UNDER the provisions of the new “Sale of Immovable Property (Specific Performance) N81(I)/2011”, which came into force in Cyprus on July 29 last year, “vesting”/”assignment” contracts were introduced.
This new type of contract enabled a buyer to sell a property that they had contracted to purchase before its Title Deed had been issued without any involvement, cooperation or knowledge of the developer.
At a stroke, the new law removed the opportunity for nefarious property developers to demand extortionate sums of money from those wishing to sell their property before its Title Deed had been issued.
Or so we thought!
A recent case came to light in which a person who wished to sell his property was given the following advice by his lawyer:
Cancellation fee is charged by the developer to enable the signing of a new contract with the new purchaser. We have asked the developer to provide us with their statement of account and also cancellation fees. This is usually approximate to the amount that you would have paid as lands registry fees (Property Transfer Fees). Capital gains tax is zero. Other dues and expenses relate to the utilities and stamp duty on the legalisation of the cancellation agreement, and the agent’s commission fees.
In relation to the issue that you raise about vesting contracts, this is to inform you that since the adoption of the new law, the Deeds of Assignment (Vesting/assignment contracts) are now recognised as a valid exercise of a right to sell by way of assignment. What this article does not inform you is that you remain tight up to the property up and until separate title deeds are issued and you will be liable and responsible to pay lands registry fees at a future time when the separate title deeds are issued. Your purchaser will also have to pay lands registry fees.
The advantage of proceeding through the cancellation agreement and the developer is that you no longer have any connection with the property, the property is sold on and therefore it is an issue then between the developer and the new purchaser as to when separate title deeds will be issued. Additionally you will not be called to pay lands registry fees.
Regrettably, this person accepted this advice and proceeded with the cancellation agreement; this decision cost him many thousands of Euros.
I asked one of the lawyers on the list provided by the British High Commission in Nicosia for their opinion on the matter. The head of the Land Registry confirmed that:
- the transfer will be made directly in the name of the assignees.
- Property Transfer Fees only get paid once by the assignees i.e. when the actual transfer is made.
In a nutshell, the advice given to proceed with a cancellation agreement was wrong and the background information provided was rubbish.
You might well ask why the lawyer chose to give his client the wrong advice and in whose pocket the thousands of Euros it cost the buyer to sell the property ended up. I will leave this to our readers to speculate!
If you wish to sell
AS THIS CASE clearly demonstrates, the advice given by some lawyers in Cyprus is unsound; it cannot be relied upon or trusted.
Wrong advice cost this person many thousands of Euros in cancellation fees that could have easily been avoided, and I suspect that other clients of this lawyer may also have been given the wrong advice – and quite possibly other lawyers are giving wrong advice.
If you are considering selling your property and wish to avoid being taken to the cleaners, please use one of the lawyers on the list provided by the British High Commission in Nicosia.