Ayia Napa, Cyprus. Cyprus’ audit office said five hotels in Ayia Napa are paying less rent to the government than they should, citing their revenues and the value of the land on which they stand.
Findings on long-term lease agreements
The audit office report, released on Tuesday, examined contracts concerning state forest land and said five 99-year lease agreements were signed for hotels in Ayia Napa in the 1970s and 1980s, with the first signed in 1970.
The report said the 1970 agreement stipulated that the hotel would pay rent until 2069 as a percentage of gross revenue, while the four subsequent contracts stipulated that rent would be paid for 99 years as a percentage of the market value of the land on which the hotels stand.
In all cases, the report said adjustments were to be made based on inflation and accepted prices of accommodation and concessions.
Legal and administrative issues affecting rent adjustments
The report said the law allowing for the procedures to calculate rent for the hotels was repealed in 2019, leaving no “basis for adjusting the rent” according to the law.
It quoted the legal service as saying this situation may mean the agreement is legally unclear and thus invalid, requiring arbitration.
The report also said the forestry department asked the land registry to calculate the amount payable as rent by the five hotels, but the calculation was delayed due to failure to obtain requisite documents from local authorities and the urban planning department.
As a result, the report said the five hotels are still paying rent based on figures compiled between 2017 and 2022.
“The non-revision of rents for more than three years, during a period in which there was a significant increase in tourist activity and inflation results in the state collecting lower revenues than those which were provided for in the contract,” the report said.
Reference to another state forest land lease
The audit office also referred to the lease of state forest land inside a Natura 2000 protected area in the Troodos mountain village of Phini, where a company applied to the forestry department in 2014 to lease 20,000 square metres of land to build an “adventure park”.
How should the government address rent recalculations for long-term leases when the legal basis for adjustment has been repealed?