The division of a piece of land into separate plots constitutes an important procedure which is subject to the town-planning restrictions on the land, the requirements set by the law on immovable property and the approval of the director of the Land Registry.
When land is co-owned, the written consent of all co-owners is required until the completion of the division, as well as their agreement on the share each one will receive.
The purchase of co-owned land which is to be divided does not constitute a secure transaction, since it is subject to the full completion of the division. Any such agreement is not legally enforceable until the division is made and if it does not happen, the agreement becomes void. The rights of a purchaser cannot be ascertained since they are subject to the completion of the division and the issue of the separate title deeds.
Where the division of a plot of land becomes impossible, the purchaser should expect nothing more than the return of their money and the cancellation of the sale contract by the Land Registry.
The issue is to be resolved through the application of the legal principle of a contingent contract and not through the doctrine of frustration. A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
Moreover, according to the law of contract, a contingent contract to do or not do anything if an uncertain future event happens cannot be enforced by law, unless and until that event has happened. If the event becomes impossible, such a contract becomes void.
Judgment of the court of first instance
The Supreme Court of Cyprus affirmed the decision of a District Court referring to the principle of a contingent contract in a dispute concerning the purchase of a share of co-owned land.
A sale contract was entered into and signed by one of the co-owners with a purchaser, containing a clause that in the event division of the land and issue of separate title deeds became impossible or the director of the Land Registry refused to give consent, the agreement would be void and the amount paid returned.
In the process of a local inquiry which took place, one of the co-owners refused to sign the required documents by the Land Registry, withdrawing his consent for the division. Under the circumstances, the division of the land became impossible and the vendor informed the purchaser that the contract became void and legally unenforceable.
The purchaser did not accept the termination and requested the transfer of the share without success. The dispute ended up in the District Court which decided in favour of the vendor, issuing an order for the return of the deposit and the deletion of the sale contract from the Land Registry record.
Judgement of the Supreme Court
The Supreme Court upheld the aforesaid decision stating that the agreement depended on the division – an uncertain future event – and if the division became impossible, the agreement would be void.
As to whether the vendor took reasonable steps to make the division possible, the court was of the opinion that the vendor as a co-owner did his best to persuade the other co-owners. One co-owner refused to give his consent and he indeed had such a right.
Therefore, according to the Supreme Court, the District Court correctly dismissed the purchaser’s action, deciding that the vendor who received 1/10 of the sale price could not have waited indefinitely, given the fact that the remaining balance of the purchase price carried no interest. The true intention of the parties was that the division of the land preceded its transfer to the purchaser.
It is evident that a purchaser entering into a sale contract for the purchase of an immovable property jointly owned by more than one person, must ensure that the sale contract will be signed by all co-owners as vendors unless there is a division agreement between them deposited at the Land Registry. By doing so, the purchaser will protect and safeguard their rights, since they will be in a position to make all co-owners responsible either for the specific performance of the agreement or for breach of contract.
George Coucounis is a lawyer specialising in Immovable Property Law, based in Larnaca. E-mail: [email protected], tel: 24818288
