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Land Registry defies court judgement

The Famagusta Land Registry office may find itself in contempt of court after refusing to implement a court order for Specific Performance instructing it to transfer a property to its rightful owners.

defy court judgementNEFARIOUS property developers are not the only ones who have a disregard of the law. We heard this morning that the Land Registry refused to act on an order for Specific Performance issued by a District court.

A British couple purchased a property in 2005 at the eastern end of the island – a resale apartment with Title Deeds. Their contract was duly stamped and lodged at the Land Registry for Specific Performance and there were no prior mortgages or any other claims lodged against; the title was ‘clean’.

At that time non-Cypriots buying property had to obtain permission from the Council of Ministers to own any property they purchased. This permission was duly granted to the couple two years later in November 2007.

However, the transfer of ownership of the apartment to the couple was never achieved due to the vendor’s inability and/or refusal to pay the Capital Gains Tax and Immovable Property Tax owed to the Inland Revenue.

Frustrated by the lack of progress, the couple instructed their lawyer to file an action at the District Court. This he did with the consent of the vendor who was named in the action as the defendant.

The court issued its judgement in early 2012 which, amongst other things, included an order for Specific Performance of the Contract of Sale. The vendor was granted a stay of execution on the judgement for a period of nine months to enable her to resolve her financial predicament and pay the Immovable Property Tax and Capital Gains Tax she owed.

After the nine month period had elapsed and armed with the court judgement, the lawyer applied to the Land Registry to implement the Specific Performance Order.

However, the Land Registry effectively refused to implement the judgement of the court. In a letter to the law firm acting on behalf of the British couple it wrote:

“I wish to inform you that the application can be accepted provided that the following documents shall be produced:

  1. Application signed by the purchasers or their agent.
  2. Form N.313 from the Income Tax Office, concerning the payment of the Capital Gains Tax.
  3. Certification from Paralimni Sewerage Board.
  4. Certification from the Municipality of Paralimni, that the immovable tax is paid.

We are at your disposal for any further clarifications you may need.”

Perhaps it would be appropriate to sue the Land Registry for contempt of court. Contempt of court is the offence of being disobedient to a court of law by defying its authority, which is often behaviour that is illegal because it does not obey or respect the rules of a law court.

What hope is there for anyone wanting the deeds to the property they purchased if the Land Registry disobeys the judgement of a court?

Readers' comments

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  • jjames says:

    When given an opening, as in this article, look how many people take the opportunity to point the finger at developers (lawyers/banks inc. – take that as read).

    Quite right too!!

    Nigel’s comments below – they are rumbled and surely must soon be held properly to account.

    Yet I invite you to go to the IMF website, to the videos, and watch Delia Velculescu’s summing up of the Cyprus economic crisis made only 2 weeks ago. “Cyprus-dealing with a Crisis”.

    As a prominent member of the Troika team she has seen first-hand what is going on and yet still makes no reference to these crooks’ part in the mess affecting us!

    Diplomacy or something more sinister?

    In the case of these people I advocate a variation on a well-known maxim: “Kick a man when he’s down!”
    Don’t let them off the hook – keep on exposing them for what they are!!

  • kufrahdog says:

    JaneDoe re yours at 3:00 pm – I am unable to agree entirely with your last two sentences. The system in Cyprus for the control, sale and purchase of land is deeply flawed. The evidence is out there – witness the failure of the system to deliver title deeds to those who have purchased (paid in full) property, to mention one example. Until I see concrete evidence of change for the better I will hold to my view that the property system is not fit for purpose.

    The flaws in the system began to be exposed during the financial crisis of 2008. It is now clear that Cyprus is not so much reeling from the effects of a recession, but rather that Cyprus is suffering the effects of a self-inflicted wound, attributable in part to abnormal banking and property systems. The very presence of the Troika bears testament to the fact that Cyprus cannot be trusted to put its own house in order. KD.

