Acquisition of real estate property in Greece by non residents
A. Brief description of the procedure for obtaining real estate property
1. Finding the property – assistance of a real estate agent
The buyer may seek the assistance of a real estate agent in order to find a property to acquire. Real estate agents usually provide their services according to a written mandate that they receive from the buyer. This mandate should include the amount of the broker’s fees and should specify the period during which it is binding.
Real estate agent’s fees are not statutorily provided, therefore the parties may freely agree on that. However, in practice the fees are usually around 2% of the price of the property as indicated in the contract, while it is likely that the parties agree on a smaller percentage in big transactions. V.A.T. at 23% is applicable. The fees are payable upon the conclusion of the contract.
2. Legal due diligence (title search) of the property.
The lawyer of the buyer makes a research on the legal aspects of the contracts/ title deeds concerning the real estate property. This search takes place at the Land Registry Office and/or the Cadastre Office of the region where the property is located and aims at finding the contracts/ title deeds proving the right of the seller and his predecessors in title on the property (up to at least 20 years before the current contract), as well as any encumbrances (mortgages, pre-notices of a mortgage, foreclosures and court claims) against all those persons.
In particular, it must be verified whether the contracts/ title deeds are accurate and continuous, and also that the contracts/title deeds are properly registered in the Land Registry Office/Cadastre Office.
Finally, if the property on sale is an apartment (i.e. a «horizontal» property in a building) it is advisable to check the establishment of the «horizontal» property, as well as the regulation of the building.
3. Technical survey of the property
In Greece, and especially in large urban centers, the widespread construction activity since the 1960s created a regime of intense urban sprawl and congestion. As a result, many areas were built either without the existence of construction regulation by the State, either contrary to the regulations, where such regulations were in force.
However, in order to deal with this situation and because of the fact that the intense construction activity was in service of the urbanization in Greece, the Greek legislator occasionally adopts laws settling those unauthorized constructions or the violations of the regulations.
For the above reasons, when the property to be transferred is land or lies off the town plan, it is necessary that an engineering is recruited, in order to check whether the property meets all the legal conditions for construction.
Also, it is advisable in all cases to verify compliance of the property with the legislation regarding the settlement of illegal constructions and the settlement of semi-open spaces, as stated in the recent laws 4014/2011 and 3843/2010 respectively.
The above mentioned laws provide for the suspension of sanctions for unauthorized structures for thirty (30) years and for the maintenance of the semi-open areas for forty (40) years, as long as the owners pay a specific fine, following the procedure set by the above-mentioned legislation.
4. The pre-contractual agreement – earnest money
Before drawing up and concluding the final contract of sale, the parties may agree and sign a pre-contractual agreement, according to which the buyer will give an amount as an advance payment against the agreed total price.
According to article 369 of the Greek Civil Code, contracts that create real property rights need to be concluded before a notary. The same would normally apply (according to article 166 of the Civil Code)
to the pre-contractual agreement of sale. In practice, however, the pre-contractual agreement of sale is usually done in the form of a private agreement between the seller and the buyer, without the involvement of the notary. This entails the risk that the contents of the contractual agreement, when it is not made before a notary, may not be legally enforced -and hence are treated as “gentlemen’s agreements”. The reason why in practice the parties do not involve notaries is to avoid costs.
5. Acquisition of a Tax Registration Number by the foreign buyer.
In order to conclude the contract of sale, it is required that both parties, (i.e. the buyer too) have a Tax Registration Number in Greece, hereinafter referred as «A.F.M. » Foreigners who are residents abroad receive an «A.F.M.» by the Tax Office for Foreign Residents (4 Metsovou str, Athens).
The process is relatively simple and it is completed at the Registry Department of the above mentioned Tax Office, as long as the following documents are submitted:
1. A certified copy of the passport of the foreigner. 2. Officially translated authorization, if a proxy applies for and receives the A.F.M (depending on the occasion the authorization may require apostile) 3. A document in standard form, called M1, titled “Statement for the acquisition of A.F.M / Change of personal information” 4. A document in standard form, called M7, titled “Declaration of the taxpayer’s relations”.
A foreigner, who has his residence abroad, qualifies for the acquisition of A.F.M, provided that he has appointed a tax proxy, both for the receipt of the A.F.M. and for the submission and the clearance of the relevant tax declarations. The appointment of a tax proxy is also necessary so that the authorities notify the tax proxy for any document addressing to the tax payer who is resident abroad. The personal information of the tax proxy (name, ID number, residence address, correspondence address and his own A.F.M.) should be inserted in the above mentioned form M7.
