Cyprus Considers Capping Rent Increases

Cyprus may soon introduce new rules governing rent increases. ALMA party MPs Odysseas Michaelides and Michalis Paraskevas have submitted a bill to Parliament proposing to prohibit landlords from increasing the rent for a tenant's primary residence more than once every 24 months and by more than 6% over that period.

The initiative comes amid continued growth in rental prices, which has been particularly noticeable in Limassol, Nicosia, Larnaca and Paphos. In recent years, strong demand, limited housing supply and the influx of foreign professionals have made housing costs one of the island's most pressing social issues.

Who Will the New Rules Apply To?

The authors of the bill note that the current Rent Control Law covers only part of the housing stock. Owners of most residential properties can currently increase rents significantly when renewing leases, leaving tenants with little legal protection.

If adopted, the new rules will apply only to a person's primary residence. Under the proposal:

1. the initial rent will continue to be freely agreed by both parties;
2. the restrictions will apply only to subsequent rent increases;
3. the law will not have retroactive effect and will apply only to new lease agreements, as well as renewals or new contracts signed after it enters into force.

The proposal is intended to strike a balance between the interests of property owners and the need to make the rental market more predictable for Cyprus residents.

Rent Increases Limited to Once Every 24 Months

Under the proposed legislation, landlords will be allowed to increase rent only once every 24 months.

The increase may not exceed the lower of the following:

1. the percentage specified in the lease agreement;
2. the maximum limit set by the Council of Ministers.

The bill itself sets an overall cap of 6% over a two-year period. In addition, landlords will be required to provide tenants with at least 60 days' written notice before any increase takes effect. The notice must include:

1. the current rent;
2. the new rent amount;
3. the percentage increase;
4. the legal basis for the increase;
5. a calculation demonstrating that the increase complies with the legal limit.

If such notice is not provided, the rent increase will automatically be deemed invalid.

What Practices Would Be Prohibited?

The authors of the bill also aim to close the most common loopholes used to circumvent rent restrictions. In particular, landlords would no longer be allowed to artificially increase rental costs through mandatory additional charges or hidden fees. Contract clauses in which tenants waive their statutory rights in advance would also be considered invalid.

Particular attention is given to situations in which landlords terminate a lease solely to re-let the property at a substantially higher rent. If a landlord refuses to renew a tenancy and then rents the same property to a new tenant within six months at a rate exceeding the legal limit, this will be presumed to constitute an abuse of the law.

This presumption may be rebutted only if there are legitimate reasons, such as:

1. the owner intends to move into the property personally;
2. the property has been sold;
3. major renovation or reconstruction has commenced;
4. or the previous tenant materially breached the lease agreement.

Rent increases above the statutory limit will be permitted only following substantial, documented improvements to the property, such as a comprehensive energy-efficiency upgrade, complete replacement of electrical wiring or engineering systems. Routine cosmetic repairs or maintenance to address normal wear and tear will not qualify as grounds for a higher rent.

Who Will Resolve Disputes?

All disputes arising under the proposed rules would be handled by the District Courts.

The court would have the authority to:

1. declare a rent increase unlawful;
2. order the landlord to refund any overpaid rent;
3. award compensation if an attempt to circumvent the law is proven.

The bill will now be reviewed by the relevant parliamentary committee before being submitted to MPs for debate. Experts note that the proposal represents another attempt by the government to mitigate the effects of the housing crisis. In recent years, rental prices in Cyprus have risen far faster than household incomes, particularly in cities with strong business activity and rapid construction. At the same time, the authorities are expanding affordable housing projects, increasing social support programmes and discussing additional mechanisms for regulating the rental market. Nevertheless, experts continue to view a long-term increase in housing supply as the key factor in stabilising rental prices.