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Cyprus – Transfer of Title Deeds to Enclaved (“Trapped”) Buyers under the new Law Provisions

SINCE September 2015, and the adoption of the Immovable Property Transfer and Mortgage Law (Amendment) (No. 10) Law of 2015) (hereinafter, the “Law”), thousands of applications have been made with the District Land Registries in Cyprus by enclaved buyers of immovable property, seeking to obtain Title Deeds for their properties. As the procedure was quite new for all parties involved, we are taking this opportunity now that we have build-up the requisite experience as to the procedures and documents involved, to provide you with a generic guide on this matter.

Scope of the Law

The new Law’s aim is to facilitate the transfer of immovable property to its buyer(s) who, having fulfilled all their contractual obligations to the seller, have thus far been unable to obtain the Title Deed connected to the property in their own name(s). One of the most common scenarios in which the buyer is enclaved (or “trapped”), is when the seller (usually being a Property Developer) has mortgaged the land on which he was building or a memo or any other encumbrance has been registered against the property, which is the object of the contract of sale, and the Developer is unable or unwilling to repay this mortgage and any other debts.

Who can apply for Title Deeds?

Any buyer who has yet to receive the Title Deed to the property he has purchased may apply for its Title Deed regardless of whether its Title Deed has been issued; the fact that there may be mortgage or other encumbrance preventing its transfer is irrelevant.

In cases where the title deed has yet to be issued, the applicant has the right to apply to the Department of Lands and Surveys for the compulsory acquisition of title according to the provisions of Part VI of the Immovable Property (Tenure, Registration and Valuation) Law, Cap. 224.

In addition to any buyer, the following are entitled to apply:

  • The vendor of the property. This could be a private individual or a company – although usually this is a Property Development company.
  • The mortgagee under the mortgage contract deposited at the Land Registry.
  • The lender who granted the loan to the buyer to purchase the property.
  • The buyer who purchased the property via an assignment/vesting contract deposited at the Land Registry.
  • The Director of the Department of Lands and Surveys ex officio. (As a consequence, buyers who have been ‘reluctant’ or neglected or avoided in the past to obtain Title Deeds to the property they purchased may now find they have no option. Furthermore, if they fail to pay the Property Transfer Fees on receiving a notice from the District Land Office (hereinafter the “DLO”) to do so, an encumbrance will be lodged against the property corresponding to the amount of the transfer fees increased by fifty percent (50%).)

Criteria to be met for the Application

The only criterion for filing an application is that a Contract of Sale or a vesting/assignment contact to purchase the property in question must have been deposited at the DLO in which the property is situated by 31st December 2014.

In cases where a contract has not been deposited or unknowingly removed from the Land Registry, the applicant must apply for a Court Order. Once the order has been issued the contract may be deposited at the relevant DLO.

The Law only concerns itself with contracts that have been deposited at a DLO. In cases where a dispute has arisen between a purchaser and a vendor concerning (for example) the supply and payment of additional work performed that were not included in the original Contract of Sale, unless a separate contract for such additional work had been prepared, signed and deposited at the DLO, hen such a dispute will not prevent the transfer of a property’s Title Deed to its purchaser.

Filing the Application and Supporting Evidence

Completed Title Deed Applications Forms (in Greek or English) may be filed at any DLO in the Republic regardless at which DLO their Contract of Sale was deposited.

It is noted that in cases where a property has been purchased in joint names it is not necessary for both buyers to submit an application, provided that the applicant can prove that the full payment of the purchase price and taxes have been made.

In order to avoid any delays to the review and procedure, the buyer/applicant should submit as many documents and supporting evidence as possible in support of their application. These documents include:

  • Copy of the Contract of Sale / Assignment Agreement;
  • Copy of the receipt for the filing with the DLO of the Contract of Sale or Assignment Agreement;
  • Proof of payment of the Purchase Price (Bank Account statements, any receipts received from the Developer, any confirmation letter received from the Developer confirming that the purchase price was settled in full, SWIFT vouchers from the Bank as to the payment effected, etc);
  • Copies of tax clearance for the property;
  • Copy of the current Title Deed for the property;
  • Any other documents evidencing that the contractual obligations toward the seller/Developer have been duly fulfilled.

What happens if Buyer has not fully paid the Purchase Price?

It is sometimes likely that a small amount of the total Purchase Price has not yet been settled to the Developer. However, this is does not put an immediate stop to the applicant’s ability to proceed with this application.

If the applicant buyer declares that they have not fully paid the purchase price, they will be required to pay the balance into a special temporary account in the name of the Director of the Department of Lands and Surveys. This money will not be paid to the seller until the Title Deed for the property has been issued and registered in the name of the purchaser.

Cases where the Buyer has fully paid the Purchase Price.

If the applicant buyer declares that they have paid the full purchase price, they need to provide evidence, such as:

  • Original receipts or photocopies of receipts showing the property has been paid for in full. If the seller is a company, including a Land Development company, these receipts must bear: the company logo, the amount paid, the signature of the company representative and the company stamp.
  • Proof that the money for purchasing the property was deposited in a financial institution (e.g. a bank), showing that the deposit was paid in cash or cheque – or details of the transactions confirming the transfer of payments from the purchaser’s account to the seller’s account.
  • A signed certificate from the seller or the financial institution confirming that the full payment of the purchase price has been made or that the buyer has fulfilled his contractual obligations.

In situations where the purchaser encounters difficulties obtaining evidence confirming they have paid in full (e.g. because the Developer is refusing to provide them with relevant receipts), they may swear an affidavit before the Cyprus District Court and include this with their application. However, this affidavit will not be considered as adequate evidence and the purchaser must strive to obtain further evidence, as outlined above, to support their application.

