New Procedures for Protecting Property Buyers in Cyprus

For many years, buyers in Cyprus have faced issues when purchasing property without title deeds. These buyers, often referred to as “trapped” or “enclaved,” found themselves without legal ownership despite paying for the property. In response, the House of Representatives introduced several pieces of legislation in 2011, 2015, and most recently in 2023, aimed at providing better protection for buyers. However, a recent court ruling has added complexity to the situation, casting doubt on some of the protections established in the past decade.

The Problem of Trapped Buyers

Title deeds are essential legal documents that confirm land ownership and provide crucial information about the property, such as existing mortgages, long-term leases, and court decisions. In Cyprus, it has historically been possible for buyers to purchase real estate without obtaining title deeds. This typically occurred when sellers had mortgaged the property and were unable to transfer the title, leaving buyers vulnerable. Even after paying the full price, buyers were not guaranteed that the seller would use the funds to repay the mortgage, leaving them exposed without legal ownership.

This situation left thousands of buyers in legal limbo, with no clear recourse to secure full ownership of the property they had purchased. The severity of this issue led to multiple legislative interventions aimed at rectifying the situation and providing buyers with better legal protection.

Legislative Interventions: 2011, 2015, and 2023 Laws

To address the issue, the House of Representatives passed three significant pieces of legislation over the years: the Sale of Immovable Property (Specific Performance) Law 81 (I)/2011, an amendment to the Transfer and Mortgage of Immovable Property Law 139 (I)/2015, and most recently, Law 132 (I)/2023. These laws introduced a series of measures intended to allow trapped buyers to secure title deeds by following specific legal procedures, including repaying mortgages directly and seeking court orders for the transfer of property.

The 2011 and 2015 Laws: Specific Performance and Mortgage Relief

The 2011 law allowed buyers to protect themselves by repaying the mortgage on a property and seeking a court order to force the seller to comply with their contractual obligations. If successful, the Department of Lands and Surveys (DLS) could delete or lift the mortgage, enabling the buyer to obtain full title to the property. However, to benefit from this protection, buyers were required to deposit their sales contract with the DLS within six months of the purchase.

In 2015, the legislation was further refined, ensuring that mortgage relief provisions were more robust and applicable to more buyers. However, despite these efforts, not all issues were resolved, leading to the need for additional legislative action in 2023.

The 2023 Law: A New Procedure for Buyer Protection

In late 2023, the House of Representatives passed an amendment to the 2011 law that introduced new procedures aimed at enhancing buyer protection. One of the most significant changes was the requirement for sellers to include a search certificate from the DLS in the contract of sale. This certificate, showing any burdens or claims on the title, must be no older than five days at the time of the contract’s signing. This step was designed to ensure that buyers had access to up-to-date information on the property’s legal status.

The new law also introduced different procedures (Type A, B, and C) depending on the buyer’s specific situation, particularly when dealing with mortgaged properties. Under these procedures, buyers could repay up to 95 per cent of the mortgage, ensuring that the lender (usually a bank) would delete the mortgage and allow the property to be transferred to the buyer.

Constitutional Issues and Court Ruling

Despite these efforts, the situation became more complicated in June 2024, following a ruling by the Cyprus Court of Appeal in Civil Appeal 285/2018. The court held that certain provisions of the 2011 and 2015 laws were unconstitutional. Specifically, the court ruled that the power of the DLS director to delete a mortgage on a property without the lender’s consent violated the lender’s right to property, as guaranteed by Article 23 of the Constitution. Additionally, the ruling noted that the deletion of a mortgage could infringe on the right to freedom of contract under Article 26.

This decision has placed many trapped buyers in a difficult position, as the Land Registry has since frozen the processing of applications for mortgage deletions. Until the government resolves the issue—likely through new legislation—the protection measures introduced by the 2011 and 2015 laws cannot be applied.

What Can Buyers Do?

Given the current uncertainty, buyers in Cyprus should take extra precautions. Anyone purchasing property without title deeds should ensure that the search certificate is included in the contract of sale and is no older than five days. Additionally, obtaining legal advice from a qualified Cyprus property lawyer is essential to avoid potential pitfalls and protect one’s investment.

In summary, while recent legislation has attempted to resolve the issue of trapped buyers in Cyprus, a court ruling has created new legal challenges. Buyers should proceed with caution, ensuring that they understand their rights and obligations, and seek professional advice before proceeding with any property transactions in Cyprus.

 

source: Cyprus Mail