Real Estate Laws and Regulations in Greece

1. REAL ESTATE OWNERSHIP

1.1  Legal framework  

As a typical example of a first-generation human right, the right to property has been consistently protected by all constitutions adopted since the Greek War of Independence. Today, the fundamental right to property, whether in the form of real estate or movable property, is enshrined (while simultaneously confined) in art. 17§1 of the Constitution of 1975/1986/2001/2008/2019: “Property is under the protection of the State; rights deriving therefrom, however, may not be exercised contrary to the public interest.”

At a statutory level, the protection of property has mainly taken the form of the different real rights (also known as rights in rem) regulated in the third section of the Greek Civil Code (GCC) entitled Law of Real Rights. GCC art. 973 establishes a numerus clausus of real rights, all of which vest in their holder legal, direct, and erga omnes power with respect to property. Amongst these rights, the ones applicable to real estate are:

• Ownership (GCC art. 999 et seq.): the fullest, all-encompassing real right which consists in using the property in any legal manner. Essentially identified with the property itself, ownership is best described as a jus in re propria (right in one’s own property), as opposed to the qualified nature of the rest of real rights, which grant a jus in re aliena (right in the property of another) and are therefore viewed as encumbrances of ownership.
• Servitudes (GCC art. 1118 et seq.): the rights attached either to another estate (predial servitudes) or a person (personal servitudes) which consist in enjoying one or more benefits from the substance of someone else’s property (e.g., a right of way). Usufruct, the right to fully use and derive profit from someone else’s property without altering its substance, is the most representative case of personal servitude, specially regulated in the GCC (art. 1142 et seq.).
• Mortgage (GCC art. 1257 et seq.), the right of a creditor to collect their claim with priority from the value of someone else’s real estate property. It is the most traditional example of a security interest.

The above provisions of the GCC have remained virtually unchanged since the entry into force of the Code in 1946. However, certain additional real rights have been fashioned from time to time by means of special laws, the most significant of these (from an investor’s point of view) being the so-called “surface right” introduced by Law 3986/2011. This right applies to certain types of public properties and grants powers similar to ownership exclusively over the buildings constructed thereon, derogating from the superficies solo cedit principle of land ownership according to which the owner of the land is also the owner of the buildings above it.

Finally, apart from real rights, powers of usage and possession of real estate property may come in the form of contractual rights (rights in personam), such as the rights deriving from a lease agreement.

As to the potential subjects of all the aforementioned real rights, these generally include all natural and legal persons, whether it be Greek or foreign. Nonetheless, for reasons of national security, Law 1892/1990 prohibits the acquisition of real, but also contractual rights in designated border areas (which admittedly cover a significant part of the country) to national and legal persons who are nationals of or seated in a country outside the EU or the EFTA. This prohibition also extends to the purchase of legal entities owning properties in border areas. The persons concerned may apply for permission to acquire real or contractual rights in such areas before a special administrative committee. 

The remainder of art. 17 of the Greek Constitution (§§2-7) is dedicated to balancing the conflict between the right to real estate property and the public interest through the process of expropriation, which results in the deprivation of private persons of their property. These rules are further specified in Law 2882/2001 (Code of Expropriation of Immovable Property). The main principles governing expropriation in Greece are the requirement of a public interest which renders expropriation necessary (in line with the constitutional principle of proportionality), a full (as opposed to a merely just) compensation corresponding to the value of the property, the determination of this compensation by the competent civil courts on a provisional and/or a final basis and its payment at maximum 18 months following the court decision, as well as the consummation of the expropriation process only upon payment of the full compensation.

In closing this introductory section, here is a little snapshot of the Greek real estate market today: after a long decade of stagnation due to the 2009 debt crisis, it is finally showing vibrant signs of recovery. A recovery process assisted by important legislative initiatives such as the immigrant investor program known as “Golden Visa,” the privatization projects of the Hellenic Republic Asset Development Fund, the various incentives offered by laws on so-called “Strategic Investments” and, more recently, horizontal tax cuts and reliefs. It is also hearting to realize that the demand for properties seems to be quite resilient to (although of course affected by) the further socio-economic shock caused by the COVID-19 pandemic and the restrictions it brought about. To illustrate this point, the total number of building permits issued in Greece from August 2020 to July 2021 was higher by 18,2% compared to the previous 12-month period, while house prices across the country saw a year-on-year increase of 7,9% in the third quarter of 2021 according to the Hellenic Statistical Authority’s Report on Building Activity: July 2021. Considering Greece’s allure as a holiday destination, a lot of these residential properties are destined to be used for short-term rentals (e.g., through Airbnb); at the same time, a significant portion of both domestic and foreign investment volumes are channeled into developing new hotels, villa complexes, and integrated tourist resorts in different locations. Finally, the Ellinikon project, the breakthrough urban regeneration vision in the Athens Riviera is already coming to life and anticipated to become one of the key drivers of the Greek economy in the near future.

1.2  Registration of ownership

Pursuant to GCC art. 1198, registration of the relevant legal acts in public records is a precondition for the valid establishment and transfer of all real rights on real estate properties. There are currently two systems of publicity operating in parallel: the traditional so-called system of “registrations and mortgages” (GCC, Regulatory Decree 19/23.07.1941, Royal Decree 533/1963) and the newer system of the National Cadastre (Laws 2308/1995 and 2664/1998). It is the intention of the Greek state to fully replace the system of registrations and mortgages with the undeniably superior system of the cadastre. At this point, however, the National Cadastre is estimated to cover approximately one-third of the real estate properties of the country, leaving most areas still under the flawed old system.

The system of registrations and mortgages, represented by the competent Land Registries, is structured around the persons holding real rights in a specific area, and searches therein are conducted by reference to the holders’ identities. The records are kept in a physical form (books). On the contrary, the National Cadastre, represented by the competent Cadastral Offices, is organized by reference to each real estate property (land plot). Cadastral records are kept digitally in a unified database.

