Simultaneous Payment and Transfer of Property

Simultaneous payment and transfer of a property

George Coucounis advises that payment and transfer of an immovable property in Cyprus are separate but mutual obligations which must be fulfilled simultaneously if it is so stated in the sale agreement.

There is often a term in a sale contract concerning an immovable property in Cyprus stating that a certain amount of the purchase price will be paid concurrently with the transfer of the property to the purchaser. In such a case, the purchaser's payment obligation and the vendor's transfer obligation are simultaneous and reciprocal, thus they must be fulfilled at the same time.

Article 51 of the Contract Law, Cap.149 is applicable, which provides that when a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise. Therefore, there is no issue as to which of the parties is going to perform his obligation first and if one of them fails to meet his obligation, the other party cannot claim that there is a breach of the sale contract, even if the time for the payment and the transfer of the property is stated in the agreement.

The above issue was examined and decided by the Supreme Court in a case where both the vendor and the purchaser were expecting each other to meet their obligations. They signed a sale agreement according to which the vendor agreed to sell to the purchaser an immovable property for the price of 90.000 CYP and the last instalment, plus interest, was to be paid on/or before a certain date, concurrently with the transfer of the property to the purchaser. The time went by and neither the purchaser paid the instalment nor the vendor offered to transfer the property and claim the money.

The purchaser was ready and willing to pay the money due but he expected the vendor to visit him as he did before with the previous instalment. On the other hand, the vendor claimed that since the purchaser did not make the last payment on the agreed date, he was entitled to terminate the sale contract, as he did the day after; he relied on the sale agreement which stated that the time and payment of the purchase price were essential terms of the agreement.

The Court of first instance decided that the answer to the above was to be found in article 51 of the Contract Law, Cap.149 and that the aforesaid terms of the sale agreement were mutual and to be performed simultaneously.

The vendor having failed to inform the purchaser by the agreed date that he was ready and willing to transfer the property to him, he could not claim that the purchaser was in breach of the sale agreement by not paying the balance due on the agreed date. Therefore, the vendor was not entitled to terminate or cancel the sale agreement and the relevant notice he sent was not valid to legally terminate the agreement.

Moreover, the Court being satisfied that all the provisions of article 2 of the Specific Performance Law, Cap.232 were met, i.e. the sale agreement was written, duly stamped and deposited at the District Land Registry, the vendor was called to transfer the property and an action was filed within six months from the agreed date, ordered the specific performance of the sale contract, thus the transfer and the registration of the property into the name of the purchaser, on the condition the purchaser paid the last instalment, plus the interest due.

The Supreme Court upheld the above and decided that both parties acted in a similar manner with regard to their mutual obligations on the agreed date. They did not contact each other and none of them expressed willingness and readiness to meet their obligations. Based on that, none of them acquired a right against the other by only referring to the agreed date.

Regarding the vendor, since he remained silent and he did not ask the payment on the agreed date, having also failed to inform the purchaser that he was ready and willing to transfer the property simultaneously, he was not entitled to terminate or cancel the agreement. The sale agreement remained alive and valid but its terms concerning the time of the payment were not essential anymore. From that point, each party was responsible to perform and the matter was not as to who terminated the agreement first.

The purchaser would have been guilty of breach of the agreement if he was asked to pay and accept transfer of the property within a reasonable time and failed to do so. The vendor could not simply terminate the agreement, as the Court below correctly decided.