DEPUTIES mulling legal changes to solve the Title Deeds shambles yesterday agreed on a key provision that would give buyers the right to Title Deeds regardless of pre-existing mortgages on the property.
The House Legal Affairs Committee indicated after a meeting yesterday that important progress had been made on the issue. “We aim to strike a balance between the rights of the buyer and the seller, but also guarantee the rights of mortgagees,” committee chairman Ionas Nicolaou told reporters following a session involving land developers, property owners’ associations, bankers, and officials from the departments of Land Registry and Town Planning.
The House Legal Affairs Committee is currently working on two of five government-sponsored items of legislation geared at overhauling the system. Nicolaou said, however, that each bill was distinct and would be forwarded to the plenum irrespective of progress on the others.
A key provision of the bill, on which there was broad agreement yesterday, gives the buyer the right to have the property transferred to his or her name regardless of whether a pre-existing mortgage on that property has been paid in full.
Nicolaou explained: “Having calculated their participation in the share of the loan for which there is a mortgage preceding the sales contract, buyers will be able to propose settling that amount to the lender on behalf of the seller.”
“Once such payment is made, for the purposes of a specific performance [court order] it shall be deemed to have priority over any mortgage. A court will be able to order that the real estate be placed in the name of the buyer irrespective of whether the mortgage has been paid in full.”
Nicolaou said “everyone is in agreement that the sales contract shall have priority over the mortgage, for the purpose of protecting the buyer…from abusive practices.”
An estimated 100,000 properties in Cyprus are without Title Deeds and Land Registry officials have confirmed that 30,000 of these properties have been bought by foreigners, the vast majority being British.
Many of these buyers have been conned into buying property mortgaged by the developers and are left in the lurch when the developers default on their bank loans.
The spirit of the proposed bill is to spell out where the involved parties – the buyer, the seller and the lender -stand in relation to one another, the DISY MP noted. “It explicitly states who has priority and when, and defines an encumbrance [claim on real estate] that is created once a sales contract has been submitted to the Land Registry,” said Nicolaou.
It will be obligatory to present the property’s sales contract to the Land Registry Department before any such transaction can take place.
Regarding current sales contracts that have been signed but not yet filed with Land Registry, Nicolaou said a window of six months would be given for filing contracts after the law is passed. In this respect, the new law would not have retroactive effect.
In addition, on presenting the sales contract to the Land Registry, the buyer will be secure in the amount they have paid to the seller until that date, in the event the seller (developer) is unable to complete the project or to transfer individual units to separate buyers of a housing project.
“On submitting the contract, an encumbrance shall be created with regard to the amount paid up until that moment…and that encumbrance shall give the buyer priority over any other obligations of the seller.” Under the legislative proposal, Nicolaou said, “a buyer will have the right to take legal recourse and request a court injunction ordering the seller to transfer the immovable property to their name.”
“This is a straightforward procedure,” he added.
A poll conducted by the Cyprus Property News Magazine last year found that close to 100 per cent of foreign buyers would not have bought in Cyprus if they had been informed of the practice of withheld Title Deeds and developer mortgages.
@Nigel – I understand what you’re saying but it doesn’t work this way in Cyprus.
Developers are constantly looking for new building plots of land. Either within the village boundaries or rural areas.
As soon as they have made the purchase, they ask for a bank loan, usually far more than the current market land value.
Friends in right places gets you the business loan you need to start your building project.
I have a house in Cyprus. Several years ago, I asked my Cypriot bank for a loan. I was told they would assess current market value and lend me No more than 60% of its total value.
Developers have borrow far more than they have collateral.
Everyone in Cyprus thought the sun would shine all year round forever & a day..
@Unbelievable – the banks will loan the developer more money because the value of the asset (the land) has increased in value.
It’s the same as in the UK. You buy a house for £250,000 and 10 years later it is valued at £500,000. The Bank will grant you a second mortgage on your house because its value has increased.
Banks will assess land value at (current market value) – right?
I still see the banks acting immoral because if the developer has just purchased a piece of building land for £500k, how can the bank loan him £1.5million?
Are the banks calculating what the building development ‘could’ be worth with all those lovely houses sitting on it?
If this is how the banks acted, then it’s one hell of a business Risk !
@Unbelievable – A bank will loan money based on its assessment of the risk and the value of the collateral (among other things).
While prices were rising a developer could go back to the bank and extend the mortgage.
However, now that prices have fallen and developers are not getting the inflow of cash necessary to service their debts, there is a problem!
The value on a Title Deed is the Land Registry’s assessed 1980 value of the property – not its market value.
It is the market value that the bank will use when assessing loan/mortgage applications.
@Nigel – surely the bank who issued a developer mortgage prior to any houses being built, did so illegally?
Any lender would want to know what collateral you have to decide how much they can lend you (Banking code of practice etc)
Example; So if Mr developer buys land for £500k but needs more cash to build his development, how can a bank lend him £1million?
