Real Estate 2023 Comparisons

Key sources of real estate law include:

• Article 17 of the Greek Constitution on the right to property;
• the third section of the Greek Civil Code (the GCC) entitled “Law of Real Rights” (Articles 947 et seq) and the provisions of the GCC governing lease contracts and contracts for work;
• Law 3741/1929 and Legislative Decree 1024/1971 on condominiums;
• Presidential Decree 34/1995 and Law 4242/2014 on commercial leases;
• Laws 2308/1995 and 2664/1998 on the National Cadastre;
• Law 2882/2001 on expropriation; and
• a plethora of ever-changing construction and urban-planning laws and regulatory acts.

The Greek real estate market has been marked by the following trends during the past year:

• a steady (and expanding) focus on tourism-related investments (eg, in hotels, resorts, branded villas, camping and glamping sites), both in terms of greenfield projects and, even more so, in the context of upgrading and refurbishing of existing stock;
• significant investor interest in high-standard commercial real estate, especially in sustainable office and retail buildings, logistics, data centres and renewable energy facilities;
• a continuing upsurge in the number of transactions involving urban residential properties (including residential construction), some of which are subsequently utilised for short-term renting;
• high demand for holiday houses across the country by foreign purchasers, especially members of the silver economy.

As the market starts to recover from the restrictions imposed by the COVID-19 pandemic, it is now faced with the ramifications of the war in Ukraine, inflation, rising energy and construction costs and, lately, increasing interest rates leading to an immediate decline in housing loan applications. Nevertheless, in contrast to other European countries, average property purchase and rental prices in Greece kept growing throughout 2022, fuelled in part by the booming post-COVID tourism industry, tax cuts, the promising projects of the “Greece 2.0” plan funded by the Recovery and Resilience Facility, as well as the opportunities in green real estate investment created by the ongoing undersupply of prime stock, coupled with the recent European and national legislation on the energy efficiency of buildings.

Finally, noteworthy recent deals include the acquisition of land plots in the areas of Spata and Koropi in Attica for the development of three data centres by Microsoft (a project with a total budget of approximately EUR1 billion), the signing of a definitive arrangement between Alpha Bank S.A. and the consortium comprised of Dimand S.A. and Premia Properties REIC for the sale of a EUR438 million real estate portfolio comprising diverse commercial assets (“Project Skyline”), the numerous agreements signed by Lamda Development for the materialisation of its landmark Ellinikon Project, and many more.

It appears that disruptive technologies such as blockchain or decentralised finance have not yet had a significant impact on the Greek real estate market, nor have innovative concepts of the platform economy such as real estate crowdfunding. However, it is expected that private initiatives aimed at transplanting them to Greece will soon emerge. For the time being, promising projects related to the valuation of real estate through AI, 3D modelling for virtual house tours and others are ongoing.

Infamous for its regulatory disorder and bureaucracy, the Greek real estate sector would deeply benefit from legislative, administrative and technological reforms aimed at precipitating permitting processes and simplifying transactions between stakeholders. Certain steps have indeed been taken in this direction since the pandemic (see 2.3 Effecting Lawful and Proper Transfer of Title), but these are still at a rather premature stage.

It is also crucial that the energy-efficient refurbishment of Greece’s obsolete building stock be incentivised, that the property tax system be further rationalised and that inflated construction costs, as well as the relation between rental prices and wages, be closely monitored.

The GCC establishes three real rights (rights in rem) applicable to real estate: ownership, servitudes (including usufruct and habitation) and mortgage. Condominiums are conceived as special forms of ownership (“horizontal” or “vertical” ownership).

Additional real rights have been occasionally introduced by means of special laws, including the so-called “surface right” on buildings erected on certain types of public properties (Law 3986/2011).

Apart from the above, a person may hold contractual rights (rights in personam) over real estate, such as the rights deriving from a lease.

The transfer of real estate rights is primarily regulated by the GCC, Laws 2308/1995 and 2664/1998 on the National Cadastre, as well as Law 3741/1929 and Legislative Decree 1024/1971 on condominiums.

Special legislation imposes additional conditions and restrictions on the transfer of all or certain properties, associated not as much with the type of real estate as with urban and environmental planning and licensing (protection of forests, cultural heritage, nature conservation areas, foreshore and beach zones, etc), as well as taxation issues.

For the lawful and proper transfer of a real estate property, an agreement must be concluded by way of a notarial deed and duly registered in the public records of the competent land registry or cadastre office. Land registries typically use the old system of registrations and mortgages, which is organised by reference to the persons holding real rights in a specific area, while cadastre offices operate under the advanced system of the National Cadastre, which is structured around the properties themselves. In this context, it is noteworthy that the long-awaited conversion of the Land Registry of Athens into a cadastre office took place on 20 March 2023.

Title insurance is not commonly offered by Greek insurance companies.

Lastly, attempts have been made to digitalise real estate transactions since the COVID-19 pandemic, mainly focused on the electronic submission of transfer tax declarations and the electronic collection of documents to be mandatorily attached to the notarial deeds of transfer. Moreover, the so-called “Property’s Digital Folder”, a system allowing notaries to electronically collect the documents required for a real estate transfer (provided that both parties are natural persons and that the property falls under the system of the National Cadastre), was launched on 9 October 2023 in a trial version, and is scheduled to become fully functional on 1 November 2023.

Real estate due diligence typically consists of a combination of legal and technical review of a property.

Legal due diligence aims at confirming the seller’s ownership through a review of the legal acts registered with the competent registration authority (typically for a minimum “20-year lookback period”, which is required for adverse possession), the identification of any registered encumbrances or other legal defects (eg, mortgages, foreclosures) and the review of any non-registered leases provided by the seller. With the pandemic acting as a catalyst, the records of the National Cadastre (for areas where the procedure has completed) are now available for remote research in its database.

