In previous articles I’ve stressed the need for buyers to take independent legal advice when buying property in Cyprus. Unfortunately, many buyers fail to heed the advice and end up with all sorts of problems, one of which I discuss in this article.
But even assuming that they’ve taken independent legal advice, buyers do not always appreciate that the ways of working in UK and Cyprus are completely different.
For example, anyone who has bought in the UK will be familiar with things like surveys, local authority searches and preliminary enquiries that are carried out before contracts are drawn up and signed. But in Cyprus, these types of checks tend to be the exception rather than the rule.
Although many lawyers acting on behalf of foreign clients understand the many issues, I thought it worthwhile to outline one of those issues and how it may be addressed. You need to discuss this with your independent legal representative here in Cyprus.
It sounds a bit odd to be thinking about selling your property when you’re buying it; let me explain:
When buying property in the UK, if either party decides to pull out of the deal after contracts have been exchanged and before Completion, they have to compensate the other. The same is true in Cyprus; once you’ve signed a contract, there is no escape until Completion unless you’re prepared to compensate the other party.
(Completion occurs when the sale and purchase of the property are finalised, and the buyer becomes its legal owner. In Cyprus, this is achieved when the Title Deed to a property is registered in the name of the buyer).
This isn’t too much of an issue in the UK. Contracts are exchanged and Completion takes place a couple of weeks later. But in Cyprus, Completion can take several years – I know many people who have been waiting more than ten years for Completion and some who have been waiting for more than twenty!
And herein lays the problem – if you should want to sell you property before Completion, you must compensate the ‘other’ party. To avoid this issue, your lawyer needs to include a “right to sell” clause into your contract. This will look something like the following:
“If at any time after the signing of the present agreement the Purchasers desires to sell the said Property, they will have an absolute right in doing so as they are deemed to be the beneficial owners of the Property providing that the Purchasers have fulfilled all their obligations as herein provided. The Vendors shall be obliged and cannot in any way object to and /or deny and/or withhold their consent to sign any necessary cancellation contract and new contract of sale with the new purchaser/s, provided that the vendors shall not be liable for any taxes and/or other related expenses as a result of such transaction.”
I recommend that your lawyer includes a separate clause limiting any ‘related expenses’ to a reasonable figure, say CYP 500 or CYP 1,000; this will be sufficient to cover any legal costs incurred by the developer.
To illustrate how important it is for your lawyer to limit these expenses, one developer demanded 15% of the purchase price (in cash) before agreeing to cancel a contract!