The court determines the fair rent once
The purpose of the legislator is to determine fair rent so that it corresponds to rents in the market
The Rent Control Court determines the fair rent once so that the increase amounts to the rental value of the market and then the percentage of the increase is determined by a relevant order of the Council of Ministers. The court does not have the power to determine the fair rent for a second time, except in the event that the owner and the tenant do not agree on the percentage of the increase determined according to the order of the Council of Ministers and which from April 22, 2023 was determined at a rate of 6 per cent as the upper limit rent increase for the two years starting from then until April 21, 2025.
The reservation of article 8(4)(a) of Rent Control Law N.23/83 is a temporary exception when it comes to the rent of a residence or shop in a controlled area, which is low and has not been previously determined by the court, to be increased to 90 per cent of the average rents of the proximity area where the property is located or 80 per cent in the event that the tenant is displaced or suffering.
The law
Article 8(4)(a) of law 23/83 provides that the upper limit of the fair rent determined by the court shall not exceed 14 per cent for the first two years from the entry of the law into force, after the end of which period the percentage will be determined every two years by the Council of Ministers by decree on the recommendation of the Minister of Justice.
Subject to the proviso to section 8(4)(a), if the first application made after the commencement of the amending law of 1995 for a rent increase based on the permitted rate, which did not then exceed 14 per cent, leads to the determination of rent lower than 40 per cent of the current average of the rents of the proximity area, then a rent equal to 40 per cent of this average is determined. The percentage of 40 per cent as above, for the first or subsequent applications, increases from January 1, 1997 by 10 percentage points every two years, until it reaches 90 per cent of the average rent of the proximity area.
This percentage became 50 per cent on January 1, 1997, 60 per cent on January 1, 1999, 70 per cent on January 1, 2001, 80 per cent on January 1, 2003 and 90 per cent on January 1, 2005.
The upper limit of the fair rent determined by the court shall in no case exceed 80 per cent of the percentages determined in subsection (4)(a) for displaced persons and sufferers. The meaning of the terms displaced persons and permanent residents includes displaced persons and permanent residents attending a higher education school in the Republic recognised by the Ministry of Education and Culture, who rents a residence in the Republic.
The jurisprudence
The Supreme Court in CA212/2010 Feraios v Georgiadis, on November 2, 2015, decided that according to the Rent (Amendment) Law 102(I)/1995 in an application for an increase in the rent of a property within the proximity area after the application of the amending law, if the first application leads to an increase in the rent lower than 40 per cent of the average rent of the proximity area, then 40 per cent of this average is determined as rent.
This percentage of 40 per cent of the average has been increasing since January 1, 1997 every two years by 10 percentage points and thus reached 90 per cent on January 1, 2005. Before the enactment of the amending law, the rents of the properties within the proximity area were very low because most of them were rented earlier.
The court further states that the legislature considered it fair to harmonise the rents so that they gradually reach 90 per cent of the average current rents of the proximity area, which would correspond to the market rent. Once they have reached 90 per cent then a new rent increase cannot exceed the 14 per cent that was in force at the time according to the order of the Council of Ministers. Therefore, what could be applied was the determination of the fair rent up to 14 per cent then and now 6 per cent, based on the more general scope of article 8(5) of the law.
The president of the Rent Control Court LS Kammitsi in the decision she issued on September 13, 2021 considered that according to the aforementioned authority, the Supreme Court decided that, since an increase of up to 90 per cent of the average rents of the proximity area was given, the second increase and the determination of rent at any rate other than 14 per cent, which was then in force, and 6 per cent, which is in force now, is not justified.
George Coucounis is a lawyer specialising in immovable property and he is the founder of George Coucounis LLC, based in Larnaca, coucounis.law@cytanet.com.cy, Tel: 24 818288