If the documents are duly submitted, the AFM is usually issued on the same day.
6. Real Estate Transfer Tax (F.M.A.)-V.A.T. on new buildings.
As from 01.01.2006 (only for the buildings for which the building permit was issued after that date), a V.A.T. of 23% is imposed on the first sale of newly built buildings, by a building constructor or any other person who deals professionally with the construction and the sale of buildings.
Regarding real estate property, for which according to the above paragraph there is no obligation for payment of V.A.T., the transaction is charged with Real Estate Transfer Tax (hereinafter referred as F.M.A), which is imposed on an increasing scale (namely at 8% of the value of the property, as indicated in the contract, up to the amount of 20.000,00 € and at 10% for any further value). The Real Estate Transfer Tax should be paid to the competent Tax Office by the buyer prior to the conclusion of the contract. Previously it is necessary that the buyer has submitted to the Tax Office the relevant statement on real estate transfer tax (Statement on F.M.A.), which is drafted on a given standard form and which is checked on its accuracy by the Tax officers.
7. Exemption from payment of the F.M.A.
The buyer is exempted from payment of the above described F.M.A., when the transaction concerns the acquisition of his primary residence, provided that the buyer or his spouse or a minor child of his is residing in Greece and none of these persons has other property that can meet their housing needs (Article 1 L.1078/1980, as amended by Article 21 L.3842/2010).
These provisions apply only where the purchaser falls into the following categories: a) Greek citizens, b) Greeks in origin that re-domiciled from Albania, Turkey and the former Soviet Union, c) citizens of member states of the European Union, d) recognized refugees under the provisions of Presidential Decree 96/2008 and e) third country nationals who enjoy the status of long-term residency in Greece, under the provisions of Presidential Decree 150/2006.
Furthermore, this exemption is granted to a single person as long as: 1) he/she buys a residence on an agreed price up to €200.000,00 , including the value of a parking space and a storage space. Each of those spaces should be up to twenty (20) square meters and it is required that these spaces are part of the same property and that they are acquired at the same time with the same contract.2) he/she buys land on an agreed price up to €50.000,00.
The above amounts may increase, depending on the marital status of the beneficiary, the number of his/her children etc.
If the buyer transfers the property or creates any right on the property, excluding mortgage, within five (5) years since the purchase transaction, he/she is obliged, before the transfer or the creation of the right, to pay the relevant tax on the value of the property.
8. Drafting the contract
The law requires that the sale contract is drafted and concluded before a notary public. The choice of the notary is usually a privilege of the buyer. However, the notary’s role is to safeguard the transaction and must be neutral.
The presence of a lawyer before the notary upon signature of the contract of sale is mandatory when the value of the property, as indicated in the contract, is greater than the amount of €29.347,03 regarding properties in the region of Athens and Piraeus, or when it is more than the amount of €11.738,81 regarding every other region. Of course, the appearance with a lawyer is possible in any case, even for properties that are sold on a lower price than the above-mentioned, if the parties (or one of the parties) chooses to have a lawyer involved to assist with the transaction and protect his rights.
The seller has to adduce a series of documents that are listed below. It is advisable that this list is updated together with the notary because it may be that some of the paperwork is no longer required or that additional documents are needed.
– Identity card or passport.
– Certified copy of the planning permission (if the property is a building).
– Tax clearance certificate, as evidence that the seller has no debts against the Greek State.
– Insurance clearance certificate, as evidence that the seller has no debts against social security institutions, in case that he is an employer or if it is a construction company.
– A confirmation that the seller has submitted the relevant statement to the Tax Office, if the property on sale has been acquired by inheritance or donation.
– A confirmation of the Municipality where the property is located, as evidence that there is no Real Estate Duty (called TAP) owed for this property.
– A declaration that the property on sale has not generated income in the last 5 years. In the event that the property has generated income, the seller has to adduce a certificate by the competent tax office confirming that the income was declared.
– A declaration that he has declared the property being sold among his assets (form E9).
The buyer has to adduce at least the following documents:
– Identity card or passport.
– Receipt of payment to the competent tax office of the Real Estate Transfer Tax (F.M.A.), otherwise a confirmation that the buyer is exempted from its payment under the provisions for obtaining its primary residence.
9. Registering the contract at the Land Registry.
Under Article 1192 of Civil Code, all contracts that are concluded inter vivos (including donations the cause of which is the death of the donator) and that create, transfer or eliminate a right on real estate property, are registered at the competent Land Registry.
If the contract is not registered, the transfer of the right of ownership (the acquisition) is not completed.