Technical due diligence, performed by engineers, focuses on establishing the property’s location and dimensions as well as examining the legality of any buildings thereon.

Together, lawyers and engineers collaborate to define the property’s spatial and urban planning status (planning identity) to ensure that the property is suitable for its intended use.

Typical representations and warranties include statements that the ownership of the property belongs indeed to the seller and that it is free from of any encumbrances (legal defects) or natural deficiencies or urban planning restrictions (substantive defects) that could hinder the envisaged use by the buyer. No special representations or warranties appear to have emerged during the COVID-19 pandemic.

In addition, certain warranties are prescribed by law to be included in the sale and purchase agreement, either for all types or for specific types of properties (eg, that the property does not bear any illegal or not-regularised buildings, that it does not lie within a forest nor constitute a prime farmland, or that there are no water abstraction points to be found thereon). In the event of a misrepresentation (or breach of warranty), regardless of the seller’s fault, the buyer may generally demand proper performance, a reduction in the sale price, or partial or full compensation, and they may even rescind the contract; conditions and exceptions apply.

Please note that in larger deals pertaining to commercial properties, it is not uncommon for the seller’s representations and warranties to be made subject to an expiry date and/or for their liability to be limited to a certain amount (to the extent permitted by law), depending on the project’s budget and particularities. Finally, representation and warranty insurance is not used in Greece.

A real estate investor should be advised on the law of real rights and contracts. In the event the investor is looking to develop the property, it is extremely important to expand the due diligence and focus on:

• spatial and urban planning provisions;
• environmental restrictions;
• any special legislation applicable to the property (eg, cultural heritage, forest legislation) and the envisioned business activity (eg, tourism, energy legislation);
• corporate and banking and finance law and, if necessary, tax law.

Criminal, administrative, and/or civil liability for soil pollution or environmental contamination lies with the persons who caused said effects through acts or omissions (in accordance with the EU's “the polluter pays” principle) and not with the persons who are merely present or future owners of the properties where these acts or omissions transpire.

Of course, in the case of a share deal, the buyer would assume all pre-existing debts and liabilities of the legal entity being purchased, including its environmental liabilities.

A buyer may ascertain the permitted uses on the desired property through meticulous legal and technical due diligence; the findings are subsequently included as representations and warranties in the sale and purchase agreement.

More favourable terms for the development of a project may be achieved through special urban-planning tools such as the special urban plans of Laws 4447/2016, 4864/2021 on Strategic Investments, 3982/2011 on business parks, etc, which take the form of unilateral administrative acts – basically, presidential decrees or ministerial decisions – issued upon application of the investor.

Furthermore, under specific conditions, owners of large beyond-city-boundaries (see 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning) plots may initiate a planning process in accordance with Law 4280/2014.

Expropriation is possible under the guarantees of Article 17 of the Constitution, as further refined in Law 2882/2001.

For the declaration of expropriation, a public interest duly proved must exist. The compensation to be awarded must correspond to the full value of the property and not be subject to any deductions (eg, taxation); this is determined by the competent civil courts on a provisional and/or final basis and must be paid at a maximum of 18 months following the court decision, while the process of expropriation is only consummated upon payment of the full compensation.

Temporary requisition of property is also envisioned in special laws under extraordinary circumstances (eg, war), in which case compensation is merely just.

For most buyers, the purchase of real estate is taxed with a Real Estate Transfer Tax (RETT) at a rate of approximately 3% on the higher of the objective value or the transfer price (subject to minimal increases for the benefit of local authorities), with only minor exemptions. In lieu of the RETT,  VAT at a rate of 24% is imposed on the transfer, under certain conditions, with an option for deferral of this tax until 31 December 2024.

The seller, in turn, incurs a 15% capital gains tax on real estate (FYA) if they are a natural person, yet this is also deferred until 31 December 2024. Capital gains realised by legal entities are subject to business income tax at a rate of 22%.

For the remaining part, notary and registration fees (typically around 2.5% on the price) are borne by the buyer.

Share deals are generally exempt from indirect and transfer taxes, and as a result they tend to be more appealing on this basis. Only a capital gains tax (15%) or, for legal entities, a business income tax (22%) is imposed on the seller. If the transferred shares derive, directly or indirectly, over 50% of their value from real estate, such capital gains tax is also deferred until 31 December 2024.

For national security purposes, Law 1892/1990 prohibits the acquisition of both real and contractual rights on properties in designated border areas and specific islands to buyers who are nationals of, or seated in a country outside, the EU or the EFTA, as well as the purchase of legal entities owning such properties. However, the persons concerned may file an application for permission to acquire such rights before a special administrative committee.

The acquirer of real estate will typically raise finances through a combination of equity and debt financing.

Equity financing essentially consists of increases in a company’s capital usually covered by existing shareholders, but also through the stock market (if the company is listed) or by institutional investors.

Debt financing mainly comes in the form of conventional bank loans, open credit facilities and bond loans. Bond loans, only available to Greek Sociétés Anonymes (SAs) under Law 4548/2018, stand as a highly appealing financial instrument, unmistakably preferred for larger investments. Most bond loans in Greece are issued by means of private placement and subscribed by banks, affiliates of the issuing company or other institutional investors, rather than being offered on the open market.

As a hybrid arrangement, SAs may also choose to issue convertible bond loans, where bondholders have the right to convert their bonds into company shares.

