Contracts concluded between a "trader" and a "consumer" lie at the heart of consumer protection law, as defined by both national legislation and EU law. Real estate agreements, which typically involve large financial commitments, are no exception. The need to balance unequal bargaining power, ensure transparency, and prevent the abusive exploitation of the weaker party are fundamental objectives of the relevant legal provisions.
1. Subjective and Objective Scope of Application
The term "consumer", according to the law, includes any natural person acting for purposes that are not related to their trade, business, craft, or profession. Conversely, a "trader" is any natural or legal person acting for purposes related to their professional activity, including any person acting on their behalf or under their instruction.
Case law from the Court of Justice of the European Union (CJEU) has affirmed the importance of the individual's intention at the time the contract is signed. For example, in the Costea case (C-110/14), the court ruled that even a lawyer can be considered a "consumer" if the transaction is not linked to their professional activity.
The objective scope of application covers any contract that does not merely reproduce mandatory statutory provisions or international conventions, as confirmed in cases such as RWE Vertrieb (C-92/11) and Kušionová (C-34/13).
2. Transparency and the Importance of Information
The transparency of contract terms is a key requirement for the lawfulness of contractual clauses. According to Article 52 of the Law, and repeatedly emphasized in CJEU judgments (e.g., Kásler (C-26/13), Matei (C-143/13)), terms must be clearly drafted and must allow the average consumer to understand their financial and legal consequences.
The "average consumer", according to the Court, is one who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural, and linguistic factors.
3. Unfairness of Contract Terms
Under Article 50 of the Law, a contract term is deemed unfair if it causes a significant imbalance in the rights and obligations of the parties to the detriment of the consumer and contravenes the requirement of good faith. This assessment takes into account:
- The nature of the goods or services,
- The other terms of the contract or related agreements,
- The economic and legal situation of the parties,
- The overall negotiation behavior of both parties.
The Annex to the Law includes a "grey list" of indicative unfair terms, confirmed in cases like Aziz (C-415/11) and Constructora Principado (C-226/12).
4. Exceptions: Core Subject Matter and Price-Equivalence Clauses
According to Article 48(2), the assessment of unfairness does not apply to terms that define the core subject matter of the contract or the price-to-service ratio, provided that such terms are clear and comprehensible. The term "core subject matter" refers to the essential obligations under the contract, as interpreted in Case C-186/16.
5. Examples of Unfair Terms in Real Estate Contracts
Real estate sale contracts in Cyprus often include unfair terms such as:
- Payments without guarantees: The consumer pays in installments based on construction progress, without clear definition of phases or any guarantee for completion.
- Asymmetrical penalties and interest: The consumer is subject to interest and penalties for late payments, but the seller faces no equivalent consequences for delays.
- Cancellation without remedy: The buyer has no right to withdraw or claim compensation if the property is not delivered or transferred on time.
- Unilateral modifications: The seller reserves the right to unilaterally alter property characteristics without granting the buyer a right of withdrawal.
- Undefined transfer costs: The buyer is obliged to pay vague or undefined transfer fees with no transparency on amount or calculation method.
- Future obligations: Binding the buyer to future agreements (e.g., shared facility management) without prior disclosure or consent.
6. Role and Powers of the Consumer Protection Service (CPS)
The Consumer Protection Service (CPS) plays a central role in investigating unfair terms and has the authority to impose administrative measures even without proof of damage or intent. The Director of the CPS may issue enforceable administrative decisions, impose fines, and order the cessation of use of specific terms.
The process includes:
- Examination of the consumer nature of the contract,
- Analysis of the terms against the grey list of unfair terms,
- Assessment of the clarity and transparency of clauses,
- Evaluation of the fairness of terms in light of good faith and contractual balance.
7. Consumer Rights
Under Article 63 of the Law, a consumer has the right to file an individual lawsuit for damages suffered due to unfair terms or to request other legal remedies.
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