Basic Rent Control Restrictions
Basic Rent Control Restrictions
The present is intended as a follow up on a previous publication on forms of leases and the concept of statutory tenancy under the Rent Control Law of 1983, and covers the common grounds of removability of statutory tenants as well as rent increase restrictions.
What is the protection provided by the Rent Control Law of 1983? As also explained in the previous publication, the Rent Control Law of 1983 provides protection to a certain category of tenants, giving them the right to remain in possession of the leased properties after the expiry or termination of their lease agreements unless and until a ground for eviction provided under this Law exists. As this right is not based on a contact but derives from the application of the Law, it is not contractual but statutory (legislative). So, a contractual tenant (in possession under a lease agreement or a periodic tenancy) that falls into the category protected by the Rent Control Law of 1983, who remains in possession upon expiry or termination of his contractual tenancy, does not become a trespasser but continues to lawfully possess the property as a statutory tenant under the provisions of this Law. A statutory tenancy is accordingly a statutory right of the tenant to irremovability from the property, unless and until a ground for eviction provided for in this Law exists.
To whom do the Rent Control Law of 1983 protections apply? The Rent Control Law of 1983 applies, as aforesaid, only to a certain category of tenants that fulfil certain criteria. The tenant needs to be an EU citizen or a company controlled by EU citizens, the leased property must be a building leased or offered for lease as a residence or for commercial purposes, the leased property must also be in a controlled area to which the Rent Control Law of 1983 applies (which includes all cities and certain larger villages), and the leased property must have been under lease or offered for lease on 31/12/1999. These are rather technical criteria that need to collectively be fulfilled, otherwise no protection is afforded under the Rent Control Law. Obviously, this protection has been left to cover only older properties, as by definition, anything constructed as of 1/1/2000 does not enjoy protection. Likewise, empty plots and petrol stations are excluded. These criteria are derived from the definitions in Article 2 of the Law.
What are the grounds of eviction? The grounds of removability of statutory tenants are exhaustively set out in Article 11 of the Rent Control Law of 1983.
The most common ground is non payment of rent under Article 11(1)(a). If a statutory tenant fails to pay rent on the time this is due, the owner wishing to initiate eviction proceedings has to serve a notice on the tenant calling him to pay the rent so delayed within 21 days. If the tenant pays the rent within this period of 21 days, there is no ground for eviction. If the tenant fails to pay the rent within this period of 21 days, then this constitutes a ground for eviction and the owner can file proceedings before the Rent Control Court for his eviction. Once such application for eviction is filed before the court, it has to be served on the tenant, and if the tenant nevertheless pays all rents in arrears by that time plus the legal costs incurred by the owner within 15 days, proceedings for eviction still cease, unless the owner can prove that the tenant systematically delays the payment of rent. Otherwise, if there is still no payment, the application for eviction proceeds before the court. In order to counteract abuse of the court process by tenants who have failed to pay rent, but chose to defend eviction proceedings by putting forward some form of defence that was doomed to fail but nevertheless would delay the process, a drastic amendment of the Law has taken place, and the court registry can no longer allow tenants to submit a defence in eviction proceedings for non payment of rent, unless they furnish receipts or other proof of payment of rent or unless the tenant pays the amount of the delayed rents into court.
Other important grounds for eviction in Article 11 include the demolition of the leased property where this is not an abuse of right, the demolition and reconstruction of buildings on the property, renovations that cannot take place without delivery of possession, and the highly controversial demand for delivery of possession of the property for the owner’s own use. The provisions of the Law are self explanatory to a large extent, although full of difficulties in practice.
What about the possibility of rent increase οr decrease? The other major restriction, and consequently protection afforded to statutory tenants by the Rent Control Law of 1983, is the control of rent increase. As aforesaid, provisions for rent increases in the previous lease agreement between the parties do not apply once the tenancy becomes a statutory one, and rents in statutory tenancies are determined in accordance with the provisions of Article 8 of the this Law, which is essential.
It has to stressed that under Article 8 it is possible for both the owner to claim an increase in rent and for the tenant to claim a decrease in rent.
There are two basic rules for the determination of a fair rent. The first such rule is that there can be an increase every two years by a percentage set by a decree issued by the Council of Ministers of the Republic. This was initially 14% as stated in the Law, but was later decreased and was kept at 0% for quite a long time. This has only recently been set to 6%, rendering owners able to claim such increase every two years, although a valuation by the Land Registry needs to take place first in order to ensure that this renders a fair amount.
In case this increase by 6% still leads to an amount of rent less than 90% of the rents in the small area around the property, then the second rule is that the owner is entitled to claim that the rent is set at the figure rendered by the 90% of the rents in the small area. This is highly technical and involves valuations with complex factors being taken into account. The basis of such valuation is the comparison between the rents of other properties in the small area with the rent payable for the property.
