THE new Sale of Immovable Property (Specific Performance) N81(I)/2011, which came into force earlier this year, contains important provisions that significantly improve the purchaser’s position compared to the situation that existed under the old Law that it replaced.
One of the most important changes in the new Law, which has remained so far almost unnoticed, is its provision about “assignment contracts” which may, if properly utilised, solve the problem of resales where an up-to-date title does not exist.
Under the new Law any purchaser of property may assign his rights and/or obligations under the contract to an assignee, either gratis, or by the payment of an amount of money. This “assignment contract” can be concluded without the agreement of the original vendor (usually a property developer) and can be deposited at the Land Registry within two months of its signing, provided the original contract has already been deposited at the same Land Registry Office.
The “assignment contract” has, in effect, the same legal status as the original contract. It is binding on the original vendor and its depositing at the Land Registry offers the same protection to the assignee as that provided by the Law to the original purchaser.
Thus, if the original vendor (e.g. property developer) fails to fulfil his obligations by issuing and transferring an up to date title in the name of the assignee, the latter may apply to the Court and obtain an order for the Specific Performance of the contract. The Court may:
- order the transferring of the title in the name of the assignee and, when a title does not exist;
- order that all necessary actions be taken so that the title is issued.
If the property is assigned (in effect resold) by the payment of a higher price than the original price of the property, the original purchaser/assignor may have to pay Capital Gains Tax for the assignment. A tax clearance from the Capital Tax Office must, therefore, be produced at the Land Registry before depositing the assignment contract.
In the Law there is no reference to any obligation of the original purchaser to pay Property Transfer Fees. So as soon as the original purchaser pays any capital gains tax due, he is relieved from any further obligations and disappears from the scene.
The new procedure has several important advantages over the procedure of cancellation agreements:
- It is an absolutely lawful procedure, so no question of tax evasion or other illegality arises.
- The original vendor/ developer is not involved. Therefore his consent is not required and no question of payment of “contract cancellation fees” or any other amount of money to him arises.
- The new purchaser/assignee has the full protection of the new Specific Performance Law.
In conclusion, there is no doubt that the new procedure is extremely beneficial to both prospective vendors and prospective buyers of resale properties and it is expected to significantly boost the resale market in Cyprus.
About the author
Andreas D. Symeou LL.B, M.Sc (U.L.A.) was the draughtsman of the original amendments to the Immovable Property (Tenure, Registration and Valuation) Law, which underwent many changes before being approved by parliament on 24th March 2011.
He is a property consultant and a Member of the Royal Institute of Chartered Surveyors (MRICS) and may be contacted at [email protected]