Legal tips to prevent costly mistakes on Greek real estate

September 2, 2019

 

 

Buying a property in Greece can be a difficult process. Lots of checks need to be held on a number of issues and often unexpected hurdles may arise, just when you thought that the process was about to wind up.

 

Greekguru.net spoke to one of the country's leading legal advisers, Bernitsas Law, to get some insight on what buyers should - and should not - do. 

 

Nikos Vouhiounis, a senior associate in Bernitsas Law's real estate department, says the right legal and technical due diligence is necessary, spelling out the steps that are needed. He also talks about the legal costs involved, how procedures in Greece compare with other European countries and gives an update on what is going on in the market right now.

 

 

 

GG: When looking for real estate in Greece, what are the key legal considerations that a buyer needs to take into account?

 

Vouhiounis: In the case of an already built property, either of residential or commercial use, a potential purchaser must conduct a legal and technical due diligence. The legal due diligence aims to confirm the ownership status, including indisputable and continuous succession of ownership for at least twenty years, as well as the absence of any liens and encumbrances or third party claims.

Searches include onsite visits to the local Land Registries and Cadastre offices. Also, if a building regulation is in place for the specific asset, its terms should be reviewed and considered.

 

The technical due diligence of a built property confirms that the asset complies with its building permit and that no town planning violations or other deficiencies of a technical nature exist.

 

However, in the case of an undeveloped asset, there are quite a few issues which a potential real estate investor should examine and confirm before proceeding with their investment. One of the most important is the town planning status of the property. This includes the nature of the property, i.e. residential, rural, forestry etc. and the applicable town planning regulations, such as permitted uses, building co-efficiency and building coverage, permitted heights and any existing or future obligations for in kind, or in money contributions, for the implementation of the town plan in the specific area.

 

The regulatory framework as regards the process for the issuance of a building permit, as well as of an operational permit, if applicable, should also be closely examined in the case of an undeveloped asset. Furthermore, it should be confirmed whether there are any restrictions that apply to the specific asset and its future exploitation or development.

 

Finally, the property should be cleared from forestry and archaeological issues, especially in the case of undeveloped land which is located outside the town plan.

All such matters must be established in the context of the technical due diligence of the property.

 

The legal due diligence should confirm not only undisputable and continuous succession of ownership by the current owner and the absence of any registered encumbrances, liens and third party claims, but also any legal restrictions on transfer which may impede or even prevent the transfer from happening.

 

GG:What kind of legal costs does the purchase of a property in Greece entail?

 

Vouhiounis: Given that acquiring property in Greece can be either in the form of a share deal, in the context of which the buyer purchases the SPV owning the property, or in the form of a direct asset acquisition, different costs and duties apply. However, in both cases the buyer needs to conduct a thorough due diligence on the property and, in the case of a share deal, on the SPV.

 

In a share deal, the transfer is completed by way of execution of a private agreement between the seller and the buyer for the transfer of the SPV shares. In this case, the costs of the buyer are the fees of its professional advisors in the context of the due diligence of the SPV and of the property, i.e. legal, technical and financial. In this form of transaction no obligatory fees or taxes apply.

 

An asset deal takes place by way of execution of a Notarial Deed before a Notary Public. In such a case, the buyer must pay a 3 percent transfer tax calculated on the purchase price (or 24 percent VAT in the case of a first transfer of a new build, the building permit of which was issued after 2006). Notarial and Registration fees also apply, totaling between approximately 1-1.5 percent of the purchase price. Finally, in this type of transaction, legal and technical advisors' fees shall also apply in the context of the legal and technical due diligence carried out on the property.

 

GG: How different is the procedure of buying a property in Greece, when compared with other European countries?

 

Vouhiounis: From our involvement in cross-European real estate transactions and also through our co-operation with international legal firms and other real estate professionals, it appears that there are both similarities and differences between Greece and other EU countries.

 

The fact that in most EU countries the regulatory framework on town planning issues is more straightforward and the same applies to the construction and operational permits and approvals.

 

Additionally, the long time existence and operation of Cadastre Offices in such jurisdictions makes the confirmation of a property's ownership status and the check for any existing liens and encumbrances an easy task. Also, Greece has the particularity that due diligence from an archaeological perspective is necessary in almost all areas throughout Greece, especially in the case of rural land, which is not an issue in most European countries.

 

Finally, it appears that in most European countries the acquisition of property and the development thereof does not require the submission of as many documents and certificates to the competent public authorities or the issuance of so many permitting approvals and decisions from central governmental and local authorities, as is the case in Greece.

 

 

"The newly elected Greek government has announced a number of tax incentives and related measures aiming to increase the interest of foreign but also national investors in the Greek real estate market."

 

 

GG:What are the most common mistakes foreign buyers make when acquiring real estate in Greece? 

 

Vouhiounis: In order to avoid any mistakes when entering the Greek market, foreign buyers, whether private individuals or institutional investors, should obtain advice from reliable and well reputed professional advisors before completing a real estate deal.

 

Such advice should include legal, technical and, if necessary, tax and financial. All due diligence findings should be taken into consideration, analyzed and assessed, before completion, but also in the negotiations stage.

 

Ownership, town planning and permitting processes and real estate taxation should be carefully examined and analyzed. All applicable rules for the completion of the transaction should be followed and complied with, in order to avoid any unpleasant surprises.

 

It should always be borne in mind that Greek bureaucracy and the number of documents and certificates which need to be obtained before completion is achieved, may create delays. The same applies to building and operational licensing processes, where multiple public authorities are involved. Therefore, especially in the case of large scale real estate investment projects, whether commercial or touristic, prior contact with the competent authorities for obtaining their preliminary feedback is advisable.

 

In the case of joint ventures or partnerships between a potential buyer with a local partner, the conduct of a thorough due diligence on such partner's financial status and business record should also be carried out.

 

GG:What is the mood in the real estate market right now?

 

Vouhiounis: During the last 2-3 years we have experienced a continuous interest in the Greek real estate market from foreign investors especially in tourist projects located around the Greek islands but also on the mainland. This was even more intense as regards hotels in the center or in the greater area of Athens. In particular, the center of Athens has become a booming area for new hotel investments, either in the form of renovations and re-branding of existing hotels, or the construction and operation of new ones.

 

Many of the international hotel operators which had no presence in Greece to date, such as the Four Seasons, Hyatt, Marriot and Wyndham, now operate hotels in Athens. As for statistics, it is worth mentioning that the average overnight stay of tourists in Athens has increased from 2-3 nights to 4-5 or even 6.

 

Additionally, the Golden Visa program implemented by the Greek Government, which gives access to a five year visa to the owner of real estate in Greece (minimum value 250,000 euros) has created a new market for non-EU individuals acquiring residential properties all over Greece. This visa allows non-EU nationals to travel within all EU countries, while it also covers their families.

 

Also, the tremendous increase of the Airbnb market has led to a huge demand for small and medium size apartments and houses in many tourist areas around Greece but mostly in Athens. This has resulted in an increase in prices in this type of asset but also in the revival of some underprivileged areas of Athens.

 

In a bid to emphasize its interest in the sector, the newly elected Greek government has announced a number of tax incentives and related measures aiming to increase the interest of foreign but also national investors in the Greek real estate market. Also, it has promised a new regulatory framework to facilitate the permitting process for the development of large scale real estate projects. As a first step, one of the top priorities of the new government is the adoption of all necessary governmental decisions which shall allow the commencement of the development of the Hellinikon Project.

 

Do you want to increase the exposure of your business? Looking to boost your credibility?

 

The team at greekguru.net can help you meet your goals!

 

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