In 2015, the Parliament in Cyprus introduced the Law 139(I)/2015, commonly known as the “Trapped Buyers Law” to address issues faced by property buyers who were unable to obtain title deeds for the properties they purchased, despite having fulfilled their contractual obligations.
This predicament arose from various complications, including developers’ failure to clear mortgages or other encumbrances on the land where the properties were constructed, leaving buyers in a difficult position.
Under Trapped Buyers Law, trapped buyers could submit an application to the Land Registry for the transfer of title deed, and if successful, they managed to “bypass” the developer and achieve the transfer of the title deeds for the properties the purchased into their names.
Recent developments
A recent ruling by the Court of Appeal in Cyprus, following an appeal by a banking institution against a lower Court decision, has significant implications for the trapped buyers. The Court found that the provisions of the Law, which allowed the transfer of title deeds to buyers despite the existence of mortgages, infringed the rights of creditors, i.e., the banks. This decision deems these provisions unconstitutional, emphasizing the banks’ rights to retain claims on mortgaged properties, even if they are sold to third parties.
Summary of the Case
The case involved a bank which had provided loans to a developing company, which had secured these loans with mortgages on land intended for future construction. A third-party buyer purchased an apartment to be built on the mortgaged land and later applied to the District Land Registry to transfer the title deed into their name, on the ground that they fulfilled their contractual obligations. The Land Registry’s initial decision in favour of the buyer was objected by the Bank. The District Land Registry rejected the Bank’s objection, citing that the necessary documentation supported the application for title transfer. However, the Bank proceeded with a legal action, seeking to nullify the Land Registry’s decision and declare the law unconstitutional.
The Bank initially challenged the decision of the Land Registry at the District Court, and then appealed to the Court of Appeal, arguing the unconstitutionality of the Law.
Ruling of the Court of Appeal
The Court of Appeal ruled that certain clauses of the Trapped Buyers Law are unconstitutional. This ruling recognizes the rights of banks to retain mortgages and their claims on properties even if they have been sold to third parties, i.e., the trapped buyers, despite the existence of legislation aimed at protecting buyers who have been trapped in these circumstances.
The decision of the Court of Appeal resulted in both the suspension of the ongoing reviews of the applications already submitted by trapped buyers with the District Land Registry Departments, and the halt in the acceptance of any new applications.
The ruling will not impact cases where title deeds have already been transferred to the trapped buyers, but it will affect the pending cases in District Courts, as it sets a precedent.
Consequences of the Court’s Ruling
- Heightened Legal Uncertainty: Trapped buyers now face increased uncertainty regarding their property ownership. The suspension of application reviews and acceptance of new applications by the Land Registry Departments of each District means that buyers who have fulfilled their contractual obligations may still be unable to obtain title deeds due to existing mortgages.
- Parliamentary Response: The Parliament will need to consider alternative legislative measures or amendments to address the constitutional issues highlighted by the Court. This could involve drafting new laws to ensure the balanced protection of trapped buyers while upholding the constitutional rights of creditors.
- Market Impact: The uncertainty and legal complications arising from this ruling could affect the real estate market in Cyprus. Potential buyers may be hesitant to invest in properties without clear title deed processes, potentially leading to a slowdown in the market.
Conclusion
The recent ruling of the Court of Appeal and the decision of the authorities to stop the review of the existing applications and the acceptance of any new applications, pose a significant setback for the protection of trapped buyers in Cyprus. Although the Government had enacted legislation to safeguard buyers, the Court of Appeal sided with the Bank.
The Parliament should act swiftly to address these constitutional issues and find a fair solution that protects both buyers and creditors.
Those who consider purchasing or selling a property in Cyprus are advised to seek independent legal advice and consider the specific circumstances of each case, to ensure an efficient and smooth process and to protect their financial interests..
Maria Kokoridi
Lawyer at Polycarpos Philippou & Associates LLC
Buying in Cyprus our highly trained and highly qualified and expensive solicitor told us that when buying a property in Cyprus it was exactly the same laws and rules as Britain. The only reason we didn’t get the title deeds immediately was the volume of work at the Land Registry, which were so busy.
But rest assured. “You’ll get them within 2-3 years”.
Ten years later we were lucky and got our title deeds, but not without losing much sleep.
No way today would I buy a property in Cyprus without deeds, and I understand the heartache that goes to those still without their deeds.
In Britain the assets of the individual and the Company are kept separate, those individuals that can’t pay their bills are made bankrupt and their assets are taken and sold, which includes their Mercedes cars and huge villas.
Obviously a bad law was passed in 2015. Banks worldwide are allowed by law to have a hold on an asset pending the full payment of any related debt. Buyers have the right to have ownership of a property once their financial obligations are met. But apparently not in Cyprus. How about our President calls the UK PM and ask for a copy of their relevant laws? So that Banks and Buyers can have equal protection against the sharks…