A number of regulations impose obligations upon sellers and mortgage lenders to protect buyers
The legislation introduced by the amending Law 132(I)/2023 is a step forward in the protection of property buyers. It amends the Sale of Immovable Properties (Specific Performance) Laws 2011 to 2020 and came into force with its publication on December 12, 2023. The basic provisions oblige sellers to attach to the contract of sale a search certificate for the property, which bears a date that does not differ from the date of signing the contract by more than five working days.
Also, in the event that a seller’s immovable property is already encumbered by a mortgage or contract and the registered owner thereof is not under prohibition, the filing of the sale contract in the land registry is only accepted if it is accompanied by a written declaration from each mortgagor and seller about which the buyer has been informed in writing, according to Type A of the Appendix, ie quasi-bank waiver of the buyer or according to Type C of the Appendix, ie written consent of the buyer. In this way, the buyer is informed correctly and in time, so that they can take measures to protect their rights.
This legal protection of the buyer obliges the seller and prevents them from concealing the existence of any mortgage or contract executed before or in the interval from the date of a previous search certificate. This can also happen in the case of land developers who mortgage a share of the land to secure the loan of another buyer to whom they are selling an apartment in a block of flats or a house in a complex under construction. This avoids any fraud against the buyer and any inconvenience and expense if the seller later does not cooperate to restore him.
The written declaration issued by the mortgagor in accordance with Form A states the mortgage registered upon the seller’s property and relates to the contract between the seller and the buyer for the sale of either the property or a unit, apartment or house erected or to be erected on the property. If the mortgage was registered by the seller for his loan, then the mortgagor certifies that if 95 per cent of the amount of the contract between seller and buyer is deposited into the bank account for which IBAN details are given and which is held in the name of the seller, then the mortgagor undertakes to discharge or eliminate the property from the said mortgage. If the mortgage was registered by the seller on a share of the land to facilitate another buyer to purchase a unit, then the amount shown on the declaration is zero.
The mortgagor in Form A also declares that if he fails to discharge or extinguish the purchaser’s property from the mortgage, the purchaser shall produce to the Land Registry Form B of the Appendix, duly signed and sealed by the mortgagor, who certifies that the amount has been deposited by the buyer and/or seller into the specified bank account held in the name of the seller and that discharges or extinguishes the buyer’s property from the mortgage. The land registry director then transfers the property to the buyer’s name, free from the mortgage and regardless of any encumbrances or prohibitions that may burden the property or its owner and which follow the buyer’s contract as a priority.
The above amending Law provides for sanctions against both the seller and the mortgagor when they fail to comply with their required obligations. The land registry director may impose an administrative fine on the seller which does not exceed €10,000 and on the mortgagor which does not exceed €100,000, after having previously notified them by registered letter of their intention, giving them the right to submit representations before they decide on it.
Through the provisions of the above law, several problems that led to the creation of trapped buyers are solved and legal security and transparency in real estate transactions are strengthened. Above all, it ensures that the property is transferred to the buyer free of any encumbrance and the sale price paid by the buyer is used to pay off an existing mortgage.
George Coucounis is a lawyer specialising in Immovable Property Law, based in Larnaca. E-mail: coucounis.law@cytanet.com.cy, tel: 24818288