Pursuant to Regulatory Decree 19/23.07.1941, Land Registries fall under the competence of the Ministry of Justice, while the Prosecutor of the local Court of First Instance supervises and exercises disciplinary powers upon their personnel. Cadastral Offices are run by the legal entity under public law with the name Hellenic Cadastre, established by Law 4512/2018 and supervised by the Ministry of Digital Governance. That said, in areas integrated into the system of the National Cadastre, where Cadastral Offices belonging to the Hellenic Cadastre have not been set up yet, existing Land Registries operate as transitional Cadastral Offices, until their envisaged gradual abolition.

Registration is generally not required for the establishment or transfer of contractual rights. However, in the case of a long-term lease agreement of more than nine years, future owners of the real estate property are only bound by the lease if this has been registered in the public records (GCC art. 618). Conditions and exceptions apply.

1.3  Publicity of real estate register

In the case of Land Registries still operating under the old system of registrations and mortgages, there is no absolute clarity as to whether the law offers the right to research their (physical) records to all individuals with properties registered therein, or only to certain categories of professionals (hence the divergent opinions Nos. 7/2020 and 69/2020 of the Prosecutor of the Supreme Civil and Criminal Court and the Legal Council of the State, respectively). The general practice is that the records are made available to lawyers, interested individuals accompanied by their lawyers, and bailiffs.

Pursuant to Ministerial Decision 11206/2021, records of the National Cadastre are available either through in-site research at the computers of the Cadastral Offices of the Hellenic Cadastre or the Land Registries operating as transitional Cadastral Offices, or through remote research in its database. In-site research is permitted to lawyers, bailiffs, notaries, and engineers (under different restrictions), while remote access is also granted to all other persons but only in relation to the registrations that concern them.

 1.4  Protection of ownership

The primary legal remedies established for the protection of ownership are the declaratory action (art. 70 of the Greek Code of Civil Procedure), rei vindicatio (GCC art. 1094), and actio negatoria (GCC art. 1108). A declaratory action is filed against a person who merely questions the ownership of the claimant, with the request that the claimant be officially recognized as an owner vis-a-vis the defendant. Rei vindicatio (loosely translated as a “direct claim”) is used to proceed against a person who unlawfully possesses or occupies a property, depriving the owner of such possibility, and results not only in the recognition of the owner’s right but also in the recovery of the property. Finally, actio negatoria (loosely translated as a “negative claim”) is filed in cases where the owner, although not absolutely forced out of their property, is unlawfully disturbed in the full enjoyment of their right of ownership by an offender, and the request consists in the cessation of the nuisance and/or the omission of a future nuisance.

In the system of registrations and mortgages, a false or inaccurate entry does not prevent the true owner of a property from successfully protecting their ownership using the above remedies. Registration of the relevant legal act (e.g., a sale and purchase agreement, an act for the acceptance of an inheritance) only constitutes one of the conditions to be fulfilled for the transfer or establishment of a real right on a real estate property, and it does not guarantee itself said transfer or establishment. Also, entries do not facilitate the proof by the registered holder that they are indeed entitled to the real right in question: they would still have to prove in court the rest of the conditions prescribed by law for the acquisition of their right. Finally, persons who accept the entries of the system in good faith and proceed to legal transactions relying thereon are generally not protected. For example, the purchaser of a property from a person who appears to be its current owner by means of a sale and purchase agreement with the previous owner, which is, in fact, null and void, will not acquire ownership on the grounds of them trusting in the public records, save for very limited and rather marginal cases (e.g., if the registered sale and purchase agreement between the previous and the current owner is null and void due to it being fictitious).

Conversely, the initial entry for every property in the National Cadastre becomes final after the lapse of a specific time period during which it can be challenged. Thereafter, entries produce a non-rebuttable presumption of accuracy, which means that the claims in rem (a declaratory action or a rei vindicatio) of the true owner of the property are erased. The true owner is limited to monetary claims against the inaccurately registered owner, and may only reclaim the property itself if it has not yet been transferred to another person for a consideration. For all subsequent entries, a rebuttable presumption of accuracy is established: future registered holders of real rights on the same property will not bear the burden to prove the rest of the conditions (other than the registration) for the acquisition of their right; the opposing party will have to prove their absence. Finally, good faith in previous entries of the National Cadastre benefits the person who relies thereon to acquire a real right, even if these entries are proven to have been inaccurate.

Apart from filing a remedy for the direct protection of their ownership, owners may, alternatively or jointly, seek the protection of possession of their property against potential offenders, pursuant to GCC arts. 987 and 989. The actions related to possession not only manifest the advantage that possession is easier to prove than ownership (especially under the system of registrations and mortgages), but can also be accompanied by a request for interim measures (art. 733 of the Greek Code of Civil Procedure).

2. REAL ESTATE ACQUISITION

2.1  Share deal or asset deal?

Acquisition of real estate may come in the form of either a direct acquisition of real rights on the desired property(-ies) by an investor (asset deal) or an indirect structure, where the investor gains control over a legal entity holding such right through the purchase of its shares (share deal).

Share deals tend to be preferred in the business world for a number of reasons. Their popularity is mainly attributed to the following features that distinguish them from asset deals:

• They are freed from the formalities of an asset deal, as sale and purchase agreements for the acquisition of shares are not required to be drafted by means of a notarial deed or registered with a Land Registry or a Cadastral Office. They are therefore more straightforward, and investors may not only acquire but also dispose of real estate in a quicker and simpler manner.
• They do not entail notarial or registration fees or incur much lower taxes related to the transfer of shares.
• The insertion of a legal entity between the investor and the real estate asset, usually in the form of a capital company, comes with all the benefits of a separate legal personality, subject to rare cases of lifting of the corporate veil. That is, not only implications related to the specific business venture that is the acquisition and development of one or more real estate assets for a specific purpose will not affect the investor directly (at least not from a legal point of view), but also the business venture is further transferable as a whole. This is one of the reasons why Real Estate Investment Companies (REICs) tend to set up separate subsidiaries for their different projects.
• The existence of any (not regularized) illegalities of buildings on the purchased property will not threaten the validity of a share deal, whereas an asset deal with such objects would be null and void (see 2.4.).