Finally, finance leasing (regulated by Law 1665/1986) is a popular asset financing format 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). This may also take the form of a sale-leaseback agreement.

Mortgage is, unsurprisingly, a creditor’s main form of security when financing a real estate project. A prenotation of mortgage, ie, a conditional mortgage which may be registered over a debtor’s property following an interim court order (to which the debtor shall consent), is usually preferred because, as a rule, it is more cost-effective.

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 claims and receivables generated by the property, as well as claims from material contracts of the debtor; and
• 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 as obligations of the debtor to maintain a certain legal and financial status and inform the creditor about any changes therein, to not dispose of or encumber the property or its receivables, to not proceed to corporate transformations, etc.

The restrictions summarised in 2.11 Legal Restrictions on Foreign Investors also apply to the acquisition of securities over real estate by foreign lenders.

The foreign exchange and cross-border funds transfer restrictions introduced in mid-2015 to constrain liquidity outflows from the Greek economy have been fully lifted since September 2019.

The grant of security over real estate entails two main types of fees.

• Notary fees or court costs in order to obtain a title for the registration of a mortgage or a prenotation of mortgage, respectively.
• Registration fees payable to registration authorities ranging between approximately 0.7% and 0.9% of the secured amount. By way of exception, Law 3156/2003 sets a fixed registration fee equal to EUR100 for mortgages and prenotations of mortgage aimed at securing bond loans.

The above costs are almost always borne by the debtor.

For the enforcement of their security, in addition to attorney’s fees, a creditor will first have to incur a judicial fee (currently at the rate of approximately 1% of the amount claimed) to file an action to obtain a court decision or a court order awarding them their claim and, following that, they will need to prepay an enforcement duty, ranging between 2% and 3% of the same amount, as well as various expenses for bailiff’s fees, notary fees, auction costs, etc.

Valid establishment of a security over an entity’s property requires due authorisation through a resolution of its management body. Substantiating corporate benefit is not a precondition for the validity of such resolutions, but rather a means to exculpate managers from liability vis-à-vis the entity. 

Law 4548/2018 on SAs prescribes a specific process for the provision of securities to the benefit of related parties (controlling shareholders, board members, etc). Also, financial assistance rules apply, which restrain an SA from directly or indirectly financing or providing security for the acquisition of its own shares by third parties.

The standard enforcement procedures available to a lender are laid out in the Greek Code of Civil Procedure (the GCCP), while other statutes such as the Legislative Decree dated 17 July/13 August 1923 and the Code of Collection of Public Revenues are also applicable, mainly depending on the nature of the creditor (financial institutions and public authorities, respectively).

Pursuant to the GCCP, the existence of an enforceable title (eg, a notarial deed, a court decision, a payment order, the latter inarguably being the go-to option for lenders) is a necessary condition for enforcement.

The various steps of a full enforcement process include the service of the debtor with a copy of an executory transcript (which contains the enforceable title), the foreclosure of the property, and the conducting of a (now digital) forced auction in respect thereof, several months after the foreclosure. The time needed until the consummation of the process (ie, the collection of the claim) in a scenario without “complications” should be estimated at around one year from the service of the copy of the executory transcript. It may, however, be considerably extended if the borrower files for a stay and suspension of proceedings or if a (first) auction fails. In addition, following the auction, litigation may arise between different creditors as per their ranking, in which case the collection of the claim does not coincide with the completion of the process; immediate yet temporary collection (subject to judicial validation of the ranking) may be achieved through the issuance of a bank letter of guarantee.

The priority of a creditor’s claims depends on the rank of their security on the property, which is determined by the chronological order in which different securities have been registered. The GCCP also determines maximum percentages of the auction proceeds that different categories of creditors (eg, those holding securities, those with “general privileges”, unsecured creditors) may receive in case of concurrence.

Lastly, emergency legislation set off by the COVID-19 pandemic is no longer in force, while transitory provisions preserve the procedural rights of the parties.

A secured debt may partially recede in the face of another debt (be it older or newer) upon a forced auction, in case it concurs with different categories of debts (see 3.6 Formalities When a Borrower Is in Default).

Additionally, secured debt may be agreed to become subordinated to another debt, in either of the following manners:

• by the secured creditors arranging (through a notarial deed), a re-ordering of the rank of their consecutive securities and duly registering said arrangement; and/or
• by the creditors entering into in personam subordination arrangements with a view to re-allocating the proceeds from a forced auction, or otherwise regulating their conduct vis-à-vis a common debtor.

The second approach may be inexpensive and assure a level of confidentiality, but it is always exposed to the risk of the counterparty’s (ie, the fellow creditor’s) default.

As implied in 2.7 Soil Pollution or Environmental Contamination, simply holding or enforcing security over real estate does not suffice to generate environmental liability.

Prudent lenders can mitigate the risk of having causally contributed to environmental damage in any way by adopting a series of measures, including:

• separating owner, co-investor and partner roles from financing roles;
• conducting adequate environmental due diligence; and
• developing a continuous and comprehensive environmental risk management approach with the help of technical experts.

Security interests provided by a borrower that subsequently becomes insolvent are to be set aside by means of an insolvency recission brought by the liquidator, if they have been registered during the so-called “suspect period” (ie, the period between cessation of payments and the actual declaration of insolvency, but not exceeding two years prior to the declaration). Insolvency recission is even mandatory for securities related to pre-existing claims (“old money”) registered during the suspect period, as well as the preceding six months. By way of exception, securities in favour of financial institutions benefiting from the provisions of the Legislative Decree of 17.7/13.8.1923 are not subject to rescission.

