Contingent Contracts in Property Sales

Beware contingent contracts in property sales

George Coucounis describes why in Cyprus it can be risky to agree to buy property only if a particular thing happens.

A purchaser who agrees to purchase an immovable property on the basis that an uncertain future event will happen takes the risk his contract will not be enforceable by law if such an event does not happen.

The sale of a plot of land which will be divided in the future, provided the relevant permit is issued, or the sale of an undivided share in a piece of land on the basis that it will be separated and divided later, are good examples of contingent contracts. Such agreements depend on subsequent conditions to happen in order to be enforced. Therefore, if the event does not happen, the agreement becomes void and the vendor is entitled to terminate it without any consequence.

However, if the vendor receives any money on account of the purchase price, he will be under the obligation to return it to the purchaser.

In a recent judgement, the Larnaca Court ordered the return of the money paid as a deposit, declared that the sale contract was legally terminated, that its deposition at the Land Registry was void, without any legal effect and ordered the District Land Officer to delete it from the records of the Land Registry.

The facts were the following: the vendor was a co-owner of a piece of land, owning 5/13 shares and agreed to sell them to the purchaser, provided the aforesaid shares were separated and divided according to a topographical plan as long as the other two co-owners consented. The purchase price was agreed at €188.000 and an amount of €18.000 was paid as a deposit upon signing of the sale agreement. The balance of the purchase price was to be paid, with no interest, simultaneously with the transfer of the sold property to the purchaser, provided a separate title deed was issued.

The vendor undertook the relevant procedure and costs for the division of the land and the issue of the separate title deed. The purchaser declared in the agreement that he was familiar of the land and had inspected it and that he was aware of the rights of first option of the co-owners according to the law.

Furthermore, the sale contract stated that the purchaser was entitled to deposit it at the Land Registry and that in the event the division of the land and the issue of a separate title deed was impossible or refused by the District Land Officer, the agreement was to be void and the deposit was to be returned to the purchaser.

Even though all the co-owners, prior to the signing of the sale agreement, submitted an application to the Land Registry for the division of the land in two parts, one for the vendor and the other for the other two co-owners, and the relevant procedure for the division of the land started, later one of the co-owners refused to sign the required documents. Under the circumstances, the division became impossible because the consent of all the co-owners was not given. Consequently, the vendor also withdrew his consent.

The Court, in the action instituted by the purchaser, accepted the version of the vendor that he did everything he could on his behalf for the division of the land and dismissed the action, issuing a judgement in the counterclaim of the vendor.