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27th June 2022
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HomeProperty ArticlesCaveat Emptor – Let the Property Buyer Beware

Caveat Emptor – Let the Property Buyer Beware

The property boom on the island over the past few years has led to many buyers not receiving their title deeds as the authorities struggle to stay afloat, swamped with applications.

In September 1999, it had been announced that thousands of property buyers who had not received title deeds from the seller could now take their case to court after the Supreme Court ruled that the issuing of title deeds of immovable property without the seller’s consent was legal and constitutional and should take effect as soon as contracts are lodged with the Land Registry Department.

The situation affects both locals and foreigners on the island, who are facing the problem of negligence by sellers in issuing a separate title deed and transferring the property to the the legitimate owner.

At the time, lawyer George Coucounis, who won the Supreme Court case, had said:

“Now, buyers have the right to refer to provisions of law, irrespective of the time they have deposited their sale contract with the Land Registry. Buyers can now apply to the court to order the seller to issue separate title deeds for the property they have bought.”

But the problem has not been solved with the Supreme Court decision, as thousands of buyers know only too well. A British couple who bought an apartment in Nicosia four years ago are still waiting for their title deeds despite their contract promising their delivery no later than two years following the purchase.

“The situation is unacceptable,” Stephen Hughes told the Sunday Mail. “Every time we call, the developer keeps stalling, telling us they will be issued next month.”

This week, Coucounis admitted to the Sunday Mail that, “there is still a problem in the issuance of title deeds and this is due to the three parties involved in their issuance, the developers, the purchasers and the appropriate authorities.

“There is a significant number of developers who do not take the necessary action for the issuance of separate title deeds due to financial benefits, irregularities in construction and a variety of other reasons.”

He added that in certain developments developers failed to pay off mortgages on the property, either to finance other investments of theirs or because they were unable to repay, with the result that title deeds remained with the banks.

This is a possibility that seriously worries Hughes. He said others in the complex where he had bought were all in the same boat, despite properties being bought in full, without mortgages. But what if the title deeds are being held by the bank because the developer had not off his mortgage on the property? “What happens if the developer goes bankrupt and the bank takes the flats, despite all of them being paid for?” he asked.

The developer of the specific property insists this is not the case, saying his company pays off all its debts within two years.

He says the problem lies elsewhere. “The deeds have not been issued as we have not received them. They are with the Land Registry Department.”

He estimated it would be another four to five months before the deeds were released.

“Everybody will get them in the end, so I don’t know why they are complaining,” he said.

But Chartered Surveyor and property valuer Antonis Loizou described the general situation as “extremely problematic”, saying he was actively campaigning for change.

“As a result of the property boom of the last three to four years, annual applications have increased from 7,500 to 14,000. The Land Registry Department and planning authorities simply can’t cope.

“The government is being asked to simplify the whole procedure and to reduce the red tape, but I don’t think they are listening and the problem is getting worse. If the international market learns of this, there will be huge consequences for the building industry in Cyprus, which is worth more than one billion pounds every year in overseas sales alone.”

He advised any prudent buyer do their homework. “If they want to sell the property on but do not have a deed, they should have a cancellation agreement in place with the developer,” he said. “This entails various risks though, for example a demand for capital gains tax or double transfer fees. It is not something I would recommend but is sometimes necessary.”

He said he was aware of cases where people had not been able to sell on their properties as they did not have a title deed.

According to Christos Ktorides, the Assistant Director of the Interior Ministry’s Town Planning and Housing Department, the delay in issuing deeds is caused by two main reasons. “First, there is a huge number of applications which need to be dealt with, and secondly, the problem lies with developers,” he said.

“They must receive certificates of approval for building work from the relevant District Office before they can apply for deeds. To be issued with a certificate, they must fulfil all planning and building criteria for their projects. Finding this problematic, they often proceed with building without a certificate of approval, meaning they do not receive the title deeds.”

Lawyer Coucounis agreed. “The most important reason why most of the developers do not take the necessary steps to obtain separate title deeds is that there are irregularities in the construction which they are not interested in rectifying,” he said.

“Also responsible for this situation are the town and planning authorities and the local authorities, who tolerate this situation. In order to deal with the problem, the government, through the House of Representatives, enacted a law for the legalisation of a significant number of irregularities regarding immovable properties purchased prior to March 24, 2005, valid for 18 months, until the end of September 2006.

“It is up to the government to extend the time period of the law. It enabled the legalisation of several irregularities but only to the point of the issuance of a certificate of completion of works, and not title deeds.”

He said that the law, which enables the purchasers to obtain separate title deeds for their properties, “provides for the appointment of an appropriate person to issue separate title deeds in the name of the vendor. In order for this to be done, legal action must be taken against the vendor for the appointment of a suitable person to issue the separate title deeds in the name of the vendor.

“From the issuance of a certificate of final approval and/or completion certificate, the procedure for the issuance of the title deeds can be initiated.”

He added that the procedure, “will be undertaken in the name of the vendor and all relevant applications will be signed by the suitable person appointed by the court in lieu of the vendor.

“From the moment the separate title deeds will be issued, the purchaser is qualified to bring legal action against the vendor, claiming the specific performance of his sale contract. In other words, the court will order the district officer to transfer and register the property from the name of the vendor to the name of the purchaser”.

But “only the purchasers who have deposited their sale contract with the District Land Office can use these remedies,” he cautioned.

“This is why a purchaser is also responsible for the problems in the issuance of separate title deeds.”

The lawyer concluded by saying that, “if they do not make sure they properly secure their rights at the beginning of the purchase transaction through solid legal representation, they will certainly face problems later on in the issuance of the title deeds.

It is important for them to deposit the sale contract with the District Land Office within the legally specified time limit and to obtain from the vendors a bank guarantee for the removal of the mortgage upon the land, if there is any, and for the issuance of separate title deeds.”

Such advice is little consolation for Stephen Hughes, who has done everything by the book, and is still waiting.

“Developers are building like crazy across the island and leading people up the garden path as promises of deeds rarely materialise. How can somebody build a block of flats, sell it on and yet still use it as security to borrow more money to build more flats to keep more people waiting for their deeds? They should not be allowed to start new developments abroad if they haven’t paid off their debts in Cyprus.

“This has been allowed to go on unchecked and has become general custom with no basis in legality. It deprives people of security of tenure. A deed should be a basic right of a property owner.”

His wife, Sarah, said the situation was so bad that, “it will put off people wanting to buy property on the island. We all want our deeds so we can pass them on to our children,” she said.

A spokeswoman at Laiki Bank said their policy was the same as all other banks and based on Land Registry regulations. “In order to take out a mortgage, a buyer must produce a title deed. If they do not have one, a sale contract will be assigned to the bank, so in effect, the bank owns the property.”

She added that, “it is the developer’s obligation to issue deeds, with the bank taking on the deed upon registration of the mortgage. If the developer does not have the deed, they must issue a title deed guarantee in favour of the buyer, who I advise to request sufficient security from the developer in the form of a title deed guarantee.”

So there you have it. Caveat Emptor: Let the buyer beware.

Copyright © Cyprus Mail 2006


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