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Acting on unsound legal advice can cost you thousands

In efforts to prevent nefarious property developers in Cyprus demanding extortionate sums of money from clients who wished to sell a property before its Title Deed was issued, the government introduced a new law last year.

UNDER the provisions of the new “Sale of Immovable Property (Specific Performance) N81(I)/2011”, which came into force in Cyprus on July 29 last year, “vesting”/”assignment” contracts were introduced.

This new type of contract enabled a buyer to sell a property that they had contracted to purchase before its Title Deed had been issued without any involvement, cooperation or knowledge of the developer.

At a stroke, the new law removed the opportunity for nefarious property developers to demand extortionate sums of money from those wishing to sell their property before its Title Deed had been issued.

Or so we thought!

A recent case came to light in which a person who wished to sell his property was given the following advice by his lawyer:

Cancellation fee is charged by the developer to enable the signing of a new contract with the new purchaser. We have asked the developer to provide us with their statement of account and also cancellation fees. This is usually approximate to the amount that you would have paid as lands registry fees (Property Transfer Fees). Capital gains tax is zero. Other dues and expenses relate to the utilities and stamp duty on the legalisation of the cancellation agreement, and the agent’s commission fees.

In relation to the issue that you raise about vesting contracts, this is to inform you that since the adoption of the new law, the Deeds of Assignment (Vesting/assignment contracts) are now recognised as a valid exercise of a right to sell by way of assignment. What this article does not inform you is that you remain tight up to the property up and until separate title deeds are issued and you will be liable and responsible to pay lands registry fees at a future time when the separate title deeds are issued. Your purchaser will also have to pay lands registry fees.

The advantage of proceeding through the cancellation agreement and the developer is that you no longer have any connection with the property, the property is sold on and therefore it is an issue then between the developer and the new purchaser as to when separate title deeds will be issued. Additionally you will not be called to pay lands registry fees.

Regrettably, this person accepted this advice and proceeded with the cancellation agreement; this decision cost him many thousands of Euros.

The facts

I asked one of the lawyers on the list provided by the British High Commission in Nicosia for their opinion on the matter. The head of the Land Registry confirmed that:

  • the transfer will be made directly in the name of the assignees.
  • Property Transfer Fees only get paid once by the assignees i.e. when the actual transfer is made.

In a nutshell, the advice given to proceed with a cancellation agreement was wrong and the background information provided was rubbish.

You might well ask why the lawyer chose to give his client the wrong advice and in whose pocket the thousands of Euros it cost the buyer to sell the property ended up. I will leave this to our readers to speculate!

If you wish to sell

AS THIS CASE clearly demonstrates, the advice given by some lawyers in Cyprus is unsound; it cannot be relied upon or trusted.

Wrong advice cost this person many thousands of Euros in cancellation fees that could have easily been avoided, and I suspect that other clients of this lawyer may also have been given the wrong advice – and quite possibly other lawyers are giving wrong advice.

If you are considering selling your property and wish to avoid being taken to the cleaners, please use one of the lawyers on the list provided by the British High Commission in Nicosia.

Readers' comments

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  • andyp says:

    Trouble is who do you actually trust in this profession? You do not find out until as we all know it is too late.

    @FFJ and everyone else Do not give up. More official complaints are needed or they win. Took me nearly 3 years to get a “result” from DBA but who knows what might happen next!

  • Costas Apacket says:

    Correctomundo Gavin!

  • Andrew says:

    @Fighting for Justice. Death would be a merciful release. Although it would probably allow “them” to keep your home for longer and rob those you leave behind even more than at present, if that is possible.

  • Gavin Jones says:

    All this jiggery-pokery is part of the general wheeze culture perpetrated by the Cypriot legal ‘profession’ to deliberately confuse and fleece unsuspecting real estate purchasers in whatever way they can.

    Lawyers are the majority in the Cypriot parliament so it’s in their collective interest to keep this chicanery going by NOT passing laws which would cut this Gordian knot of institutionalized deception.

    Solution? Issuing of title deeds on completion date. But that would never do for the reasons stated above.

    And in the meantime? Don’t buy. Period. The risks are simply too great because finding someone you can trust in each of the various buying elements (developer, lawyer, bank, estate agent) is a lottery.

    People reading this and the plethora of comments from others have been warned.

  • Steve says:

    I’m glad to hear that. Another issue with Bar Association minimum fees is the question of to whom the Bar Associations fees apply. If the person writing the will is not an advocate then I wonder if the bar associations fees apply. I have looked at the definition of “Cyprus Advocate” and it is not clear to me whether all practicing “solicitors” in Cyprus would necessarily be bound by those fee limits when written into a will.