Creditors whose securities are not lost due to an insolvency recission find themselves in a much more favourable position than unsecured creditors, as they may still initiate (individual) enforcement proceedings over the debtor’s property even after the declaration of insolvency.

The expiry of CHF LIBOR has been handled at EU level through the issuance of Implementing Regulation (EU) 2021/1847, by virtue of which all references thereto in contracts and financial instruments were automatically replaced with references to the new Swiss Franc risk-free rate SARON. Greek financial institutions have taken prompt measures to adjust to the new framework and inform their clients accordingly, as well as adopted action plans nominating alternative rates to other LIBOR interest rate benchmarks (eg, EURO LIBOR).

Pursuant to Article 24 paragraph 2 of the Greek Constitution, spatial and urban planning fall under the regulatory authority and control of the State.

There are currently three levels of planning, hierarchically arranged:

• spatial planning, implemented through spatial plans on a national and regional scale (SSPs and RSPs accordingly);
• the first sublevel of urban planning, whereby general building terms and restrictions as well as land uses are set either through Local or Special Urban Plans (LUPs or SUPs); and
• the second sublevel of urban planning, whereby the provisions of the previous level are further detailed in an Implementing City Plan (ICP).

In areas where urban planning has not completed (customarily referred to as “beyond-city-boundaries areas”), stricter rules typically apply.

The New Building Regulation (NBR, Law 4067/2012) sets out the general restrictions applicable to the design, appearance and construction methods of buildings. These restrictions refer to technical matters, such as the building’s height and volume, allowed constructions, buildable areas, etc. In addition, rules related to the safety and durability of buildings are contained in the Building Construction Regulation (BCR, Ministerial Decision 3046/304/1989).

The observance of the provisions of the NBR and the BCR is monitored, as a rule, by the Building Services of the competent municipalities, as well as by building inspectors from the registers of the Ministry of the Environment and Energy.

For private properties benefiting from a full planning regime, the building terms and restrictions and permitted uses of land are set by the corresponding LUP or SUP (which take the form of presidential decrees), as well as the ICP (a ministerial decision or a decision of the competent Co-ordinator of Decentralised Administration). Properties in non-urban (beyond-city-boundaries) areas are regulated by specific legislation, which introduces extensive restrictions in relation to allowed uses, buildability of plots, etc.

Upon development of each property, a building permit is issued by the local Building Service, in which the specific building details and selected use are recorded and must be abided by, always in line with the superior levels of planning. Special competence may be established due to the nature (eg, a private property of the State) or functional purpose (eg, a Strategic Investment) of a property.

Two main entitlements must be obtained for the development of a property.

• Depending on the type and scale of the project, an environmental assessment process may be required in line with EU law, resulting in the issuance of a Decision for the Approval of Environmental Terms (DAET). The procedure includes a phase of consultation with the public, during which third parties may submit objections.
• A building permit is necessary for the performance of the envisaged construction works, accompanied by a set of project studies (architectural, structural, etc). A building permit or an “approval of small-scale works” may also be needed in some cases of refurbishment.

DAETs and building permits may be challenged by any person claiming legitimate interest with a petition for annulment before the Council of State or the competent Administrative Court of Appeals, respectively.

Additional entitlements (eg, an installation permit, a building pre-approval) may be required for projects of a specific size or nature.

Should an application for any type of entitlement be rejected, the applicant may appeal against the act of dismissal before the competent court, which, in the absence of a provision specifying otherwise (eg, in the case of building permits), is the Council of State.

It is rather extraordinary for agreements with public authorities to be entered into for the development of a property; the issuance of a series of unilateral administrative acts upon application is the absolute norm.

However, in the context of the vast privatisation programme adopted to manage the Greek financial crisis, special development contracts for properties owned by the State may be entered into between the Hellenic Republic Asset Development Fund (HRADF) and private counterparties, following a public procurement process.

Another exception would be the Memorandum of Understanding and Cooperation signed between developers of the so-called “Big Private Projects” (MIE) and the Ministry of Culture in relation to antiquities found within the site of the project.

Finally, as regards contracts with utility companies, these may be concluded for any project, but as a rule they cannot be made subject to special or preferential terms.

A violation of the provisions on environmental permitting may result in an obligation to take corrective measures, a fine ranging between EUR500 and EUR5 million, a prohibition of the unauthorised operations, either temporary or definite, as well as criminal liability.

In the case of construction works performed without or in defiance of a building permit or in breach of the applicable building terms and restrictions, the illegal building is subject to demolition, while the law also envisions relevant fines and criminal liability. Moreover, transactions for the transfer or establishment of real rights on properties with illegal buildings thereon are absolutely null and void. It should be noted, however, that the law has offered considerable room for the regularisation of illegal constructions realised before 2011.

Finally, in the case of illegal use, the building or facility may be subject to administrative sealing, either temporary or definite.

Although all types of legal entities envisaged by Greek law may hold rights on real estate, the most common vehicles used to invest in real estate are SAs and Greek Private Companies PCs, both capital companies.

For larger portfolios, Real Estate Investment Companies (REICs), introduced by Law 2778/1999, constitute the primary regulated entities. These operate as listed SAs, licensed and extensively supervised by the Hellenic Capital Markets Commission (HCMC), while 80% of their assets must be made up of real estate and 50% of their annual distributable net income must be allocated to their shareholders.

The constitutions of non-regulated real estate entities (SAs and PCs) are tailored to the particular investment activities in which they intend to engage. As a rule, SAs are founded by notarial deed and may only be founded by means of a private document or digitally, at the portal of the competent service of the General Commercial Registry (GEMI), if the so-called “Model AoA” are used without variation and no capital contributions in kind requiring a notarial deed (eg, real estate) are made. PCs are founded digitally, save for similar cases where a notarial deed is necessary due to the nature of contributions in kind.

