Illegal Property Sale Agreement

Illegal property sale agreement

In Cyprus, any purchaser consenting in stating a lower property purchase price than the real one is running the risk to lose both the purchased property and the money he has paid for it, as George Coucounis explains.

Any property sale agreement, aiming to deceive the authorities by concealing the real price of an immovable property, is illegal. Despite this, there are still individuals, who agree in a property sale transaction by signing agreements, which declare a lower price than the real one, thus paying part of the price “under the table”. By doing this, they believe that they would avoid paying transfer fees, capital gains tax, income tax or even more they are trying to hide their real annual income. They believe that their tax-free money would be precious to them and the illicit profit would be considerable, since they would avoid paying tax, thus having multiple “fake” benefits. However, they pay no attention to the risk they are running, particularly the purchasers, when, in the event of a disagreement, things might not go smoothly at the end. It is even possible that the deposit of the sale contract at the Cyprus Land Registry for specific performance purposes to be proved ineffective and unable to give them sufficient or any protection at all.

The details derived from a civil appeal are distinctive and useful to be mentioned along with the outcome. The vendor owned two pieces of land at a village in Larnaca district and signed an agreement for their sale to a purchaser at a specific price, with £500 to be paid in advance and the rest on the day of the transfer. The deposit was paid and the purchaser deposited the sale agreement at the District Land Registry. The vendor denied completing the sale on the grounds that the price mentioned in the sale agreement for the two pieces, was not the real one, because the purchaser was going to pay him an additional amount in cash “under the table”. He claimed before the Court that he wanted to get legal advice regarding the validity of this transaction. After having seen his lawyer he decided not to proceed with the completion of the sale agreement.

It is obvious from the above that the vendor afterwards changed his mind and had “second thoughts” and he no longer wished to proceed with the sale of his land to the purchaser, despite the fact that he would receive money “under the table” on top of the price that was stated in the sale agreement. The purchaser’s version was that her boss, who had made the negotiations with the vendor and had signed the relevant contract, claimed that it contained the real agreement between the two parties, meaning that the amount stated in the contract was the real purchase price of the land.

The trial Court concluded that neither the testimony of the purchaser nor the testimony presented by the vendor was real. However, the Court was satisfied that the purchaser indeed offered to pay a specific amount in cash on top of the amount that was stated in the sale agreement. The concealment of the real price was aiming to deceive the Authorities, thus avoiding to pay the proper transfer fees and at the same time to conceal the real income of the purchaser for income tax purposes. Therefore, the Court dropped the case.

On appeal, the purchaser claimed that: - (a) Wrongly the Court accepted the evidence of a third party regarding the contents of the sale agreement, because, on accepting such evidence the Court virtually replaced the contract made between the parties with its findings that a higher price than the one stated in the contract was agreed, meaning the amount “under the table” and (b) the assessment of the evidence by the Court was wrong.

The Supreme Court upheld the judgment of the trial Court and decided that (a) the Court correctly accepted the evidence which was aiming to prove that the agreement was affected by illegal elements included in it and (b) the Court of Appeal never interferes with the findings of the trial Court, when such findings are based on the credibility of oral evidence, provided the assessment is justified.

Although the purchaser bought the two pieces of land and deposited the sale agreement at the Land Registry, she has lost the land and the money she paid as a deposit. Further, no one can disregard the trouble and inconvenience she went through during a court dispute and the legal costs she had to pay. It would have been wiser, particularly for the purchaser, to state the real purchase price of the two pieces of land in the sale agreement, thus not giving grounds to the vendor to change his mind, leading to the above-mentioned consequences. The issue concerns the property purchasers rather than the vendors, since the purchasers are the ones in a worse position, especially when they are deprived of the property they purchased. Therefore, they ought to agree and state the real sale price of the property purchased in the sale agreement, thus avoiding the risk to lose both the property and their money.

Besides, nowadays when every person is “put on record”, no purchaser has a reason to conceal part of the purchase price of a property, because he cannot avoid paying tax and also it is not to his interest to be exposed to pointless risks. On the other hand, sooner or later he himself could be the vendor of the property purchased and he would have to pay the money he believes he has saved which could be much more. He might avoid paying some land transfer fees, but at some other time in the future he will have either him or his successors in title to pay much more money by way of capital gain tax or income tax. As regards the vendor, he is obliged to give account on the extra money he would get “under the table”, since, as it is obvious, he would not be able to deposit it in any bank account, due to the abolition of the banking confidentiality, both in Cyprus and the EU countries. Even if he thinks of spending it to cover his daily needs, this is neither a solution nor an excuse to act illegally.


George Coucounis is an experienced lawyer practicing in Larnaca, Cyprus.

Educated at University College (London) and Thessaloniki University (Greece), George is fluent in English and has been practicing law in Cyprus since 1982.

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