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Why Title Deed legislation cannot work

The Title Deed legislation under discussion by the Cyprus government cannot work because it fails to address several critical factors; it is nothing more than a planning amnesty designed to protect property developers who have broken the law.

THE new legislation will neither correct the Title Deeds problem per se nor all its inter-related problems because it cannot do so, owing to its limited scope and its inherent defects. It is, in effect, nothing more than another planning amnesty designed to protect developers who have failed to obtain proper planning permission.

In particular, the new legislation will not address the following critical factors:

  1. The developer mortgage debt bubble hanging over Cyprus, estimated at €5.9bn in March 2009 and now probably €7bn, which, under the present flat market conditions and one-third drop in property prices, will deter the authorities, banks and developers from closing existing mortgages and issuing long overdue Title Deeds.
  2. Compliance with any requirements on developers will be essentially voluntary with no enforcement mechanism and minimal or no penalties for non-compliance i.e. the legislation will be unenforceable.
  3. The banks will not be barred from continuing their current practices of issuing or extending developer mortgages against properties that have already been sold; property buyers will still be expected to indemnify the bank if the developer goes bust; there is no automatic protection against errant banks that collude and connive with errant developers and their lawyers.
  4. The issue of rogue and negligent lawyers and the ineffectiveness of the Cyprus Bar Association in (a) setting and policing strict property conveyancing standards and (b) disciplining and removing errant members. (See Gavin Jones’s open letter to the Attorney General, for example).
  5. Perversities in the justice system, with the police generally barred by the Attorney General from investigating allegations of property fraud (a recent rare exception being the K & M Famagusta Developers case where Cypriot rather than foreign buyers were the alleged victims, implying that Cypriots are treated more fairly than foreigners).
  6. The tardy and ineffective justice system in which alleged property fraud victims are forced to take long-winded and costly civil cases against alleged perpetrators.
  7. The long standing gross inefficiency of the numerous government departments and municipal functions involved in the processing of all the many stages required before Title Deeds are issued; a system clogged with new applications and a huge pre-existing backlog may prove to be the main practical downfall of the new legislation.
  8. No obvious anti-corruption mechanisms are included.
  9. The legislation will not be retrospective; therefore the current backlog of buyers of 130,000+ properties (some 40,000 estimated to be British) still awaiting their Title Deeds typically 5-15 years so far, will receive no protection; if a developer mortgage exists on the land and the developer goes bust or is unable to service his mortgage debt, they could be subject to bank repossession.
  10. The new tiered system of Title Deeds is doomed to failure; for example, as only a fool would buy a property that did not have full, clean and unconditional Title Deeds, how will developers be able to sell their properties including their huge glut of unsold properties? This will put extra pressure on their gearing and liquidity and in turn on the banks. Also, many buyers who bought in good faith some years ago may suddenly find that their property has been devalued owing to the issue of an imperfect Title Deed. Who would want to buy their property with such a curse on it?

Buyer protection? It will still be virtual, not real.

Readers' comments

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  • paul ruse says:

    Well I read the article and all the comments.

    And I agree with every one.

    But once again we must press our Euro MPs and UK MPs. If we don’t we wont get any progress.

    And as in my own case BREACH OF CONTRACT we want our land back. Close one loop hole and they will find another to rob us. If the developers don’t the Lawyers will.

  • Andrew says:

    The whole system is corrupt from top to bottom.

    Why should people who have paid in full for their homes be held to ransom by banks which they have never had any contact with.

    Why should lawyers be allowed to prepare contracts which do not protect their clients.

    Why do lawyers not do encumbrance searches before any money is paid to a developer.

    Why does Land registry allow contracts to be lodged against land which is already mortgaged . Why do Land registry not protect families who have already lodged contracts.

    Why do Banks not insist that developers make stage payments on land and indemnify innocent buyers.

    It stinks and the people involved should be held to account .

    WE ARE IN EUROPE. EUROPEAN PARLIAMENT SHOULD BE MADE TO LISTEN.

  • Jim says:

    My usual war cry: DO NOT PURCHASE PROPERTY IN CYPRUS UNLESS A CLEAR TITLE DEED IS AVAILABLE FOR TRANSFER TO YOU, AT POINT OF SALE.

    I see some developers are advertising “Title deeds guaranteed” or “Title deeds delivered shortly” to try & entice buyers. Do not be fooled.

  • Hector says:

    The situation in the South almost mirrors that in the North of Cyprus. It must be in the Cypriot blood to cry for justice and their human rights on the world stage and yet think it perfectly OK to lie, cheat, con and countenance corruption at all levels.

  • Alan Waring says:

    @Steve. I did what you did in checking for no mortgages both before contract and subsequently. As I understand it, if any mortgage is attached after the contract is lodged with LR it cannot take precedence over the purchaser. That’s the theory but I would not trust my life on it and, if it did happen, no doubt it would take a long-winded multi-party civil action to put right. Of course, no such post hoc mortgages should ever be allowed to be attached at all but in Cyprus NEVER say ‘never’!

    Rest assured that I strongly advise anyone (including Iranians) to be ultra-careful and cautious about buying a property in Cyprus. I would imagine that this is now the common position of most sensible people. If the unadulterated facts are given to people, they can make up their own minds.