Existence of current Title Deed

It is highly recommended that the applicant checks whether a Title Deed exists for the property in question. This can be achieved by checking the DLS database online. If the applicant is unable to find details of their property they should apply to the DLO for the Compulsory Acquisition of Title, taking the completed form with them when they file their application.

Payment of all other Financial Obligations

The applicant needs to provide evidence that he has fulfilled other financial obligations set out in their Contract of Sale, such as the payment of property-related taxes where this is applicable (which is true in the vast majority of contracts).

If the applicant’s Contract of Sale contains a clause to the effect that all taxes and levies connected with the immovable property should be settled by him from the date of purchase onwards, he will need to provide evidence that they have paid these property-related taxes and charges and will need to obtain statements from the Tax department (Immovable Property Tax), the Sewerage Board, the Municipality or Community (local property taxes) in which the property is situated as appropriate confirming that they have paid their obligations.

However, in some cases this will prove difficult, as many property development companies do not bill their customers until the property’s Title Deed is available for transfer. Furthermore, it is a usual phenomenon that property development companies owe the government unpaid taxes as to their properties, as they do not collect these from the buyers (or sometimes they collect, but fail to actually settle the taxes).

Applicants who are unable to obtain statements from the various authorities confirming that they have paid these property-related taxes may still file their applications at the DLO.

If, during its examination of their Title Deed application, the DLO finds that their tax obligations have not been paid, it will serve a notice to the applicant to pay their taxes to the competent authorities and produce the necessary evidence to the DLO.

Once the applicant has paid their obligations, the competent authorities, will issue the necessary statements.

If the applicant can prove that they are not liable to pay these property-related taxes they will be considered to have fulfilled their contractual obligation.

Lastly, it is noted that the property taxes and levies currently applicable arise under the following laws:

  • Immovable Property Tax under the Taxation of Immovable Property Law of 1980, Law24/1980;
  • Immovable Property Fee under the Municipalities Law of 1985, Law 111/1985 or the Communities Law of 1999, Law 86 (I) / 1999; and
  • Sewerage Charges under the Sewerage Systems Law of 1971, Law1/1971.

Review and Examination of the Application

Once the DLO has accepted the application, they will start their investigation into the case. The DLO will check the three basic conditions that must be satisfied before the transfer of the Title Deed in the name of the buyer can take place, these being as follows:

  • Payment of the Full Purchase Price

During its investigation the DLO may request information from any interested party to produce evidence that the full purchase price has been paid.

If, after examining the evidence it transpires that the full purchase price of the property has not been paid, the application will be put on hold until such time as the balance of the purchase price has been paid into a special temporary account in the name of the Director of the Department of Lands and Surveys.

The balance remaining to be paid shall only be transferred to the seller/Developer once the Title Deed is issued in the name of the Buyer/Applicant.

  • Existence of Title Deed

If a Title Deed for the property in question has not been issued, the applicant may apply to the DLO for the Compulsory Acquisition of Title. The application will be put on hold until such time as the property’s Title Deed has been issued.

Unfortunately, it is not unheard of that the Title Deed has not been issued; this may be because the DLO has not received the necessary paperwork from the District Office, or there may be planning infringements that need to be corrected, parts of the development may not have been completed, the property could encroach on someone else’s land, etc.

In some cases, the vendor (developer) may be unwilling or unable to fund the work required that will enable the District Office to issue Certificates of Final Approval. In such cases the only option available to the affected buyers is to pool their resources

and pay for the necessary work – and then sue the vendor (developer) once the Title Deeds have been transferred to them to recover their costs.

In extreme cases it may prove impossible for the DLO to proceed with the transfer of the Title Deeds. In such situations the DLO will refund money received from buyers who have not paid for their property in full that it holds in a special account.

  • Have all taxes been paid?

If, during its examination of their application, the DLO finds that the buyer’s tax obligations have not been paid, it will serve a notice to the applicant to pay their taxes to the competent authorities and produce the necessary evidence to the DLO.

The competent authorities, will issue the necessary statements once the applicant has paid his obligations. It is worth noting that the buyer’s tax obligations will be calculated at the rate applicable to the buyer, not at the higher rate applicable to a developer.

Transfer of the Title to the Buyer/Applicant

Once the above provisions of the Law have been fulfilled, then the DLO will send out to all interested parties a notice advising them that it intends to transfer the property to the buyer/applicant and requesting any objections they may have, giving them 45 days to respond.

Interested parties are those who have registered encumbrances against the property in question (e.g. mortgages), who have the opportunity to object to the transfer and/or request the transfer of their encumbrance within the 45-day period.

It is worth noting that the seller may only object under the following conditions:

  • The buyer has not fulfilled his contractual obligations;
  • The contract is void.

The DLO will investigate any objections it receives and will advise interested parties of its decision once its investigation has been completed. Once investigations have been completed, the DLO will send a notice to the buyer and a notice to the seller requesting them to transfer the property to the buyer with 60 days of the notice being issued – and requesting the buyer to pay the Property Transfer Fees within the 60-day notice period.

Within the 60-day notice period the buyer may attend the DLO without the seller being present and pay the Property Transfer Fees.

The buyer may opt to pay the full amount, in which case their transfer fees will be reduced by 10%, or opt to pay the transfer fees in 12 equal monthly instalments.

If the buyer fails to pay the Property Transfer Fees, the transfer will still go ahead. However, an encumbrance will be lodged against the property corresponding to the amount of the transfer fees increased by fifty percent (50%).

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