Paying the Rent
The Risk Watch Column: By Dr Alan Waring
No tenant likes paying the rent but most meet contractual obligations to the landlord and pay up on time. Some, however, do not. Non-payment is always a problem for any landlord. With residential tenants, the landlord is likely to find that the ‘system’, legally and practically, is loaded against him. It is not unknown for bad tenants to fail to pay rent for a year or more and it may cost the landlord as much as the lost rent in legal fees to even get the matter to court.
There are two contrasting rent issues in Cyprus. One concerns the problem of residential tenants who refuse both to pay their rent and/or to quit the property. The other concerns the widely circulating view that the British government has refused for some 38 years to pay its rent to the Cyprus government for the Sovereign Base Areas (SBAs).
Does the UK Owe Cyprus Rent for the SBAs?
A considerable number of Cypriots have expressed to me their great annoyance at the ‘fact’ that the UK has failed since 1965 to honour its obligations under the Treaty of Establishment to pay the Cyprus government rent for its military bases. I have read many similar assertions in the newspapers and on the internet. The sum of £12 mln (some say per year, others say over 5 years) is often quoted. The ‘fact’ that the UK has not paid this supposed rent has become repeated endlessly and has long been an embedded part of modern Cypriot folklore.
The more I asked Cypriot friends and acquaintances about this issue the more the ‘fact’ was thrust back at me and the more I could see how sensitive it was. Typically, respondents asserted that the UK’s refusal to pay the rent and the arrears all the way back to at least 1965 meant that, with interest, the Cyprus government was now owed billions (sic) and, by implication, this had contributed to the country’s financial crisis in March 2013! Putting myself in their shoes, I would probably be very upset too. But, is the assertion of non-payment true?
This intriguing question led me to put on my forensic investigator’s hat. All the assertions I had seen or heard were linked to obligations apparently included in the Treaty of Establishment between the UK and Cyprus when the latter was granted its independence as the Republic of Cyprus in 1960. Having obtained a copy of the Treaty No 5476 of 12 December 1960 and its appendices, which are all in the public domain, I was unable to detect any reference either to the SBAs being leased to the UK or to any rent to be paid. This makes sense since, if the SBAs per se had been leased or rented, then they could not have been termed ‘sovereign’ – that would be an oxymoron. Sovereign means ‘under sole state authority or ownership’.
Reinforcing this, on page 118 of the Treaty, Sir Hugh Foot on behalf of the UK, stated that the UK does ‘not intend to relinquish their sovereignty or effective control over the Sovereign Base Areas and that therefore the question of their cession does not arise’. On page 119, the Cypriot representatives Arch. Makarios and Dr Kücük, replied that they wished ‘to assure you that the Republic of Cyprus will not demand that the United Kingdom should relinquish their sovereignty or effective control over the Sovereign Base Areas’ unless the UK government ‘should at any time decide to divest themselves of the aforesaid sovereignty or effective control over the Sovereign Base Areas, it is understood that such sovereignty or control shall be transferred to the Republic of Cyprus’.
So, where does the mysterious popular assertion of the very specific figure of £12 mln rent for 1960-65 come from? It is probably a confused interpretation of Appendix R of the Treaty which covers Financial Assistance to the Republic of Cyprus (RoC) and is very specific in referring to monies that the UK will pay as grants and aid (not rent). Over the period 1960 to 1965, the UK government agreed to pay RoC ‘by way of grant’ the sum of £12 mln ending on 31 March 1965. During the final 6 months of that period, and similarly before the end of each succeeding 5 year period, the UK agreed to review the grant aid in conjunction with the RoC to ‘determine the amount of financial aid to be provided’ to the RoC for the following 5 years. Appendix R also lists some additional grant aid of £1.34 mln for one-off infrastructure and other specified items, plus a loan if required for extension of the electricity supply on the island.
For reasons I do not know, the initial £12 mln grant aid for the period 1960-65 does not appear to have been followed through with subsequent 5-yearly agreed aid after 31 March 1965. I would guess that agreement could not be reached so it has all been in limbo since.
Grant aid is what the term implies: a gift of financial assistance (not a loan, not a rent and not compensation). There may well be arguments that the UK ought to have leased the base areas and ought to have paid rent for them but, as is clear from the Treaty wording, such arguments have no basis in the Treaty. Interestingly, Arch. Makarios who co-signed the Treaty on behalf of the Greek Cypriots seemed content in signing off on Appendix R; there were several amendments written in as codicil notes from him and Dr Kücük (representing Turkish Cypriots) but none of these suggest in any way that they felt that the SBAs’ status should be leasehold or rented.
Zapping ‘Can’t Pay, Won’t Pay’ Tenants
The SBA case is one where there is no lease and no rent to pay. In contrast, there are large numbers of cases in Cyprus where residential tenants refuse to pay their rent and arrears for long periods. Many are adept at evading both the landlord and the law. However, the administration of justice is so pedestrian and weak that it appears to be heavily biased in favour of the tight-fisted tenant. As an example, a tenant of a house in the Larnaca district stopped paying rent after he claimed to have lost his job. Despite promising the landlord on numerous occasions that he would pay all his arrears, in fact no payments were received in over a year and so the landlord felt obliged to take legal action. However, this sounds easier than it is. Before the landlord can apply to the court for a hearing, he has to have three consecutive demand notices delivered and handed to the tenant in person by an official bailiff. As in many such cases, the tenant proved to be remarkably skilled at never being at home when the bailiff called. It took another year before all three notices were finally delivered. For the final notice, the landlord had to play private detective and follow the tenant covertly from his home so that the bailiff might nab him. It turned out that the ‘unemployed’ tenant was actually running his own business out of sight down a backstreet while nevertheless claiming unemployment benefit. There was also a suspicion that he was claiming his rent (that he had not actually paid) from the Social Security office and may well have been forging the landlord’s rent receipt signature.
So, how can such petty criminals be stopped? Although tempting, the landlord cannot legally take unilateral action such as eviction without a court order or dispose of the tenant’s possessions in lieu of unpaid rent.
Some years ago, Iran had a situation just like in Cyprus, so much so that the rental market virtually dried up. Landlords en masse essentially withdrew their properties. The situation was so critical that the government decided to take radical action. This involves giving tenants only one month’s notice protection and allowing landlords to require 6 months’ rent in advance plus 6 months’ deposit. In addition, if a tenant’s rent is overdue by even a couple of weeks the landlord can request an immediate court order for eviction and arrest and criminal prosecution of the tenant. I am told that all this has fundamentally changed the situation and the kind of abuse so rife in Cyprus is now very rare. A model for the Cypriot authorities to learn from, perhaps?
Dr Alan Waring is an international risk management consultant with extensive experience in Europe, Asia and the Middle East with industrial, commercial and governmental clients. His latest book *Corporate Risk and Governance is at www.gowerpublishing.com/isbn/9781409448365 . Contact email@example.com .
©2013 Alan Waring
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