies in cases where the buyer will also need some preparatory work done by his lawyer (tax registration, opening of a bank account, official translations etc.).

- Real Estate Agent Fees: the estate agent’s fee is freely traded and subject to an agreement. Usually, this is agreed at a fee of 2% of the actual price paid for the property to be paid (plus 24% VAT).

How long does the purchase process take?

It usually takes around four to six weeks from the preliminary contract to the sales contract.

How the right of property is preserved in Greece?

When a developer company fails, for instance. Under the Greek Constitution, the right to property is under the protection of the State. The only limitations that may be imposed legally on the right of ownership on real estate are the ones concerning public interest. Greek laws extend the protection of property rights to both foreign and Greek nationals and the legal system (Civil Code, Code of Civil Procedure, as well as various special laws) protects and facilitates acquisition and disposition of all property rights. When a developer company fails, the buyer is entitled to participate in the bankruptcy proceedings only as a bankruptcy creditor of the developer and to claim the due to the afore mentioned cause reimbursement of his money.

What are the Inheritance Tax implications of holding a real estate in Greece?

Inheritance tax law aspects of real estate properties in Greece acquired by foreign tax residents are a bit complicated but usually, individuals are subject to the inheritance tax law of the country of their citizenship or the country of their residence or the country where their assets are located (lex rei sitae). Real estate properties located in Greece, regardless of the citizenship or the residence of the heirs, are taxed pursuant to Greek tax inheritance rules. There is one exception to this, i.e. in case an international treaty has been put in place between Greece and the country of citizenship or residence of the foreigner. However, Greece has entered into internation al tax treaties for the avoidance of double taxation as rgards inheritance tax law, only with four countries, i.e. Germany, Spain, USA and Italy. Inheritance tax rates under Greek law are determined on the basis of two factors; the relationship of the deceased person with the heir and the value of the estate. In particular there are three classes of heirs; depending on the class of the heirs and the value of the inherited property, the inheritance tax rates escalate from 0 to 40%.