  • kufrahdog says:

    Nigel re yours at 3:34 pm – thank you, but the amounts in the referenced articles do not give the total tax debt attributable to developers and vendors nation-wide in respect IPT and CGT plus any other property related tax. KD.

  • @kufrahdog at 3:34 pm – Politis (the Greek language newspaper) published the names of 32 developers who hadn’t paid their Immovable Property Tax by the due date last December and who owed more than €100,000. You can read that article at Unpaid Immovable Property Tax from 32 developers.

    I expect there are many more owing less than €100,000. In the case referred to in the article, the vendor’s Immovable Property Tax debt is more than €11,000 and the Capital Gains Tax they owe is just over €4,000.

    And the leaked report from the Bank of Cyprus listed its 24 largest debtors – see Bank of Cyprus furious over leaked debtors list.

  • Denton Mackrell says:

    Readers may recall that the incoming President Anastassiades last year, and on several occasions since, made it a personal campaign to root out corruption, maladministration, incompetence and laziness in the civil service. It has been his cause celebre. Yet, here we are again confronted by another glaring example of such malaise.

    Come on, Mr President! Are we to believe that you are unaware of this systemic sickness, this cancer in the system of Cyprus property law and how it is applied? Or are you all mouth-and-trousers and too timid to do what must be done to cut out this cancer?

  • kufrahdog says:

    Nigel at @:42 pm:

    Re your paragraph 3, so why doesn’t the Inland Revenue take the sort of action you have described against my developer, whose total tax debts exceed EUR100k according to the N50 Report?

    Do you know, does anyone know, the total national tax debt attributable to defaulting developers and vendors? I assume this would be over and above the NPLs that now burden the banks. KD.

  • JaneDoe says:

    @Stuart: You explained it in more details; thanks.

    @kufrahdog: Indeed, there are many things that must change. However, the purchasers are not the only victims of the problematic system of the delayed issuance of the title deeds. The vendors and the lawyers are victims of the same system too, even though this is difficult to be understood or believed by the purchasers. I believe that the desired changes would come more quickly when you stop losing your (so much) money and your energy in suing all these people (because 5 lawyers try to benefit themselves from the whole situation and get flourished by victimising the victims once again), and when you work all together to resolve the problem.

  • andyp says:

    Whilst it is stupid that ultimately the innocents suffer in most of these property cases if LR is regulated by statute and sticking to the rules a court order will change nothing.

    The whole property buying system is not fit for purpose and should generally be avoided whilst in it’s present form

  • @All – Whatever the legal rights and wrongs may be in this case, it is clear that the present law places anyone buying property at a severe disadvantage should the vendor fail to pay any taxes owed relating to that property.

    The tax debt must be treated as a personal tax debt rather than being linked linked to the property being sold. The defaulting tax payer should be able to come to an arrangement with the Inland Revenue to pay their tax by instalments if necessary.

    Alternatively the Inland Revenue could place a levy on the vendor’s bank account, deduct payments from their wages/salary, seize their car and other personal property, take criminal proceedings against them. It isn’t rocket science!

    Why penalise the purchaser for the wrongdoings of the vendor?

  • Stuart says:

    The legal obligations of the vendor are to pay the Capital Gains Tax and any Immovable Property Tax owing at the time of sale of the property in order for the Land Registry to proceed with the transfer of Title to the new owner.

    When you sell a property in Cyprus, even though it may be your own residence, you are liable to pay CGT on its disposal at a rate of 20%, although certain deductions are available and can be claimed by the seller.

    The Land Registry cannot legally proceed to transfer the Title until it has the necessary legal proof from the Inland Revenue that the CGT and IPT liabilities have been settled by the vendor. This is a statutory requirement and so cannot be overturned by a Court Order.

    The Court Order in this case was for the vendor, who is named in the action as the sole defendant, to perform a specific act and complete the contract by paying the tax and thus releasing the legal transfer of Title to the new owner.

    Indeed, the Court even granted the vendor a stay of execution of its Order for a period of nine months to allow her to resolve her financial predicament and pay the CGT and IPT she clearly owes, thus making her solely responsible for resolving the impasse.

