In June 2024, the Cyprus Court of Appeal issued a pivotal ruling that has profound implications for ‘trapped buyers’—individuals who, despite fulfilling their contractual obligations, have been unable to obtain title deeds for properties due to developers’ outstanding mortgages. This decision scrutinizes the constitutionality of the 2015 “Trapped Buyers Law,” which was enacted to address such predicaments.
Background of the Trapped Buyers Law
The 2015 legislation aimed to assist property purchasers hindered by developers’ financial encumbrances, such as unpaid mortgages, preventing the transfer of legal ownership. The law empowered buyers to apply directly to the Land Registry for title deed transfers, effectively bypassing developers’ financial liabilities.
The Court of Appeal’s Decision
On June 20, 2024, the Court of Appeal examined a case where a developer had sold an apartment encumbered by a prior mortgage to the Bank of Cyprus. The Land Registry had authorized the transfer of the title deed to the buyer under the 2015 law. However, the Bank contested this decision, asserting that the transfer infringed upon its rights as a mortgagee. The Court of Appeal ruled in favor of the Bank, declaring specific provisions of the Trapped Buyers Law unconstitutional. The Court emphasized that these provisions violated property rights and contractual freedoms protected by the Constitution, thereby upholding the Bank’s claim over the mortgaged property.
Implications for Trapped Buyers
This ruling has significant repercussions for numerous trapped buyers in Cyprus. The Land Registry has suspended the processing of existing applications and halted the acceptance of new ones under the 2015 law. Consequently, many buyers who have completed payments for their properties remain unable to secure legal ownership, leaving them vulnerable to foreclosure actions initiated by developers’ creditors.
Government Response and Future Outlook
In response to the Court’s decision, the Cypriot government, in collaboration with legislative authorities and the Law Office, is actively seeking alternative solutions to safeguard trapped buyers’ interests. Potential measures include drafting new legislation that balances the constitutional rights of creditors with the need to protect bona fide property purchasers. The government aims to develop a legal framework that addresses the complexities highlighted by the Court, ensuring equitable treatment for all parties involved.
Conclusion
The Court of Appeal’s ruling underscores the intricate balance between upholding constitutional property rights and protecting consumers in the real estate market. As Cyprus navigates this legal landscape, the development of a fair and effective solution for trapped buyers remains a critical priority, necessitating concerted efforts from all stakeholders to achieve a just resolution.
