No money to pay potentially huge claims
The government’s decision decades ago to treat Turkish Cypriot properties in the government-controlled areas as effectively having zero value could come back to haunt it in the coming years if it finds itself liable for both decades of loss of use and compensation at today’s market value, the Financial Mirror has learned.
According to legal expert opinion, a whole nest of property cases could be brought against the government on human rights grounds by Turkish Cypriot property-owners.
Moreover, this would be a separate issue from any other potential court cases relating to Greek Cypriot property in the north or other property in the British Bases.
Law of necessity has already been dealt a huge blow
One of the main messages from our sources is that it doesn’t really matter what the current law of the Republic of Cyprus says. What matters is whether it is in accordance with the European Convention on Human Rights.
Moreover, there is no connection in law between the violation of property by one person and the fact that this person’s property is being violated elsewhere.
These princples are particularly relevant with respect to the law of necessity, a principle used by the Cyprus government to deal with the unusual situation on the island. But the law of necessity has also had important consequences for human rights and was dealt a huge blow in the Aziz case.
In June 2004 Cyprus lost a case brought by Ibrahim Aziz, a Turkish Cypriot living in the south, to the European Court Human Rights. The Court judged that the Republic of Cyprus was in violation of the right to free elections and the prohibition of discrimination by not allowing Aziz to register on the electoral roll. (Under the Constitution, Greek Cypriots and Turkish Cypriots are supposed to be registered separately.)
Just a few months later in September 2004, the Cyprus Supreme Court judged in favour of Arif Mustafa, a Turkish Cypriot residing in the south for several years, who wanted to move back to his property.
The government withdrew its appeal in February 2006, when it became clear that it would lose the case.
After the Greek Cypriot refugees living in the property were rehoused, Arif Mustafa became the first Cypriot to have his property restituted after the division of the island.
Various scenarios
Once the principle is established that individual human rights override the law of necessity, a whole raft of uncomfortable scenarios are possible, according to our sources, with potentially huge consequences for government finances.
These include:
*A Turkish Cypriot sues the government for building on his land. He sues first for loss of use, in the form of rental income at market value for decades, plus inflation, plus interest. He also sues for compensation for expropriation. Compensation for expropriation is normally paid at market value on the day of expropriation. No doubt interest on that compensation is payable afterwards.
*A Turkish Cypriot sues a Greek Cypriot who has built on his land that has not been expropriated. (According to our sources, more than 5,400 Greek Cypriot families have built houses on Turkish Cypriot land that was not expropriated.) The Greek Cypriot, who was encouraged to build on the land by the government, asks to be indemnified against the government. In other words, the government pays the damages. The damages, as above, come under two heads: rental income at market value since 1974, and compensation for the expropriation. Since expropriation has not yet happened, it will be valued at today’s market value, which will rise every year.
*A Turkish Cypriot refugee sues a Greek Cypriot refugee for trespass on his land (or other way round of course). Trespassing is a criminal offence, implying that the police will have to be involved.
*A Turkish Cypriot refugee charges the government a 6-month hotel bill because the government insists on six months of residency in the government-controlled areas before the Turkish Cypriot can get his property back.
*A Greek Cypriot or Turkish Cypriot sues the government for not allowing him to register his sale (transfer of title) at the land registry. Currently the government will only allow sales of Greek Cypriot refugee property between members of the same family.
*A Greek Cypriot refugee sues a Turkish Cypriot refugee for trespass and using the principle in the Orams case, forces the sale of the Turkish’ Cypriot’s land in the south to pay his compensation.
Where’s the money?
If enough of these cases were brought to trial you can see why questions are now being asked about the government’s unfunded liabilities and whether any of this is taken into account when calculating the budget deficit according to Maastricht criteria.
Just looking at the potential liabilities for loss of use (ie excluding any claims for expropriation), Stelios Orphanides, writing in this Sunday’s Politis, made a rough estimate of CYP 1 bln (13% of GDP).
It is clear that this money will have to come from the taxpayer.
Our legal source explained that after 1974, Turkish Cypriot property, amounting to some 400,000 donums (555 million square metres), was in effect used as a policy tool to cushion the effects of 1974.
Thus, property was handed over at little or no value to Greek Cypriots who themselves had fled their own homes.
Although this was done with good intentions, it had an unfortunate consequence: because the property was treated as having no value, it was not managed at commercial value.
This is one of the reasons why the Guardian of Turkish Cypriot Properties, the public body set up in the early 1990s to handle Turkish Cypriot property, is running an annual deficit (once unpaid rent is taken into account). No one knows how big its accumulated debt is.
People are now beginning to ask how one can manage all that property and come up with a deficit.
Of course, the market did work in a way. It is known that some refugees rented a property from the government at a minimal rent of, say, CYP 1 per month, but then rented it on at market value, of say CYP 550 per month.
When the day comes that the Turkish Cypriot wants compensation for loss of use, the Turkish Cypriot will be entitled to market rent, so the government will have to find another 549 per month plus interest.
But since the Guardian fund is in deficit, it is the Cyprus taxpayer who will be called upon to pay.
Fiona Mullen
