On May 22, the House of Representatives approved with some amendments, and after much discussion, the government’s proposals regarding rents owed by coronavirus-struck tenants.
As is well known, a number of tenants, both residential and commercial real estate, have faced and will continue to face liquidity issues due to the spread of the pandemic and restrictive measures introduced.
Some of them are good tenants, who have so far been consistent in their obligations but have found themselves in financial difficulty due to the prolonged inactivity caused by the lockdown.
However, another group of tenants is trying to take advantage of the situation by demanding excessive reductions or suspension of rent payments.
The purpose of this article is to inform the public on the new state of affairs formed with the government proposals regarding the rights and obligations of landlords and tenants, being approved by parliament.
The government’s first proposal voted through, regards tax incentives for landlords to lower rents.
Essentıally the state, acknowledging that a massive reduction in rents imposed by law would be both unfair and unconstitutional, so it decided to encourage landlords to voluntarily come to an understanding with their tenants who need some help.
In the event a property owner decides to proceed with a rent deduction, then the state will provide him with a 50% tax credit on the discount they made.
In order for a landlord to benefit from the tax incentive, the rent deduction must be between 30% and 50% of the total rent.
The rent deduction must be made for a maximum period of three months.
It is understood that for the property owner to be eligible for the tax credit, they must be paying income tax that exceeds the credit.
For example, for a monthly rent of €1000 with a 40% discount for three months, the total discount is €1200 and the maximum tax credit that the owner will benefit will be €600.
The second provision concerns real estate subject to the rent law.
In December 2019, Parliament amended the rent law allowing for faster evictions, in cases where bad tenants systematically did not pay their rent on time.
What changed is that essentially, the burden of proof of rent payment was transferred to the tenant.
In the event that tenants cannot prove that they have paid their rent claimed to be due by the landlord, then the case is taken to court, and a trial takes place much faster than before.
And it can now be carried out without the physical presence of the tenant.
Under COVID-19 decrees, the owner is deprived of the right to make use of the relevant provision of the law on evictions from April up to and including September 2020.
This means that if a tenant does not pay the rent for one or more of the above months, the landlord does not have the right to file for an eviction order through the courts.
He does, however, maintain the right to legally demand that delayed rents be paid.
We are confident that good landlords will be able to come to a mutually satisfactory arrangement with consistent tenants who really need this discount.
After all, it is in nobody’s interest to see a possible dispute being dragged through the courts, with all the ensuing consequences.
The writer is Chairman of the Cyprus Property Owners Association