Introduction
The recent decision of the Supreme Court in Limnatitis and others dated 08/06/2021 highlighted, once again, the importance of registering a contract for sale of immovable property in the Lands Registry.
The purpose of this article is to remind us, through the decision of Limnatitis (mentioned above), of the importance of registering a contract for the sale of immovable property at the Lands Registry, how to register such a contract at the Lands Registry, and lastly, some of the most significant changes introduced by the Sale of Immovable Property (Specific Performance) Law of 2011 (hereinafter referred to as "Law No. 81/2011"), relating to the extension of registering an immovable property sales contract at the Lands Registry as well as the obligation of the seller to register such a contract at the Lands Registry in certain circumstances.
Brief History of the case of Limnatitis
In 1992 the owner at the time of a plot of land (for the purposes of this article and hereinafter referred to as "Plot A") agreed with the owner at the time of an adjacent plot (for the purposes of this article and hereinafter referred to as "Plot B") to purchase a triangular strip of land from Plot B on to Plot A, with size 26 sq.m for the amount of 600 Cyprus pounds. To this end, the owners in question filed an application in the Lands Registry in order to adjust the borders of the said Plots.
While the examination of the above application was still pending from the Land Registry, the owner of Plot B transferred the said plot to her husband, while the owner of Plot A transferred it to her children.
When it was time for an on-site investigation for the purpose of issuing the new title deeds, the spouse of the owner of Plot B, i.e., the new owner of Plot B, passed away, and the administrator of his estate refused to sign the relevant forms for the border adjustment process and did not comply with the terms of the original agreement to transfer the said strip of land, and as a result, the initial sale and border adjustment did not proceed.
Finally, around 2002, the administrator of the property of the deceased of Plot B sold and transferred Plot B to a company, including the disputed strip of land in order to be developed.
The new owners of Plot A, claiming that the company had knowledge of the prior sales agreement of the said strip of land, and that in any case the disputed strip of land should not be allowed to be sold to the buyer company, applied to the Court asking, amongst others for the implementation/specific performance of the initial sale agreement of the specific strip of land and the adjustment of the borders that had been made between the original owners of Plots A and B. When the new owners of Plot A failed to prove their case before the Court of First Instance, they appealed to the Supreme Court.
The Supreme Court in its decision, stated, inter alia, that "since the agreement for adjustment (sale agreement) was not registered at the Lands Registry, in terms of property law, the appellants (i.e. the new owners of Plot A) did not acquire a right on the disputed strip of land in accordance to the law.
According to Section 4(1) of Immovable Property (Possession, Registration and Valuation) Law, Chapter 224 (hereinafter referred to as the 'Law"), no proprietary right, interest etc. is acquired on immovable property other than by virtue of the provisions of the Law.
According to Section 40 (1) of the Law, no transfer or encumbrance on immovable property is valid unless it is registered in the Lands Registry."
Furthermore, the Supreme Court also stated that:
"Such right in rem is only created if the sale is made with a written contract which is registered at the Lands Registry (Chapter 232, which was then replaced by the Sale of Immovable Property (Specific Performance) Law of 2011, Law No. 81 (I)/2011). It is the registration of the contract at the Lands Registry that makes the buyer potentially the owner of the immovable property, under the law of equity in the context of a constructive trust. Otherwise, his rights are limited to damages".
Following the above, the decisive factor for the Court was whether the disputed sale agreement was registered at the Lands Registry, according to the legislation in force at the time, namely the Sale of Immovable Property (Specific Performance) Law Chapter 232, since, without its registering at the Lands Registry the appellants would have no right over the strip in Plot B other than a rights for damages for breach of the initial agreement. Consequently, the appeal of the new owners of Plot A also failed.
Registering the contract at the Land Registry
The registering of a contract for the sale of an immovable property at the Lands Registry is now regulated by Law No. 81/2011 which came into force on the 01/08/2011, replacing Chapter 232, and which, amongst others, introduced provisions to strengthen the protection of the buyer in order to ensure that the object of the sale will eventually be registered in his name, in case the seller refuses to do so.
Procedure
Immediately after the signing of an agreement for sale of immovable property and its stamping at the Stamps Registrar, the buyer can file the contract at the relevant Lands Registry of the District where the immovable property is located. The registering of a contract for the sale of an immovable property at the Lands Registry is done by completing and submitting Form ΔΕ 129.
Conditions
In order to be able to register a contract for the sale of immovable property at the Lands Registry and, thus, for specific performance to apply (as seen below) according to Law No. 81/2011 the following must be complied with:
- The immovable property must be registered at the Lands Registry of the relevant District in at least one of the sellers' name,
- The contract must be in writing, contain sufficient details of the identity of the contracting parties, adequately describe the immovable property that is the subject to the contract, indicate the consideration and be signed by all contracting parties,
- The contract must be submitted within six (6) months from the date of its signing, at the Lands Registry of the District where the immovable property is located.