Although more inexpensive and effortless in terms of the actual deal, it cannot be overlooked that purchasing a company that owns a real estate property involves risks not only related to the property but also the company itself. In addition, the formalities of an asset deal may be troublesome, but could potentially reveal significant findings, especially through the involvement and expertise of legal professionals (both lawyers and notaries), who would be qualified to notice abnormalities or insufficiencies in the property’s documentation. In this sense, multifaceted, meticulous, and sophisticated legal due diligence becomes of vital importance in the context of a share deal. Lastly, maintaining the purchased company naturally means embracing an additional set of corporate and accounting obligations.

2.2  Share deal

A share deal consists in acquiring shares in, and thus gaining control over, a company owning (or holding any other real right on) the desired real estate property. These companies are usually capital companies, primarily in the form of a Societe Anonyme (SA) or a Greek Private Company (PC). They might constitute either special-purpose entities, with the limited function of owning the property in question, or actually engage in business activities. The acquisition of shares is achieved through a sale and purchase agreement between the old and the new shareholder(s).

Before entering into the agreement and in order to assess the risks of the transaction, it is an essential part of the process for due diligence to be conducted on behalf of the prospective purchaser. Depending on the target company’s nature, size, history, activity, etc., varying types and degrees of due diligence may be required, including legal, financial, tax, operational, commercial, environmental, and others. Special due diligence of legal and technical character is carried out on the company’s real estate assets (see 2.6.).

In the context of the company’s legal due diligence, it is investigated whether the company has been lawfully incorporated and operates in accordance with the corresponding corporate legislation (Law 4548/2018 for SAs and 4072/2012 for PCs), whether it complies with any applicable corporate governance or regulatory requirements and whether there are any provisions in the companies’ Articles of Association or call options that may prevent, or encumbrances on the shares that may devaluate, the transaction. Also, a review of the company’s material contracts (e.g., loans, guarantees, insurances), employment policy, data protection policy, pending trials, etc. is performed. It is especially important to verify if the company has taken all measures in order to be exempt from the Special Real Estate Tax (EFA) (see 4.2.).

Following the due diligence, should the purchaser wish to proceed with the transaction, the sale and purchase agreement for the acquisition of the shares is drafted and executed. Law 4548/2018 on SAs does not prescribe a particular form for this agreement, while Law 4072 on PCs only requires that it be written; therefore, the common practice is that a private document is signed, without the need to involve a notary public. In the case of SAs, the transfer of shares is then registered in a special company record (the shareholders’ record) along with the names of the contracting parties, and either a new share certificate is issued in the name of the purchaser or a relevant note is made on the existing certificate. Please note that as per art. 184 of Law 4548/2018, starting from January 1, 2020, all bearer shares issued by Greek SAs are mandatorily transformed into registered shares. Different registration procedures apply with regard to listed shares. A very similar procedure is followed for PCs.

 If, after the transfer of shares, the purchased shares, the company itself or its real estate properties are revealed to fall short of what the parties had agreed (e.g., the purchaser discovers that the company is in debt or faces regulatory implications or its properties are subject to restrictions that they had not been informed of when entering into the deal), the provisions on the so-called “substantive” and “legal” defects of the object of a sale apply (mutatis mutandis), granting a – far from negligible – set of claims against the seller (see 2.6.). However, a prudent purchaser is advised to not rest on the protection of the law mainly because, oftentimes, these claims would be activated (or at least realized) after the sale price has been paid, and also not all deficiencies of the purchased company could be easily categorized as substantive or legal defects. For this reason, additional protection is ensured through the inclusion of specific terms in the sale and purchase agreement, which incorporate the findings of the due diligence and contain representations, conditions precedent (e.g., deferred payments until the seller succeeds in removing an existing third-party right, such as a mortgage, from the company’s property), warranties (which guarantee the full spectrum of claims against the seller irrespective of whether they are in fault of not), indemnities, and penalty clauses.

With regard to taxation, share deals are exempt from indirect taxes (VAT, stamp duty) and transfer taxes, save for a 0,2‰ Sale Tax levied upon the seller of shares listed in the Athens Stock Exchange (art. 9 of Law 2579/1998). For the remaining part, the seller of shares who is a natural person is subject to a Capital Gains Tax, which is calculated at a rate of 15% of said capital gains (art. 43-43 of Law 4172/2013). If the seller is a legal person, a business income tax is imposed on the capital gains instead, at a rate of 22%; however, an exemption applies in the case that the legal person transferring the shares is a tax resident of Greece and maintains at least 10% equity holding in the company whose shares are being transferred for at least 24 months.

Lastly, a share deal could be concluded through a merger of a company interested in acquiring the real estate property (or one of its subsidiaries) with the owning company, in which case special rules apply (Law 4601/2019).

2.3  Asset deal

For the process of an asset deal preceding the execution of the sale and purchase agreement by means of a notarial deed and the risks to be considered by the purchaser, please refer to section 2.6.; for the ways in which such risks are usually addressed in the agreement, please see the relevant paragraph of section 2.2. above, as these are common in share and asset deals; for details on the notarial deed itself and relevant fees, see section 2.4.; for the subsequent registration process and its fees, refer to section 2.5.; for applicable transfer taxes, please check section 4.1.

2.4  Disposal process

As explained above, the involvement of a notary public is not needed for a share deal, whereas an asset deal would only be valid if performed by means of a notarial deed.