In rent determination proceedings, the court has to direct the Land Registry to carry out its own valuation, but often the parties who disagree engage professionals of their choice to dispute this.
Due to the difficulties and technicalities involved in eviction and rent determination proceedings, taking legal advice at an early stage is crucial and highly recommended.
Christos Stylianides
Advocate/Partner
Disclaimer: The above is offered as a simplified general outline for the purpose of this Article and does not constitute legal advice.
Are we moving to a new era? - ECB decides to cut key European Central Bank interest rates for second time
Are we moving to a new era? - ECB decides to cut key European Central Bank interest rates for second time
On 12 September 2024 the Governing Council decided to lower the deposit facility rate – one of the three key ECB interest rates, by 25 basis points. In addition, as decided and announced earlier, on 13 March 2024, ECB will proceed to changes to its operational framework for implementing monetary policy. Thus, from 18 September 2024, the spread between the rate on the marginal lending facility and the rate on the main refinancing operations will remain at 25 basis points, while the spread between the main refinancing operations and the deposit facility rate will be set at 15 basis points.
Accordingly and with effect from 18 September 2024, the deposit rate facility will be decreased to 3,50% (from 3,75%), the rate on the main refinancing operations will be decreased to 3,65% (from 4,25%) and the rate on the marginal lending facility will be decreased to 3,90% (from 4,50%).
At a national level it is expected that many people will be positively affected since there are numerous loans the base interest of which is the ECB rate on the main refinancing operations. What now remains to be seen is how and whether the base interest rate of loans which is set by the base interest rate of the lending banks according to their methodology will be affected too, in favour of the borrowers.
For the monetary policy decision of the Governing Council of the 12th of September 2024, you can visit the link below:
https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.mp240912~67cb23badb.en.html.
Rafaella Georgiou
Advocate/Partner
ECB finally decides to cut key European Central Bank interest rates
ECB finally decides to cut key European Central Bank interest rates
On 6 June 2024 the Governing Council decided to lower the three key ECB interest rates by 25 basis points. After almost nine months, where these rates remained steady, the interest rates on the main refinancing operations will be decreased to 4,25%, on the marginal lending facility to 4,50% and on the deposit facility to 3,75%, with the effective date being the 12th of June 2024.
It remains to be seen how and whether interest rates at a national level will be affected.
For the monetary policy decision of the Governing Council of the 6th of June 2024, you can visit the link below:
https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.mp240606~2148ecdb3c.en.html
Rafaella Georgiou
Advocate/Partner
Personal Repayment Schemes under the Insolvency of Natural Persons Law of 2015
Personal Repayment Schemes under the Insolvency of Natural Persons (Personal Repayment Schemes and Debt Relief Orders) Law of 2015 (Law 65(I)/2015)
What is a Personal Repayment Scheme?
Due to the 2012 economic crisis, the government introduced a series of measures to protect the persons that were most affected by it and were rendered unable to service their debts.
The Insolvency of Natural Persons (Personal Repayment Schemes and Debt Relief Orders) Law 65(I)/2015 (hereinafter «the Law») provides the Debtor with the ability to agree or impose a Personal Repayment Scheme (hereinafter «PRS») on a Creditor. PRSs have recently been increasingly used by Debtors as a tool to save their main residence, avoid bankruptcy, and to ultimately discharge all or part of their unsecured debts gaining the ability to become solvent.
How is an Insolvency Practitioner being appointed?
The Debtor initially gets in contact with an Insolvency Practitioner and provides him with all the necessary documentation, personal information and updated financial status so that the Insolvency Practitioner can assess his current financial situation and determine if he is eligible for a PRS, under the provisions of the Law.
How is a Protective Court Order issued?
If the Insolvency Practitioner determines that the Debtor is eligible for a PRS, he then proceeds with the filing of an application to the Insolvency Department (governmental) in order for the latter to examine the application and to verify if the conditions of the Law are fully met. If the Insolvency Department decides that the conditions are met, the Insolvency Department then proceeds with the filing of a court application for the issuance of a Protective Court Order.
A Protective Court Order, once issued, prohibits any creditors from proceeding with any legal actions or initiating any enforcement or execution proceedings against the Debtor. There is a 14-day time limit from the day a notice of the Protective Court Order is duly served on the creditor during which the creditor has the opportunity to apply for the annulment of such Protective Court Order, but such annulment is generally difficult to achieve. The Protective Court Order remains in force for 95 days and can be extended by court application for 40 days and again for a further 40 days, but this second extension is only available in case of a change in the Insolvency Practitioner involved.
What does the process of making a proposal for a PRS involve?
Where a Protective Court Order is issued, the Insolvency Practitioner will thereafter give written notice to the creditors concerned that he has been appointed by the Debtor for the purpose of making a proposal for a PRS and invite the creditors to make submissions to the Insolvency Practitioner regarding the debts concerned and the manner in which the debts could be dealt with as part of a PRS.
