In an effort to protect the interests of purchasers of immovable property, the amended Sale of Land (Specific Performance) Law (132(I)/2023) (the Law) came into force on 12 December 2023. Essentially, the Law simplifies the procedure for specific performance, ensuring that the upon fulfilling their contractual obligations, the property will be transferred to the purchaser.
The Law amends the Sale of Land (Specific Performance) Laws of 2011 to 2020, collectively known as the Sale of Land (Specific Performance) Law of 2011. Aiming to provide a pre-emptive approach to protecting purchasers of immovable property, the Law amends the procedure for submission of a contract for the sale of a property, particularly in cases where the property is encumbered by a pre-existing mortgage.
Key changes
In addition to the existing requirements set out in the original Laws of 2011 to 2020, the Law provides for requirements applying to all contracts signed on or after 12 December 2023. Specifically, for any contract of sale signed on or after the date of the enactment, the following would have to additionally take place when lodging a contract with the Department of Lands and Surveys:
- The Vendor must provide a search certificate of the immovable property in question, dated within five days prior to the execution date of the contract of sale the latest. Failure to provide this incurs an administrative fine of up to €10,000 imposed by the Director of the Department of Lands and Surveys.
- If the property in question is encumbered by an existing mortgage or if another contract of sale has already been lodged with the Department of Lands and Surveys, the deposition of the new contract of sale is conditional on the inclusion of one of the following additional documentation:
- Form A: A written declaration duly signed by each of the secured creditors/mortgagees undertaking that, once 95% of the agreed purchase price is received in a specific bank account of the vendor, the secured creditor/mortgagee shall issue a confirmation of payment to the purchaser (Form B) and waive or extinguish the mortgage;
or
- Form C: A written declaration duly signed by the purchaser confirming the purchaser’s wish to proceed with the deposition of the contract of sale without Form A.
- Any amount deposited by the purchaser and/or vendor into the vendor’s bank account specified by the secured creditor/mortgagee in Form A, including any downpayment, shall be considered a payment of the purchaser, against or in full settlement of the purchase price. If an advance payment is received by the vendor before or on the signing of the Contract of Sale, it must be deposited in the bank account determined in Form A by the secured creditor/mortgagee.
- Upon payment and acceptance of the amount in Form A by the mortgagee, a written confirmation of payment (Form B) must be provided to the Purchaser. The mortgagee is then obligated to withdraw the mortgage from the purchased property. Failure to release the property from the mortgage can result in an administrative fine of up to €100,000 imposed by the Director of the Department of Lands and Surveys.
If a contract of sale, accompanied by both Form A and Form B, is deposited at the Department of Lands and Surveys after 12 December 2023, and provided that the mortgagee has withdrawn the mortgage, the property will be transferred to the purchaser free of any encumbrances. In cases where the mortgagee issues and signs Form B but has not withdrawn the mortgage, the purchaser can enclose Form B in the transfer of ownership application. This results in the extinguishment of the mortgage, finalising the transfer with the purchaser obtaining title free of any encumbrances.
The Law also empowers the Court to issue a decree of specific performance in cases where a contract of sale, accompanied by Form A, is deposited at the Department of Lands and Surveys, and a mortgage was imposed on the property before the deposition. This is contingent on the Court’s satisfaction that the purchaser has fully paid the purchase price to the vendor. The law addresses issues faced by trapped purchasers in Cyprus, allowing a smoother transfer of mortgaged properties once contractual obligations are met. It is also noteworthy that if the purchaser signs Form C, there may be a lack of protection mechanisms and the outlined specific performance procedures may not apply.
Final remarks
The legal protection for buyers mandates sellers to disclose any existing mortgages or contracts executed before or during the period between the date of a previous search certificate and the current transaction. This safeguard prevents fraud, inconvenience, and expenses for the buyer, especially in cases involving land developers mortgaging a share of the land for another buyer’s loan.
Allowing for the transfer of Title Deeds under full safety and legal certainty, the amendments aim to resolve issues leading to trapped buyers, enhancing legal security and transparency in real estate transactions. It ensures that properties are transferred to buyers without encumbrances, and the buyer’s payment contributes to settling existing mortgages.
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