The Politics of Homeownership and Title Deeds (1)
We have been consistent in explaining, and drawing attention to the sorry state of affairs which exist regarding the matter of homeownership and the issue of title deeds.
Recent developments in the field and concerns expressed from readers merit a return to this topic by taking a more thorough look at what is happening and to draw conclusions and learning lessons from experience. In the next three issues of In Touch we will dwell on first, some of the major developments and concerns that have recently surfaced and the issues arising; secondly the provision of illustrative material (case studies) to demonstrate the seriousness and severity of the problem and finally our opinions and advice to readers and consumers in general who are thinking of entering the immovable property market what to look for and what to avoid in their dealings with developers or sellers.
Cyprus Property Action Group
The formation of the Cyprus Property Action Group is a welcomed development. It is not surprising that the Group was initiated and formed entirely by the British community in an attempt to combat the growing problem of purchasers experiencing serious personal, financial and legal liabilities as a result of a combination of lax and exploitative relationships in the housing market in favour of the seller, a tradition of neglect and political apathy and outdated, confusing and contradictory laws. It is not surprising because this community in particular not only constitutes one of the largest groups of purchasers hence their first-hand knowledge, predicament and exasperation with the lack of progress but also because this community has a long tradition of “community action” and “self-help”. One of the present authors, in an early research paper, has characterized this need for self-help when everything else fails as something akin to “Robinson Crusoe had a better servant than Friday: Robinson!” (Community Development Journal, 1979, “The myth of a radical trend in British community work”, vol. 14, issue 1, pp.3-13). In short, what others can do or will not do, you can do better yourself.
Since its formation, together with the fact that the political terrain is gradually changing to the better with the election of overseas-born municipal councillors, the Group has managed to bring out in the fore the problems of homeownership and to some effect. They have managed to reach the national media and achieve headline status. This prompted various critical editorials in the Greek and English national press and state and commercial television channels. They have set up a website and are available for advice to those who need it. Lastly but not least, they have managed in this short period to meet up with the Finance Minister and put forward their grievances and proposals. Although such self-help developments and the emergence of pressure groups are riddled with problems in sustaining themselves and becoming effective in the political process, we believe that the Cyprus Property Action Group have an important and necessary role to play in the process of making positive changes to current legislation and practices.
The Legal Scene and Law Reform
The House Legal Affairs Committee is considering amendments to current practice to provide legal safeguards and protection to purchasers on signing the contract of sale prior to the issue of a certificate of approval and subsequently, all things being equal, the provision and transfer of title deeds to the purchaser. However, it is important to mention that this is not the first time that the authorities have attempted and aborted the task of finding a workable solution to the problem of so many “titleless” properties and the subsequent problems this social and legal phenomenon causes for purchasers in particular. As we reported In Touch (issue 8, pp. 20-21, 2007) the authorities have been tossing with various ideas and schemes to rectify matters, from turning a blind eye to irregularities and breached building regulations to changing current rules to allow purchasers to apply for the issuing and transfer of separate title deeds with or without the seller’s and/or developer’s consent, cooperation or participation and, assumingly, without regard to whether the title in question is mortgaged by the developer or a third party (as for instance, it is common practice for a developer to build on land which is owned by others and who in turn are heavily mortgaged to even more others). Furthermore, the authorities have even considered, and are still considering, to amend legislation to allow for title deeds to be issued without the certificate of approval but as we argued elsewhere this may lead to opening a Pandora’s box that may unleash other complicated legal and social consequences which may outweigh the benefits.
In the present attempt to amend current laws, the idea is to establish the contract of sale, which must be deposited and registered at the Local District Land Office within two months of the agreement, as taking legal precedence over the expected title deeds. In other words, the submission of the contract of sale to the District Land and Survey Office ought to, following the amendment, establish the contract as proof of ownership rights equivalent to holding the title deed to any property. It will be interesting to see how this amendment will proceed or reach the statute book bearing in mind the many political and financial interests involved in making laws and in particular in a situation where collusion between diverse interests, tradition and neglect have allowed so many bad practices and exploitative relations to emerge and become embedded in the very social and political structure of the state as though they are “legitimate”.
Title Deeds, Legal Ownership and Explanations for the Current Problems
A rough estimate is that anything between 80 to 90% of properties in Cyprus are without title deeds on the name of the people who live in them. Indeed the figure grows to 95% for all new properties. There are many reasons for this but for us there are three causes which are in the main responsible for the current mess.
