MANY of you will have seen Channel 4′s damning documentary about the Title Deed problems affecting thousands of Brits who have bought property in Cyprus. If you missed it, there’s a chance to see an 8 minute video below.
The first case concerns Roger Snelling who bought a 3 bedroom house in Pissouri. He only found out he had a problem when he went to the Land Registry and did a Title search. To his horror, he discovered that the developer had taken out a CYP 180,000 mortgage on the property before he bought it. (We can only speculate as to the reasons why Roger’s lawyer didn’t uncover the mortgage or tell him of the problem when he was buying the property).
In Roger’s situation, the bank’s claim to the money takes precedence over his claim to ownership, and Roger is now at risk of losing his home. He is pursuing his case through the court.
Roger’s case is not unique; as Andrew Winter reported in the Channel 4 program “There are massive problems in Cyprus with Developers abusing property law to make huge profits for themselves…”
Here are two other ‘scams’. (Although I call them scams, they’re perfectly legal under Cyprus’ archaic property laws).
Scam 1 – Take out a mortgage after the Title search
In this scam, the vendor takes out a mortgage on the property between the time that a Title Search is carried out and your Contract of Sale is deposited at the Land Registry.
Here’s how it works:
Let’s assume that you are using a competent lawyer. On 1st March, he/she carries out a Title search at the Land Registry and finds there are no mortgages or other ‘encumbrances’ lodged against the property you’re planning to buy.
The next day, the lawyer draws up your Contract of Sale and discusses it with the vendor’s lawyer. You then visit the lawyer and discuss the contents of the Contract. If you’re happy, you sign the contract and your lawyer deposits it at the Land Registry.
Because these things take time, it could be a week (more likely 2 or 3) before your Contract of Sale is deposited at the Land Registry; let’s say it’s deposited on 15th March.
Between the 1st March and 15th March, the ‘crook’ you’re buying from mortgages the property – no-one is any the wiser – you end up buying a mortgaged property and risk losing everything (like Roger).
Scam 2 – Mortgage the land on which your property’s built after you’ve bought it
Under certain circumstances, a developer can take out a mortgage using the land your property’s on as collateral. Here’s an example of how the scam works (and once again, it’s all perfectly legal!!!)
A developer has 10,000 sq.m of land, which has yet to be divided into individual plots, so there’s just one Title Deed for the whole plot.
Lets say he sells five properties off-plan on 500 sq metre plots. The properties are built, the developer gets his money and the people move in.
The developer goes to the bank and takes out a loan using the remaining 7,500 sq.m of the land as collateral. Land prices have rocketed over the past few years. (There’s a large plot of land on the way to Troodos that was worth 20,000 in 1980 – today, the Land Registry values it at 935,000). So you can see that banks would be willing to loan money based on the increasing land value.
The bank then registers the mortgage against the Title Deed of the land at the Land Registry.
BUT the Land Registry has no way of knowing what part of the land has been sold and developed – all it’s got is one Title Deed for 10,000 sq.m of land – and that’s what the claim is lodged against (along with the claims of the 5 buyers).
So if you go out and buy a property that’s on a plot that has not had a separate Title Deed issued, you could have the problem of the developer taking out a loan on the land even though he’s sold part of it to you!
So what you may say – my claim to ownership takes precedence over the mortgage, so why should I care? The answer should be obvious:
If you decide to sell before you get your Title Deeds, who is going to buy a mortgaged property from you? And if the developer doesn’t pay-off the mortgage, what are you going to do?