The Law regarding Conveyancing

Whether you are buying land, new development property or an existing property, the same legal procedure is followed:

1. The buyer and seller reach an agreement and a Sale Agreement is drawn up.

2. Four copies of this agreement are made and all of them are stamped at the District Land Registry Office. One of the copies is stamped as ‘Original’ and will usually be retained by the Purchaser’s lawyer.

3. The other copies are each stamped with a CY£1 stamp and certified as true copies of the original.

4. The stamp duty is paid by the purchaser or on his behalf by his attorney duly authorised by the Power of Attorney document and one of the copies of the Sale Agreement is registered with the District Land Registry Office for purposes of Specific Performance.

5. The third copy of the Sale Agreement is lodged with the mortgage provider (if any). The last copy of the Sale Agreement is given to the vendor.

6. The Terms of the Sale Agreement are complied with and the purchaser takes possession of the property.

7. When the title deeds have been drawn up, the parties, or their respective attorney(s), meet to pay the Land Registration Transfer Fees at the District Land Registry Office and to register transfer of the property from the vendor to the purchaser. Unless the Sale Agreement states otherwise, the transfer fees are payable by the purchaser.

Stamp Duty
Stamp Duty is payable by the purchaser on signature of the Sale Agreement to the sum of £1.50 per £1,000 up to £100,000 and £2.00 per £ 1,000 thereafter.

Land Registration Transfer Fees – Payable by the Purchaser
On transferring title you will be charged in tranches as follows:

Value up to £ 50,000 3% Fee payable at £50,000 £1,500
£50,001 to £100,000 5% Fee payable at £100,000 £4,000
Over £100,000 8% Fee payable at £150,000 £8,000

Note that these bandings are per person. If you purchase a property jointly on a 50:50 basis for, say, £100,000, you will both be liable to pay £1,500 – an overall saving of £ 1,000.

Specific Performance
This is a particularly important concept of the Law of Conveyancing. The chief purpose of Specific Performance is to protect the purchaser. The most common reason for requiring the court to invoke the Specific Performance Law is that for whatever reason a property developer unreasonably delays transferring title.

The Law of Specific Performance provides that in the event that the Sale Agreement has been deposited with the District Land Registry Office and providing that both parties are in a position to effect transfer, then within six months of notification by the purchaser to the vendor the vendor must duly effect transfer; if he does not the purchaser can apply for a court order requiring immediate transfer.

There are two further effects of Specific Performance, both of which act in protection of the purchaser:

1. When the certified true copy of the Sale Agreement is deposited with the District Land Registry Office, the Sale Agreement acts as an onus on the property. The District Land Registry Office has been notified that on such and such a date Mr. A signed an Agreement with Mr. B to buy the property. Mr. B cannot now renege on that Agreement and instead decide to sell the property to Mr. C. This effectively stops gazumping.

2. If the Sale Agreement is not registered with the District Land Registry Office and subsequently, sometimes many years later, both parties attend to pay the Registration Transfer Fees, the amount payable will be assessed upon the value of the property at the date of the visit. However, if the Sale Agreement was originally registered with the District Land Registry Office, the amount payable will be assessed on the value of the property on the date that the Sale Agreement was signed. Since the value of property tends to increase, the buyer will generally prefer to pay on the value of the property at the earlier date!

Power Of Attorney

The processes involved in buying property and obtaining title are many. Most cannot be bothered with all the hassle, assuming they are familiar with the procedures involved in the first place. So most people appoint an agent to do the work for them. This appointment is effected by signing a Power of Attorney. The agent you appoint will usually be your lawyer and his price for acting as your legal representative will normally be included in the price he first gave you to buy your property.

Legal procedure - stage payments for new property

The terms and conditions that must be observed by the developer will be set out in the Sale Agreement, as will the amount and timing of the various stage payments the buyer will be obliged to make. The Sale Agreement will be given to you by the developer and once you have signed the document you will legally be bound to it; there is no ‘cooling off’ period prescribed within Cyprus’ laws. So it’s important that the Sale Agreement is fair and reasonable: do not sign the document until both you and your lawyer are happy with all of its clauses and that you have accessed the money you need, including having a firm mortgage offer if required, to make the payments involved.

There is no set formula for stage payments; larger developers will tend to be strict in the contractual terms that they lay down whereas smaller developers will be more elastic.
Some developers will attempt to link stage payments to specific dates, others will link stage payments to work actually done. Since linking payments to specific dates does not give the developer any incentive to actually get on with building your property, a competent lawyer will try to link stage payments to progress made. The initial deposit, usually payable upon signature of the Sale Agreement, can vary enormously too.

Interim Payments

Having paid the deposit there will follow a series of payments. When the works that are required for a particular stage are complete and payment for that stage is due, a ‘Notice of Completion’, will be signed either by the architect or by the supervising civil engineer employed by the developer. The Notice of Completion will be served on you or on your attorney, and you will be allowed a short period of grace to make the payment.

Alternatively if you have arranged a mortgage, then the Notice of Completion will be automatically be referred to your mortgage provider for payment. Your bank will then arrange for an inspection to be carried out and if everything is in order make payment to the developer.

Procedure if there is a mortgage involved.

The mortgage is based upon the Sale Agreement, and your mortgage provider will retain a signed and stamped copy. The mortgage provider will adhere to the payment schedule after the buyer has provided evidence that the initia funding provided directly by himself has been paid to the developer.

Title Deeds

Title Deeds on Property Developments only become available after some years have passed – 3 years is a typical period – as a protracted procedure is involved to divide the land that the property developer initially purchased for the whole development. The legal procedure to produce individual title deeds will only start when all of the units which comprise a development are completed. When the developer was initially granted a building permit he was granted the permit for the whole project.

Legal procedure - buying an existing property

While the legal procedures are very much in accordance with the principles already described, buying an existing property is a simpler procedure. Firstly the buyer will usually be purchasing from an individual, rather than a developer. Secondly, in most cases, a separate title deed will already exist.

That said, there are a few extra jobs that the lawyer will have to undertake on the buyer’s behalf and the terms of the Sale Agreement will be different.

Your lawyer’s first job will be to inspect the title deed of the property the buyer wishes to purchase. He will check at the District Land Registry Office that the deed correctly describes the property – for instance that a house is described as a house and not as a field! Your lawyer will also check the title deed for any charges registered on the property – such as an outstanding mortgage.

Your lawyer will then examine the draft Sale Agreement, which he will receive from the vendor’s lawyers and which he will amend, as necessary, in your best interests. One would normally expect to pay a 10% deposit and the balance of 90% upon completion. There may be an amount withheld pending transfer of the property. Depending upon the value of the property and the status of the vendor, the buyer’s lawyer may insist upon linking a payment to the provision by the vendor of a certificate of Capital Gains Tax Clearance. The other charges incumbent upon the property are local rates, immovable property tax, municipal rates, sewerage (if any), refuse collection and common expenses (for a flat or apartment). Apart from Capital Gains Tax and Immovable Property Tax, these ancillary charges are unlikely to exceed £300 a year.

This article is an excerpt from the booklet Living in Cyprus (1), published by James Franklin and adapted from a publication of The Sunday Times co-written by the same author.