    @Steve – the minimum fees apply to the advocate members of the Cyprus Bar Association.

  • Costas Apacket says:

    Nigel, are the Bar Associations minimum fees published anywhere?

    @Costas – Yes, lawyers have copies and I have one – they’re in Greek

  • @Steve – there is no problem with non-Cypriots, be they resident or not, acting as executors. But if they are not resident, they may have problems as there is much work to do and they would need to spend quite some time in Cyprus.

    The Cyprus Bar Association stipulates minimum fees that a lawyer can charge for acting as an executor (and some lawyers charge considerably more). However, the person making the Will can agree lawyers fees beforehand and have these written into the Will.

    (The Bar Association’s minimum fees are used in cases where no fee has been agreed).

  • Steve says:

    When we bought our apartment 9 years ago, our solicitor wrote a clause in the contract limiting any cancellation fee to the developer to a few hundred Euros.

    There is another potentially dangerous area – Cyprus wills – the potential cost of which can make cancellation fees look like peanuts. People are encouraged to nominate non-citizens/non-residents of Cyprus, be it family, friends, UK lawyers, etc…as executors and a clause in the will says in the event that the nominated executors are unable to act, the executor will be the Cyprus lawyer who drew up the will. I’m told Cyprus courts awarding probate do not look kindly on non-residents as executors.

  • Costas Apacket says:

    I think a lot of us have acted on unsound legal advice when we bought a property in Cyprus in the first place!

    Unfortunately hindsight is a wonderful, if sometimes frustrating, thing!

    Not, though, anything like as frustrating as seeing so many obvious cases of negligence and criminal activity going unpunished by the appropriate body.

  • @Fighting For Justice – I don’t see how it could cause problems if one of the parties died.

    The original buyer will have assigned all his rights (and obligations) under the Assignment Contract to his buyer – so if he died, the beneficiaries of his Will would have no claim on the property as it would no longer form part of his/her estate.

    If the person who bought the property died, their rights under the Assignment Contract would pass to his/her heirs.

    I totally agree with your point about “these crooks being allowed to practice” – the Bar Association issues paltry fines on lawyers, some of whom should have their licenses withdrawn. Also, it’s a very secretive organisation and it does not publish the names, offences and penalties imposed on their errant members.

  • @Clive – This transaction was conducted after the new law came into force.

    If you look at the second paragraph from the lawyer he says “since the adoption of the new law” – so it must have been on the statute books.

  • John Swift says:

    I’ve long said that lists should be drawn up across the board regarding a wider range of issues than just lawyers.

    There are many areas where forewarned wold have been forearmed.

    It appears that they’re also clamping down on unregistered property letting agents, we were victims of a rogue trader who our solicitor found not to be registered and trading illegally and four years later she was still trading.

  • Fighting For Justice says:

    Made my complaint against my ex lawyer in May 2010 and nothing happening. I have good reason to believe that he has spent all the money in his client account, even the government taxes he has seen fit to collect on their behalf.

    Victims still fall to these crooks while they are allowed to continue to practise.

  • Fighting For Justice says:

    I was recently told that selling a property like this could cause immense problems if, prior to title deeds being issued, one of the parties died, not that dying isn’t an immense problem on it own.

    Anyone comment on that?

  • Clive says:

    Not wishing to excuse the poor advice given by the Shuster lawyer but could it be that this law didn’t come into effect until July last year on property deals commencing on or after July last year? Nothing is usually retrospective here is my reason for raising this point.

  • John says:

    I was informed 3 years ago that the process that has now been legalised was used by Cypriots in the Village a Freneros to buy and sell property without the landowner/developer having any involvement.

    Wonder if all these ‘old’ contracts are/have been legalised?

  • James JH Lockhart says:

    Costas

    I think I hold the record 5 years.

    But I think the average is about 3 years. The Board can even fine the naughty people up to a 1000 euros!!

  • Andrew says:

    These cowboy lawyers are all too common. Unless Cyprus rids itself of these corrupt (Devils) advocates then no one can safely buy a property. If you can not trust a Cyprus Bar registered lawyer, then there is no hope.

  • Costas Apacket says:

    James – Do you mean three years for a reply?

  • James JH Lockhart says:

    Well Nigel I think that will take about three years ?

  • @James JH Lockhart – I have suggested to the person involved to raise a complaint with the Cyprus Bar Association on the grounds of ‘Inadequate Professional Services’.

  • James JH Lockhart says:

    I suppose the Cyprus Bar association will remain silent or describe it as a clerical error ?

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