Ayia Napa hotels underpaying on rent, audit office says

By Tom Cleaver

Five hotels in Ayia Napa are paying less in rent to the government than they should, given their revenues and the value of the land on which they stand, according to a report released by the audit office on Tuesday.

The report examined contracts signed regarding state forest land, and explained that in the 1970s and 1980s, five 99-year lease agreements were signed for hotels in Ayia Napa, with the first of those five being signed in 1970.

It explained that the 1970 agreement stipulated that the hotel would pay rent until 2069 as a percentage of its 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, it said, adjustments were to be made based on inflation and accepted prices of accommodation and concessions.

However, the law allowing for the procedures to calculate the rent for the hotels was repealed in 2019. As such, the report said, there is now no “basis for adjusting the rent” according to the law.

It then quoted the legal service as having said that this situation may mean that the agreement, being now legally unclear, is thus invalid, and would as such require arbitration.

Additionally, it said that the forestry department had asked the land registry to calculate the amount payable as rent by the five hotels, but that this calculation had been “delayed due to the failure to obtain” the requisite documents from local authorities and the urban planning department.

As a result, it 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,” it said.

As well as issues in Ayia Napa, the audit office made reference to the lease of state forest land inside a Natura 2000 protected area in the Troodos mountain village of Phini, wherein a company had applied to the forestry department in 2014 to be leased 20,000 square metres of land to build what was described as an “adventure park”.

It stated that the following year, a cabinet decision had ratified the leasing of 40,000 square metres for the purpose of the “adventure park”, with “no additional application or documentation” having been found related to the expansion of the amount of land leased.

Additionally, it said, the minutes of the meeting of the involved government departments in 2014 regarding the leasing of the land were not found, while no evidence was found to confirm that any examination of the criteria regarding the application took place.

It reported that once the lease contract was signed in 2015, eight years then passed before the leaseholders filed a planning application in 2023, despite the contract having provided for “the immediate implementation” of the planned project.