Apart from the sale and purchase agreement for the real estate property, a series of other documents are required by law for the conclusion of the asset deal by means of the notarial deed and are typically annexed thereto. These include, among others:

• Certificates of payment of taxes related to the ownership of the property (ENFIA, TAP – see  4.2.) for the years before the transaction, as well as a proof of payment of the applicable transfer tax (FAM – see 4.1.).
• The seller’s solemn declaration and an engineer’s certification that a) the property is a vacant land plot, b) that the building(s) existing thereon are legal, or c) that any illegal buildings existing thereon have been duly regularized. The engineer’s certification is accompanied by a topographic diagram of the property drafted according to the National Coordinate System, subject to exceptions. Please note that as a general rule set in art. 82 of Law 4495/2017, transactions for the transfer or establishment of real rights on properties with illegal (or not regularized) buildings thereon are absolutely null and void. However, this prohibition does not, interestingly, cover deals for the acquisition of shares in companies that are already lawful owners of said properties.
• An energy performance certificate for the building being transferred, if applicable, which is handed over to the purchaser.

The aforementioned solemn declaration, engineer’s certification, and energy performance certificate shall be absorbed and replaced by the so-called “Building’s Digital Identity” envisaged in Law 4495/2017. As the legislation currently stands, starting from January 1, 2021, the new document required for the transfer of most buildings shall be the Certificate of Completeness of the Building’s Identity, without an option to use the previous set of documents.

Special documents might be required for reasons associated either with the subjects of the transaction (e.g., an insurance clearance certificate when a seller is a natural person performing business activities or any legal person), the natural or legal status of the property (e.g., a certificate of non-burnt land for private forests and forest expanses) or both (e.g., special administrative permission for foreign transferees of properties in designated border areas – see 1.1.).

A breach of duty by the notary public who has agreed to perform the transaction may result in their civil liability, disciplinary consequences, and, in special cases (e.g., the intentional non-attachment of the aforementioned solemn declaration and engineer’s certification to the notarial deed), is treated as a criminal act.

Finally, pursuant to Ministerial Decision 111376/2012, notarial fees are calculated as an aggregate of certain standard fees (EUR 20 for the first page and EUR 5 for each of the other pages of the deed) and a progressive fee at a rate ranging between 0,80% and 0,10% on the higher of the objective price (see 4.2.) or the price of the property agreed between the parties. Notarial fees are also subject to VAT.

2.5  Registration of change of ownership

As previously mentioned, registration of all legal acts resulting in the transfer or establishment of real rights on real estate property, a primary example being a sale and purchase agreement for the transfer of ownership, must be registered with the competent Land Registry or Cadastral Office.

Registration is usually complete shortly after the notarial deed has been brought for registration, subject to delays caused by the process of reviewing the legality of the legal act (see below) and the understaffing of certain Land Registries. In any case, for legal purposes such as the determination of the priority of real rights, it is the time of application for the registration of the (valid) legal act that is of consequence.

Registration fees apply and are calculated based on a rather complex structure of standard and proportional fees and tend to differ slightly for Land Registries and Cadastral Offices. Indicatively, art. 6 of Law 4512/2018 provides that a fee at a rate of 5 or 6‰ on the value of the transferred property is payable for the registration of sale and purchase agreements at a Cadastral Office.

Finally, the personnel of the competent registration authority is not commissioned to accept and register all legal acts brought before them in an unquestioning manner; however, their review is limited by law and differs between Land Registries and Cadastral Offices. At Land Registries operating under the old system of registrations and mortgages, the review of the registrants is generally formal, mainly focused on the confirmation that all required documentation has been submitted, and does not extend to the examination of the documents’ validity (art. 13 of Royal Decree 533/1963), save for certain cases of blatant nullity. On the other hand, at Cadastral Offices, and in service of the principle of public faith in cadastral registrations, registrants proceed to a deeper review of the legality of the legal acts brought before them, verifying their suitability to produce the desired legal consequences (art. 16 of Law 2464/1998). In both cases, a breach of the registrants’ duties (e.g., the registration of a blatantly null and void agreement) may incur their civil liability, disciplinary penalties, but also, in extreme cases and provided that the registrant acts with intent, criminal responsibilities.

2.6  Risks to be considered

The acquisition of ownership (and other real rights) on real estate, be it through a share or an asset deal, might involve considerable risks associated with either the validity of the transaction itself or the possibility to legally, safely, and effectively proceed to the envisioned use and/or development of the property. For this reason, thorough legal and technical due diligences should be conducted on behalf of the prospective acquirer.

Legal due diligence typically includes the review and confirmation of an uninterrupted sequence of titles (i.e., legal acts capable of producing the transfer of a real right, such as sale and purchase agreements, deeds of acceptance of inheritance, court decisions, etc.) duly registered in the public records, that is, either in the physical records of the competent Land Registry or in the system of the National Cadastre (see 1.2.). The titles themselves should be reviewed in terms of their validity, for a minimum 20-year lookback period. This period is essential because it is the time required to acquire a property by adverse possession (extraordinary usucaption), and continues to benefit the consecutive successors of the initial possessor of the property. Furthermore, it is investigated if there are any registered encumbrances or other property defects (e.g., mortgages, prenotations of mortgage, servitudes, long-term leases, lawsuits, seizures) or non-registered leases. In any case, it should be reminded that the factuality of the conclusions reached through a title review is inevitably dependent on the system of publicity that applies in the area of the property (see 1.4.).

Technical due diligence, performed by engineers, usually focuses on confirming the property’s location and dimensions, as well as inspecting existing buildings and structures in order to confirm their compliance with the corresponding building permit(s) and applicable legislation. This last verification is crucial because, as explained under 2.5., the transfer of real rights on properties with illegal (or not regularized) buildings thereon is generally impossible.

Finally, legal and technical advisors collaborate in order to review the property’s spatial and urban planning status (or planning identity), which delineates the ways in which the property can be built on and exploited. Indicatively, it is determined whether the land plot falls inside or outside a city plan, what are the allowed land uses and applicable building terms and restrictions deriving from such status and whether limitations arise from special legislation on forests and forest expanses, cultural heritage, nature conservation areas, foreshore and beach zones, etc.

