Cyprus Court Ruling Shakes Up Property Market: Trapped Buyers Law in Limbo
In 2015, Cyprus’ Parliament enacted Law 139(I)/2015, known as the “Trapped Buyers Law,” to aid property buyers unable to obtain title deeds despite fulfilling their contractual obligations. This situation often arose because developers failed to clear mortgages or other encumbrances on the land where the properties were built, leaving buyers stuck without legal ownership.
The Trapped Buyers Law allowed buyers to apply directly to the Land Registry for title deed transfer, bypassing developers and enabling ownership transfer to buyers who had met their contractual terms.
Landmark Court Decision
A recent Court of Appeal ruling in Cyprus, stemming from a bank’s appeal against a lower court’s decision, has major implications for trapped buyers. The Court determined that parts of the Law, which allowed title deed transfers despite existing mortgages, violated creditors’ rights, specifically those of banks. This ruling deemed these provisions unconstitutional, reinforcing banks’ rights to maintain claims on mortgaged properties, even if sold to third parties.
Case Summary
The case involved a bank that had provided loans secured with mortgages on land meant for future construction. A third-party buyer who purchased an apartment on this mortgaged land applied to the District Land Registry to transfer the title deed. Although the Land Registry initially sided with the buyer, the bank objected, eventually leading to a legal challenge that declared the Trapped Buyers Law unconstitutional.
Court of Appeal’s Impact
The Court of Appeal’s ruling does not void the Trapped Buyers Law but impacts its application. The decision has led authorities to suspend both the review of existing applications and the acceptance of new ones. The ruling does not affect cases where title deeds have already been transferred but sets a precedent affecting pending District Court cases.
Consequences of the Ruling
- Increased Legal Uncertainty: Buyers face heightened uncertainty about property ownership, with the suspension of Land Registry applications causing significant delays.
- Parliamentary Action Needed: The Parliament must consider new legislative measures or amendments to address the constitutional issues raised by the Court, balancing the protection of buyers and creditors.
- Market Impact: The ruling could deter potential buyers, leading to a slowdown in the Cyprus real estate market due to unclear title deed processes.
Future Outlook
The Court of Appeal’s decision, along with the authorities’ suspension of application reviews, presents a major challenge for trapped buyers in Cyprus. While the Government’s legislation aimed to protect these buyers, the Court sided with the banks. Parliament must act quickly to resolve these constitutional issues and find a fair solution for both buyers and creditors.
Prospective property buyers and sellers in Cyprus are advised to seek independent legal advice, considering the specific circumstances of their cases to ensure a smooth process and protect their financial interests.