WHEN a buyer wishes to purchase a property in Cyprus, he would quite often enter a reservation fee agreement to reserve the property and pay a reservation fee prior to signing his purchase contract.
The property would be taken off the market and the reservation fee agreement would simply set out the circumstances in which the fee is returned to the seller or kept by the buyer.
For example, if a structural survey reveals a defect in the property then the reservation fee may be returned to the buyer. Alternatively, if the buyer has changed his mind for no apparent reason then the reservation fee may be retained by the seller. It is also wise for a lawyer to keep the reservation fee monies for the benefit of both parties until completion rather than the buyer transferring the monies directly to the seller.
We have found that in practice reservation agreements should also include a clause relating to access to the property. Sometimes the time period between signing a reservation agreement and executing a sales contract may be quite lengthy as the buyer may be waiting for a mortgage to be approved or the lawyer is awaiting a waiver letter from the bank as the development may have developer’s mortgages.
A potential buyer should never assume he will be allowed to visit after paying a reservation fee because that may not be the case and this can be incredibly frustrating for a potential buyer. After the reservation fee has been paid a seller may go overseas and an agent may refuse access as he may be concerned that the buyer may get cold feet.
Gaining access is incredibly important if you are planning to carry out renovation work on a property and builders will be required to provide you with quotes. Alternatively, if you are planning to rent out the property then you would want letting agents to visit and view the property in order that you don’t lose out on valuable rental income after completion.
So, as well as paying care and attention to your sales contract, it is equally important for your lawyer to pay care and attention to your reservation agreement and not only set out the circumstances in which the fee is returned to either the seller or buyer. In fact, if you are a buyer you should ensure that your lawyer specifies the amount of visits, the length of the visits and the notice that should be given, for example 24 to 72 hours’ notice in order that your property is ready on the day of completion and you have not lost any valuable time or money.
The information and opinions within this article are for information purposes only. They are not intended to constitute legal or other professional advice and should not be relied on or treated as a substitute for specific legal advice relevant to your particular circumstances.
About the author
Andrea Pavlou is a dual qualified English Solicitor and Cypriot Advocate and speaks fluent English and Greek.
She is a Senior Partner in the law firm Pavlou & Pavlou who specialise in Real Estate, Shipping, Corporate, Business and Private Client matters.