If the purchaser wishes to bind their prospective seller in advance (e.g., for a certain sale price) before the completion of the due diligence, it is common practice to conclude a preliminary agreement. Such agreements are also useful for the seller to bind prospective purchasers before they (the seller) gather all necessary contractual documentation (see 2.6.). In order to be valid, a preliminary agreement should contain all the essential elements of the final sale and purchase agreement and also be drafted by means of a notarial deed (GCC art. 166). For the remaining part, it might be either unilaterally, or bilaterally binding.

In the event that, after the final transfer is complete, a purchaser finds out that the property is flawed with substantive or legal defects that they were unaware of during the transaction, they hold a set of claims against the seller. This means that if the seller manages to prove that the purchaser had knowledge of these defects, they are exonerated from the purchaser’s claims.

More specifically, in the case of substantive defects, which may affect the property’s natural qualities or its administrative status (e.g., a deficiency in the surface of the land plot, illegal buildings, planning restrictions), the purchaser has the right to: a) demand that the defect be rectified (if applicable), b) request that the sale price be reduced, c) rescind the sale and purchase agreement, or d) seek compensation, either exclusively or in addition to the previous rights (GCC arts. 540 et seq.). The first three rights are available regardless of the seller’s fault (by way of intent or negligence), whereas compensation generally requires demonstrating such fault. In case of legal defects, i.e., third-party rights that hinder the enjoyment of the purchaser’s right, the purchaser may, regardless of the seller’s fault: a) require proper performance of the sale and purchase agreement, and possibly claim compensation for the delay in proper performance, b) insist on performance on the contract despite the defect and claim compensation for the existence of the defect, c) rescind the sale and purchase agreement, or d) exclusively seek compensation (GCC arts. 515-517).

Please refer to section 2.1. on share deals to see the ways in which the purchaser may ensure greater protection through the sale and purchase agreement, which apply to asset deals as well.

3. REAL ESTATE FINANCING

3.1  Key sources of financing

Banks represent a primary source of real estate financing in Greece, as debt financing on a commercial scale is reserved for licensed credit institutions. To this end, they provide loans, project finance schemes, or sale and lease-back contracts.

Investment capital can be raised through the stock market, institutional funds, or through the issuance of bond loans. Bond loans, governed by Law 4548/2018, are only available to Greek Societes Anonymes and have proved a particularly effective instrument, both among companies specialized in real estate investments (REICs) and other corporations. The so-called category of “green bonds”, issued for the financing of sustainable real estate projects, appears to be increasingly attractive across all sorts of investors.

Another practice worth mentioning is finance leasing, whereby a regulated financial lessor acquires a property from the original owner and enters into a long-term lease with the interested investor, combined with an option to acquire ownership of the property at a pre-agreed residual value (typically nominal or even zero).

In addition to the above, funding is available for real estate investments through various national and European development programs. Indicatively, special state funds from the Greek Recovery and Resilience facility are dedicated to incentivizing and supporting certain types of sustainable “Strategic Investments,” i.e., large-scale projects that are deemed particularly important for the national economy and for which a unique framework exists.

3.2  Protection of creditors

A creditor's primary security when financing real estate projects are, unsurprisingly, mortgages, and prenotations of a mortgage over the debtor’s properties. Other securities include:

• Pledges over the debtor’s shares and bank accounts.
• Nominal pledges on debtor’s goods in turnover, machinery equipment, etc. in accordance with Law 2844/2000, or floating charges.
• Personal or corporate guarantees granted by the debtor’s shareholders or entities affiliated with the debtor.
• The assignment of insurance claims, rental claims, and generally all receivables generated by the property(-ies), as well as any claims arising from material contracts of the debtor (e.g., a management agreement with a hotel operator).
• The assignment or establishment of pledges over claims arising from loans granted to the debtor by its shareholders.

In addition, financing agreements contain covenants, such obligations of the debtor to maintain a certain legal and financial status and inform the creditor about any changes, to comply with applicable laws and regulations, to not dispose of or encumber the real estate property(-ies), to not dispose of receivables, to not proceed to corporate transformations and/or distributions, etc.

4. REAL ESTATE TAXES

4.1  Transfer taxes

The transfer of real rights on real estate properties is subject to taxation. These transfer taxes are levied once and burden either the transferor or the transferee (usually, a seller or a purchaser) of said rights. They include:

• The Real Estate Transfer Tax (FMA) - Law 1587/1950. This tax is imposed on the purchasers of the real rights at a rate of 3% (subject to minimal increases for the benefit of local authorities) on the higher of the objective price (see 4.2.) or the price of the property agreed between the parties. Exempt from the FMA are, up to certain amounts, the natural persons who purchase properties that shall serve as their main residence. The FMA must be paid by the purchaser before the execution of the notarial deed for the transfer of the real right.
• The Value Added Tax (VAT) - Law 2859/2000. In place of the FMA, VAT is imposed on the transfer of real rights on new and unoccupied buildings (or parts thereof in the case of a horizontal property) whose buildings permit has been issued after January 1, 2006, at a rate of 24%. Subject to the tax are all natural and legal persons in the context of their business activities. Any subsequent transfers only incur FMA for the purchaser. It is important to point out that persons subject to VAT may opt for a deferral of their obligation to pay VAT until December 31, 2022, in which case the transferee’s obligation to pay FMA applies.
• The Capital Gains Tax on Real Estate (FYA) - art. 41 of Law 4172/2013. Capital gains realized by natural persons upon disposal of their real rights are taxable at a rate of 15%. However, the application of this tax has been continuously deferred since its introduction and is currently deferred until January  21, 2022. If the seller is a natural person acting in the context of their business activities or a legal person, these capital gains are, instead, subject to business income tax (at a rate of 9-44% depending on the tax bracket for the former and 22% for the latter).