If Mr developer completes his project and then asks the bank for a loan – again, the bank will take a copy of the Title Deed which clearly states the land value at £500k. Remember, at this stage the developer has NOT issued new Title Deeds to his new houses.
Anyone…. Go to a Cyprus bank, tell them your land is worth x amount and ask them how much they are prepared to lend you.
They will probably say 50% of the land value – Maximum!
@Anna – If a buyer has clear Title to a property, then he should not be affected if the company/builder he bought from goes bankrupt.
But we will have to see the precise wording of this law once it been passed by the Plenum and published.
It is those without clear Title who will pay if the company/builder goes bankrupt. But if the company’s assets are liquidated, there is a very real risk that those people will lose their homes even though they may have paid the company/builder because the liquidator will be interested in getting as much money as he can for the secured creditors.
There are home buyers in Paphos, Paralimini and Nicosia who are currently at risk of losing their homes as a result of their developer’s company collapsing.
Referring to the above:
Please clarify for me: if the title deed in now being issued to the name of the buyer, who will be paying the bank mortgage if the company/builder goes bankrupt?
One argument I am hearing is why people did not do a search on a property or the land a project was being built on before entering into a sales agreement that albeit omitted any encumbrances developer had on property? This does not justify of course what is being proposed in these bills that the purchaser gets loaded the extra cost of the developers mortgage no matter how small this is….I suggest everyone here contact Cypriot members of European parliament and and ask how compliant to EU law these proposals are…here are some email addresses…i am not for one going to sit back and think of England in this case, and will keep pestering them.
ionasnicolaou@cytanet.com.cy
info@kasoulides.com.cy
takis.hadjigeorgiou@europarl.europa.eu
antigoni.papadopoulou@europarl.europa.eu
parliamentary-committees@parliament.cy
vouli@parliament.cy
european-affairs@parliament.cy
s.g@parliament.cy
What a sad day for the ordinary people of Cyprus, the poor souls who had nothing to do with the making of this situation. They will suffer as there are calls to boycott all Cypriot goods and take all your business and money elsewhere.
If that’s the best idea the government can come up with all buyers should dig in and not be brainwashed into thinking they the government are trying to help us,with this latest proposal.
I understand most want of the island now, it stinks with corruption and lunacy.
But those who can should dig in and sit it out, do not line their pockets any more, that’s what they are praying we are stupid enough to do.
Do not do it even if you have all the money in the world.
They are greedy thieving arrogant pieces of you know what.
I will not be a cash cow for them any longer.
@dimitri – The only satisfactory solution to this problem is for the government to change the process for issuing Title Deeds.
In my opinion, the present system has been designed to provide employment for as many people as possible.
Of course, changing the system would be much more difficult for the government as it would probably put many people out of work.
I will try to contact mr.iona and see if i get any sense out of him, in the meantime dear Nigel is there anything else you suggest can be done?, or who people should approach? by the sounds of it the law is legalising developers breaching the sales contract they sign with clients by loading on extra financial burdens to the purchaser when it comes to title deeds time ….does the cy government ge taken to court?
Nigel – I’ve said this right from the beginning..
Non Cypriot buyers will never win with Title Deeds. This situation is far too big.
Compared to the North/South divide Title Deeds and Land issue, it’s been going on for 35yrs and will continue for evermore.
You will lose out in the end and the Developers will take your money and disappear into the sunset.
They Win – You WILL Lose !
yes rather vague, and is what is being discussed going to apply to future transactions or existing purchases? I am hoping the it is the latter of the two made in previous post
b) It could mean that if there was no ‘participation’ by the property buyer in the preceding loan taken out by the developer, then the property buyer has no obligation to contribute to paying off the Developers debt and can receive their TD’s.
I do not see how the buyer is obliged to pay off any of the developers debt if the buyer has signed purchase agreement contract of sale that explicitly says property a. is being sold to person X. by developer Y for the the cost of whatever…..but this is Cyprus you will say?
Nicolaou explained: “Having calculated their participation in the share of the loan for which there is a mortgage preceding the sales contract, buyers will be able to propose settling that amount to the lender on behalf of the seller.
This totally opaque statement needs clarification, because it could mean one of two things:
a) It could mean that the property buyer will have to pay off a proportion of the Developers previous debts to the loan provider,(e.g the bank), before they can receive their legal Title Deeds.
or
b) It could mean that if there was no ‘participation’ by the property buyer in the preceding loan taken out by the developer, then the property buyer has no obligation to contribute to paying off the Developers debt and can receive their TD’s.
For example if 10 buyers buy 10 properties at an agreed price of €100 each, on which the developer has a previous, (& unknown), mortgage / loan of €100 then I don’t mind paying €90 to the developer for my property and €10 to the Bank to settle the developers loan, but I’m not willing to pay €100 to the developer for my property and then an additional €10 to the bank to settle the developers debts.
How would interpretation a) above be “protecting the buyer…from abusive practices?â€Â
Which is it Mr Nicolau?