Amendment to the Sale of Property (Specific Performance) Law

The revised Sale of Property (Specific Performance) Law (132(I)/2023), which took effect on December 12, 2023, aims to safeguard the interests of buyers of real estate. This amendment streamlines the process for specific performance, guaranteeing that once contractual obligations are met, the property will be transferred to the buyer.

The amendment aims to adopt a proactive stance in safeguarding buyers of real estate by revising the procedure for submitting a contract for property sale, especially in situations involving properties burdened by existing mortgages.

The key changes introduced by the amendment include:

The seller is required to furnish a search certificate for the specified property, dated no earlier than five days before the contract of sale’s execution date. Failure to comply may result in an administrative penalty of up to €10,000, enforced by the Director of the Department of Lands and Surveys.

If the property is burdened by an existing mortgage or if another contract of sale has been submitted to the Department of Lands and Surveys, the lodging of the new contract of sale is subject to the inclusion of additional documentation. This documentation can take one of the following forms:

Form A: A written declaration signed by each secured creditor or mortgagee, confirming that upon receiving 95% of the agreed purchase price in a designated bank account of the seller, they will issue a payment confirmation to the buyer (Form B) and release or discharge the mortgage;

Or

Form C: A written declaration signed by the buyer, expressing the buyer’s intention to proceed with the submission of the contract of sale without requiring Form A.

Any funds deposited by the buyer and/or seller into the seller’s bank account as designated by the secured creditor or mortgagee in Form A, including any down payment, shall be deemed as payment from the buyer, either partially or in full settlement of the purchase price. If an initial payment is received by the seller prior to or at the time of signing the Contract of Sale, it must be transferred to the bank account specified in Form A by the secured creditor or mortgagee.

Upon receipt and acceptance of the specified amount as outlined in Form A by the mortgage holder, the purchaser must be furnished with a written confirmation of payment (Form B). Subsequently, it becomes the responsibility of the mortgage holder to release the mortgage from the property that has been purchased. Failure to release the property from the mortgage may lead to an administrative penalty 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 submitted to the Department of Lands and Surveys after December 12, 2023, and provided that the mortgage has been released by the mortgage holder, the property will be transferred to the buyer without any encumbrances. In instances where the mortgage holder has signed Form B but has not withdrawn the mortgage, the buyer can include Form B in the application for the transfer of ownership. This action results in the extinguishment of the mortgage, concluding the transfer with the buyer obtaining title free of any encumbrances.

Furthermore, the Law grants the Court the authority to issue a decree of specific performance if a contract of sale, accompanied by Form A, is deposited at the Department of Lands and Surveys, and a mortgage was placed on the property before the submission. This is subject to the Court’s satisfaction that the buyer has fully paid the purchase price to the seller. This legal provision addresses the challenges faced by buyers in Cyprus, enabling a smoother transfer of mortgaged properties once contractual obligations are fulfilled. It’s important to note that if the buyer signs Form C, there may be a lack of protection mechanisms, and the specific performance procedures outlined may not apply.

Buyer protection laws require 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 requirement serves to prevent fraud, inconvenience, and unexpected expenses for the buyer, particularly in situations where land developers mortgage a portion of the land for another buyer’s loan.

The amendments aim to facilitate the transfer of Title Deeds with utmost safety and legal certainty, addressing issues that often lead to buyers becoming trapped. By enhancing legal security and transparency in real estate transactions, these changes ensure that properties are transferred to buyers without any encumbrances, and the buyer’s payment contributes to settling existing mortgages.