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Eversheds Global Estate Management

Greece

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - full ownership of real estate exists when an individual or legal entity has the exclusive right to manage, enjoy, exploit and/or dispose of its property.

Leasehold - according to the recently enacted Law 3986/1.7.2011, the real estate right approaching the notion of leasehold, is the right of “surface”, whose beneficiary is granted separate ownership than that of the owner of the land on buildings existing or to be constructed, for a limited duration from 5 to 50 years. The right of surface is applicable only to state lands. The establishment of surface needs the execution of a notarial deed and the registration thereof in the relevant Land Registry or Cadastre. Acquisition of surface right by means of adverse possession is not possible. The parties are free to determine the content of the surface right which may include terms regarding for example the construction, maintenance and use of a building, the insurance coverage of the building, who shall bear the costs of the building and/or the land, the right of the land owner to consent before the surface is burdened with any liens or is transferred, the right of the land owner to penalties in case the surface owner does not fulfil its obligations, etc. The surface right may be transferred and can also be contributed to the share capital of companies. Liens that pre-existed on the plot on which a surface right is established, survive unless their beneficiary consents that his/her right is limited to the land or the surface. Last, the establishment of the surface is effected against a consideration by way of either a one-off payment (similar to a purchase price) or a periodic payment (similar to a rent) or a combination of the two. As regards its tax treatment, the law treats the surface right in the same way as that of the usufruct.

Common hold/Usufruct - please see above under “joint/co-ownership/division of full ownership”.

Condominium ownership - as per Greek law, condominium ownership is a specific form of co-ownership established following division of horizontal properties, such as for instance ownership on separate apartments situated in the same building. For more details, please see below, under "joint co-ownership"

Utilisation right - please see above under “joint/co-ownership/possession-detention"

Joint/Co-ownershipPossession – detention

Registration - the ownership of a property, irrespective of the means of its acquisition, must be registered in the competent Land Registry (or Cadastre for areas that Cadastres operate) of the area where the property is located. In Land Registries apart from ownership rights, all other real property rights are registered such as, burdens, liens or claims over real property, such as for instance mortgages, prenotations of mortgage, seizures, etc. In addition, lease agreements with a duration exceeding nine years must be vested the form of a notarial deed and must also be registered, so as to be invoked against any new owner. Registration, however, is not compulsory for commercial lease agreements, which by law have a minimum term of 12 years. Registration of ownership with the Land Registries is made on the basis of the name of the owner and not on the basis of the property itself. In many areas of Greece, in addition to Land Registries, Cadastre Offices are currently established and, operating, where registration is made on the basis of the property. The cadastre system of registration is expected to cover the whole of the country in the next few years, when the Land Registries will be abolished. Currently, major urban centres in Greece, including the city of Athens are being included in the competent Cadastre Offices.

 

Restrictions on foreign ownership

Restrictions on foreign ownership

Full ownership may be subject to various restrictions, depending on the location and/or the buildings or constructions existing thereon, such as neighbourhood rights, restrictions deriving from the fact that horizontal or vertical properties have been established in a plot, zoning or planning restrictions. Expropriation of property for public interest reasons and upon payment of relevant compensations is also possible.

 

Title to real estate

Title to real estate

Investigation of title - not applicable

Information on the register - information registered in the Land Registries and in the Cadastre Offices is available to the public. Review and assessment thereof is however, officially permitted only to lawyers and Court Bailiffs.

Transfer of title - in order to acquire a title to real estate, a transfer of title is required, which takes place by virtue of the execution of a Notarial Deed. Such transfers are effected either inter vivos and include for instance donations and sales, or mortis causa and include the acceptance of inheritance. Under all such circumstances transfers take place by virtue of the execution of a Notarial Deed. Ownership is also acquired by virtue of adverse possession. Under Greek law, a person or legal entity may become owner of a real estate property by adverse possession provided that such person/legal entity:

(i) has been in possession of the property for an uninterrupted period of ten (10) years in good faith, and by acting as owner (ordinary adverse possession); or (ii) has possession of the property for an uninterrupted period of twenty (20) years (extraordinary adverse possession).