First, there is a historical reason. In our view, following the Turkish invasion and the influx of nearly a third of the population into the free parts of the Island as refugees caused a serious social, political and personal upheaval particularly in terms of personal suffering, social accommodation and physical accommodation. In terms of the latter, we believe that the authorities were forced to take a more relaxed approach to housing and construction of housing estates for accommodating the vast housing and other needs of the population. In short, what many have not realized is that the relaxation of the rules and the violation of building and planning rules to build new housing estates (on both Greek and Turkish owned land) out of expediency and a good cause, has had a gradual unanticipated social effect on the general approach to existing laws and regulations about building and planning permits, final certificate of approval and title deeds. This sliding scale to the worse, has gradually filtered through to most areas of the construction industry particularly in the provision for private housing. In other words, the need for ways to accommodate immediate housing needs at a time of a socio-political crisis and disaster has, in the course of time (33 years to be exact), let to a practice of the authorities turning a Nelson eye to continuous and blatant violations of building laws and regulations by allowing developers, vendors and purchasers of property a free reign in illicit relations. This side-effect of the war and the invasion which has escaped attention and the expressed apathy and/or neglect or inability of the authorities to do something about it, has led to a highly volatile and dangerous stage. A lot of people without title deeds are now living in fear of the housing bubble bursting and, apart from the broader economic and political repercussions which may follow, may find that they are the real losers faced with financial disaster and loss of their homes by default.
Secondly, there are long delays in the issuing of new title deeds and currently it may take up to eight years or more due to the backlog before the fact. This is partly due to the anachronistic practices present in the system which are threatening the system with collapse under its own weight in processing a backlog of applications and partly due to the developers’ inertia, financial obstacles (see below regarding mortgages), lack of certificate of approval due to construction problems or illegal buildings or modifications to buildings carried out in breach of the original plans and permits.
Thirdly, the problem with many properties is that they are heavily mortgaged to third parties (such as for instance, Banks) on delivery to purchasers by developers. Here we must draw attention to another complication. It is not uncommon that buyers and their legal representatives fail to recognize and check out the detail that there may be other interests in the transaction. That is to say, the developer may build on land owned by a third party (individual or institution) which means that the developer may not owe any money but the third party (the real owner) may do! In another twist to the relationship, both the developer and the owner of the land (if they happen to be two different legal entities) may both have substantial loans taken as security on the land and the houses built on that land. Therefore, until these financial obligations, whatever their nature, are cleared first, there is no chance whatever for title deeds to be issued to the rightful owners of the property who should be in the first place the buyers. Simultaneously, until those debts by developers and others are cleared there remains the risk of default (i.e. failure to repay the loans) and the real prospect of Banks or whoever is owed the money to force a sale to recoup the losses meaning that the unfortunate buyer is left in real terms homeless and destitute. So, the existence of this phenomenon of mortgaged properties at the time of delivery means that substantial delays in the issuing of title deeds may incur unless such financial obligations are cleared up first which is not often the case.
The Multiplier Effect of “Titleless” Properties
As can be understood, each major explanation or reason above provides, unfortunately, new opportunities for further delays or risks. For instance, if it takes ten years for title deeds to be issued on a property, it is almost illogical to think that for ten years homeowners will refrain from carrying out any improvements to their property. By definition these improvements could be the nail in the coffin for under the law no improvements or amendments of any type can be carried out to any property as they are deemed to breach the original building and planning permits. In such a case a certificate of approval may be withheld and thus no title deeds. As we are on this subject of changes and additions to a property, these include basic things such as sheds and believe it or not satellite dishes exceeding one meter in diameter. Given that satellite dishes are springing up all over Cyprus without permit we estimate that infractions of the law are widespread and begs the question what will happen if, in the current state of affairs, the authorities attempt to enforce the law. A permit is required for installing a satellite dish but unfortunately again a homeowner cannot apply for a permit unless s/he is the legal owner of the property. In the absence of title deeds the legal owner remains the developer or whoever holds the title deeds. It is the developer again who needs to apply for such a permit and, thus, without his cooperation, the purchaser is not in a legal position to argue and, in his/her ignorance, by carrying out a small alteration or addition, succeeds, at the same time, to fall foul of the law as well.
It is also important to remember or recognize that lack of title deeds may mean other disadvantages for the purchaser. Other than being prohibited from carrying out any alterations to the property, without legal ownership of a property the purchaser cannot raise any loans on the property either at the time of raising capital for the purchase or during possession unless s/he gets a guarantee from the legal owner who assumingly is the vendor. More serious if in the course of waiting for title deeds the purchaser needs to sell the property this cannot be done unless the original contract is cancelled and a new contract is signed by the developer or legal owner. This means that unless this is an obligation stipulated in the original contract prior to cancellation, the developer or legal owner may refuse to do so and where s/he may oblige, s/he may require the payment of a fee. It is not unusual for developers to ask for a fee of up to CYP3,000 (or more as some cases show) for the benefit. In short, it is a case of tails you lose, heads I win.
