Requirements for deposition of sales contract
A step forward for the protection of the property buyer has been introduced in an amending law to the Sale of Immovable Properties laws with its publication in December. The basic provisions oblige the seller to attach to the contract of sale a search certificate for the property, which bears a date that does not differ from the date of signing the contract by more than five working days. Also, in the event that the seller’s immovable property is already encumbered by a mortgage or contract and the registered owner thereof is not under prohibition, the filing of the sale contract in the Land Registry is only accepted if it is accompanied by a written declaration from each mortgagor and seller for which the buyer has been informed in writing.
In this way, the buyer is informed correctly and in time about the existence of any mortgage or contract that affects or encumbers the property. This legal protection of the buyer obliges the seller and prevents him from concealing the existence of any mortgage or contract executed before or in the interval from the date of a previous search certificate. This can also happen in the case of land developers who mortgage a share of the land to secure the loan of another buyer to whom they are selling an apartment in a block of flats or a house in a complex under construction. This avoids any fraud against the buyer and any inconvenience and expense if the seller later does not cooperate.
The written declaration issued by the mortgagor A states the mortgage registered on the seller’s property and relates to the contract between the seller and the buyer for the sale of either the property or a unit, apartment or house erected or to be erected on the property. If the mortgage was registered by the seller for his loan, then the mortgagor certifies that if 95 per cent of the amount of the contract between seller and buyer is deposited into the bank account for which IBAN details are given and which is held in the name of the seller, then the mortgagor undertakes to discharge or eliminate the property from the said mortgage. If the mortgage was registered by the seller on a share of the land to facilitate another buyer to purchase a unit, then the amount shown on the declaration is zero.
The mortgagor also declares that if he fails to discharge or extinguish the purchaser’s property from the mortgage, the purchaser needs to provide the Land Registry with Form B signed and sealed by the mortgagor, who certifies that the amount has been deposited by the buyer and/or seller into the specified bank account held in the name of the seller and that discharges or extinguishes the buyer’s property from the mortgage. The Land Registry Director then transfers the property to the buyer’s name, free from the mortgage and regardless of any encumbrances or prohibitions that may be burdened the property or its owner and which follow the buyer’s contract as a priority.
The amending Law provides for sanctions against both the seller and the mortgagor when they fail to comply with their required obligations. The Land Registry Director may impose an administrative fine on the seller which does not exceed €10,000 and on the mortgagor which does not exceed €100,000, after having previously notified them by registered letter of his intention.
Through the provisions of the above Law, several problems that led to the creation of trapped buyers are solved and legal security and transparency in real estate transactions are strengthened. Above all, it ensures that the property is transferred to the buyer free of any encumbrance and the sale price paid by the buyer is used to pay off an existing mortgage.
George Coucounis specialises in the Immovable Property Law, and is based in Larnaca, coucounis.law@cytanet.com.cy, Tel: 24 818288