4.2  Specific real estate taxes

Not only the transfer but also the mere ownership (or the holding of other real rights apart from mortgages but also, the possession) of real estate in Greece is subject to taxation. The following taxes are levied on an annual basis on the ownership of real estate properties:

• The Uniform Real Estate Property Tax (ENFIA) - Law 4223/2013. This tax consists of a principal tax, imposed on each real estate property located in Greece and owned by a natural or legal person and a supplementary tax, imposed on the aggregate value of the taxpayer’s rights on real estate. The principal tax on buildings is calculated by multiplying the surface of the building with a so-called “basic tax,” which ranges between 2 and 13 depending on the price zone where the building is located, and other coefficients regarding the building’s oldness, floor, facade, etc. Price zones are determined by means of a decision of the Minister of Finance (the latest available one is dated June 7, 2021, and shall take effect on January 1, 2022) and these prices form the basis of the renowned system of objective values, which should – albeit frequently have not – converge with the current market values of the properties. Similar rules apply to vacant plots. The supplementary tax is imposed at a progressive rate for natural persons (the first EUR 250,000 being tax-free) and at a standard rate for legal persons.
• The Municipality Duty (TAP) - art. 24 of Law 2130/1993. This tax, also imposed on natural and legal persons alike, is collected through electricity bills in favor of Municipalities. The tax is imposed at a rate ranging between 0.25‰ and 0.35‰ on the real estate’s objective value and (if applicable) further multiplied by a rate derived from the building’s oldness.
• The Special Real Estate Tax (EFA) – art. 15 et seq. of Law 3091/2002. Only applicable to legal persons, this tax is calculated at 15% of the property’s objective value. This extortionate tax was introduced in order to tackle the tax avoidance problem of offshore companies regarding their real estate in Greece since the ultimate beneficiaries of these properties remained secret from Greek authorities. Therefore, among other exceptions, companies with a registered seat in Greece or in another country within the EU or the EEA or a third country (provided that this country is not included in the Greek list of non-cooperative jurisdictions), which (i) have registered shares (or the equivalent in their jurisdiction), (ii) disclose their ultimate beneficial shareholders (individuals), and (iii) such individuals hold a Greek tax identification number, are exempt from paying the EFA.

5. CONDOMINIUMS

5.1  Legal Framework for condominiums

A much more conventional example of a divergence from the superficies solo cedit principle than the surface right (see 1.1.), condominiums exist in Greece in the form of horizontal and vertical properties, which are collectively referred to as “divided properties.”

Horizontal properties are mainly governed by GCC arts. 1002 and 1117 and Law 3741/1929. Horizontal ownership is the special form of ownership which consists of (a) exclusive ownership of a floor or an apartment in a building and (b) a mandatory co-ownership on the land plot and the building’s common areas (roof, yard, stairways, etc.). Vertical properties, in turn, were introduced by Legislative Decree 1024/1971, pursuant to which the aforementioned provisions on horizontal properties also apply, mutatis mutandis, to vertical properties, forming a shared legal framework for both concepts. Vertical ownership is the special form of ownership which consists of (a) exclusive ownership of a building constructed on a land plot with two or more separate buildings and (b) mandatory co-ownership of the land plot and the common facilities thereon. The two types of divided properties may also coexist, if a vertical property is also partitioned into horizontal properties, creating a so-called “composite vertical property.”

Apart from their conceptual differences, it should be mentioned that, unlike horizontal properties, the establishment of vertical properties is not allowed in non-urban areas (i.e., on land plots beyond city plans and settlement boundaries). However, certain exceptions apply; one to be considered are integrated tourist resorts (Law 4002/2011).

Divided properties are typically established by means of an agreement between all the co-owners of the whole property, a unilateral act of the sole owner of the property, or an agreement between the owner (or owners) of the whole property and the transferee of the divided property. All these acts must take the form of a notarial deed and be registered in public records.

5.2  Rights and duties of co-owners

The rights and duties of the owners of divided properties derive from Law 3741/1929, as well as the provisions of the GCC on co-ownership (arts. 1113-1117). It is also typical – albeit not mandatory – that additional rights and obligations are set by virtue of by-laws established through an agreement of all the co-owners, which must take the form of a notarial deed and be publicly registered.

In relation to the part of the property exclusively owned by them, the owners of divided properties enjoy all the powers emerging from the right of ownership. As regards the common parts of the property, each co-owner holds a right of free use and repair thereof, on condition that the rights of the other co-owners are not harmed and that the ordinary purpose that these parts are destined to serve is not altered.

In terms of duties, each co-owner shall contribute to the common expenses of the whole property depending on the value of their divided property and be obliged to take the necessary measures for the maintenance of the common areas in the event of imminent danger.

5.3  Liability of co-owners

An owner of a divided property may breach their obligations under the law or the by-laws (if in place) and thus become liable vis-a-vis the other co-owners. If the breach consists in offending the exclusive ownership of another co-owner, this co-owner is equipped with the actions in rem and the remedies related to possession described under 1.4., as well as claims for the compensation of any damages suffered. Similarly, if a co-owner offends the co-ownership of the rest on the common areas of the property (e.g., by arbitrarily occupying a common space), each of the other co-owners may protect their percentage of co-ownership or co-possession by exercising the same claims, and also request compensation for any personal damage. In any case, each of the other co-owners holds a primary right to request that another co-owner conforms to all their obligations under the law (e.g., that they pay their share in the common charges) or the potential by-laws (e.g., that they cease to exercise an activity which is not allowed in the building), and demand compensation if damages occur.

5.4  Rights and duties of condominium associations

Together, all the owners of divided properties on a land plot form a union of persons which is not endowed with a legal personality (GCC art. 107). The two main bodies serving this union are the General Meeting of the Co-owners and the Administrator, whose role is usually elaborated in the by-laws, as the relevant provisions of Law 3741/1929 are frugal.

The General Meeting of the Co-owners decides on matters related to the maintenance, improvement, and use of the common parts of the property. The majorities required for decision-making are fixed in the by-laws. These majorities, however, may not amend the by-laws (which constitute an agreement between all the co-owners) or unanimous decisions of all the co-owners.

The Administrator is typically elected by a majority at the General Meeting in accordance with the by-laws; in the absence thereof, a consensus of all co-owners is required for their appointment. The Administrator is usually responsible for the execution of the maintenance works in the common areas, the allocation of the common expenses, and the legal representation of the union of the co-owners. Finally, the law does not require the Administrator to also be a co-owner, but the by-laws may.

