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13
Buying a Home in Cyprus
A Practical Guide to Successful Real Estate Purchase - Top Tips Supplement

Performance guarantee
One way to help protect your interests when buying property off-plan is to
obtain a ‘performance guarantee’ from the developer’s bank.
A performance guarantee secures claims made by the buyer on the
developer from default in delivery or performance of the terms of the
contract. In this case, we are considering the delivery of Title Deeds.
For a performance guarantee to be most effective, your Contract of Sale
needs to specify a date by which the developer undertakes to transfer
separate Title Deed, which is usually 2 to 5 years after taking delivery of
the property. Although most contracts I’ve seen do specify a date for the
transfer of separate, some do not; this has financial implications as you will
see below.
If the developer fails to transfer Title Deed in the specified time period, you
can make a claim against the performance guarantee. This should enable
you to recover your money - and depending on the actual wording of the
guarantee you could also receive interest on that money.
How much does it cost
Banks charge varying amounts for performance guarantees depending on
the level of risk involved - say 1.75% - 2% per annum of the guaranteed
sum. So if the guaranteed sum is the cost of the property, for this example
€400,000, and the bank charges 2%, the performance guarantee will cost
€8,000 per annum.
If the developer has contracted to transfer Title Deeds to the property not
later than five years after delivery, the performance guarantee will cost
€40,000.
If the developer’s bank refuses to issue a performance guarantee or
charges an exorbitantly high fee, you can be sure you’re making a
potentially high-risk purchase.
© Nigel Howarth
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