The constitutions of REICs must be further aligned with the requirements of the applicable law (mainly Law 2778/1999), eg, in respect of the types of investments that they are permitted to make.

SAs must have a minimum share capital equal to EUR25,000 and capital contributions are made either in cash or in kind. Conversely, there is no minimum capital prescribed for PCs. Contributions may come under the form of capital, non-capital or guarantee contributions. Finally, REICs must have an initial fully paid-up share capital of at least EUR25 million.

Non-regulated SAs and PCs are governed by the corporate bodies envisaged by their respective laws, namely a general shareholders’ meeting and a board of directors for the former, and a partners’ meeting and one or more managers for the latter.

In addition to the applicable corporate law, listed SAs are subject to the general corporate governance regulations of Law 4706/2020. REICs, in particular, must also follow the special corporate governance rules of Law 2778/1999, which include maintaining a written investment policy, engaging technical and valuation experts and publishing extensive information on their portfolio on a biannual basis.

Annual entity maintenance and accounting expenses may range from as low as EUR5,000 (plus VAT) for the smaller and less active PCs used for real estate investments, to several hundreds of thousands of euros or more for REICs with fully staffed, in-house accounting departments and larger portfolios.

A lease agreement is by far the most frequent and practical arrangement to temporarily concede the use of real estate. Depending on their purpose, leases may be classified as merely “civil”, residential or commercial; in the last two cases, special regulations apply in addition to the general provisions of the GCC on leases, primarily in connection with their minimum mandatory duration.

In personam rights over real estate may also derive a finance lease (see 3.1 Financing Acquisitions of Commercial Real Estate).

Finally, rights in rem granting the power to use another’s property such as usufruct and habitation may be established for restricted periods of time with the help of time limits or resolutive conditions. However, this is a construct rarely utilised in practice.

The legislation on commercial leases does not envisage different types of commercial leases depending on their subject matter. However, a considerable distinction is made between commercial leases concluded before (old leases) and after (new leases) 28 February 2014, when Law 4242/2014 was enacted, remodelling the legal framework for commercial leases as formed by PD 34/1995.

In any case, the special legislation on commercial leases does not apply to the leasing of spaces within the premises of ports, airports and train stations, within public spaces such as archaeological sites and universities, listed buildings, etc, even if the purpose of the lease is commercial. Such leases are treated as “civil”, regulated by the GCC only.

Commercial leases are currently subject to the semi-mandatory provisions of PD 34/1995 and Law 4242/2014, in the sense that the rights granted thereby to each of the parties may not be waived upon first conclusion of the lease agreement, but only a posterior waiver is possible. The most prominent example regarding new leases is that their duration is mandatorily set at three years, even if initially agreed for a shorter or indefinite term, and may, of course, be agreed for longer.

For the remaining part, commercial leases are regulated by the GCC, whose provisions primarily represent jus dispositivum that may be modified by contrary contractual engagements. Nonetheless, exceptions apply; for instance, pursuant to the GCC, it cannot be agreed that a termination by the lessor on account of non-payment of rent takes effect earlier than one month after the date when payment was due.

Moreover, the COVID-19 pandemic instigated legislative interventions in favour of both lessors and lessees in 2020 and 2021, which, however, are no longer in effect. Instead, new extraordinary measures have been adopted to lessen the impact of the current inflation and energy crisis (see 6.5 Rent Variation).

Typical terms of a commercial lease agreement include the following.

• The agreed duration of the lease, which is very much dependent on the lessor’s investment. However, after the introduction of a minimum three-year mandatory duration in 2014 (previously set at 12 years), the average length of a commercial lease is nowadays relatively short, ranging from five to eight years.
• The lessee typically undertakes to perform ordinary maintenance and repair in the premises, whereas the responsibility for extraordinary repairs and replacements remains with the lessor.
• Rent is payable monthly, or, in the case of certain higher-value leases, on a quarterly or even biannual basis.

During the pandemic, COVID-19 clauses emerged, mostly as a special incarnation of force majeure clauses, specifying whether the lessee’s obligation to pay rent would or would not be suspended, if public health regulations prevent them from using the premises for the purposes of their business.

The amount of rent is freely determined by the parties, as are the percentage and frequency of its adjustment. 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 change in Consumer Price Index (CPI) statistics. However, it is rather extraordinary for a specific rent readjustment clause not to be included in a commercial lease agreement.

It is noteworthy that, due to the current inflation and energy crisis, special mandatory legislation has been introduced, by means of which rent increases in commercial leases are capped at 3% annually during the years 2022 and 2023.

It is typically agreed that the rent shall increase yearly by a percentage equal to the percentage of annual shift in CPI, often further increased by another percentage (eg, CPI + 2%). Alternatively, pre-determined amounts of rent corresponding to specific sub-periods of the total term of the lease are set.

Rent review clauses, whereby the rent is brought in line with the property’s current market value through real estate appraisal, are not particularly 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, the GCC entitles each of the parties to request that the rent be adjusted by the competent court, if the balance of the lease contract has been disrupted by a material change of circumstances (eg, a significant increase or decrease in the property’s market value), a tool widely utilised in the past decade of financial crisis in Greece.

Lastly, rent may always be re-determined by means of a new agreement between the parties.

A commercial lease may be made subject to either stamp duty at a rate of 3.6% of the rental amount, or VAT at a rate of 24%. The parties are entitled to elect the tax regime applicable to lease and will typically opt for VAT if they can successfully benefit from input VAT deduction.

The sums required to be paid by a lessee at the start of a lease may include the following.

