The House of Representatives of the Republic of Cyprus has amended the Transfer and Mortgage of Property Law of 1965 (9/65) (the Law) in 2015, through the introduction of Part VIB of the Law, seeking to protect "Trapped buyers".
The provisions of Part VIB of the Law were deemed by the Courts of Cyprus as unconstitutional as they conflict with Article 23 (right to own property), Article 25 (right to practice any profession) and Article 26 (right to freely contract) of the Constitution of the Republic of Cyprus. Particularly, Part VIB of the Law has been held to be unconstitutional for the following reasons, amongst others:
(1) Part VIB granted the Director of the Land Registry the right to transfer the property to a "Trapped buyer" without (i) the prior consent of the mortgagee and/or the charge holder; and (ii) the payment of any damages to the said persons;
(2) The Director of the Land Registry had the right to transfer the mortgage and burden another property of the mortgagor without the prior consent of the mortgagor and the mortgagee;
(3) The powers and authority granted to the Director of the Land Registry were greatly expanded. Essentially, the Director of the Land Registry had the right to (i) cancel any mortgage and/or any other encumbrances burdening the property in question; and (ii) transfer the property to the "Trapped buyer" without the prior consent of the seller and the credit institution.
On the 26th of July, 2019, the much-awaited amendments to the Law (the "Amending Law of 2019") were ratified and can be summarized as follows:
1. Article 44IΘ of the Law
The Law stipulated that the buyer, the seller, the mortgagee, and the creditor, on the basis of a loan agreement with the buyer, had the right to file an application to the competent Land Registry for the transfer of immovable property in the name of the buyer. The Amending Law of 2019 has also granted the right to assignees, under an assignment agreement of the buyer's right over a contract of sale, to file an application for the transfer of the immovable property.
2. Article 44KAA of the Law
The Amending Law of 2019 now provides that the Director of the Land Registry has the obligation to inform, in writing, the buyer, the seller, the mortgagee and/or charge holder (if any) in relation to (i) the filling of the relevant application; and (ii) the fact that the application has already examined. Previously, the Director merely had an obligation to inform the interested parties about its intention to transfer the property to the buyer within a period of 45 days from the date of service. As such, any interested parties were only informed about the fact that an application for transfer had been submitted after the decision of the Director.
3. Article 44KB(1) of the Law
In accordance with the Amending Law of 2019, the Director of the Land Registry has the obligation to take into account any evidence and/or information and/or document provided by the buyer, the seller, the mortgagee, and the charge holder, before notifying the latter of its intention to proceed with the transfer of the property.
4. Article 44KB(7) of the Law
The Law now provides that, in case an objection filed by any interested party lacks the necessary evidence and documentation, then the Director of the Land Registry has the obligation to proceed with the issuance of a fully detailed and reasoned decision for the rejection of the objection in question. The Director of the Land Registry must notify the applicant and the buyer about its decision, unless the applicant and/or buyer furnish the Director of the Land Registry within 30 days with an injunction order prohibiting the transfer of the property in the name of the buyer.
The amendments introduced through the Amending Law of 2019 have increased the input and involvement of the interested parties throughout the procedure, whilst simultaneously limiting the powers of the Director of the Land Registry. However, the balance between the rights of the buyer and the rights of the interested parties in an equitable and fair manner has not yet been achieved. Essentially, even if the interested parties are increasingly involved in the procedure, there are no adequate safeguards in place protecting their rights against the "Trapped buyer".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.