By Marios Konstantinou
For decades, buyers without title deeds have beset the Cyprus property market. Thus, the House of Representatives intervened with legislation to protect the buyer of land and other real estate. The new procedure was established in 2011, 2015, and 2023 legislation. Nevertheless, a recent court ruling on the constitutionality of some of those provisions has complicated matters.
Trapped buyers
Title deeds are legal documents recording land ownership. They show the property owner and contain important information such as mortgages, court decisions, long-term leases (over 15 years), and other charges.
In Cyprus, it was possible to buy real estate without title deeds. This typically happened when the seller had mortgaged the property and could not transfer the title. Even if the buyer paid the price, there was no guarantee that the seller would use the money to repay the mortgage. Buyers were left exposed, with the term “trapped” or “enclaved” buyers used to describe their predicament. In essence, they did not have proper title to their property.
The situation was far from satisfactory. The House of Representatives intervened with three pieces of legislation: first, the Sale of Immovable Property (Specific Performance) Law 81 (I)/ 2011; second, Law 139 (I)/ 2015 amending the Transfer and Mortgage of Immovable Property Law 9/ 1965, and, third, Law 132 (I)/ 2023, amending the 2011 Law. We will call these the 2011, 2015, and 2023 Laws and explain how they work.
The specific performance procedure: 2011 and 2015
Under the 2011 Law, buyers could protect themselves if they bought without title deeds by repaying the mortgage and then asking the court for an order of specific performance against the seller. This order made the seller comply with their obligations. The Department of Lands and Surveys (DLS) could delete or lift the mortgage. To succeed, however, the buyer had to deposit the contract of sale to the DLS within six months. The legislation on mortgages was amended accordingly by the 2015 Law.
The new procedure
At the end of 2023, the House of Representatives legislated again on the issue of trapped buyers, amending the 2011 Law. The 2023 Law changed the operation of the 2011 Law and the 2015 Law on mortgages.
The new procedure according to the new Cyprus property law is as follows: When selling real property, the seller must include a search certificate from the DLS showing any burdens on the title as part of the contract. The search certificate must not be five days older than the contract date.
Type A procedure: Type A is a document in the 2023 Law where the lender (bank) confirms that if the buyer repays 95 per cent of the mortgage, they will issue a payment confirmation and delete the mortgage. Any deposit from the buyer goes to the mortgage repayment, and the lender has to accept it.
Type A and Type B procedure: The Type B document in the 2023 Law confirms from the lender (receipt) that the Buyer has repaid 95 per cent of the mortgage. Under the Type A and Type B procedures, the lender deletes the mortgage, and the DLS transfers the property to the buyer. If the lender does not delete the mortgage, the buyer will deposit the Type B document signed and sealed by the lender, and the DLS Director will transfer the property to the buyer.
Type C procedure: The 2023 law contains a Type C document that allows the buyer to declare that they will deposit the contract of sale without a Type A declaration.
The new procedure applies to contracts signed on and after December 12, 2023. The 2011 Law still covers earlier contracts.
Constitutional matters
The 2015 Law gives effect to the 2011 legislation and applies to contracts deposited up to December 31, 2024. As we said earlier, under the 2015 and 2011 laws, the Director of the DLS can delete a mortgage on a property. The buyer must pay the price in full and apply to the DLS. Using form type IE, the Director informs the parties that they intend to transfer the property to the buyer. The relevant provisions are 44 IΘ to 44 KB of the 2015 Law.
Nevertheless, these provisions have recently been held unconstitutional. In Civil Appeal 285/ 2018, on June 20, 2024, the Court of Appeal held that the power of the DLS Director to delete a mortgage effectively destroys the lender’s (bank’s) right to property. The right to property is protected by Article 23 of the Constitution. Moreover, deleting or lifting a mortgage is against the right to freedom of contract, protected by the Constitution under Article 26.
This decision is not good news for trapped buyers. The Land Registry has since frozen the examination of applications from trapped buyers. Following the Court of Appeal’s decision, the processing of applications is under a moratorium and cannot continue.
The government is trying to find a solution, possibly with new legislation. The best way for buyers to protect themselves now is to ensure that the five-day search certificate is included in the contract of sale, and never buy without first getting legal advice.
Summing up, legislation tried to resolve the situation with trapped buyers, creating a procedure allowing the DLS to delete a mortgage and transfer property to the repaying buyer. This power of the DLS was declared unconstitutional. Thus, the government is re-examining the matter. Buyers must not buy without title deeds (resale properties that do not yet have a title deed), or at least without getting legal advice from a Cyprus property lawyer.
Marios Konstantinou is a Lawyer – Partner at George K. Konstantinou Law Firm, Gladstonos 55, Roussos Center Point, 5th floor, Office 5E, Limassol 3040, Cyprus
