The introduction of the amending Law 132(I)/2023 (the “Law”) in the legal framework of property transactions represents a significant evolution in Cyprus’ real estate sector, through which the legislator intended to promote efficiency, transparency and enhance protection to buyers of immovable properties that are encumbered by pre-existing mortgages or lodged contracts.
New section 4(a) (1A) of the Law requires the Seller, under penalty of a fine up to €10.000, to include as an integral part of the Contract of Sale an Immovable Property Search Certificate issued by the Lands Registry depicting any encumbrances or prohibitions on such property. The Immovable Property Search Certificate must bear a date which does not differ from the date of signing of the Contract of Sale beyond five (5) working days (either before or after the signing date), be appended to the Contract of Sale and initialled by the Seller and the Buyer. This condition applies to all Contracts of Sale to be lodged with the Lands Registry after the 12.12.2023.
New section 3(A) of the Law restricts the lodge of a Contract of Sale with the Lands Registry where the immovable property is encumbered specifically by pre-existing (a) mortgage, or (b) lodged contract of sale, as mentioned below. It is clarified that the restriction does not apply where the immovable property is encumbered otherwise than as above, e.g. by memo. This condition applies to all Contracts of Sale of properties (bearing a pre-existing mortgage or lodged contract of sale) to be lodged with the Lands Registry after the 12.12.2023.
The restriction: the lodge of a Contract of Sale can no longer be accepted by the Lands Registry, unless the lodge is accompanied by Written Declaration of Type A (+ Type B) or Written Declaration of Type C, and the owner of the property is not restricted by any other prohibitions.
Written Declaration of Type A: Where the immovable property is encumbered by mortgage and the Buyer paid the Seller an amount equal to 95% of the purchase price (including any down payment paid at the signing of the Contract of Sale) in the bank account of the Seller maintained by the Mortgagee, the Mortgagee, under penalty of a fine up to €100.000, must accept the payment of the amount and release the property of the mortgage. In this respect, the Mortgagee must issue and sign the Written Declaration of Type A (countersigned by the Seller and the Buyer) committing to accept the payment amount, issue to the Buyer the Written Declaration of Type B and release the property from the mortgage.
Written Declaration of Type B: In addition to the signing of the Written Declaration of Type A, the Mortgagee must also sign the Written Declaration of Type B confirming acceptance of the payment and release of the property from the mortgage and hand it over to the Buyer. In case the Mortgagee fails to release the property from the mortgage, the Buyer can submit the signed Written Declaration of Type B with the Lands Registry at the time of the transfer, allowing the property transfer to proceed unhindered, regardless of the Mortgagee’s release status or presence.
Written Declaration of Type C: If the Buyer wishes to proceed with the lodge of the Contract of Sale regardless of the mortgage, the Buyer must issue, sign and submit with the Lands Registry the Written Declaration of Type C confirming that the Buyer is aware of the mortgage and chooses to proceed with the lodge of the Contract of Sale despite the encumbrance and the protection afforded by the Law.
Written Declaration of Type A: Where the declaration for the transfer of the property is submitted with the Lands Registry accompanied by the Written Declaration of Type A (provided that Written Declaration of Type B has also been issued), and the Mortgagee released the property from the mortgage, the Lands Registry will transfer the property (for which separate Title Deed has been issued) to the Buyer, regardless of any other encumbrances or prohibitions that may exist and follow the immovable property at priority.
Written Declaration of Type B: Where the declaration for the transfer of the property is submitted with the Lands Registry accompanied by the Written Declaration of Type B (because the Mortgagee failed to release the property from the mortgage), the property will be released from the mortgage (without the Mortgagee’s presence) and then the Lands Registry will transfer the property (for which separate Title Deed has been issued) to the Buyer, regardless of any other encumbrances or prohibitions that may exist and follow the immovable property at priority.
In specific cases, such as when the Seller is subject to bankruptcy or liquidation proceedings, the relevant provisions of the Companies and Bankruptcy Laws apply to guide the transaction and safeguard the interests of those involved.
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