• A security deposit (either in the form of cash or a bank letter of guarantee), typically agreed to be between one and six monthly rents; to the extent that it is not forfeited to satisfy the lessor’s claims under the lease agreement, the deposit is refunded on an interest-free basis upon expiry or termination of the lease and proper return of the premises.
• The costs for purchasing and maintaining one or more types of insurance policies required by the lessor (see 6.11 Insurance Issues).
• Any costs for fit-out works, utilities connections or security upgrades agreed to be performed by the lessee.
• A lease premium, ie, a non-refundable lump sum payment made for the grant of a lease, especially a longer one. This is not very common.

The allocation of a building’s common charges among its occupants (owners or lessees), including the costs related to maintenance and repair of common areas, is achieved through the provisions of the building’s by-laws, namely an agreement executed by the different owners of a building, which is binding for lessees as well. Again, the costs for ordinary maintenance and repair are usually borne by the lessees, whereas the owners remain responsible for extraordinary repairs and replacements in the common areas.

As a rule, each lessee in a building with several occupants enters into separate contracts with the providers of their choice for all types of utilities including telecommunications, electricity, gas, water, sewerage, etc, and simply pays the relevant charges.

By way of exception, buildings may offer a single central system for certain types of utilities (eg, a central heating system), in which case charges are allocated among users based on either the readings of separate meters or pre-determined percentages of contribution for each separate property.

Commercial lease agreements often contain insurance clauses. The types of insurance policies usually required include the following.

• A property insurance policy on the leased premises, either in the form of an all-risks or a named perils coverage (fire, flood, earthquake, explosion, malicious damage, etc), which may be agreed as a responsibility of either party. Insurance on the lessee’s equipment and merchandise is, naturally, held by the lessee.
• A business liability insurance policy for third party-claims, also maintained by the lessee.
• A contractor’s all risk (CAR) insurance policy to be purchased by the lessee in the event of any construction or fit-out works.

Moreover, lessees frequently take out business interruption insurance policies, either of their own accord or upon request of their lessors or lenders. It is noteworthy that such policies provided by Greek insurance companies usually only offer coverage for losses sustained because of material damages; therefore, the COVID-19 pandemic and the relevant public health measures did not constitute insurable events under most such policies.

Commercial lease agreements specify the purposes and ways in which the property may be used by the lessee and, as a rule, the lessor will hold a right to terminate the lease if this use is altered without their prior consent. Restrictions may be imposed through the building’s by-laws, if executed.

In any case, the agreed use must be consistent with the uses permitted by the spatial and urban planning rules or any special legislation (on cultural heritage, nature conservation areas, etc) applicable to the property, as well as the uses envisaged in any existing building permit.

A commercial lease agreement may grant the lessee a right to alter or improve the leased premises for the purposes of the agreed use, usually in accordance with plans and specifications approved by the lessor. Other than that, any works that the lessee may wish to perform in the future are invariably made subject to the lessor’s prior consent.

It is also typically agreed that:

• the lessee is solely responsible to obtain all necessary permits to perform construction or fit-out works and that they shall bear all relevant costs; and
• the lessor may choose to keep all buildings, improvements and fixtures for the benefit of the property and without a duty to repay the lessee (which may incur additional taxation), or alternatively have the premises returned to them in their original state at the lessee’s cost.

As explained in 6.2 Types of Commercial Leases, the legislation on commercial leases is rather uniform. While special laws and regulations often apply to the different types of commercial activities carried out by lessees, these only indirectly affect the content of the relevant lease agreements.

Please note that in residential real estate (ie, properties that are exclusively destined for residential use as per the applicable urban planning rules), chances are that lessees of potential commercial leases will not be legally able to use the premises in the agreed manner.

It is typically agreed that the lessor shall hold a right to terminate the lease in case the lessee is declared insolvent, or even if an insolvency petition is filed by or against them.

If the lessor chooses to not exercise said right, the Greek Insolvency Law (Law 4738/2020) entitles the appointed liquidator to elect between:

• continuing with the lease, in which case the lessor is treated as another insolvency creditor for any rental payments due before the lessee is declared insolvent, while they are not affected by the insolvency proceedings for rents owed to them after the declaration of insolvency and, in the event of non-payment thereof, may initiate (individual) enforcement proceedings over both the insolvency and the post-insolvency estate of the lessee; or
• terminating the lease, in which case the lessor may only seek to collect rental payments due before the declaration of insolvency, on the same basis as any insolvency creditor.

The most standard forms of security include security deposits and bank letters of guarantee (see 6.8 Costs Payable by a Tenant at the Start of a Lease). It is also possible for natural or legal persons associated with the lessee to provide guarantees for the proper performance of the lessee’s obligations.

In principle, the lessee must vacate the premises immediately upon expiry or termination of the lease. However, pursuant to the GCC, if the lessee continues to use the leased premises after the lease has expired and the lessor does not object thereto, the lease is automatically converted into a lease for an indefinite term and may be terminated by any party at any time without cause, subject to observing minimum notice periods.

As a means to ensure timely return of their property upon expiry or termination, lessors often demand that a penalty clause be included in the lease agreement, stating that the lessee shall pay them two or three times the equivalent of one day’s rent for each day of delay. Lessors are also entitled to be indemnified for any additional direct or indirect damage resulting from the delay (eg, the loss of a chance to conclude a new lease with another lessee).

The lease may also be concluded by a notarial deed, in which case it is also possible to include specific provisions on the lessee’s eviction and its enforcement.

