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Hidden mortgage bill passed

At today’s plenary session of the Cyprus parliament MPs approved the hidden mortgage bill designed to resolve the issue of ‘trapped’ property buyers who are unable to obtain Title Deeds due to their developer’s debts.

A new dawnCYPRIOT MPs took a giant step to resolve the island’s Title Deed-cum-fraud mess that has blighted the property sector and tarnished the reputation of Cyprus at a plenary session of parliament earlier today.

They approved the ‘hidden mortgage’ bill that will sort out the mess created by the failure to provide Title Deeds to people who have paid for their property and fulfilled all their contractual obligations, due to their developer’s debts.

The new law gives the Land Registry the authority to exempt, eliminate, transfer and cancel mortgages and/or other encumbrances, depending on the case and under certain conditions – and includes all sales that took before the end of 2014.

Assuming President Nicos Anastsiades gives his assent to the bill, it should become law in a matter of days when its content will be in the public domain.

From early reports it seems that two amendments were made to the draft bill:

  • Title Deeds will not be transferred to buyers who have failed to comply with their contractual obligations to the vendor regarding Immovable Property Tax, local property tax and sewerage tax (a failure to pay communal charges to the developer will not prevent the transfer.)
  • If the purchaser effects the transfer of the property within 60 days, the Property Transfer Fees may be paid in twelve monthly instalments OR a 10% reduction in the fees will be granted.

From information I have gleaned today I believe that the outstanding debts include all claims that were lodged at the Land Registry before and after a contract of sale was deposited.

Trapped purchasers must be able to demonstrate that they that they have fully complied with their contractual obligations to the vendor and should gather together payment receipts to be presented as confirmation when they submit their application.

If purchasers have lost or were not provided with receipts, it should be possible to obtain cheques, transaction records, etc. from the bank. (A Cypriot who contacted me managed to get copies of his cheques confirming payments from his account with the Hellenic Bank.)

Those who paid in cash without receiving any form of invoice or receipt and who therefore cannot provide the necessary evidence to confirm that they have paid will face problems and may have to bring a civil action in a court if their vendor refuses to provide them with a receipt.

It is my understanding that in the longer term, legislation will be introduced that will enable Title Deeds will be issued for all dwellings that are habitable. However, those dwellings that infringe planning regulations may have ‘notes’ attached to their Title. Also money owed by the vendor will be deducted from payments received from the sale of property before being credited to his account (just like many other European countries.)

Readers' comments

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  • brian says:

    Hi Nigel,

    What does this new law mean for me?

    I was one of many in 2007 who were introduced to Cyprus by MRI overseas property company.

    We had a now well-known unscrupulous lawyer.

    All we have for the property is a contract with the developer. Also a mortgage with Alpha Bank.

    I have never had any request for Immovable Property Tax and could never afford it anyway.

    The property has been badly let down and has damp problems so has been unrentable for a good while.

    I had a receipt from the lawyer that she lodged something with the land registry on my behalf.

    What does it all mean?

    Thanks
    Brian

    (Editor’s comment: You should have registered the property with the Tax Office last year – see Paying Immovable Property Tax 2014. I suggest you register asap. How can you say that you couldn’t afford to pay the tax until you know how much it will be? If it’s a small holiday apartment, there’s a good chance you may be exempt.

    If the property or the land on which the property was built was mortgaged by the developer before you purchased, the new law will help protect you and perhaps speed the issue of its Title Deed. You can check whether the property you purchased is burdened by a mortgage and other encumbrances by following my guide at New title search procedures in Cyprus.

    If the property is suffering from damp, it could be as a result of a ‘structural defect. More about the types of defect and how to deal with them at Structural and Routine Defects.

    If you haven’t done so already, I suggest you discharge your “well-known unscrupulous lawyer” and get a decent one to look after your interests.)