    The Land Registry was never cited as a Defendant in these proceedings and, by adhering to its statutory procedures, has no case to answer in my opinion.

  • M Hannah says:

    Jane-Doe Right or Wrong, they disobeyed a Direct Court Order. If they get away with this then every one will try and do the Same. Don`t forget that this is THE Department that issues the Deeds to the rest of us. So if They choose to do it again, it could be yours that they wont issue, think about that.

  • Andrew says:

    Johnny Foreigner`s guide to property purchase in Cyprus.
    You can buy it, some may enjoy it, but few will ever own it.
    Something very similar to the streetwalkers code.

  • Janner says:

    You know those rich kids you see in the news hanging out with royals in trendy pubs. The ones with asticratic blood. They can live that fantasy lifestyle cause someone else is always picking up the tab. That’s how Cyprus operates. It’s easy to do what you like when someone else pays and there isn’t a big stick ready to beat you. No consequences and no boundaries means bad behaviour!

  • kufrahdog says:

    Jane Doe (10:57 pm) makes some good points with which I agree. My lawyer informs me that tax debts borne by a developer / vendor and due to the Inland Revenue are regarded as money owed to the government of Cyprus. The law in Cyprus requires these tax debts to be paid off and a tax clearance certificate issued before title deeds can be transferred to the purchaser of a property. The law is morally indefensible and totally illogical, but it is the law.

    In Cyprus, if purchasers have paid for a property, why is it necessary to deny purchasers the right of full legal ownership on the grounds that developers / vendors have not settled their outstanding tax debts?

    In Cyprus, why is it that developers’ / vendors’ tax debts are not solely a matter between them and the Inland Revenue?

    In Cyprus, why is it that lawyers are not legally obliged by any law or professional code of property conveyancing practice to reveal these arrangements to purchasers?

    In Cyprus, why is it that legal arrangements and business procedures / processes are so constructed that financial and moral risk is transferred discretely and legally to purchasers as a consequence of the irresponsible and often fraudulent behaviour of developers / vendors?

    In Cyprus, are there any leaders who could repeal the existing bad property laws and put things right? On present showing, perhaps not. KD.

  • jon frazer says:

    @JaneDoe- and what precisely are “sure legal obligations of people” in this context?

  • JaneDoe says:

    1. If the court order is not against the Land Registry Office, the later is not obliged to an action and cannot be found liable of contempt of the Court.

    2. The Court order is wrong in terms that is cannot overturn sure legal obligations of people; the tax must be paid; this is the law and it cannot be changed by any Court order.

  • Denton Mackrell says:

    @Jon Fraser. Glad you spotted the irony! I was, of course, being just a tad wicked.

  • Gavin Jones says:

    How many times have we seen this sort of thing over the years? Countless.

    Cyprus is a lawless society in thought as well as deed, the concept of right and wrong being non-existent. Ditto boundaries. Some may recall the Immigration Department refusing to release people in detention despite being told to do so by the Supreme Court.

    On a personal level, I wrote a 1,700 word article entitled ‘The Man versus The State‘ which can be accessed by keying in the article’s title in the ‘search’ box in http://www.cyprus-mail.com . It tells a sorry tale over many years of institutionalized, deliberate delays and blatant manipulation. Although I won a Pyrrhic victory and was awarded damages, after more than six months since the conclusion of the lawsuit, I’m still awaiting payment.

    Justice in Cyprus? I think not. It’s more a question of “Abandon hope all ye who enter here”, with due acknowledgement to Dante.

  • jon frazer says:

    Denton Mackrell- re your last para.

    Decline and Fall from what? the usual understanding is of a decline of a great, once-civilised nation; I think here of the observation attributed to the French ambassador to the USA in the early 20th century. He remarked that “(America) has the unique distinction of being the only nation to go from barbarism to decadence with no intervening period of civilization.”

    Ring any bells?