Lessees are entitled to unilaterally assign their rights and obligations deriving from a commercial lease (ie, their position as lessees) in the exceptional case of severe health issues preventing them from continuing their commercial or professional activities in the leased premises. For the remaining part, the transfer of a lease agreement presupposes a mutual agreement of all its old and new subjects.

Subleases are not permitted unless agreed otherwise. Sublease clauses often stipulate that the lessor’s approval of a potential sublessee is a precondition for the conclusion of a sublease (although not to be unreasonably withheld), that the sublessee shall be made subject to the terms of the primary lease related to the use of the premises and that the lessee remains personally liable for vis-à-vis the primary lessor.

The law provides that the lessor may terminate a commercial lease before its expiry if the lessee makes improper or arbitrary use of the property, if they fail to pay rent (but also common charges or utility bills) in time, if they proceed to an unpermitted sublease, or for a “serious cause” (ie, for any occurrence which, combined with all other circumstances, renders the continuation of the lease intolerable). However, unless the parties have explicitly agreed otherwise, in new leases it is no longer possible for lessors to invoke reconstruction of the property, owner-occupancy, or the intention to practise their own business in the leased premises as causes for termination.

For their part, the lessee is 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 the unobstructed use thereof as agreed, or for a “serious cause” as well.

The parties may also agree to additional causes for termination by the lessor (eg, if the lessee breaches an operating covenant, if they fail to renew the required insurance policies) or the lessee (eg, if they fail to secure or subsequently suffer loss of the administrative permits needed to use the property as agreed, for reasons not attributable to them).

Finally, it should be mentioned that the ill-advised wording of Law 4242/2014 has given rise to divergent appellate court interpretations as to whether and under which conditions lessees still hold a right to terminate a commercial lease for convenience (ie, without cause). In a recent judgment, the Supreme Civil and Criminal Court appears to have suggested that both parties are equally bound by the agreed duration, set by law at three years at minimum, and that lessees no longer hold a right of termination for convenience. This suggestion, however, came in the form of an obiter dictum, and it cannot be deemed to have certainly resolved the issue.

As with any lease, no particular form is required for a commercial lease to be legally binding between the parties; the usual practice is, however, for it to be concluded by means of a private document.

The GCC sets additional formalities for all leases, but only in connection with their binding power over future owners of the leased property. To this end, a document bearing a “certain date” is required, a condition also fulfilled upon the mandatory declaration of the lease on the Greek electronic system for taxation services (TAXISnet).

For leases exceeding nine years in duration, drafting by notarial deed is further prescribed, as well as registration in the public records (resulting in a fee typically equal to 1.8% of the total rent). While under the old regime, where a minimum mandatory term of 12 years was fixed by law, the Supreme Civil and Criminal Court had produced a case law pronouncing that the aforementioned formalities were not applicable to commercial leases (and that these are binding over future owners in any case), its position has not been tested for new leases, whose minimum term has been set at three years.

A lessee who persists in occupying the leased premises, despite the lease having expired or having been terminated, may be involuntarily removed therefrom following a court decision.

An ordinary action to this end is expected to produce a court decision within nine to 12 months after its filing. Alternatively, a lessor may choose to file an application for interim measures for the protection of their possession of the property, in cases where the lessee usurps the lessor and expresses an intention to master the property as if it were their own; this court decision should be expected within six to eight months.

The above time frames vary depending on the number of adjournments and the workload of the competent court; the trials will be further extended if any party chooses to appeal against the first instance decision.

A significantly faster process is reserved for cases where, following a written lease agreement, the lessee is being evicted due to non-payment of rent. If, following a written protest against the lessee served by a court bailiff, the lessee does not pay the lessor in full within 15 days, the lessor may file an application for the return of their asset, the relevant court order being issued within a month. The lessee may file their objections within 15 days after they are served with the court order.

A lease may be put to an end by a public authority in the event of expropriation of the leased property (see 2.9 Condemnation, Expropriation or Compulsory Purchase). Unlike owners, lessees would not be entitled to compensation by the State.

Lenders of commercial lessors may reserve for themselves the possibility to claim from their borrowers to terminate a lease in cases where the lessor holds such right (eg, due to non-payment of rent) yet restrains from exercising it, thus jeopardising their cash flow and repayment of their debt.

Three different types of pricing arrangements are commonly used in construction projects:

• the unit price model;
• the cost-plus model; and
• the lump sum model.

Construction contracts amalgamating more than one model are also found in market practice. 

The pricing structure chosen by the parties largely depends on the particularities of the project. For instance, the riskier lump sum model is best suited for simpler, smaller-scale developments, where the owner lacks the sophistication to scrutinise and manage the relevant costs and where the contractor is also entrusted with designing the project or can verify the quality and completeness of any pre-existing designs.

If the project’s designs are drawn up by the owner, the contractor is not responsible for their adequacy or sufficiency, but only for performing the works accordingly. However, it is often agreed that the contractor shall review the owner’s designs and point out any defects. Conversely, if designs are drawn up by the contractor, the contractor is accountable for both the designs and the construction of the project.

Overall, the structure preferred by owners and lenders alike is for a single counterparty to assume full responsibility for designs and construction under the construction contract. If this is not feasible (eg, the implementation of project involves several unrelated providers), interface risks will typically be addressed by way of special agreements.

The contractor is responsible vis-à-vis the owner for the proper construction of the project. Failing that, the owner shall hold a series of rights as per the GCC and common contractual practice, namely: to request the rectification of any defects, to pay a lower price, to rescind the contract or, if the contractor is also at fault, to claim compensation for damages resulting from the breach of contract.

Contractual clauses containing warranties and penalties or providing for a reporting and inspections regime, the appointment of a supervising engineer, conditions on subcontracts, adequate insurance, etc, are useful devices to further mitigate construction risk.