  • embapaphos says:

    Thanks again Nigel, your feedback is always much appreciated, do you envisage any sort of ‘amnesty’ in the near future whereby ‘developer-less’ buyers will be able to easily attain e.g a building permit/division permit or cert of final completion (that should have been job of developer). Plus these aforementioned costs get lodged by authorities against the developer not buyer?. I only refer to the various applications not actual material costs that may be needed to put a project right & title deed ready. Something I guess will have to be done if the 48,000 deed-less cases are to be resolved sooner rather than later, it amazes and shocks me how one reference number in the land reg changes hands numerous times before anything is actually done…and this same ref has to go the district admin too and local municipality etc etc

    (Editor’s comment: I don’t envisage an amnesty – but who knows.)

  • embapaphos says:

    Nigel has the law been published yet? I checked ministry of the interior and land registry website regarding the ‘form’ that can be submitted and found nothing….are they only available at each land reg office?

    Also another query ..if a planning infringement is preventing cert of final approval…developer missing due to this….residents of project affected can get together and get the relevant permits to resolve issue is my understanding?, BUT as land is still developers (until deeds for buyers issued) he was and is still liable to pay the costs for the certificate of final approval and the division/division certificate, of these properties he built? correct?

    It also my understanding (I heard this from Mr Socratous Land Registry head) that the land registry/district admin authorities can if the developer is absent, and not responding to these obligations proceed with issuing a cert of final approval and division of the properties, and hence the issuing of the separate deeds……wondering if we sort our building infringement out whether or not state will proceed with further steps on its own to facilitate issuing of deeds and then try to re-coup these costs from missing developer, or allow buyers to pay all the costs involved in the deeds issuing process and ask the buyers to then chase developer via the courts….? My thinking is buyers stand less of a chance of ever recovering these costs than the state would.

    (Editor’s comment: Yes, the law and the application forms have been published (in Greek) available at ΝΟΜΟΣ ΠΟΥ ΤΡΟΠΟΠΟΙΕΙ ΤΟΥΣ ΠΕΡΙ ΜΕΤΑΒΙΒΑΣΕΩΣ ΚΑΙ ΥΠΟΘΗΚΕΥΣΕΩΣ ΑΚΙΝΗΤΩΝ ΝΟΜΟΥΣ ΤΟΥ 1965 ΕΩΣ (ΑΡ. 9) ΤΟΥ 2015.

    I expect the Interior Ministry will publish an announcement and the forms in English shortly.

    What you would normally do in situations where the developer has failed to to sort out the problems and apply for the necessary paperwork is to apply for a ‘Specific Performance’ order from the court. If successful, you will be able to complete whatever work is needed to resolve any issues, etc. at your expense – and then sue the developer to recover the costs. If he’s absent you would probably be able to lodge a ‘memo’ on his property(ies).)

  • Happy Soul says:

    Hi all,

    I went to the Land Registry in Larnaca to apply for Title Deeds this morning, the office is ready.

    I filled in 2 forms, one in English, one in Greek. I paid 10 euros for one.

    They asked for the Land Contract and receipts to prove I had paid for the land. (I bought the land first, building later.)

    They accepted the forms and told me they would telephone me at a later date, so, our application is in.

    I have since found out that the form in Greek had a letter on the back stating that I should have gone to my village office and got a form from them stating I had paid all my sewage and rates. Take your Contract of Sale with you.

    Also a visit to the Tax Office for a similar Form.

    It was painless get down there.

    Many, many thanks to CPAG and all.

    (Editor’s comment: You’re welcome.)

  • Frank says:

    Any thoughts, Nigel, on the situation facing purchasers who paid full price to a developer; with that developer contracted to pay IPT on the development; with reimbursement as a condition of Individual Title Deed transfer?

    Developer later had a change of heart (if he has one) and issued fantasy figures as a demand for earlier reimbursement: citing a completely irregular method of calculation (resulting in an overcharge of c.300%). It appears that those fraudulent demands actually represented IPT which had not ever been paid by the developer to the government.

    Thus, many Buyers declined to pay against those fraudulent invoices. Title Deeds are still held up at the Horizontal Division stage. Are these Buyers to benefit from the new legislation; or will their failure to satisfy the developer’s fraudulent invoices act as an obstacle to their protection.

    (Editor’s comment: I am aware that the more nefarious developers extort money from those who purchase property in this way. Most recently a very well-known developer in Paphos who is heavily in debt has been using this tactic.

