The Sale of Real Estate (Special Execution) Law of 2011 (Law 81(I)/2011) regulates the procedure for the specific performance of real estate sale contracts (hereinafter "Sale Contracts") in the Republic of Cyprus. Under this law, if a Court orders the registration of an immovable property to a person, then the vendor must transfer such property to that person. Essentially, the Court can mandate the transfer or securing of possession of the immovable property, which is the subject of the Sale Contract, to the buyer.
Due to the ongoing expansion of the real estate market in Cyprus and the persistent issue of vendors being unable to transfer properties to buyers who have fulfilled their contractual obligations, due to existing encumbrances, legislative amendments were deemed necessary. To address these challenges, Law 132(I)/2023 was enacted on 12th December 2023, amending the Sale of Real Estate (Special Execution) Law (Law 81(I)/2011) (hereinafter "the Law"), to simplify and ensure the real estate purchasing process.
A pivotal amendment is the addition of Article 3A, which states: "Where the only encumbrances to which the immovable property, which is the subject of the Sale Contract, are a deposited mortgage or another deposited Sale Contract, and the registered owner is not under prohibition, the deposit of the new Sale Contract to the Department of Lands and Surveys by any of the contracting parties is accepted only if it is accompanied by a written declaration—(a) by each mortgage lender and vendor, which the buyer has acknowledged in writing, according to Type A of the Appendix, or (b) by the buyer according to Type C of the Appendix."
Type A of the Appendix details a commitment from the mortgagee to discharge the immovable property from the existing mortgage, once 95% of the purchase price agreed upon by the vendor and the buyer is deposited into a bank account of the vendor. If the mortgagee fails to fulfil this commitment, the buyer can adduce the Type B of the Appendix to the Department of Lands and Surveys, which, upon being duly signed and stamped by the mortgagee, allows the Director of the Department of Land and Surveys to transfer the property into the buyer's name.
Finally, Type C of the Appendix, provides a mechanism for a purchaser to acknowledge the existence of an encumbering mortgage on the immovable property they are purchasing. This allows the lodging of a Sale Contract without the need for the written declaration from the mortgagee and vendor required by Type A of the Appendix. By signing Type C, the purchaser confirms they are aware of the mortgage and choose to proceed with the Sale Contract despite the encumbrance.
Based on the new Article 5 (2A) of the Law, if prior to the deposit of the Sale Contract, accompanied by Type A of the Appendix, there is already a deposited mortgage encumbering the immovable property, subject of the Sale Contract, the buyer and/or the vendor, where the latter received an advance payment from the buyer upon signing the Sale Contract, deposits into the vendor's bank account the 95% of the purchase price agreed upon by the vendor and the buyer, then the mortgagor is obliged to accept this payment and provide the buyer with a written confirmation of payment according to Type B of the Appendix, releasing or eliminating the immovable property from the mortgage. Failure of the mortgagee to release the immovable property from the mortgage, may result to the imposition of an administrative fine of up to €100,000 by the Director of the Department of Land and Surveys (Article 5(2A)(c) of the Law).
Overall, the amended Articles 3 and 5 of the Law seek to create a safer and more reliable environment for real estate transactions in Cyprus, benefiting all parties by introducing measures to expedite the transfer of ownership, reducing bureaucratic delays, and making the process more efficient for both buyers and vendors.
According to Article 7 of the Law, the Court may issue an Order of special performance of a Sale Contract under any conditions it deems necessary. The new Article 7 (4A) allows the Court to issue an Order of special performance for a Sale Contract deposited to the District Land Office in accordance with the provisions of Article 3A and on which there is a deposited mortgage, if it is satisfied that the buyer has paid the amount specified in the written declaration issued according to Type A of the Appendix.
Another significant change is that the vendor is required, according to Article 4 (1A) of the Law, to include a Certificate of Survey of the immovable property as an integral part of the Sale Contract. This certificate must be dated no more than five business days from the Sale Contract signing date. In cases of non-compliance with the above-mentioned obligation, the Director of the Department of Land and Surveys may impose an administrative fine of up to €10,000, after giving written notice to the vendor and providing a five-day period from the date of receipt of the notice for the vendor to submit representations.
As can be derived from the above, transparency is a central pillar of the amendments to the Sale of Real Estate (Special Execution) Law. The new provisions require vendors to provide detailed information about the property's condition, including information about any encumbrances, legal disputes, or other factors that may affect the sale of the immovable property. This ensures that buyers are fully informed before entering into any agreement, reducing the risk of fraud and disputes. Furthermore, the newly added provisions, that provide for increased penalties for those who violate the Law, act as a deterrent to non-compliance, ensuring adherence to legal obligations by all parties involved in property transactions and preventing unfair practices.
In conclusion, the recent amendments to the Sale of Real Estate (Special Execution) Law mark a significant development in the real estate sector, enhancing buyer protection, particularly in cases where the property is encumbered by a pre-existing mortgage. By implementing stricter rules and refining procedures, these amendments aim to create a safer and more reliable environment for property transactions, thereby contributing to the continuous growth and stability of the real estate market in Cyprus. These changes are expected to address long-standing issues and promote fairness in property dealings, reflecting a commitment to safeguarding the interests of immovable property buyers and ensuring that the property acquisition process is transparent and effective.
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