NEW HOMEOWNERS IN CYPRUS will have greater property security if an amendment that allows their contract of sale priority over developers’ mortgages is approved.
The issue was brought up for discussion at the House Legal Affairs Committee on Thursday and is backed by the Lands and Survey department.
By law, in order for a person to legally own property in Cyprus, he or she must have the title deeds to the property. However there have been instances where developers have delayed the transfer of title deeds to their clients for over 10 years, a phenomenon that has caused much frustration among foreign buyers looking to settle on the island.
A property under development is initially registered with the Lands and Survey department as a whole part of land. Only when the land is developed and separated into houses or flats upon its completion is each one allotted a separate title deed.
Within two months of purchasing a property from a developer, a buyer must deposit a signed and stamped copy of the contract of sale with the Lands and Survey department. By doing this, the buyer is able to take legal action against any developer that refuses to transfer the title deeds to him or her. The courts will then instruct the developer (the seller) to transfer the title deeds to the purchaser.
The problem lay in the fact that the seller was not sufficiently protected under the existing law, first Land Officer, Haris Mardas, told the committee.
At present developers’ mortgages take priority over the deposit of the contract of sale. In other words any seller who has taken out a mortgage on the land slated for development has precedence over the buyer.
“Therefore the seller who has mortgaged the property and sold it to buyers of flats or houses they’ve built has priority,” he said.
In order to do away with this problem the Lands and Survey department is suggesting amending the law so that the contract of sale will have priority over any mortgage. The contract will also have to have a bank’s written consent, he said.
The reason the bank’s consent is necessary is because where a development company goes bankrupt, the bank puts up the land for public auction to make back its money. Any money left over goes to the buyers.
However if the law were changed, the proceeds from the public auction would first go to the buyers and any profits left over to the bank.
“In other words banks would have to start being very careful about what developers they give mortgages to,” a financial source told the Cyprus Mail.
Another issue brought up at the House Committee was that sellers (developers) hold the title deeds as a trustee on condition that the buyer fulfils his obligations, thus protecting the buyer.
At present although the seller is obliged to transfer the title deeds to the buyer, the existing mortgage makes the transfer impossible to be carried out.
DISY deputy and House Legal Affairs Committee chairman Ionas Nicolaou said he was also planning to suggest amending the law so that by submitting the contract of sale with the Lands and Survey department, buyers had the same ownership rights as if they had already received the title deeds.
“This is so that they feel more secure and so that they don’t have to wait for the title deeds to be issued,” he said.
He added: “In every other European country a contract of sale is tantamount to ownership. In Cyprus you need to have the title deeds so that someone doesn’t sell it elsewhere.”
What Nicolaou meant was that where a buyer failed to deposit a contract of sale with the Lands and Survey department, the developer could sell the property to a third party.
“The first buyer would then be compensated for the property by the developer but that would be of little consolation if it was bought 10 years ago because he or she would receive a lot less than what it was valued for today,” he said.
Nicolaou said the Lands and Survey department had been given a month within which to submit its suggestions and from then the committee hoped to begin drawing up the bill.
Copyright © Cyprus Mail 2007