The state is losing revenue from five hotels built on forest land in Ayia Napa that continue paying rents frozen at 2017-2022 prices despite years of surging tourism and inflation, an Audit Office report released yesterday shows.
Auditor General Andreas Papaconstantinou found serious delays in rent revisions under 99-year leases signed between 1970 and 1982, with outdated contractual provisions now costing the state revenue during the region’s tourism boom.
A 2019 legal change abolished the approval system for accommodation and meal prices, leaving the Department of Forests without official data to calculate rent increases. Hotels have paid unchanged rents for over three years whilst tourism revenues soared.
The audit revealed striking inconsistencies. Hotel C pays €80,991 annually—nearly double the €41,192 paid by Hotel A despite similar size and capacity. Hotels B and D, which occupy the largest forest land areas, pay just €3.40 per square metre whilst Hotel C pays €7.38.
Only Hotel E saw substantial increases because its rent is calculated as a percentage of revenue rather than land value. Its annual rent jumped from €1,576,290 in 2018 to €2,505,319 in 2024—a 70.55% increase.
The Audit Office warned rents have fallen so far below market value they may constitute illegal state aid and distort competition.
It recommended the Department of Forests calculate market rents immediately and apply Law Office guidance to ensure state forest land is leased in the most economical manner.
The Department of Forests agreed but said unilateral contract changes are unfeasible without hotel consent, with leases running until 2047, 2048, and 2069.
The department has sent spatial plans to the Land Registry to calculate rental values for hotels A, B, and C. However, the Town Planning Department confirmed it never issued planning permits for hotels B and E, with documents still awaited from the Famagusta Provincial Organisation.
A Law Office letter dated 27 May 2025 states any contract modification requires mutual consent and must comply with the Contracts Law.
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