B. Restrictions
The Greek legislation imposes restrictions on the acquisition of property in the Greek territory, only to foreign persons who are not citizens or residents of Member States of the European Union and the European Free Trade Association and in so far as the real estate property to be bought is located in border areas, according to Articles 24 et seq N.1892/1990.
The same restrictions are set regarding acquisition and transfer of shares or change of partners in companies of any legal form that own any property in the above areas.
It is noted that the border areas are: the former prefectures of Dodecanese, Evros, Thesprotia, Kastoria, Kilkis, Lesvos, Xanthi, Preveza, Rodopi, Samos, Chios, Florina and the islands of Thira and Skyros, and the former provinces of the former counties of Nevrokopi of the former prefecture of Drama, Pogoni and Konitsa of the former prefecture of Ioannina, Almopia of the former prefecture of Edessa, and Pella and Sintiki of former prefecture of Serres.
Any person or legal entity that falls within any of the above limitations may apply for the suspension of those limitations, stating the purpose for which the property will be acquired.
This application is submitted to a committee, which provides its services for a term of five (5) years in every decentralized administration under the decision of the relevant Secretary-General. The committee is composed by the Secretary – General as president and his deputy, and representatives from the Ministries of Defense, Economy and Marine and Citizen Protection, who are appointed with their deputies by the respective authorities.
The committee is authorized to suspend the restrictions, provided that it decides at a majority of the total number of members, and that the representative of the Ministry of Defense casts an affirmative vote.
Another restriction is set in Article 28 of the Law 1892/1990, regarding the acquisition by a contract inter vivos of any property right on private islands or islets in Greece-wherever they are located-, and on any building on them. In order to complete the transaction, it is necessary to obtain the permission of the Minister of Agriculture, which is given under the prior consent of the competent department of the Ministry of Defense, -General Staff of Army, Air Force or Navy-, depending on the region.
C. Special issues – Visa permit entry of non EU member-state citizens in Greece and residence permit.
Law 3386/2005, as amended by Laws 3907/2011 and 4018/2011 designates the general requirements of entry and for obtaining the residence permit in Greece of citizens of countries that are not members of the European Union, within the meaning of Article 17 § 1 of the Treaty establishing the European Community.
Under the provisions of the law mentioned above, every citizen of a non EU member – state country entering the Greek territory should have a passport or other travel document that is recognized by international conventions. These documents should bear a visa, if so required by applicable international conventions, Community law and national regulations.
The visa is issued by the Greek consular authority, at the country where the applicant has his residence. Visas are divided into short-stay visas (visa “Schengen”) and long-stay visas (national visa), considering issues relating to the public order and the security of the host country, as well as to the public health.
The national visa is issued under the above mentioned laws, according to the provisions on the residence permit. Its duration depends, as in case, on the duration of that permit.
From all the above it is clear that the visa to Greece for travel purposes (the so-called “travel visa”) should not be confused with the residence permit (the so-called “national visa”), for the granting of which the non EU-member citizen should apply immediately when entering the country and, in any case, before the end of the time that his travel –visa expires.
However, the residence permit (national visa) is only granted in specific cases, which are listed and specified in Law 3386/2005, notably including the following:
A. Residence permit for employment (including employees under dependent employment contract or contract for provision of services or work, business executives, temporary movers for provision of services, sports coaches, members of artistic groups, spiritual authors, members of foreign archaeological schools).
B. Residence permit for independent economic activity (regarding independent economic activity, development of investment activity).
C. Residence permit for specific purposes (education, vocational training, scholarships- special programs, studying at military schools, acquisition of medical specialty, financially independent persons, adult children of diplomatic staff, domestic staff of diplomatic missions, foreign press correspondents, officers of known religions, researchers e.t.c.)
D. Residence permit for exceptional reasons (humanitarian reasons, public interest, victims of trafficking).
E. Residence permit for family reunification (family members of non EU-member country citizen, separate residence permission for the family members of non EU-member country citizens, residence permission for family members of a Greek citizen or a citizen of an EU country).
Therefore, a citizen of a non EU member-state who intends to buy and, ultimately, acquires real estate property in Greece is not eligible to receive a residence permit on the grounds of his real estate right, but he has to fall into one of the above mentioned categories.
In contrast, a citizen of a non EU member- state who intends to acquire real estate property in Greece and for that purpose he wishes to visit the country, is able to submit an application to the consulate of the country of his residence in order to obtain a visa to Greece for travel purposes (travel visa). The travel visa is limited in time, always granted under the general terms and conditions of the Law 3386/2005, and may contain specific terms and conditions, depending on the country of origin of the applicant.