    The Kwa Zulu Natal case shows how bad things can get. I only hope Cyprus developers don’t start selling ‘options’!! However, some might argue that with the current delayed Title Deeds situation and lodging the sales contract with the LR, in effect the Cyprus system is not that different – the buyer is only lodging a claim on the asset and may be competing with other claimants such as banks until and unless the Title Deeds are released and transferred to the buyer.

  • Richard says:

    @Nigel

    Yes they do
    Yes they have

    I’m 100% behind you all continuing to do so. In fact I’m a regular tweeter of a lot of these articles. What a pity I didn’t know this forum existed and your guide existed before we invested.

    Point is though neither these forums and/or magazines are enough. If they were – CPAG wouldn’t have been ‘gagged’ and those people long overdue their title deeds and fair treatment would have them/it by now.

    We haven’t – so we need to up the ante. We’ve a change of UK Government now – which if it’s anything like the Thatcher one – isn’t as frightened of taking a tough line with the EU administration as the last one. That’s a positive.

    And there a lot if us. It’s easy to ignore a small number of people acting as single units. It’s a lot harder to ignore a lot of people well coordinated and with a common purpose.

    If you don’t where to find your Euro MP – here’s a good start..

    http://www.europarl.org.uk/section/your-meps/your-meps

  • Matt says:

    Thought for pause..

    It would be interesting to find out if the value of the land which a developer has mortgaged, matches the mortgage LTV.

    Land in Cyprus is very cheap. The title deed should specify the value when it’s transferred to new owner.

    I wonder if the banks are breaking their code of practice or even breaking the law by granting loans that’s are well above the land value.

    Breach of contract maybe..?

  • colin biggs says:

    cyprus property problem = major structural fault.

    cyprus govt. solution = just paper over the cracks ?

  • @Richard – I hope that the articles and comments in this magazine and on numerous property forums serve to highlight the potential problems people may face when buying property in Cyprus – and encourage those who have problems to write to their MPs and MEPs.

  • Richard says:

    Why isn’t everyone writing to their Euro MP about this rather than airing their views on forums?

    If everyone spent the same amount of time FORCING the EU to sit up and take notice – then the Cypriots couldn’t get away with it.

    So the EU have initially said no. To hell with NO – keep pushing until they say YES!

    Force the Cypriot Government to take action – we KNOW they WON’T do it themselves.

    On this 70 year anniversary of the Battle of Britain – I’m taking my cue from their bravery and courage and I’m off to start the ‘Battle of Britons’.

    We’ve invested in the military on their island for decades when they couldn’t stop fighting each other – and we’ve poured millions into their banks and Government and businesses as property buyers.

    Come on people – let’s see some SPUNK!

    All we want is fairness here – it’s about time we started to get together to DEMAND it and GET it.

  • Steve says:

    This list is pretty comprehensive. If point 3 is correct and banks are granting loans to developers on properties that have been sold and contracts deposited at the deeds registry, then no one waiting for title deeds is safe. This is criminal activity by the banks, but look who runs the banks in Cyprus – the property developers. I am waiting for title deeds. Absence of a mortgage on the property was checked before signing the contract and then checked again after deposition of the contract at the deeds registry, just to make sure. It looks like that may not be enough..

    Do I take it then that Dr Waring is advising his Iranian clients not to buy in Cyprus?

    PS if you want to see a really creative twist on the Cyprus situation, Google “Cotswold Downs liquidation” or go to http://www.iolproperty.co.za/roller/news/entry/top_kzn_golf_estate_faces

    Basically buyers paid the full price for OPTIONS TO PURCHASE (title deeds could not be issued because the change in zoning of the land from agricultural to residential had not been completed). The developer used the titles he still held as security to borrow money. He failed to repay and the “buyers” stand to lose everything; they have no claims on the properties.

  • Clive Fletcher says:

    Has it be considered that one of the reasons why the government doesn’t move on bank loans issue and collect the circa 7 billion euro, which would considerably swell the government’s coffers, is that the Cyprus banks may have already sold off the developers loans and mortgages to non-EU banks; ‘not our problem’ the Cypriot banks can reply.

    If you remember some two years ago, Aristo, the developer, became chairman of the Bank of Cyprus at the last minute,when the favoured candidate was the former minister of finance from the Cleridies government; conflict of interest or what?

  • Peter says:

    As usual plenty of excuses. In UK if you buy a property out right you get the Title deeds as soon as you have paid for it, at least then you know you own it and cannot be taken away from you.

    Why is it in Cyprus everybody wants to rip you off and think will feel better with a couple of excuses?

    I bought a property in Cyprus 5 years ago that was finished being built in 1999 and I am still waiting for the Title Deeds. I have had it up for sale now for a year with no luck because now the first question I am getting ask is, has it got Title deeds ? as we cannot get a Mortgage with out them.

    One thing I am sure of I will not buy another property with out Title deeds again.

  • Alex says:

    Well, as for para 10 above, most of the buyers on the market are Cypriots and they do not care about Title Deeds as much as the Britons do. As long as the price is good, they will snatch the opportunity. And as we see from the case of KM Famagusta, they can reasonably expect to have their complaints heard, if things go wrong.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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