Rent Increase in Cyprus. How and when can it be legally imposed.
30 July 2019
A largely discussed issue over recent times is the ongoing and considerable increase in demand, and consequently in prices, of the rental properties across the island. In connection to existing, long term tenancies, this creates an issue, on the one hand, for the tenants as to whether the landlord can impose an increase on the rental price to match prevailing market rates, and, on the other hand, for the landlords who are stuck with very low rents negotiated years ago and as to how they can increase the price to match prevailing market rate. This article explores how and when a rent increase can be legally imposed in Cyprus taking into account essential factors such as the distinction between “statutory” all other tenancies.
Relevant to the discussion of rent increase, it is first important to understand that the rental market can be divided into two categories, namely properties which are the subject of the Rent Control Law (23/1983), as amended (the “Law”) and properties which do not fall within the ambit of the Law. The Law, relates to properties built prior to 01/01/2000, excluding certain specific locations (i.e. outside the controlled areas, as defined by the Law), and it offers protection against rental increase and eviction of tenants who are classified as “statutory tenants”.
A statutory tenant under the Law is a tenant, in such a building erected prior to the year 2000, whose first tenancy period expired or is terminated and the tenant remains in possession of the property (provided that the duration of the tenancy is more than 6 months and that the tenant is not a third country national). Where a tenancy qualifies as a statutory tenancy the matter of imposing a price increase is mandatorily governed by the Law, irrespective of any provision of any tenancy agreement (whether in force, expired or terminated) and any disputes in connection to rent increases between the landlord and the tenant are resolved in a specialty court, namely the Rent Control Court. According to the Law a landlord can only request a price increase every two years and such an increase must not be higher than the maximum percentage set by the Law. The maximum increase was originally set by law at 14% and thereon the Council of Ministers issues an order every two years revising the maximum increase rate. Pursuant to the latest decision the maximum increase is zero until April 2021. Based on the above, if a landlord is requesting for a rent increase, any statutory tenant has the right to refuse the increase giving the landlord the option to file a claim in the Rent Control Court and ask for the court to set a fair rent price. The same applies from the tenant's side as well, if the tenant believes that the rent paid is considerably more than the market price. Upon such application, the Rent Control Courts will then determine a reasonable rent, taking into account, inter alia, the opinion of a valuer, the location, size and age of the building, as well as the condition of the premises. However, the discussion is somewhat theoretical because the court generally cannot grant an increase higher than the maximum percentage set by law which is currently zero. Even if this was not the case, as a matter of practice, such applications before the Rent Control Court take considerable time to be litigated and the length of such proceeding is a great deterrent for either party to seek this route, sometimes giving leverage to the tenants.
Where the tenancy does not qualify as a “statutory tenancy”, even for properties which fall within the ambit of the Law, the issue of rent increase is predominantly governed by the expressed provisions in the tenancy agreement on this matter. In other words, if the tenancy agreement provides for a rent increase then such an increase will apply and will be enforceable in case of breach by either party. Any dispute in relation to any tenancy which is not a “statutory tenancy” will be resolved as a civil matter in the District Court where the property is situated according to the provisions of Contract Law Cap. 149, as amended. Where the tenancy agreement lacks expressed rent increase provisions or if a written tenancy agreement is completely absent, the landlord may demand any rent increase or the tenant may demand a rent decrease, and as a commercial matter and the parties can negotiate and hopefully amicably agree, de facto amending the terms of the original tenancy agreement. In all other cases, where there is a dispute on the issue of rent price, either party, but most probably the landlord may seek to terminate, or in most cases, refuse to renew the tenancy agreement (thus leading to expiration) pursuant to the terms of the tenancy agreement and request immediate delivery of possession by the tenant. It is noteworthy to mention that where the tenant refuses to vacate the property on account of termination or expiry, in order for the landlord to be able to repossess his property, he has to proceed through the court with a claim of breach of contract, trespass or otherwise. Again, as a practical matter, litigation proceedings are quite lengthy even in such cases, and thus this delay may be used as leverage, by tenants mostly, in connection to price increase negotiations.
In conclusion, in addressing the issue of price increase for existing long term tenancies, both stakeholders must first make a distinction as to whether the tenancy in question qualifies as a statutory tenancy. If so, the tenant will be offered protection under law, irrespective of any provision of the tenancy agreement, and any increase can be made only every 2 years, within the maximum amount permitted by law, which is currently zero. In all other cases the issue of increase of rent is governed by the expressed provisions of the tenancy agreement and if there are no such provisions or where a written tenancy agreement was not put in place, the parties can negotiate as a commercial matter and hopefully come into an amicable agreement. Where this is not possible, either party may seek to terminate or allow expiry of the tenancy agreement, pursuant to its terms, and thus rent price will be set anew with the existing or other tenants. As a concluding remark, the power in terms of price increase is skewed in favour of the tenant in statutory tenancies but the matter is more or less balanced, if not skewed in favour of the landlord, in all other cases subject, of course to the expressed provisions of the tenancy agreement entered into every time.
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Author: Varnavas Playbell , Elina Petevinou
The above does not constitute legal advice.