When the creditor receives the abovementioned notice by the Insolvency Practitioner, he is obligated to proceed within 20 days with the submission of a valuation of the debtor’s assets that constitute securities for the debt owed. The valuation may be challenged and then an independent valuation is instructed and is binding on the parties. The creditor proceeds with an affidavit of proof of debt within 35 days of the notice for the Protective Court Order.
Based on the information above, the Insolvency Practitioner drafts a proposal for a PRS which states explicitly the secured and unsecured amount of debt, as well as comply with certain requirements set out in the Law.
Based on the Debtor’s financial status and the remaining amount available for monthly repayments after deducting the Debtor’s monthly expenses, the Insolvency Practitioner proposes a PRS for the secured and unsecured debt’s repayment. The repayment can either be payment arrangements with the creditor, transfer of the proceeds to the creditor coming from the sale of the Debtor’s certain assets that secure the debt or any other assets of the Debtor, transfer of the secured assets to the Creditor or divestment of such assets that secure the debt by the creditor. Secured debts must be repaid as a priority. In case there is no available amount for the repayment of the unsecured debt, the Debtor will ultimately be discharged of their unsecured debt, upon successful completion of the PRS.
The maximum duration of a PRS shall be 60 months but a PRS may provide that this period may be extended for a further period of 12 months in such circumstances as are specified in the terms of the PRS. The PRS shall not contain any terms which would require the Debtor to make payments of such amount that result in the Debtor not having sufficient income to maintain a reasonable standard of living for him and his dependants. The Debtor will be discharged of his unsecured debt by the end of the 60-month period and the successful fulfilment of the terms set forth in the PRS.
What is the scope of a creditors’ meeting?
After the proposal for the PRS and whilst the Protective Court Order is still in force, the Insolvency Practitioner convenes a Creditors’ Meeting, during which all the Debtor’s creditors examine the proposal and vote for its approval or rejection. Where a Creditors’ Meeting does not take place before the expiry of the Protective Court Order, the PRS procedure is deemed to have come to an end.
When is a PRS considered as consensual and when as non consensual?
If a PRS is approved by the Creditors’ Meeting, the Insolvency Practitioner notifies the Insolvency Department in order for the latter to proceed with the filing of a court application for the ratification of the PRS. The Insolvency Practitioner will also send a notice to each creditor indicating that they may file an objection to the entry into force of the PRS by lodging a notice of objection with the competent court, within 14 days of the date of the sending of that notice.
In case the PRS is rejected by the Creditors’ Meeting, the Protective Court Order is deemed to have come to an end. In more limited cases and if specific criteria and requirements set out in the Law are met, the Debtor may proceed with the filing of an ex-parte court application for the issuance of an order imposing the PRS on the creditors. An example of such requirements concerns the value of the Debtor’s main residence that has to be under €350.000 for the Debtor to be eligible for a non consensual PRS. There is also a criterion that the Debtor’s income must have been decreased by more than 25% from the day he concluded the credit agreement with the creditor, compared to his income immediately before the issuance of the initial Protective Court Order.
A creditor has the opportunity to apply for the annulment of such order within 15 days from the day the order imposing the PRS was duly served on the creditor. The main grounds for annulment relate to non fulfillment of the criteria for a non consensual PRS or non compliance of the mandatory requirements under the Law. The creditor may also apply for an annulment in case a material inaccuracy or omission exists in the Debtor’s personal information and financial status which causes material detriment to the creditor.
When is a PRS entered into and when is terminated?
In the event that the PRS is either ratified or imposed, its provisions are effective from the day of issuance of either the ratification order or the order imposing the PRS.
If the Debtor fails to comply with the provisions of the PRS, the creditor can file a court application for the termination of the PRS. There are even provisions under which a PRS is deemed as automatically terminated for non compliance by the debtor.
Vassilis Papadopoulos
Advocate
Disclaimer: The above is offered as a simplified general outline for the purpose of this Article and does not constitute legal advice.
Pro Bono
Pro Bono
We would like to make the following statement as to the issue of pro bono work.
As part of our corporate social responsibility and our commitment to aid as far as we can those who serve the public benefit, we have over the years been more than happy to offer our services to charitable or public benefit institutions and organisations, on a pro bono basis and without any charge or other consideration.
Likewise, we have been more than happy to assist on a pro bono basis several individuals that were genuinely unable to have access to legal services due to limited funds.
We have offered and continue to offer our services in such appropriate cases on a pro bono basis based on our strongly held principles and values, but we also strongly believe that such pro bono assistance, which was offered genuinely and without any motive from our part, should remain away from any publicity.
We will accordingly avoid making any public statement as to our pro bono work or engagements.