We note that in the case of consideration contracts the above conditions are differentiated and are as follows:
- the above deadline for the provider begins with the transfer of the immovable property to the counterparty,
- In the event that there is no registration, during the set timeframe, at the Lands Register of the relevant Lands Registry in the name of at least one of the sellers in relation to the immovable property which is subject-matter of the contract, or which includes the section of the immovable property that is the subject-matter of the contract, the contract may be submitted/deposited within six (6) months from the date of such registration;
- If the buyer is the transferee in an assignment agreement, which is concluded before registering the contract to which it relates and within the period of six (6) months from the date of signing the contract, the register of the contract which is accompanied by a copy of the assignment agreement and the tax clearance certificate issued by the Capital Gains Tax Law of 1980 (No.52/1980),
- If an assignment agreement is concluded that relates to a contract which is registered at the relevant Lands Registry Department, a copy of the assignment agreement shall be presented to the relevant Lands Registry Department within six (6) months from the signing of the assignment and shall be attached to the contract along with the tax settlement certificate issued by the Capital Gains Tax Law of 1980 (No.52/1980).
It is worth noting that according to Section Article 3 (2) of Law No. 81/2011, it is prohibited to include in the contract any clause that forbids the registering of the contract at the Lands Registry and any such clause is considered void. Consequently, the Lands Registry, in cases where there is such a clause, should ignore it and proceed with the registering of the contract, provided that the above conditions are met.
After the contract of sale of the immovable property in the Land Registry has been successfully registered, then the said contract will constitute an encumbrance over the immovable property that is the subject-matter of the contract.
Extension of Time for Registration of the contract for sale of immovable property at the Lands Registry
Perhaps the most important change brought about by the Law No. 81/2011, and in particular its amendment in 2017 through Law No. 48(I)/2017, is the right given to the buyer to apply to Court and request an Order by which the time for registration of the contract of sale of the immovable property at the Lands Registry is extended.
Specifically, Section 12 of the Law No. 81/2011 states that:
"The Court, may, upon request, allow the registering of a contract or the registering of an action for special performance for contracts which remain in force and have been concluded at any time, even if the period provided for such purpose has elapsed, in accordance with the provisions of this Law or the deadline for their submission, in accordance with provisions of the repealed with the Sale of Land (Specific Performance) Law, has also elapsed, depending on the case, when it deems this justifiable and reasonable for the protection of the buyer."
In accordance to the above section and its related amendment, buyers were once again given the opportunity to attempt to acquire enforceable property rights over immovable property contracts they had entered into at any time in the past, and which rights they had lost because they had not registered on time their contracts at the Lands Registry. The above applies even in relation to contracts which were concluded before the implementation of the Law No. 81/2011.
It should be noted, however, that in the event that the Court grants permission to extend the time of registration of the contract at the Land Registry, given that in the period that has passed it is possible that the legal status of the disputed properties may have changed and that priority issues may arise between the registered encumbrances, the rights in rem that a buyer acquires by submitting a contract for sale, will have effect from the day of submission of the contract and not its conclusion.
Obligation of the Seller to register the Contract
From what we have seen above, it is clear that the buyer may, without having an obligation to do so, register the contract of sale at the Lands Registry.
The Law No. 81/2011 established for the first time an obligation on the seller to register the contract for sale, that was not registered by the buyer, in cases where he intends to mortgage the immovable property that forms the subject-matter of the contract and provided that the buyer has fulfilled his, up to that date, contractual obligations.
The specific provision of Law No. 81/2011 increases the protection afforded to the buyer by creating an encumbrance in his favour which will have priority over the mortgage that will be registered. In fact, in order to ensure the enforcement of this provision, the legislator introduced into the law a criminal offence punishable by imprisonment for up to 2 years or a fine not exceeding 5,000 Euros for a seller who fails to register the contract in accordance with the above.
What does the Specific Performance of an Immovable Property Contract mean?
The ultimate goal of registering a contract for the sale of immovable property at the Lands Registry is to protect the buyer who even though has fulfilled his contractual obligations the seller nevertheless refuses or omits to transfer the property to him.
By the term "specific performance" of an immovable property contract, we mean the execution, through a Court Order, of the obligations deriving from a contract, including the registration of the immovable property being the subject-matter of the contract, in relation to which the conditions provided by the Law on Special Performance were met.
In other words, if the contract is registered in the Lands Registry, according to the conditions imposed by the relevant Legislation (Law No. 81/2011), then the buyer, where the seller refuses, is unable or neglects to comply with his contractual obligations, may apply to the Court and request an Order for Specific Performance of the agreement, i.e., inter alia, an Order ordering him to be registered as the owner of the immovable property relevant to the contract in question which was registered to the Land Registry.
Conclusion
Based on what has been analysed above, it is clear that the Limnatitis case would never have occurred, or at least matters would have been simplified, if the owner of Plot A had proceeded with the registering of the contract for the sale of the land strip on Plot B at the Lands Registry. As seen above, the registering of a contract for the sale of immovable property at the Lands Registry constitutes an encumbrance on the immovable property being the subject-matter of the contract and, therefore, in addition to the specific performance procedure that the new owners of Plot A could have followed to register this strip of land in their name, the transfer of Plot B to the company would not have been possible without the consent of the owners of Plot A who would have registered the encumbrance over Plot B.
Besides, one of the purposes of the process of registering a contract of sale at the Lands Registry, in addition to the above, is for the bona fide third-party buyers, lenders or other creditors with claims related to such immovable property to be aware in advance, through a simple search at the Lands Registry, of any encumbrances that burden such property.
Consequently, if a buyer wants to be protected by Law No. 81/2011, he must, as soon as the contract for the sale of the immovable property is signed and stamped, proceed with its registering at the Lands Registry.
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.