Registration - please see above under “principles of ownership/registration”.

Commercial leases - commercial leases by law have a minimum term of 12 years irrespective of the term mentioned in the contract. The tenant upon completion of the 12 year period may terminate the lease and neither parties are liable to pay compensation to each other. In case however the tenant does not wish to terminate the lease while the landlord wishes the opposite, the landlord in order to have the lease terminated must serve the tenant a notice of termination within nine months from completion of the 12 years and pay to the tenant compensation equal to 24 months’ rents (goodwill). Otherwise, in case the landlord does not exercise the above right, the lease is automatically extended for four years. Thereafter, the landlord who shall terminate the lease upon completion of 16 years will not owe any such compensation. The landlord may also terminate the lease prior to the abovementioned minimum term only upon certain grounds provided for under the applicable law. The tenant may, however, also terminate the lease for no reason whatsoever, provided that one year from the beginning of the lease has passed, a three-month prior notice of termination is served to the landlord and a compensation equal to one months' rents is paid to the landlord.

 

Structure of a real estate transaction

Structure of a real estate transaction

Negotiation of terms/Agreement - the terms and conditions of a transaction concerning real estate are usually negotiated between the owner of the real property or his/her agent or lawyer and the other party be it a prospective buyer/tenant or the buyer/tenant's lawyer or agent. When the terms are agreed, a lawyer or a notary public (where applicable, given that all contracts of sale and purchase of real estate need to have the form of a notarial deed and are signed before a notary public) will prepare the relevant contract.

Heads of terms – not applicable.

Due Diligence - For acquisition of property, the buyer's lawyer will conduct due diligence on the property (ownership, burdens, lawsuits, seizures etc). If the seller is a legal entity, the buyer's lawyer will also examine the legal status of the company, its financial standing and the corporate documentation to establish who is authorised to represent the company in the relevant transaction. The seller must make available all relevant documentation to the buyer and the buyer's lawyer however, the buyer's lawyer will need to review on his own the relevant registries in the Land Registry and the Cadastre. In the case of a lease, the tenant does not usually undertake a due diligence (through a lawyer) unless the lease is of substantial value.

Investigation of title - Not applicable

Purchase deed - purchase of real estate takes place through the execution of a Notarial Deed, please see above under “Structure of a real estate transaction/Contracts”

Contracts - the lawyers of the contracting parties along with the notary prepare the draft of the contract for the acquisition of property, since under Greek law any transfer of real property rights must be made through a notarial deed. Following the preparation for the draft contract the final deed is executed before the notary, who, along with the lawyers of the purchaser, as per common business practice, take care of its registration with the Land Registry or the Cadastre, since the ownership right is legally established only upon registration. For complex transactions, it is possible to execute a pre-contract first, where the terms and conditions of the final contract are clearly defined. The precontract for the acquisition of real property must also be in a notarial form.

Completion/closing - in most cases, a contract for the acquisition of real property and a lease agreement are completed upon their execution, namely in one stage, and therefore there is no separate completion stage. In some cases of acquisition, where a pre-contract has been signed, as per above, full completion (i.e. transfer of ownership) takes place when all conditions precedent for the execution of the final notarial purchase deed have been fulfilled. In some cases, especially of semi-built houses, transfer of ownership is made at the time of execution while delivery of buildings, etc. is made at the time of completion of the construction. The balance of the purchase price is usually paid upon execution, but it may also be agreed that it will be paid in instalments. In cases where construction has not been completed at the time of execution of the purchase notarial deed, the balance is usually paid upon completion of the construction and delivery of the relevant construction. Lease agreements are almost always completed upon execution, but exceptions exist, such as when the leased property is not ready to be delivered to the tenant.