  • Denton Mackrell says:

    Once again, sic transit gloria iustitiae in Kypros.

    The Decline and Fall of the Roman Empire by Gibbons charts how, among other things, the empire crumbled as its institutions, law and justice fell prey to corruption, incompetence and decadence. What a wonderful similar case study modern-day Cyprus presents!

    Nigel or anyone, fancy penning a book entitled The Decline and Fall of the Cyprus Republic 1960-20…. Could be a belter of a read.

  • scruffy says:

    So sad, all these incompetent and corrupt people in positions of power on such a beautiful island. Is there no decency left here?

  • John Swift says:

    Soon “But this is Cyprus” will be heard again.

  • Dunn Good says:

    I once had a girlfriend with Cypriot mentality she constantly told me that “what`s yours is mine and what`s mine is my own”. I`ll make the rules if you want to stay you will obey!! you may try but I`ll not comply. Needless to say I did not stay but I paid dearly.

  • Costas Apacket says:

    More banana style injustice.

  • Stuart says:

    This appears to be an odd situation where the vendor is unable or unwilling to pay the CGT and IPT owed to the Inland Revenue but subsequently the Land Registry gets a court order rather than the vendor who was named as the only Defendant in the litigation.

    The Land Registry would appear to be following its standard procedures by listing the 4 documents that are always required for it to complete the transfer and so would seem to have a legitimate defence against any attempt to sue it for contempt as it was only a party to the original action by association.

    Surely it would have made more sense for the Inland Revenue to bring an action for non-payment of CGT and IPT against the vendor who would have been reasonably presumed to be in a position to pay the taxes from the proceeds of sale of the property. This would almost certainly have been the procedure in the UK.

  • M Hannah says:

    Well Now, This is what everyone says and knows about Cyprus, There is NO LAW, IF there is. The Land Registry, should be Fined Heavily for this Blatant act of Contempt of what`s left of the Law in This Land, which Many of us have chosen to come and live.

    All the Good People of Cyprus, Rise up against this Corrupt Behaviour.

  • Mike says:

    Exactly the same circumstances applied in the case of my purchase. However being reasonably familiar with the Island and its disregard for law in favour of custom and practise I decided to save myself a lot of legal fees, which would probably result in nothing anyway, feeling it would be more cost effective to pay the vendors outstanding income and capital gains tax plus interest in order to secure title which I did. Anyone thinking that Cyprus will ever conform is really suffering a delusion. It is a way of life that has worked for them for centuries and despite rhetoric to the contrary will continue to do so for eternity, EU or not. At least that is my view. Incidentally I speak the language, to a degree, so what chance has anyone that doesn’t?

  • Peter Davis says:

    It is not the Land Registry Department.

    As an ex-police officer my torts were not laid at the foot of my employer. If I beat up a suspect it wasn’t my ‘Department’ that got prosecuted…It was me.

    This decision has been made by an individual. That individual needs to be bought before the court and asked to explain it to the judge.

    But again this is Cyprus where even those who are educated have no respect for the law.

  • Pippa says:

    I do hope that this report is being given airspace on other media outlet. Let the world see how Cyprus disregards the rule of law. I feel more and more despondent each day when this ‘government’ refuses to accept responsibility for anything and acts like the third world country it obviously is.

  • Adrian says:

    This country is a cross between the wild west and the mafia. The court should come down hard on the people that have defied this ruling. This is not a “department” obstructing the law this is people doing this for their own personal reasons and they should be brought before the court to explain. The Cypriots have to break this society that hides behind rules and regulations as long as it suits them and disregards the rule of law.

    A few more whistle blowers such as the debtors list from the banks would be good!!

  • UBoat says:

    Its Disgusting …..

    Yet again total contempt.

    Cyprus, what the HELL are you doing allowing this to go on? Your driving people away, Decent honest hard working people who actually like you and your Island. This is the thanks we get for investing money and time into your world…….

  • Pete says:

    Without consequence, the rule of law is nothing.

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