When buying any type of property in Cyprus, it is absolutely essential that your lawyer deposits your contract of sale with the District Lands’ Office within two months of you signing it for what is known as Specific Performance.
The major objective of Cyprus’ Specific Performance law is to protect your interests as the buyer from any (some) wrongdoings by the seller. It gives you the ‘right to own’ the property once you & the seller have fulfilled their obligations to each other as defined in your contract of sale and the Title Deed has been issued.
Although it does prevent the seller from changing his mind about the sale and you from being gazumped by another buyer, the Specific Performance law is not watertight. For example:
- There is no requirement for the seller to clear any mortgage on the property before your lawyer deposits your contract of sale. They may also reschedule or extend any existing mortgage without your permission.
- If the lender forecloses and calls in the mortgage, any claim it has on the property will take precedence over yours. This is because the lender’s claim existed before your claim created by depositing your contract of sale for Specific Performance. The mortgage lender will probably auction the property to recover the debt and you could be left homeless.
I know of a number of people who have lost or are at risk of losing everything because they bought mortgaged property. Under absolutely no circumstances should you buy any type of property in Cyprus that is mortgaged – the risks of losing everything are just too great.
The only way to protect yourself is to take independent legal advice & to ensure that your lawyer carries out a Title search – or you can pay off any mortgage yourself!
The problems with the Specific Performance law don’t end there:
- In certain circumstances, the seller can still mortgage the land on which your home stands without your permission, even though you may have paid him for it in full and taken posession.
In Cyprus, this is perfectly legal and puts you in an invidious position. Although you may eventually own the property, you will find it extremely difficult to sell before its Title Deed is registered in your name. And should you find a buyer, they will insist that the mortgage is cleared before handing over their money – so you might end up receiving considerably less for your home than you paid for it.
One such case, concerning a block of apartments, was related to me by a lawyer. The developer fled the island with his ill-gotton gains and left the buyers in the lurch. The only way they could get themselves out of the situation was to pay the monies owed by the developer plus various unpaid taxes, charges & fees; and this is what they did. Each apartment buyer contributed their (un)fair share to the cost.
So even if you have no intention of selling your home before its Title Deed is issued, when you die, your children and the other beneficiaries of your Will may receive considerably less than you anticipated!
Your lawyer may be able to ‘dissuade’ the seller from mortgage after you’ve bought by including severe penalty clauses in your contract of sale. There is talk of introducing some form of insurance guarantee to increase buyers’ protection. Currently however, there is no cast-iron safeguard and until the Cyprus Government acts to change the law, you are at risk.