Purchase and Sale of Property in the Absence of a Title Deed
It is particularly common in property sales practice to encounter cases where there are difficulties in issuing a Title Deed in the buyer's name. This typically arises when the developer faces challenges either in discharging existing mortgages on the property or due to planning irregularities that prevent the issuance of a final approval certificate.
As a result, the perpetuation of such a situation entails significant legal risks for prospective buyers of such properties.
When a development is constructed, the Title Deed is usually registered in the name of the developer who undertakes the construction, and the property is described as a "Plot." The proper procedure requires the signing and filing of a Sale Agreement at the Land Registry by the buyer.
Once construction is complete and all necessary permits and approvals are issued by the relevant authorities, the parties proceed to transfer ownership of the property (or unit) to the buyer by means of a Transfer Deed, which is executed at the relevant District Land Office. A Title Deed is then issued, specifically describing the constructed property (house, apartment, shop, etc.).
In cases where an obstacle arises, buyers end up having a right to the property solely on the basis of the Sale Agreement. Strictly speaking, under Cyprus law, the filing of a Sale Agreement at the Land Registry creates more of a legal encumbrance on the property rather than a real right in favour of the buyer.
This creates serious risks and complications for buyers, as they are deprived of the ability to make key changes to the property. For example, they cannot apply for additional building permits (e.g., for a pergola) or participate in state subsidy schemes (e.g., installation of a photovoltaic system).
Most importantly, the absence of a Title Deed significantly impairs the ability to resell the property, and lowers its market value.
Despite this, when a property is sold without a Title Deed issued in the name of the first buyer, the sale is typically executed through an Assignment Agreement. This is an agreement whereby the original buyer assigns their rights, derived from the registered Sale Agreement, to the new interested buyer.
The parties in such agreements are referred to as the Assignor (the original buyer) and the Assignee (the new buyer).
In order for such an agreement to be enforceable:
- It must be duly stamped, and
- Capital Gains Tax must be paid by the first buyer to the Tax Department, and
- It must be filed with the Land Registry.
At this stage, it is important to note that every contract filed with the Land Registry constitutes a legal encumbrance on the property and follows a priority order based on the date it was filed.
Encumbrances include:
- Mortgage contracts
- Assignment Agreements (including those for security)
- Sale Agreements
- Court Orders (such as memos prohibiting sale)
Therefore, it is crucial to conduct thorough due diligence and seek legal advice before purchasing any property — especially when a Title Deed has not yet been issued.
Christina Papadopoulou-Kiosidou
Lawyer
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