    If any of these obnoxious fraudsters attempt to extort money in this way you (or your lawyer) should write to the developer enclosing this letter from the Interior Ministry and request records of the amount paid as Immovable Property Tax (IPT) and a certificate showing the rate of IPT applicable to the property.

    Also, as you will have paid Immovable Property Tax directly to the Tax Office last year, they should be able to advise you how much you should pay the developer – or perhaps they will accept the payment.)

  • Pippa says:

    Nigel – Apologies, but I can’t see how your reply to Pantheman answers my question about unfinished developments being helped or not by this bill.

    (Editor’s comment: Assuming that you’ve paid for the property in full and have no outstanding contractual obligations to your developer, the property you purchased will not be repossessed as a result of a developer’s ‘hidden’ mortgage.

    But you will not be able to apply for the Title Deed to be transferred under this legislation until it has been issued.)

  • @Pantheman on 2015/09/04 at 8:58 am – My understanding is that as soon as they prove to the Land Registry that they have paid what they ought to (with un-issued Title Deeds) or 100% (with issued Title Deeds), they are protected.

  • scruffy says:

    @Carol & Nigel

    Our developer is in liquidation and as soon as the law was passed we contacted the liquidator to find out if deeds had ever been issued.

    It turns out they haven’t but he told us that they’re understanding so far was that we are no longer responsible for any debts on the land, i.e. developer mortgages, tax, or memos.

    So, it would seem that they’re understanding is that those developments under liquidation are included in this bill.

    Hopefully Nigel can confirm this from his sources.

    (Editor’s comment: My understanding is that as soon as buyers prove to the Land Registry that they have paid what they ought to (with un-issued Title Deeds) or 100% (with issued Title Deeds), they are protected.)

  • Aggis Demetriou says:

    @editors comment: Impunity or caution call what you like added on your title will stop you from transferring your property if you decide to sell, I was told this by the lands office in Limassol as I have 9 title applications since March this year.

    Land Surveyors approved by the land registry have been available since 2006 and they still rely on the land registry to be given the land points to come and survey.

    (Editor’s comment: I know that some people add/extend to their property once its Title has been registered in their name. I’m pleased to hear that the Land Registry is clamping down on this – it made a mockery of the system.

    I believe the Land Registry’s use of licensed surveyors has expanded recently (under pressure to get deeds issued) – but their work will be checked by LR surveyors.)

  • Roaminglady says:

    Thank you for helping everybody get this far Nigel.

    We have (apart from this year) never paid any IPT etc as never been asked for any. Could be because Developer never paid any, but don’t know the reason and he has vanished now so cant ask him. Will we get a backdated bill since apartment was completed 2006?

    Separate question on behalf of a friend – Do you know what the position is if your Contract not lodged at the LR but you have a Contract of Sale and all receipts for full amount?

    (Editor’s comment: You should have paid IPT to the Tax Office for 2014 as well as 2015 and I suggest you sort this out asap. If your developer never asked you to refund him the IPT he paid on the property you purchased, I suspect he didn’t pay any. Even if you are liable to pay the IPT on your apartment since 2006, I doubt if you’ll have to pay any. Prior to the change in the law you are not liable to IPT if the 1980 value of all your properties fell below CYP 100,000 (2006), €170,860.14 (2008-2011), €120,000 (2013).

    I don’t know how people whose lawyer failed to deposit their contracts of sale at the Land Registry will be treated. But I know how I’d like to treat their lawyer!)

  • Mark says:

    Hi Nigel,
    Interesting and general good news! I wonder about two things:

    1. “Title Deeds will not be transferred to buyers who have failed to comply with their contractual obligations to the vendor regarding Immovable Property Tax, local property tax and sewerage tax (a failure to pay communal charges to the developer will not prevent the transfer.)”

    What if the the sales contract says that the buyer is under the obligation to pay all taxes, fees AND MANAGEMENT CHARGES related to the property? Not paying the management charges then means that one failed to comply with their contractual obligations to the vendor.

    2. Is the transfer of title deeds from the developer to the buyer obligatory? What if buyers have not paid taxes etc but also do not care whether they have title deeds or not? Many people may have gotten used to the present situation.

