On the 12th of December 2023, the Law 132(I) of 2023 was published, amending, thus, the Sale of Immovable Property (Specific Performance) Law of 2011 (Law 81(I)/2011). The new Law amends the provisions regarding the submission of a contract for the sale of a property to the Department of Lands and Surveys and regarding the specific performance of a contract of sale.
The aim of the new Law is, essentially, to protect the interests of Purchasers by simplifying the procedure of specific performance and, thus, ensuring that the property will be transferred to the name of the Purchaser once the Purchaser fulfills his contractual obligations. In this way, the new Law creates a mechanism of protection for the Purchasers of immovable property and aims to eliminate the phenomenon of trapped purchasers.
For this purpose and in order to activate the specific performance mechanism, the new Law added obligations on all interested Parties (Vendors, Purchasers and Secured Creditors/Mortgagee) to submit additional documents, which should accompany the Sale Agreement signed between the Parties and presented to the Department of Lands and Surveys on the day of registration of the Contract of Sale.
Required Documentation
More specifically, for any Contract of Sale signed on the date of enactment of the Law and thereafter, the following documents should be attached and included:
- A Search Certificate issued from the Land Registry for the Property, which is the subject-matter of the contract, whose date needs to be maximum 5 days before the date of signing of the Contract of Sale. It is important to clarify that this constitutes an obligation of the Vendor and failure of to provide it, entitles the Director of the Land Registry to impose an administrative fine of up to €10,000.
In the event that the property, which is the subject-matter of the contract, is burdened by a mortgage or a contract and the Vendor is not subject to any prohibitions, then the deposition of the contract at the Land Registry will only be accepted if it is accompanied by the following written statements:
- A written declaration in the wording of Form A of the Annex to the Law from signed and stamped from each Secured Creditor/Mortgagee, whereby each secured creditor/Mortgagee certifies that once the 95% of the agreed purchase price as included in the Contract of Sale is received to a specific account of the Vendor held in the Mortgagee, then the Secured Creditor/Mortgagee will issue the declaration (as indicated Form B of the Annex to the Law) to the Purchaser and the Secured Creditor/Mortgagee shall withdraw or extinguish the mortgage from the Property; or
- A written declaration according to Form C of the Annex of the Law signed by the Purchaser that he is aware of the Mortgages that burden the Property and that he wishes to proceed with the deposition of the Contract of Sale without it being accompanied by Form A.
It is clarified in the Law that any amount deposited by the Purchaser and/or the Vendor into the bank account of the Vendor, which was specified by the Secured Creditor/Mortgagee in the written declaration pursuant to Form A, will be considered as a payment by the Purchaser, towards the purchase price pursuant to the Contract of Sale. In case where the Vendor received an advance payment from the Purchaser before or on the signing of the Contract of Sale, then the Vendor should deposit the said amount to his bank account determined in Form A by the Secured Creditor/Mortgagee.
Upon payment and acceptance of the amount included in Form A by the Mortgagee, the latter must give the Purchaser the written confirmation of payment according to Form B of the Appendix of the Law and withdraw the Mortgage from the purchased property, so that it is transferred to the name of the Purchaser free of any encumbrances. If the Mortgagee fails to release the property from the mortgage, it entitles the Director of Land Registry to impose an administrative fine of up to €100,000.
Specific Performance
For every application for transfer of ownership of a property for which a Contract of Sale has been deposited at the Land Registry after the 12th of December 2023 and which is accompanied by both Form A and the Form B (i.e. the Confirmation of Payment) and provided that the Mortgagee has also withdrew the mortgage from the Property, then the property will be transferred to the name of the Purchaser free of any burdens that supersede in priority the Contract of Sale.
In the event where the Mortgagee has issued and signed the Confirmation of Payment (Form B) but has not withdrawn the mortgage from the Property and provided that the Purchaser encloses in his application for transfer of ownership of a property the Confirmation of Payment duly signed and stamped, then the mortgage will be extinguished from the Property and the procedure of transfer will be finalised so that the Purchaser receives title of the Property free of any burdens that supersede in priority the Contract of Sale.
In addition, according to the new Law, in cases where a contract of Sale was deposited at the Land Registry and accompanied by Form A, the Court will be able to issue a decree of specific performance in the event that before the deposition of the Contract of Sale, a mortgage was imposed on the Property, provided that the Court is satisfied that the Purchaser has paid and settled in full the purchase price of the property towards the Vendor. The new Law amends the existing legislation so as to ensure in advance that the transfer of a mortgaged property to a Purchaser will be carried out as soon as the Purchaser fulfils his contractual obligations towards the Vendor provided, however, that the documents mentioned above will be submitted to the Land Registry. In other words, the new Law was enacted in order to regulate a serious issue that has arisen in Cyprus with the trapped Purchasers, who have fully fulfilled their contractual obligations towards the Vendors but cannot accept the transfer of the property on their name due to the existence of encumbrances. To this effect, it is important to mention that in the event that the Purchaser signs the Form C of the Annex to the Law, there does not seem to be any protection mechanism in favour of the Purchaser and the procedures of specific performance indicated above, do not appear to apply.