6. COMMERCIAL LEASES

6.1  Form and contents of a lease agreement

Just as for any regular lease, no particular form is required for the validity of a commercial lease; even an oral lease agreement can be binding. The usual practice, however, is for the lease contract to be concluded through signing a private document. In any case, tax legislation requires that the basic information of all real estate property leases (whether be it written or oral) be declared on the Greek electronic system for taxation services (TAXISnet), whereby they receive a registration number and a so-called “certain date.”

Commercial leases must at least define:

• the amount of the rent, which is usually paid on a monthly basis and adjusted annually (see 6.5.); and
• the commercial or professional activity which the lessee may exercise in the leased premises. The parties may also agree on an obligation of the lessee to practice said activity.

Other terms standardly found in commercial leases include:

• the duration of the lease;
• the amount of a security deposit or a bank letter of guarantee provided by the lessee;
• obligations of the lessee to keep the leased premises in good condition and repair any damages thereto, pay any utility charges and common area expenses, maintain a set of insurance policies, etc.;
• the exclusive responsibility of the lessee to obtain all applicable permits and approvals to exercise the agreed activity and/or perform any construction or fit-out works; and
• the reasons for which each party may terminate the lease.

As one would expect, the contents of a standard commercial lease in Greece today have been shaped, in large, by the two great socio-economic crises of the recent years: the financial crisis of 2009 and the COVID-19 pandemic. By virtue of a radical reform of the legislation on commercial leases in 2014 (see 6.2.), their minimum mandatory term was significantly lowered from 12 to three years. Surrounded by market insecurity and fluctuations, both parties to commercial leases have eagerly grasped the opportunity to conclude shorter contracts and freely re-evaluate their best interests more often. Moreover, the pandemic has not only instigated legislative interventions in the direction of mandatory reductions of rent and extensions of the leases’ duration (for periods equal to the suspension of economic activity due to quarantine) but also inspired the parties to agree on more elaborate force majeure clauses.

In spite of the adversities, the demand for commercial leases definitely seems to be on an upward trajectory, also inducing an increase in rental prices according to the eKathimerini news portal. Finally, according to the same news outlet, after an unprecedented surge in e-commerce during the pandemic, there has been fierce competition among 3PL companies to rent logistics real estate.

6.2  Regulation of leases

Commercial leases are regulated by Presidential Decree 34/1995, supplemented by the general provisions of the GCC on leases (arts. 574 et seq.). Considerable amendments were introduced to said Presidential Decree by virtue of art. 13 of Law 4242/2014, essentially creating two different regimes for commercial leases concluded before (old leases) and after (new leases) its enactment on February  28, 2014. The following information on commercial leases is focused on the current legal framework for new leases.

Pursuant to art. 45 of Presidential Decree 34/1995, its protective regulations for the rights and interests of both parties are semi-mandatory, in the sense that a waiver of said rights upon the first conclusion of the lease agreement does not produce legal effects (unless stipulated otherwise in the decree), however, a posterior waiver is possible. This means that the parties can only conclude commercial leases that bind them with the total of semi-mandatory rights and obligations of the decree, and each of them can only later decide if they want to be deprived of one or more of these rights (or not). One example of these (drastically decreased be virtue of Law 4242/2014) rights is the right of the lessee, three years into the lease, to concede the use of the leased premises to a company established with a minimum participation of 35% by the lessee. However, the most prominent example regarding new leases refers to their duration under Law 4242/2014: this is mandatorily set at three years, even if agreed for a shorter or indefinite term, and may, of course, be agreed for longer. Commercial leases can only be dissolved during the mandatory three-year period by means of a subsequent agreement bearing a certain date. In this context, if the lessee is acknowledged to still hold a right of termination for convenience under the new regime (see 6.4.), then a certain date would also be required for a subsequent waiver of this right.

Please bear in mind that there are certain exceptions where the protective provisions of Presidential Decree 34/1995 do not apply, leaving the parties under the provisions of the GCC only. These exceptions include the lease of spaces within the premises of ports, airports, and train stations, within public spaces such as archaeological sites and universities, listed buildings, etc.

6.3  Registration of leases

As a general rule, no registration is required for a commercial lease, neither as a condition for their validity nor as a prerequisite for the lease to have binding power over future owners of the leased property (however, see 6.8.). The aforementioned declaration to the tax authorities (see 6.1.) serves purely taxation purposes.

6.4  Termination of leases and renewals

The ill-advised wording of art. 13§2 of Law 4242/2014 has created a major interpretative challenge as to whether a semi-mandatory right to terminate a commercial lease for convenience (i.e., without cause) is applicable to new leases. For the time being, two divergent decisions of two different courts of appeal have only deepened legal uncertainty around the matter. More specifically, in its Decision No. 2117/2019, the Single-Member Court of Appeal of Athens held that the lessee (and the lessee only) may, at any time, even before the completion of the mandatory three-year period of the lease, terminate the lease for convenience, the termination taking effect three months later. Conversely, the Single-Member Court of Appeal of Piraeus, in its Decision 35/2020, ruled that new leases are binding for both parties throughout the lease, i.e., for at least three years or more, if the parties have agreed on a longer term, and none of them may terminate the lease for convenience at any time. It is thus evident that until the Supreme Civil and Criminal Court sheds light on the meaning of said provisions, the lessors in all new leases will continue to be insecure about their lessees having or not a right to end the contract at any time.

With regard to termination for cause, the reasons granting a right to each party to terminate the lease are usually set down in a relevant clause and are mostly associated with a breach of contractual terms. In any case, the law provides that the lessor may terminate the lease if the lessee makes improper use of the property (GCC art. 594) if they fail to pay rent in time (GCC art. 597) or for a “serious cause,” that is, for any occurrence which, combined with all other circumstances, renders the continuation of the lease intolerable. However, unless the parties have explicitly agreed otherwise, it is no longer possible for lessors to invoke reconstruction of the property, owner-occupancy, or the intention to practice their own business in the leased premises as causes for termination. On the other hand, the lessee is mainly equipped with a right to terminate the lease if the leased premises have not been delivered in time, wholly or in part, in a (substantive or legal) condition that renders possible their unobstructed use as agreed (GCC art. 585).