    Best regards,
    Mark

    (Editor’s comment: I suspect if the obligation to pay management fees is written into the sales agreement, the purchaser needs to comply with this obligation if they wish to get the deeds. But if you’re in this situation I suggest that you check with the Land Registry once the process for transferring deeds has been established.

    The draft bill enabled the buyer or the seller of the property (who has deposited the relevant contract of sale at the Land Registry), the mortgagee of the property, the lender under the loan agreement with the buyer, the director of a committee to be established by the cabinet, to request the transfer of a property to its purchaser. I am aware that some feeble-minded idiots cannot be bothered with deeds – serves their right if the lose the property.)

  • Pippa says:

    Good news indeed. However like many developments ours has yet to have the road and pavements built, and there are still two empty unsold plots of land, so what is our position, having paid for our property in full, and lodging the contract at the land registry?

    (Editor’s comment: Please see my reply to Pantheman.)

  • carol says:

    Our Developer is in liquidation have we got to wait for another bill or will this apply to us.

    (Editor’s comment: I’m not sure – let me get back to you on this one. But on the face of it if you have paid for the property, etc and it’s Title Deed has been issued, you should be able to apply for that deed to be transferred to yourself.

    Update – My understanding is that as soon as buyers prove to the Land Registry that they have paid what they ought to (with un-issued Title Deeds) or 100% (with issued Title Deeds), they are protected.)

  • Aggis Demetriou says:

    Troika has the upper hand! Once this mess is cleared another is in the wings, obtaining final approval certificates which can take many tens of years all because the government ain’t able to inspect properties at construction level, as you know no final approval certificate means no title.

    (Editor’s comment: One of the problems with the Certificate of Approval is the long delay in getting the property surveyed.

    Another problem is the fact that ownership is dependent on the condition of the property. But once its deed is registered in your name you can add to the property with impunity.

    In addition to its own staff the Land Registry is using external licensed surveyors to do this work – and it is the intention to eventually issue Title Deeds for all dwellings that are habitable.)

  • Pantheman says:

    Nigel, great work, and I know the bill has yet to pass and the details made public, but is it your understanding now that any property with a preregistered developer mortgage is safe from repossession??? With or without deeds having been issued??

  • SunnyDays says:

    Hello Nigel. We were issued with two contracts one for land, deeds promised within 3 months of payment, no deeds transferred. Other contract for build, seven years on, house still at skeleton, developer bust, contract cancelled. As we have paid for the land and paid more than the actual works we received, do you think we should be in a position to have the deeds transferred? Many thanks.

    (Editor’s comment: I’m not sure. The contract to purchase the land should have been lodged at the Land Registry. If it was and it’s Title Deed has been produced and you can prove that you’ve paid for it and have fulfilled all your obligations to the developer, you should be able to get the deed.

    The contract to build the house will not have been registered at the Land Registry. If you can get the deed for the land then you should try and find a building contractor to complete the work.)

  • Pete says:

    Good news indeed Nigel (excuse the pun) and our thanks in no small part to you, Denis and all the others who’ve campaigned to rid the island of this iniquity.

    And let’s hope those who try to profit from the issuance of deeds are named and shamed, and there will be some.

  • Who Gives says:

    @ Nigel thanks for the update on the confirmation of the amended bill that has been passed by the House of MPs. Once the bill had been approved by the President please can you confirm that if you have paid property up in full, complied to the contract obligation and paid IPT, taxes, sewerage taxes with proof of payment

    My lawyer should be able to lodge the application with LR office to obtain transfer of the title deeds on the owners name regardless of any taxes owed by the developer so clean title deeds should be issued by LR in our joint names within a three month time frame?

    (Editor’s comment: Once the law has been approved and it passes into law, I expect it will take the Land Registry a few weeks to put things in place. E.g. I anticipate that the criteria for submitting appeals to a transfer will be finalised in the coming week.

    There should be an announcement by the Interior Ministry on the process by which applications can be submitted in Greek, Turkish & English (hopefully) – and forms available on-line. I guess the time-frame to get the deeds will depend on the number of applications; there could be many thousands.)

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