Paphos municipality subleased a 17,425-square-metre Turkish Cypriot property in Mouttalos three months before obtaining permission to do so, investigations by police and the Audit Office have found.
The municipality signed a sublease contract on 9 March 2021 with a private individual. But its contract with the Turkish Cypriot Property Management Service—the body that grants sublease rights—wasn’t signed until 17 June 2021, according to records.
The case, which authorities say raises serious questions, was handed to the Attorney General on 13 January 2026 following investigations by Cyprus Police and the Audit Office. The Attorney General will decide whether to prosecute those involved.
Suspended Paphos mayor Phedon Phedonos told Phileleftheros that everything concerning the property was lawful and done in coordination with the property management service.
From refreshment bar to restaurant
The irregularities extended beyond the illegal sublease. The municipality announced a tender in November 2020 for a refreshment bar.
After awarding the contract to an individual in March 2021, it issued a permit in June 2022 converting the use to a snack bar—despite contract terms strictly limiting the premises to snack bar use without music.
An Audit Office inspection in May 2023 found the premises operating as a restaurant. The municipality had not issued a Building Permit, Professional Premises Licence, Alcohol Licence or Noise Emission Permit, at least until autumn 2023.
The Audit Office also found the municipal authority had taken no measures to stop the operation.
The municipality also allowed the original contractor to amend the agreement, replacing himself with a company. The Municipal Council approved this request in March 2021, and an amendment agreement was signed in August 2023 with retroactive effect from February 2022.
Multiple violations identified
The investigations, triggered by a complaint in spring 2022 regarding possible misappropriation of public money, uncovered a pattern of violations.
The municipality changed the property’s use despite its contract with the property management service prohibiting such changes. It issued planning permission for snack bar use only, yet tolerated restaurant operations for an extended period.
Former Auditor General Odysseas Michailides, in a letter to police in autumn 2023, stated that Paphos municipality was breaking the law.
He wrote that the Interior Minister—who serves as Guardian of Turkish Cypriot properties—had illegally given the municipality sublease rights, and that the ministry’s then general director had knowledge of the contract despite Attorney General opinions to the contrary.
An Interior Ministry team is now investigating the management of Turkish Cypriot properties, Phileleftheros reported on Saturday.
Officials respond
Former Interior Minister Nikos Nouris said he was always careful on Paphos municipality issues given the mayor’s initiatives regarding Turkish Cypriot properties.
He referred questions to Giorgos Matthaipoulos, then director of the Turkish Cypriot Property Management Service, saying he was certain Matthaipoulos acted lawfully.
Dr Kostas Konstantinou, who served as general director of the ministry, said the issues concerned institutional capacity and that the general director had nothing to do with it.
Matthaipoulos said he did not remember the exact circumstances but added that standard contract terms, based on legislation, provide that the Guardian can grant sublease rights.
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