The Appeals Court ruled unanimously on 20th June that the ‘Trapped Buyers’ law was unconstitutional.
The objective of the Trapped buyers law, which was introduced in 2015, was to a transfer property to its purchaser(s) who, although they have fulfilled their contractual obligations to the vendor, were unable to obtain its Title Deed.
Typically this situation occurred when a developer had mortgaged the land on which he was building or a memo or any other encumbrance has been registered on the property and the developer was unable or unwilling to repay this mortgage and any other debts – and a developer whose company is insolvent.
In these situations, the bank had ‘first call’ on the property. So if the developer failed to pay off the mortgage or went bankrupt, the bank would be able to sell/auction the property to recover the debt (even though the property’s purchaser had paid the developer in full for the property and may have been living in it for many years).
In 2015 the Appeals Court ruled that certain clauses of the 2015 law were unconstitutional, as they violate the right to property as well as the right to freely enter into a contract. This appeared to apply solely to cash buyers as the bank that loaned the money to the developer didn’t have any knowledge of the sale (as they would have done if the buyer needed a bank loan to buy the property.)
However, the latest decision by the Appeals Court rules the whole of the Trapped Buyers’ law unconstitutional.
Here’s the reply received from the Land Registry in reply to a question about a Trapped Buyers application:
“the Appeals Court decided in a Civil appeal that articles 44IH – 44KB of N139(I)2015, come into conflict with articles 23 and 26 of the Constitution, as a result of which the examination of the processing of any request of an Enclaved Buyer is terminated.”
It seems that the only option available to the government is to repeal and issue a revised Trapped Buyers law dealing with the mortgage issue.
Update 19 July. According to the Interior Minister, Title Deeds that have already been issued to buyers cannot be taken back. The Minister is already on the case and is expecting to put a revised law for consideration before parliament in Sept.
So far the trapped buyers law is suspended.
What a mess!
Advice to those considering buying a property in Cyprus
The only advice I can offer to those considering buying a property in Cyprus is:
Only buy property that has a clean Title Deed. I.e. a property that is not burdened by any debts or other encumbrances and does not suffer from any planning infringements. Do not buy off-plan.
Always use an independent lawyer when buying a property. I.e. a lawyer who has no connection whatsoever with the person selling the property or anyone else involved in the sale such as the estate agent.
(For British buyers, The UK Foreign Commonwealth and Development Office provides a list of English-speaking lawyers to help British nationals find the legal support they need. You can find the list at Find a lawyer in Cyprus.)
Further reading
The Appeal Court judgment may be found at Civil Appeal No.: 285/2018
Given the high priority placed on the movement of citizens and strengthening of ties between nations, one could assume that the purchase of “real property” (the technical term for land property), a home, might be protected outright in EU legislation. This is not the case; in fact the Treaty of Rome makes special exception for the purchase of real property at Article 295 stating that it “… shall in no way prejudice the rules in Member States governing the system of property ownership”. Academics are continuing to debate the meaning and impact of Article 295 on the development of legislation in this area.
Further reading – European Property Rights & Wrongs.
In an interview, Ms Wallace said: “Property rights issues in countries such as Spain and Cyprus are by far the most pressing in the Petitions Committee, and while tens of thousands face demolition, eviction or bankruptcy, the EU has been unable, or refused, to act.”
It just beggars belief! I first began writing stiff articles in Financial Mirror on the withheld title deeds scandal as far back as 2004 and continued on until 2016, when it looked like at long last most of the victims would be getting their ‘hostaged’ title deeds released. I do wonder if the Cyprus property sector, government, judiciary and overall Establishment suffers from a self-destruction syndrome.