Trapped Purchasers – The new law – How effective is
29 Apr 2021

In 2015, the Cyprus parliament voted the law for the trapped purchasers. According to this law, every buyer of a Cyprus property who has a contract deposited to the Land Registry Office can file an application for the issuance of separate title deed of the property at hand.

The said law is revolutionary because it provides to the director of the Land Registry Office the power to transfer the separate title deed of a property into the name of the buyer/applicant even if a mortgage is previously imposed on the land upon the property was erected.

Also, before the establishment of the said law, when there was any other encumbrance of the developed land, such as court decision for debts of the developer (memos) imposed on the developed land the transfer of the separate title deed into the name of the buyer was not possible without the consent of the said creditors.

No creditor would consent without compensation. In such scenario, the buyer would only seek for transfer of the separate title deed on his/her name through a court procedure for specific performance.

Although, the trapped buyers law is constitutionally wrong, with the consent of all the parties involved and especially the banks, the said law has been very effective. It is constitutionally wrong because it violates the contract law and the specific performance law. For example, a bank lends money to a developer for €1.000.000 in order to develop a project. For security, the bank registers a mortgage on the land upon which the project will be developed. The mortgage is deposited to the land registry office. Then the developer sells 10 apartments which shall be constructed on the said land. These 10 contracts are deposited to the land registry office. All of them are deposited after the mortgage was imposed which means that the mortgage has priority over the said contracts. Namely if the developer fails to pay the loan (1 million) then the bank based on the specific performance law and recently based on the immovable property law, can proceed with the sale of the mortgage (in particular the land) in order to receive the money of the loan. In this case the land together with any buildings should be erected, should be sold to a third party. The contracts of sale shall be withdrawn from the land registry and the buyers will lose their money.

With the trapped buyers law, the banks loose the option to act as described above, which is constitutionally wrong. In some cases, the banks took legal action in order to cancel the transfer of the separate title deed into the buyers’ names although appeals before the supreme court were filed against those court decisions. Due to this situation the government, the parliament and the banks have come to an agreement by amending the trapped buyers law.

For my opinion, the law is still unconstitutional however the banks now based on a silent agreement do not file objections.

Today, 6 years after the said law came into force, we see thousands of trapped buyers to have received their title deeds.

Due to the trapped buyers law, all the buyers will eventually acquire a separate title deed for their properties.

We will discuss the trapped buyers procedure in other article.

Loucas P. Louca
Lawyer/Legal Consultant

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