Cyprus has a coherent system of recording every transfer of immovable Property, as such a transfer can only be performed by a process through the Land Registry. This system provides the opportunity to locate any transfer performed and to cancel transfers of property that were made fraudulently.
At times, a transfer of property between two persons and/or legal entities may be made with the purpose of obstructing and/or delaying a Judgment creditor, namely a person and/or a legal entity who has a Court Judgement against the person performing the transfer. In this case, the transfer is performed fraudulently, so that the Judgment debtor (namely the person owing to the Judgment creditor) may hinder and/or delay and/or avoid the obligation to repay the Judgment creditor.
The following example will better explain a fraudulent transfer: Person A obtains a Court Judgment against Person B for the amount of 100000 Euros. Person B, to avoid the responsibility to repay person A, transfers the only valuable asset he owns – namely a house- to his spouse. Such a transfer will be fraudulent, as it was performed by person B -the Judgment debtor- in order to defraud Person A – the Judgment Creditor.
The Cypriot legal framework provides the legal mechanisms to cancel such transfers that are made fraudulently in order to defraud a Judgment creditor, by the provisions of Chapter 62 (The Fraudulent Transfers Cancellation Law).
Proving that a property transfer was fraudulent is easier when it takes place between close relatives such as parents – children, siblings, and/or between spouses (transfers by way of gift). Proving a fraudulent transfer is also easier when a commercial transfer of property takes place with no consideration – namely a monetary amount in exchange for the transfer – and/or with an unreasonable consideration for the transfer. For example, person A transfers a three-bedroom apartment in Nicosia to person B for the amount of 20,000 Euros. Nonetheless, the commission of a fraudulent transfer can also be proven even when there was a transfer of property by sale if the transferee had knowledge that the transfer was made with the purpose of hindering and/or delaying a Judgment creditor.
According to Article 4 of Chapter 62, any transfer by way of gift or otherwise that is deemed fraudulent under the law, may be canceled by a Court Order obtained after an application of the Judgment Creditor, irrespective of the fact that the fraudulent transfer was performed before or after the commencement of the action and/or procedure by which the rights of the Judgment creditor for debt recovery had been proven.
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.