Post completion - the buyer has to register the contract of purchase at the competent Land Registry or the Cadastre Office. There is no specific time limit, but the buyer has every interest in registering as quickly as possible since ownership is not legally transferred to the new owner until said registration. The landlord must file a copy of the lease agreement with the tax office within one month of signing.

Leases - the lease agreement is normally a simple contract, which is usually prepared by the landlord's lawyer, thereafter reviewed by the tenant or tenant's lawyer, and then signed by the parties.

Language requirement – not applicable.

Governance of lease signature/administration – not applicable. - the terms and conditions of a transaction concerning real estate are usually negotiated between the owner of the real property or his/her agent or lawyer and the other party be it a prospective buyer/tenant or the buyer/tenant's lawyer or agent. When the terms are agreed, a lawyer or a notary public (where applicable, given that all contracts of sale and purchase of real estate need to have the form of a notarial deed and are signed before a notary public) will prepare the relevant contract.

Heads of terms – not applicable.

Due Diligence - For acquisition of property, the buyer's lawyer will conduct due diligence on the property (ownership, burdens, lawsuits, seizures etc). If the seller is a legal entity, the buyer's lawyer will also examine the legal status of the company, its financial standing and the corporate documentation to establish who is authorised to represent the company in the relevant transaction. The seller must make available all relevant documentation to the buyer and the buyer's lawyer however, the buyer's lawyer will need to review on his own the relevant registries in the Land Registry and the Cadastre. In the case of a lease, the tenant does not usually undertake a due diligence (through a lawyer) unless the lease is of substantial value.

Investigation of title - Not applicable

Purchase deed - purchase of real estate takes place through the execution of a Notarial Deed, please see above under “Structure of a real estate transaction/Contracts”

Contracts - the lawyers of the contracting parties along with the notary prepare the draft of the contract for the acquisition of property, since under Greek law any transfer of real property rights must be made through a notarial deed. Following the preparation for the draft contract the final deed is executed before the notary, who, along with the lawyers of the purchaser, as per common business practice, take care of its registration with the Land Registry or the Cadastre, since the ownership right is legally established only upon registration. For complex transactions, it is possible to execute a pre-contract first, where the terms and conditions of the final contract are clearly defined. The precontract for the acquisition of real property must also be in a notarial form.

Completion/closing - in most cases, a contract for the acquisition of real property and a lease agreement are completed upon their execution, namely in one stage, and therefore there is no separate completion stage. In some cases of acquisition, where a pre-contract has been signed, as per above, full completion (i.e. transfer of ownership) takes place when all conditions precedent for the execution of the final notarial purchase deed have been fulfilled. In some cases, especially of semi-built houses, transfer of ownership is made at the time of execution while delivery of buildings, etc. is made at the time of completion of the construction. The balance of the purchase price is usually paid upon execution, but it may also be agreed that it will be paid in instalments. In cases where construction has not been completed at the time of execution of the purchase notarial deed, the balance is usually paid upon completion of the construction and delivery of the relevant construction. Lease agreements are almost always completed upon execution, but exceptions exist, such as when the leased property is not ready to be delivered to the tenant.

Post completion - the buyer has to register the contract of purchase at the competent Land Registry or the Cadastre Office. There is no specific time limit, but the buyer has every interest in registering as quickly as possible since ownership is not legally transferred to the new owner until said registration. The landlord must file a copy of the lease agreement with the tax office within one month of signing.

Leases - the lease agreement is normally a simple contract, which is usually prepared by the landlord's lawyer, thereafter reviewed by the tenant or tenant's lawyer, and then signed by the parties.

Language requirement – not applicable.

Governance of lease signature/administration – not applicable.

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - leases are categorised depending on the use of the leased asset. Thus, the two main categories of leases to which separate rules apply are commercial leases and residential leases. More particular types of leases to which separate rules apply are, indicatively, to leases of short duration, leases of spaces in border stations, ports and airports, listed buildings, leases of public spaces and of property owned by protected entities (indicatively as European Union Institutions) and financial leasing agreements. Alterations/modifications - minor alterations are usually permitted, but the landlord's prior consent is usually required for major ones.