When a commercial lease reaches its natural end upon completion of the minimum mandatory three-year period or any longer term agreed, the parties may of course agree to renew it. In absence of such a new agreement, if the lessee continues to use the leased premises and the lessor does not object thereto, it is deemed ex lege that the lease has been renewed under the same terms for a duration which is, now, indefinite (GCC art. 611). An indefinite duration means that any party may, at any time, terminate the lease without cause, subject to observing minimum notice periods.

6.5  Rent regulations and rent reviews

Presidential Decree 34/1995 explicitly states that the amount of the rent is freely determined by the parties, as is the percentage and frequency of its adjustment. For the case where the parties have not agreed on a rent adjustment clause, the law establishes a system for its adjustment after the second year of the lease, based on either the objective or commercial value of the leased premises and, following that, an annual readjustment based on the shift in Consumer Price Index (CPI) statistics.

However, is it rather extraordinary for a specific rent escalation clause not to be included. It is typically agreed that the rent shall increase annually by a percentage equal to the percentage of change in CPI, often further increased by another percentage (e.g., CPI +2%). Rent review clauses, whereby the rent is brought in line with the current market value of the leased premises through real estate appraisal, are also allowed, yet not as popular (especially for shorter leases) since they result in additional costs for both parties and a mutual agreement on the new rental price is not guaranteed.

Furthermore, through its arts. 288 and 388, the GCC offers useful tools for the adjustment of rent in the case of a material change of circumstances. Especially art. 388, granting a right to request judicial intervention for the adjustment of a contract whose balance has been disrupted by unforeseen events, has been widely used in the past decade of the financial crisis in Greece.

Finally, special mandatory legislation for the payment of rent in commercial leases has been issued for periods when the country (or parts of it) was in lockdown due to the spread of COVID-19. This legislative allocation of risks mostly came under the form of a relief of commercial lessees of 40% of their rent, with simultaneous financial aids granted to lessors.

6.6. Services to be provided together with the lease

There is generally no specific service prescribed by law that the lessor of a commercial lease shall provide to the lessee. Lessors do have a general obligation under GCC arts. 575 and 592 to maintain the leased premises in a condition that is appropriate for the exercise of the agreed commercial activity and repair any damages caused by the regular use of the premises by the lessee; these obligations, however, are usually passed on the lessee through the lease agreement.

Other than the above, the parties may freely agree on any additional service to be provided by the lessor. One such example would be a lessor of a shopping mall undertaking to provide cleaning, security, and marketing services to the lessees running the shops within the mall.

6.7  Fit-out works and their regulation

As a general rule provided by the GCC (art. 591§2) any investments in the form of fit-out works resulting in the increase of the premises’ commercial value shall be repaid by the lessor, but only if the lessor truly or presumably desired such fit-out works to be made and remain for the benefit of the property. For fixtures, instead of their right to repayment, the lessee may choose to remove them from the property. In any case, the lessor is entitled to require that the premises be returned to them in their original state (GCC art. 599), in which case the lessee is obliged to proceed to all necessary removals and perform any necessary works to restore such state.

However, these provisions are often derogated through special agreements in the lease contracts. It is often agreed that the lessor may choose to keep all improvements and fixtures for the benefit of the property, without a duty to repay the lessee, or alternatively choose to have the premises returned to them in their original state at the lessee’s cost. In the case where improvements and fixtures are agreed to remain with the lessor, it is typical that instead of repayment, a lower rent would be agreed upon, either during the fit-out works or throughout the lease.

It should be mentioned that if the improvements and fixtures made by the lessee do remain with the lessor, the latter shall be taxed for these benefits with an income tax (an income in kind). Tax legislation stipulates that if the parties have agreed that the benefits shall stay with the lessor, then the annual income in kind shall be calculated by dividing the value of these benefits by the number of years of the lease. Other than that, if the benefits to be kept exceed basic fit-out works and result in the property acquiring features that influence its objective real estate value (e.g., the construction of new, or the expansion of existing buildings), then the owner/lessor shall bear a heavier real estate tax (ENFIA, TAP – see 4.2.) burden.

6.8  Transfer of leases and leased assets

In contrast to regular leases, commercial leases seem to be immune to the risk of potential transfers of the leased properties to new owners without the need to observe the additional formalities set by GCC arts. 614-618 (proof of the lease through a document bearing a certain date, registration of leases exceeding nine years in duration). This is essentially the case-law of the Supreme Civil and Criminal Court, based on the argument that these provisions have been explicitly excluded from commercial leases by law. Thus, future owners are automatically (ex lege) bound by existing commercial leases for the remaining time of the lease. However, please note that this case law of the Supreme Court was formed under the old regime, where a minimum mandatory term of 12 years was fixed by law, and it has not been tested for new leases, whose minimum term has been set at three years.

A noteworthy exception exists for the case where the old owner is succeeded by a new one not by means of a consensual transfer, but as a result of enforcement proceedings initiated on the property of the old owner. The highest bidder in these proceedings becomes the new owner of the property and holds the right to terminate the lease at any time. The lease is subsequently dissolved within two months. Starting from January 1, 2022, the termination takes effect after six months (art. 1009 of the Greek Code of Civil Procedure).

As for the lessees, they are entitled to unilaterally transfer their rights and obligations deriving from a commercial lease (i.e., their position as lessees) in the case of severe health issues preventing them from continuing their commercial or professional activities in the leased premises. In the case of the lessee’s death, this right may be exercised by their closest relatives (art. 12 of Presidential Decree 34/1995).

Other than the above cases, the transfer of a lease agreement presupposes a mutual agreement of all its old and new subjects.