EY - THE LAND REGISTRY LEAVES ILLEGAL INTERVENTIONS AND COVERS UP

 Filenews 11 May 2023

The way state land is managed under the current legislative framework does not ensure compliance with the principles of good administration, transparency, proportionality, equal treatment and non-discrimination, in order to ensure the legality and management of the property of the Republic in the most economical, effective and efficient way, especially in cases where the lease/license is granted to private individuals for industrial purposes. tourism or other commercial purposes, says the Audit Office (EY), in a Special Report on "Management of state land leases".

In fact, as mentioned in the report, in some cases the Department of Lands and Surveys consciously allows interventions to illegally own and use state land, while the measures taken by the DLS are not sufficient to safeguard the State's revenues, with uncollected rents amounting to €8.5 million. (as of 31.12.2021).

In addition, and in line with other general conclusions, as recorded in the EY report:

• From our audit, we conclude that there is general compliance with the legislative framework, but we found cases of deviations from it concerning the lease / granting of a license for the use of state land contrary to specific provisions of the Regulations, delay in the revision of rents, non-compliance of tenants with the relevant terms of the Contracts, delay in taking measures for rent collection as well as weaknesses in internal control systems regarding the procedures followed for the disposal of state land.
• The goal set in the Charter of Citizens' Rights of completing the procedures for the disposal of state land within 12-18 months has not been achieved. It is noted that on 23.11.2021 the examination of 8.178 applications was pending, with the first dating back to 1980.
• The DLS does not carry out adequate and systematic checks to verify both the compliance of employees with the terms included in the Contracts and the implementation of the Decisions of the Council of Ministers. The lack of control significantly increases the risk of illegal use of state land or its use for unauthorised purposes, without obtaining the necessary permits.
• We found ambiguities and gaps in the Immovable Property of the Republic (Disposal) Regulations (ΚΔΠ 173/1989), which do not ensure compliance with the principles of good administration, transparency and equal treatment as well as the objective, fair and uniform examination of all requests.

Open tenders

EY recommends to the Director of the DLF "that it ensures, in favour of all potential stakeholders, an appropriate degree of publicity and control of the impartiality of the tender procedures. This dictates that for the lease of land for industrial, tourist or other commercial purposes, especially when the land is of high value, an open tender with expression of interest is launched after the DLF has determined the permitted uses and the minimum acceptable rent. At the same time, the Director of the DLS to prepare new Regulations that ensure the above principles as well as the objective, fair and uniform examination of all requests".

The main findings of the audit, as reported in the report:

• The process of granting state land for lease is completely opaque and is not done in an economical, effective and efficient way. In cases where land is granted for industrial, tourist or other commercial purposes, and in particular where it is of significant value, the concession should be made through an open and competitive procedure.
• The DLS does not adequately monitor state land leases/permits. We found delays in reviewing rents and informing tenants, non-compliance of tenants with the relevant terms of the Agreements, delay in processing the examination of cases, delay in taking measures for rent collection as well as weaknesses in internal control systems regarding the procedures followed for the disposal of state land.
• The DLF is significantly late in examining applications for the lease of state land. The pending applications on 23.11.2021, according to the Register of Applications, amounted to 8.178, with the first dating back to 1980.
• The average completion of the examination of the cases we audited was 72 months instead of 12-18 months as set out in the Charter of Citizens' Rights.
• The DLF is significantly late in collecting arrears of rent and in taking legal action against debtors and/or cancelling the Agreements, in accordance with the relevant terms contained therein. It also does not follow the procedures set out in a Circular by the Accountant General of the State for the collection of State revenues, resulting in an increase in the risk of loss of revenue.
• Uncollected rents at 31.12.2021 amounted to €8.5m. while €5.4 mil. according to the Registry on 23.11.2021, they were owed by only ten tenants.
• The DLF has not recorded the state land available for lease, which is a weakness in policy design and monitoring how it is used for public interest purposes.
• There is no easy and direct access to the Register of Leases and Licenses to monitor leases.
• The DLF legalises, without penalty, the illegal use of state land prior to the lease.
• The DLF does not timely renew the Contracts that expire and for which a new application was made by the existing tenants for the re-lease of the same plots, with the result that the land continues to be used by the existing tenants essentially illegally, without paying any rent.
• The DLF leases state land for public utility purposes for a "nominal rent", a term that is not mentioned in the legislative framework nor does it appear how it is calculated. The "nominal rent" imposed in most of the cases we examined is too low, without even covering the administrative costs of the DLS for the examination and processing of the application and without being able to relate to the type of Contract, the extent of the land, the purpose of its disposal, etc.
• The Commissioner of State Aid issued an opinion in a circular dated . 26.2.2014 that if by leasing state land the Local Authority will be involved in the exercise of economic activities, the rules of state aid and competition, i.e. the imposition of market rent, will apply. The DLF does not appear to examine the possible economic activity of applicants for the lease of state land for public utility purposes in order to impose a market rent. We identified cases where there may be economic activity by the tenant and cases where there was subletting of the land to a private individual with multiple rents without the rent being properly configured.
• In some cases we examined, the lease/granting of a license for the use of state land was done contrary to specific provisions of the Regulations.
• The Council of Ministers, in some of the cases we examined, amended its initial Decision, in favour of the tenant, without sufficient justification and without having changed the facts of each case, which, in our view, refers to preferential treatment of applicants.
• The DLS does not carry out adequate and systematic checks to verify both the compliance of employees with the terms included in the Contracts and the implementation of the Decisions of the Council of Ministers. We identified several cases of non-compliance of tenants that the DLF did not detect and address in a timely manner, as well as cases of illegal use of state land after the expiration of the Contract.
• We found that government farms in Pafos are not properly managed in accordance with the procedure provided for in the Regulations, resulting in a loss of revenue for the State.
• The Immovable Property Regulations of the Republic (Disposal) (ΚΔΠ 173/1989), on the basis of which the Contracts for the disposal of state land are examined and approved by the Council of Ministers, contain ambiguities and gaps, so they do not ensure compliance with the principles of good administration, transparency and equal treatment, as well as the objective, fair and uniform examination of all requests.
• We noted that very long agreements between the State and private entities, especially those that include provisions that make it impossible to amend them without the consent of the lessee, trap the Republic in agreements that do not serve the public interest. We found such contracts with significant unpaid amounts and excessively low rents. On the above issues, we have made specific recommendations, which, together with the comments and views of the DLS, are presented in this Report.
• We also found cases where the DLS, while it should be the custodian and protector of state land, nevertheless tolerates manifestly illegal interventions and conceals interventions. For one case we forwarded a complaint to the Independent Authority against Corruption and for a second case we will forward a complaint as soon as we receive the requested comments from competent Services.