Assignment and sub/under letting - in most circumstances not permitted by the law, unless otherwise agreed by the parties, who may further agree the specific terms and conditions of such subletting. The law however permits, under specific conditions, the granting of use of the leasehold to entities affiliated with the lessee.

Destruction/reinstatement - the tenant, when it is allowed to perform changes in the leasehold, is normally required to reinstate the premises to the condition they were at the beginning of the lease, unless otherwise agreed. If the landlord chooses not to request the reinstatement, the tenant is, as per standard practice, not entitled to be compensated for any improvements.

Duration of lease - please see above under “title to real estate / commercial leases.”

Forfeiture/irritancy - please see above under “title to real estate / commercial leases”

Insurance - the landlord usually undertakes to insure the building and the tenant usually undertakes contractually to insure the contents and whatever the tenant brings into the premises.

Rent review - the most usual rent review clause provides that the rent will be increased annually at a rate equal to the increase of the consumer price index of the previous 12 months, most commonly increased by one to two units.

Repair/decoration/furnishing - most lease agreements provide that the tenant is liable for any repairs or additions, while the landlord is usually liable for structural repairs as well as repairs of the common parts.

Service charge - are paid by the tenant to the manager of the property, according to a table of distribution of charges existing in most buildings. The landlord may be called upon to pay for repairs of the structure or of the common use parts of the building (e.g.. roof, facades, staircases, gardens etc).

Tenant’s duties - the main duties of the tenants is to keep the leasehold in good condition and to pay the rent. Further obligations of the tenant indicatively also include payment of all utility bills, municipal fees, stamp duty applicable on the rent amount, etc.

Termination/break clauses - please see above under “title to real estate / commercial leases.”

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - in most leases, the tenant pays a cash deposit to the landlord at the time of execution of the lease agreement. Such deposit is usually equal to two or three months' rent. The deposit remains with the landlord free of interest and is returned to the tenant at termination of the lease, provided the tenant has fulfilled all its obligations. Said deposit may not be set off with outstanding rents.

Surety - third party (company or individual) may be required to provide a guarantee of the tenant's obligations under the lease agreement. This is especially common when the tenant is a newly formed company, in which case the individual shareholder(s) or the parent entity(ies) will provide the guarantee.

Warranty - please see above under “surety”

Bank guarantee - bank guarantees are very uncommon.

 

Security of tenure

Security of tenure

Security of tenure - the tenant has security of tenure for the statutory period of 12 years plus eventually four years, as explained above (under ‘Length of commercial lease term’), unless a longer term has been agreed. After that period, the tenant has no statutory right to remain in occupation of the premises and, if the landlord does not agree to an extension, can be evicted.

 

Taxes

Taxes

On sale/acquisition of real estate - the transfer of real estate by means of a sale is in principle subject to real estate transfer tax with the exception of the transfer of new buildings which is subject to VAT. Real estate transfer tax is calculated on the statutory value of the property or the actual transfer value agreed, whichever is higher, and it burdens the purchaser. The real estate transfer tax is levied at the rates of 8 % for values up to EUR 20,000 and 10% on any excess. An additional 3% municipality tax is also payable, calculated on the amount of the real estate transfer tax due. The sale of new buildings or part of new buildings (i.e. buildings that are transferred prior to their first occupation and their building permit has been issued following 1 January 2006) and the land on which they are erected is in principle subject to VAT at the rate of 23%. The taxable basis for the calculation of VAT is based on the higher value among the actual sales price, the statutory value of the property and the construction cost as well as the technical, quantitative and financial data included in the respective building permit.