Limitation of the contractor’s liability is only possible for cases of slight negligence and only if prior negotiations to this end have taken place. However, in the current market environment, contractors are often unsuccessful in imposing limitation of liability clauses.

The contractor is also responsible for the timely completion of the project and its interim milestones. Remedies available to the owner in case of the contractor’s failure to meet the project’s milestones or completion date include the right to claim compensation, the right to collect penalties for each day or other agreed period of delay (even in addition to the compensation for any damages suffered), as well as the right to rescind the contract. In more time-sensitive projects, swift performance is sometimes incentivised by specifying an early completion bonus for the contractor; such a bonus may be combined with a price discount for late performance.

It is common for the owner to seek security against the contractor’s delayed or poor performance by means of bank performance guarantees, typically in an amount corresponding to 10% (or more) of the project’s value, and/or through good performance retention sums, expressed as a specified percentage (eg, 10%) of the interim payments due to the contractor. Both types of security are subsequently released to the contractor, usually one year after the delivery and acceptance of the project.

In projects relying on external (bank) financing, especially non-recourse and limited recourse loans, a step-in right is often reserved for the lender through a direct agreement with the contractor, securing that the contractor will not exercise their right to terminate the construction contract due to a breach of the owner’s obligations (eg, non-payment of the contractor’s invoices).

Like any other creditor, contractors and designers may pursue the issuance of a court decision awarding them their monetary claims against the owner in the event of non-payment; once this decision becomes final, it may serve as an entitlement for the registration of a mortgage on any of the owner’s properties. In the meantime, contractors and designers may also make a petition to the competent court for an interim order granting them a right to register a prenotation of mortgage on any of the owner’s properties.

Both a mortgage and a prenotation of mortgage may be removed on the strength of either the creditor’s consent or a final court decision, while a prenotation of mortgage may also be removed if an interim order for its revocation is issued or if 90 days have elapsed after the issuance of a final decision awarding the claim without the prenotation being converted into a full mortgage.

Depending on the type of activity that a building is intended to accommodate, additional requirements may need to be fulfilled between the completion of its construction and its occupation.

For instance, an energy performance certificate (now part of the so-called “Building’s Digital Identity”) is necessary for the conclusion of leases over most buildings, either residential or commercial.

Furthermore, plenty of business activities cannot be exercised without an operating permit or, under the new regime introduced by Law 4442/2016, a prior notification of operations (eg, tourist accommodation establishments, health-regulated establishments such as restaurants, bars and hair salons). These actions, for their part, require sets of supporting documents, some of which come in the form of administrative acts (eg, a fire safety certificate).

For the VAT levied on the sale and purchase of real estate, please refer to 2.10 Taxes Applicable to a Transaction.

As illustrated under 2.10 Taxes Applicable to a Transaction, share deals tend to be more tax-efficient than asset deals. Moreover, depending on the particularities of each transaction, common tax mitigation techniques include:

• taking advantage of the tax incentives associated with corporate transformations, which can allow for effectively tax-free mergers, demergers or hive-downs of businesses;
• implementing transfers at the level of an entity (controlling entity) different from the one holding the real estate assets (controlled entity);
• to the extent applicable, benefiting from special regimes, such as the tax status of REICs, insolvency or privatisation exemptions and/or legislation on development incentives (eg, the framework on Strategic Investments);
• taking measures towards being exempt from the special real estate tax for corporations (calculated annually at a rate of 15% of a property’s objective value), which basically consist of the disclosure of their ultimate beneficial shareholders, who must hold a Greek tax identification number.

There are many provisions introducing municipal taxes or fees scattered over Greek legislation, often criticised as obsolete. Of these, some are mandatory, and others may be optionally levied by the municipality concerned. The former category famously includes:

• the Municipality Duty on Real Estate (TAP), a tax imposed at a rate ranging between 0.25‰ and 0.35‰ on the property’s objective value;
• the Municipality Duty for the provision of cleaning and lighting services, a fee calculated by multiplying the property’s surface in square metres by a certain rate determined by the municipal council.

Both are collected through the property’s electricity bills.

As a rule, rental income is not subject to tax withholding in Greece.

Rental income tax is generally calculated at a rate of 15-45%, depending on the tax bracket, but for legal entities, corporate income tax is imposed instead at a fixed rate of 22%.

As regards the 15% Capital Gains Tax on Real Estate (FYA) levied on natural persons, this is indeed subject to tax withholding; however, it is, as already mentioned under 2.10 Taxes Applicable to a Transaction, deferred until 31 December 2024. Please note that if a natural person is deemed to engage in sales of real estate on a regular or professional basis (ie, they perform three or more similar transactions over a two-year period), they shall incur business income tax instead, at a rate of 9-44% depending on the tax bracket. For legal entities, the 22% corporate tax applies.

Whereas natural persons acting as lessors may not deduct actual expenses from their rental income, a fixed deduction of 5% of said income is offered as a presumption of expenses related to the property’s repairs and refurbishment. In addition, 40% of renovation and energy saving expenses realised until 31 December 2024 are deducted over a period of four years and up to a maximum of EUR16,000.

As regards natural persons carrying out business activities and legal entities, these may deduct interest costs and depreciation costs (based on the acquisition and improvement expenses incurred for their properties) from their rental income. Buildings are depreciated at a rate of 4% annually; land is not depreciable.

Furthermore, to the extent that a property is exploited for business purposes, it may qualify as an investment asset for VAT purposes, allowing the owner to offset construction/development (input) VAT with output VAT over a period not exceeding five years from the beginning of the property’s exploitation.