ACCORDING to a recent media report 15,000 new Title Deeds were issued by the Land Registry between June 2009 and November 2010. Amazingly though, only 4,200 of these were transferred to their purchasers.
One might reasonably wonder: How is it possible for purchasers on the one hand to complain about the long delay in issuing Title Deeds and on the other hand to fail to complete the transfer to their names?
There are several possibilities for this situation:
- The new title is still burdened with mortgages and/or other impediments which the developer has failed to remove;
- the developer has not cleared his tax commitments;
- the purchaser has not paid the whole purchase amount; the purchaser is not available, as e.g. he has left Cyprus since the date of sale, or;
- the purchaser has resold or intends to resell the property.
In the last case the (not exactly legal) practice of «Cancellation Agreements» comes into play. By such agreements, which are signed by the developer and the first purchaser, the original Contract of Sale is cancelled and at the same time a new Contract of Sale is concluded between the developer and the second purchaser.
By this practice, both the developer and the first purchaser obtain financial benefits: The developer obtains a considerable amount of money as «cancellation fees» and the first purchaser avoids the payment of Transfer Fees, as the title is transferred directly to the name of the second purchaser.
Needless to say, the only loser in this case is the public purse which is deprived of a considerable amount of taxes (Transfer Fees and, in many cases, Capital Gains Tax).
It is worth mentioning that, even if the transfer is completed, if a long time has elapsed since the signing of the contract of sale, the public purse is still a loser, because the Transfer Fees and other taxes are estimated as at the date of the contract of sale, without any interest or other charges being added to this amount.
According to the same press release, the issuing of 120,000 Title Deeds for residential and other units which have been sold is still pending.
The Authorities are doing their best to accelerate the issue of Title Deeds. At the same time, a package of legislative amendments is under way, (known as «planning amnesty» package), aimed at easing the problem. One might ask what will be the practical result of this effort if, in spite of issuing Title Deeds, most of them are not transferred, for one reason or another.
It is for the benefit of all parties, including the State, that Title Deeds are issued promptly and that they are transferred without delay to their rightful owners/purchasers. In the long run, the practice of playing games either with the issuing or the transfer of titles is not to the benefit of anyone.
The holding of a title is the only real safeguard to a purchaser, as there is always the risk that the developer goes bankrupt or that the property is burdened with such encumbrances that make the transfer of the title impossible.
It is up to the authorities, who are the main losers from the absence of titles and/or the failure to transfer existing titles, to take measures to make the issuing and transfer of titles compulsory.
Possible actions, in addition to the existing legislative proposals, may include:
- the clear condemnation of the practice of cancellation agreements as illegal by appropriate legislative measures;
- the setting of a time limit within which a transfer must be completed after the issuing of Title Deeds and;
- the imposition of penalties on developers who fail either to issue or to transfer Title Deeds for one reason or another.
Andreas D. Symeou LL.B, M.Sc (U.L.A.) is a property consultant and a Member of the Royal Institute of Chartered Surveyors (MRICS). He may be contacted at sym.andr@cytanet.com.cy
@Nigel – with respect I don’t think your interpretation is correct. An earlier paragraph describes four ways the transfer of title deeds can be delayed. One of them is a sale via a cancellation agreement and none of the others relates to sale of the property before transfer. This indicates that it covers all sales before transfer, including those where the right to sell appears in the original contract of sale. If this is not the case, why is such a sale omitted from the list when so many sales are of this type?
“d. the purchaser has resold or intends to resell the property.
In the last case the (not exactly legal) practice of «Cancellation Agreements» comes into play. By such agreements, which are signed by the developer and the first purchaser, the original Contract of Sale is cancelled and at the same time a new Contract of Sale is concluded between the developer and the second purchaser.”
@Steve – a cancellation agreement is not necessary if your lawyer includes an appropriate ‘right to sell’ clause in your contract of sale.
A cancellation agreement is a separate agreement that buyers are ‘forced’ to sign (and pay for) if their lawyer ‘forgot’ to include a ‘right to sell’ clause in their contract of sale.
@Nigel – the phrase used: “the clear condemnation of the practice of cancellation agreements as illegal by appropriate legislative measures” suggests clearly to me the removal of the option to sell the property by cancellation of the purchase agreement.
In my case, Town Planning Paphos is saying that the developer may still carry out the necessary work to remedy multiple breaches of the planning permission for a development handed over to the “owners” five years ago. I can imagine a situation where on the death of an “owner,” his or her major Cyprus asset will be in eternal probate because the asset cannot be sold.
@Steve – I think what Mr Symeou is saying is that cancellation agreements are not exactly legal. George Coucounis has a similar view (see https://www.news.cyprus-property-buyers.com/2008/11/02/cyprus-property-lawyer-says-contract-cancellation-fees-are-illegal/id=00564 ).
That does not mean he wants to take away your right to sell the property even though its Title Deed may not have been issued.
On an almost daily basis we hear of the disgraceful situation caused by non-availability of title deeds. Now it appears that many of those affected actually don’t want their title deeds. Now it also appears that many of these properties with title deeds available have not been transferred, but have been sold and the original contracts cancelled thereby avoiding transfer fees and capital gains tax.
Are we now going to have tirades against rogue owners to match those about rogue developers, bankers and solicitors? I find it amusing to see the quick fix now being advocated in the article, whereby legislation is proposed to outlaw sales by cancellation of contracts already lodged with the land registry. So what about all the owners who will never ever see a title deed, for example, because the builder has contravened the planning permission and it can’t be fixed, like building over a public footpath? Apparently Mr Symeou would be happy to let these people rot in Cyprus (That’s hell if you are one of the unfortunate “owners”)
I have often seen on this web site confident predictions that no one would buy a property without the title deed’s being available, but apparently this is happening in a significant number of cases, consequently the wind of change that was supposed to start blowing through the Cyprus property market is more likely to be less than a gentle breeze.
Is that the stench of hypocrisy I smell?
As an Ex-pat, I received the Title Deeds for my apartment in December, as its in joint names I parted with 3,500.00 euros for the 3% Stamp Duty.
All the other apartments in the block are owned by locals they haven’t collected their Deeds as they don’t wish to part with hard earned money to pay the Duty. I imagine this is why so many available Deeds have not been issued.
The issuance of Title Deeds by Land Registry may sound impressive, however, from personal experience there are significant bottlenecks especially in the Drawing Office where my Title Deeds remain in a lengthy queue with no apparent remedy. Where are the Government initiatives to increase the throughput as many property owners have a genuine desire to acquire their Title Deeds & giving priority to those who do will have an immediate positive impact in terms of revenue for the Government. Sounds to simple but very true.
@Peter – I believe that is covered by “the imposition of penalties on developers who fail either to issue or to transfer Title Deeds for one reason or another.”
@Peter – In Cyprus the present owner has to provide tax clearance certificates at the Land Registry to prove that he has paid Capital Gains Tax, etc.
You would think the Inland Revenue would think of another way to handle this sensibly – and one that would not impinge on the rights of those buying property.
I note there are only 3 possible solutions suggested for 4 problem areas. Possibly the biggest i.e outstanding developer mortgages, seems to have been ignored, yet again.
“The developer has not cleared his tax commitments”
What has this to do with the new owner who has paid in full for the property? Are the Government using or resorting to blackmail to get the developer to pay all his taxes, and the buyer is just caught in the middle? What next he has fail to floss?