Immovable property tax - Real Estate Property Tax (REPT) applies as of 1 January 2010 and burdens individuals and legal entities holding real estate property rights on property located in Greece. REPT is an annual tax and is calculated on the statutory (objective) value of the real estate property, as the latter is being assessed on 1 January of each calendar year. The statutory value is calculated for tax purposes on the basis of certain coefficients set forth by law and ministerial decisions of the Ministry of Finance and it serves as the minimum taxable base for the application of certain real estate taxes. The applicable rates range from 0% to 1% for individuals. By way of exception, a 2% rate applies with respect to calendar years 2011 and 2012 to real estate property held by individuals for the part of their value that exceeds EUR 5,000,000. With respect to legal entities the applicable rate is set at 0.6%. This rate is reduced to 0.3% for non profit legal entities. In addition, a reduced rate of 0.1% applies in certain instances, such as in case of real estate property that is being self-occupied by legal entities for the purpose of pursuing their activities. Special Real Estate Tax - As of 1 January 2010 all types of legal entities holding Greek real estate property are subject to an annual special real estate tax at the rate of 15% imposed on the statutory value of the properties as the latter is being assessed on 1 January of each calendar year. There are various exemptions applicable, such as EU companies that disclose their ultimate individual shareholders (who must have a Greek Tax Identification Number) or entities with shares listed in the stock exchange or companies generating higher amount of business income than income from immovable property, etc. Revaluation tax Enterprises maintaining double entry books are obliged to re-evaluate their Greek real estate property every four years unless the book value of such properties is higher than the respective statutory value. The revaluation is computed on the basis of specific revaluation factors set by the Ministry of Finance. Any revaluation surplus is subject to tax currently at a 2% for land and 8% for buildings. The latest revaluation has been performed within 2008 and the next will take place in 2012.

Income tax - net income from immovable property is subject to income taxation at the standard rates applicable to individuals and legal entities. The expenses that are eligible for a tax deduction are specified in the Greek Income Tax Code. As a general remark, Greek corporations are in principle eligible to deduct for income tax purposes the actual expenses incurred, whereas individuals, partnerships and foreign entities that do not maintain a permanent establishment in Greece are allowed to deduct predefined expenses set forth in the Greek Income Tax Code in a deemed manner. An additional income tax is imposed to both legal entities and individuals at the rates of 3% and 1.5% respectively. Such tax is calculated on the gross income from immovable property, whereas it may not exceed the amount of income tax due for the specific income.

Land tax - not applicable

Lease tax - rentals under a commercial lease agreement attract in principle stamp duty at a flat rate of 3.6%. Stamp tax is payable to the state by the lessor, yet it burdens the lessor and the lessee equally unless agreed otherwise. Exceptionally rentals under a commercial lease of premises located in commercial centres could be subject to VAT at 23% if the operator of the commercial centre has opted to apply VAT on rentals. The requirements that need to be fulfilled for the qualification of commercial premises as a commercial centre for VAT purposes are (i) minimum surface of 4,000 square meters, (ii) minimum number of lessees 15 and (ii) the operation of the centre should be run by one entity.

Local tax - a Municipal Property Tax is levied at a rate ranging between 0.025% and 0.035% on the market value of immovable property located in the territory of a municipality. Furthermore, there are also other municipal taxes and fees that are imposed on real estate property, such as cleaning and lighting fees, etc.

Mortgage - not applicable

Other taxes - the Special Duty on buildings powered by electricity shall be imposed in 2011 and 2012 on all buildings powered by electricity, either commercial or residential, which are subject to the Municipal Property Tax mentioned in Section “Taxes and Local tax”. It is calculated on the total surface of the building with a levy ranging from EUR 0.50 to EUR 16 per square metre depending on the market value of the building. The Special Duty is borne by the owner(s) of the building or by the holder(s) of usufruct rights, as the case may be. The Special Duty is paid to the Greek State through the utility bills issued by electricity providers. With respect to leased buildings, the Special Duty burdens the lessor, whilst any agreement to the contrary between the lessor and the lessee is explicitly prohibited.

Property lease tax - not applicable

Value added tax - please refer to Sections “Taxes and Lease tax” and “Taxes On sale/acquisition of real estate”.