Dealings in Illegal Transactions: Contradictions & Unanticipated Consequences of the Law
However, out of all this mess there is nothing like the worst possible contradiction and liability in social and legal terms than the fact that any property which is delivered (hence the act of passing on the keys to the buyer by the seller) and received (hence accepted and occupied by the purchaser) prior to the issuing of the certificate of approval is an illegal act – in both civil and criminal law. In short, here we are as a nation busy building houses and on completion we deliver them to buyers unfit for occupation, given that most of these constructions are delivered without a certificate of approval, and buyers who, in turn, accept and occupy them in good faith without recognizing that by doing so makes them, as they occupy an illegal building, illegal occupants. For those who still doubt what we have been saying and warning for a long time here is what the revised and outdated law of 1959 at the time the Republic of Cyprus was about to be launched declares in uncompromising terms: “No person shall occupy or use, or cause, or permit, or suffer any person to occupy or use, any building unless and until a certificate of approval has been issued in respect thereof by the appropriate authority” [CAP. 96(10(1)]. In addition, how many people know that on completion of a building the developer (assuming of course that he/she has the relevant permits and in our experience some do build houses even without permits) is required within 21 days to inform the authorities of completion and the authorities in return have to furnish the developer with a certificate of approval as opposed to the current long delays mentioned earlier often extending over eight years or more? [CAP.96(10)(2)].
So, is there any recourse to the law to force a developer to issue title deeds? Yes there is and, no, there is not. There is in the sense that a purchaser could seek a court order to force the seller or developer to take all appropriate and necessary action to provide for all requirements for the issuing of separate title deeds within a specified period of time. This means that the vendor is put under a legal obligation and the court’s observance that s/he will comply with the order. But this remedy only applies to contracts of sale which are deposited and registered, within two months from being signed, at the Local District Land and Survey Office. Unfortunately, many buyers fall in the trap (possibly to save money) of buying direct from developers without good legal advice, or where they seek legal advice this falls well short of expectation, are led into signing contracts which are not worth the paper they are written on and which on many occasions are not ever deposited at the District Land Office. Furthermore, even where legal action against the vendor is possible and taken one should not ignore the fact that calling on the law through litigation to put things right does not mean that the law will find for the plaintiff (refer here to our previous articles, In Touch, Issues 10 and 11, pp. 20-21, 22-23 respectively). Also, apart from the financial and personal sacrifices and the required staying power to see matters through, there is also the possible and most serious by-product of such action which has to do with the above stipulation by the current law concerning delivering and receiving an illegal building. Action against the vendor for non-compliance may also lead, through counter-action by the vendor (or the authorities) in both the civil and criminal court against the purchaser (plaintiff) for illegal entry and occupation of an illegal building! If this is not a mess created by the law and circumstances described earlier we would like someone to tell us what a mess is.
Summary & the Role of the State
We are dealing with an historical social and legal issue which has been allowed to develop to a point whereby many a people are now finding to their distaste the pitfalls they have allowed themselves to fall into whilst, at the same time, collusion between the authorities, developers and vendors in general has managed to downgrade the significance of that, and to create the impression or pretence that the situation does not exist or if it exists it will sort itself out by some fine tuning of the legislative process. We believe that no such fine tuning can save the situation from calamity unless the authorities consider the interests of purchasers and drastically but carefully amend the law by re-defining the responsibilities of all involved and setting the social exchange between the interested parties within a transparent and modern legal framework that takes into account the complexities of today’s fast changing housing market. Diverse interests must be re-defined and re-worked to ensure that old and present bad practices come to an end. Only in this way will the economy and social relations of the housing market be safely restored and prevent a gradual but obvious collapse. The future of a healthy national economy and a regular income by the Government out of such transactions in tax alone (over CYP200 million per annum) depends on that and by the authorities taking note of the writing on the wall or face the fate of another Babylon.
Professor Dr. Andonis Vassiliades & Maria Chimonides
© Prof. Dr. Andonis Vassiliades, October 2007. No part of this article may be used or reproduced in any form without prior written permission from the authors.
Professor Dr. Andonis Vassiliades is Professor of Law, Criminology & Penal Justice and a Clinical Psychotherapist.
Maria Chimonides is a Lawyer and a Legal Consultant.
They are at The Law Office & Research Centre:
Main Office, Larnaca: Kalogreon 16, Ria Court 19, Office 101, 6016 Larnaca
Branch, Oroklini: George Griva Digeni 16, Office 3, 7040 Oroklini (Close to the Bank of Cyprus)
Tel.: +357 24624449, +357 24654011
Fax. +357 24621336
The article above first appeared in In Touch Magazine, pp. 30-33, issue 12, 2007