Harris Kyriakides
Harris Kyriakides

Judgment of the Court of Appeal regarding trapped buyers

Posted on 30 July 2024 | 3 mins read

The judgment addresses whether the decision of the Director of the Land Registry to transfer the property in the name of a trapped buyer and release the mortgage is consistent with the Constitution.

Τhe recent decision dated 20/06/2024 in Civil Appeal 285/2018, deals with the provisions of Part VIB of the The Transfer and Mortgage of Property Law Ν. 9/1965 (the Law 9/65) which gives authority to the Director of the Land Registry to transfer the property in the name of a trapped buyer and discharge the mortgage and all the encumbrances of the property. The facts of the case were as follows:

The First Instance Court, dismissed the application filed by the Bank before the Court, by which the latter requested the annulment of notice type IE and the decision of the Director of the Land Registry to dismiss the opposition of the Bank. With the said application, the Bank also requested that the decision of the Director of the Land Registry to transfer the property in the name of the trapped buyer and discharge all the encumbrances is annulled and that the provisions 44IH – 44KZ of the Law 9/65 are in contravention with the article 23 of the Constitution.

Following the issuance of the First Instance judgment, the Βank filed an appeal against the judgment mentioning among other reasons that the First Instance Court omitted to deal with the unconstitutionality of the provisions 44IH – 44KZ of the Law 9/65. The Court of Appeal ruled that the examination of the constitutionality raised was essential and crucial in order to resolve the dispute between the parties since if the appellants’ allegations were admitted, then the application would succeed. Therefore, the Court of Appeal set aside the decision of the First Instance Court and examined the constitutionality of the aforementioned articles.

The Court of Appeal came to the conclusion that the discharge and release of mortgages without the right to request compensation intervenes and abolishes the right to property of Article 23 of the Constitution. Moreover, the Court of Appeal mentioned that the right to register the mortgage to another property is not an equitable compensation due to the fact that the Law 9/65 remains silent in accordance with the sequence of priority of the said mortgage in case there are other encumbrances of the other property or in case the value of other property differs. The conclusion of the Court of Appeal is that, the provisions 44IΘ – 44KB of the Law 9/65 were deemed unconstitutional as it contravenes the Article 23 of the Constitution.

Furthermore, the Court of Appeal ruled that the discharge or release of the property constitutes an intervention to the right of Contract, hence the Court of Appeal concluded that the article 44KB of the Law 9/65 is inconsistent with the article 26 of the Constitution.

In conclusion, although the legislator made an effort to protect the rights of trapped buyers, the decision of the Court of Appeal prevents trapped buyers to submit an application in case there are encumbrances against the property even if their case meets the conditions of the Law 9/65.

By: Margarita Avraam

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