Weaknesses in Executing a Sale Contract

Weaknesses in executing a sale contract in Cyprus

George Coucounis explains how the sale contract in Cyprus burdens only the vendor's share and not the whole property.

Purchasers of an off plan or under construction immovable property ought to be very careful when purchasing such a property, since it has no separate title deed and they must ensure that all the registered owners of the land must be included as vendors in the sale contract. By doing so, they protect themselves in the purchase of their property; the sale contract will create an estate in land over the whole land upon which the sold property is to be constructed and the share of all the vendors in the land will be burden and affected by the sale contract when it is deposited at the District Land Registry Office in Cyprus.

In most cases the real owner of the land is not only the developer, but other persons too, the original owners who made an agreement with the developer to develop the land, who remain co-owners in the land. The co-owners cannot become “the obliged vendors” in any sale contract, unless they become party to it.

If they are not a party to the sale contract, it can be deposited at the District Land Registry Office for specific performance purposes as against the developer whose share will be burden, but not as such against the co-owners and the whole land.

As a result, the remedy provided in Law 96(I)/1997 is ineffectual, does not concern the co-owner and it cannot be invoked against him. He is not a party to the agreement; he has no contractual relation with the purchaser and the sale contract has not created an estate in land over the whole property, it only affects the share of the developer-vendor.

In the event of any dispute between the developer and the original owner of the land, the purchaser is exposed since the remedy provided by the aforesaid law to put the vendor under the observance of an order of the Court to issue the separate title deeds becomes ineffective and of no use to the purchaser. In the alternative, when the sale contract is also signed by the original owner who kept a share in the land in his name, thus by all the registered owners and he has undertaken along with the developer–vendor to issue the separate title deeds, the purchaser is protected by the law. In such a case, a Court order can be issued against all of them as registered owners of the land to issue the separate title deeds.

The Supreme Court of Cyprus in a recent judgement ruled that the original owner who made an agreement with the developer to develop his land and kept a share in the land, thus he remained a co-owner, neither can he be considered as the “obliged vendor” nor a constructive trust was created through which an order could be issued against him. In particular, the original owner who was the absolute owner of the land had signed an agreement with the developer-vendor for developing his land and for the construction of houses therein, including an agreement as to which houses each one of them would take. The original owner of the land transferred certain shares of the land to the developer and he knew that the developer was selling the houses he would get.

Although the construction of the houses was completed, disputes had arisen in the completion of the agreement between the original owner and the developer. Therefore, the procedure for the issue of the separate title deeds was stag and hence the purchasers of the houses who purchased them from the developer filed civil actions before the Court.

The purchasers, even though they had purchased the houses through sale contracts which were deposited at the District Land Registry Office, their actions were dismissed with costs. The purchasers had purchased the houses only from the developer, paid the price, but the original owner was not a party to the sale contracts. Thus, because of the differences between the original owner and the developer, the latter could not be held responsible for not issuing the separate title deeds.

On the other hand, the original owner could also not be held responsible since he was not a party to the sale contracts. The estate in land created by the deposition of the sale contracts at the District Land Registry Office, according to article 7(1) of Cap. 232, concerned only the share of the developer-vendor in the land and not the whole land.

A different approach would have led to the paradoxical result of imposing an estate in land to the ideal share of a co-owner, who had no contractual or any other relation with any purchaser or vendor.