Buying a resale property

Do you have a problem getting your Title Deeds?
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Joined: 09 Mar 2013 21:18

Buying a resale property

Post by Rafael »

I have a question that may actually be of interest to other people who are considering buying a house in Cyprus since I would think that that should be a fairly common situation. We are considering buying a particular resale property (a house) that does not have a title deeds. The current owners bought the house from the developer several years ago. The house is a part of a larger development project that is still far from completion, and consequently there are no separate title deeds and I strongly suspect that there won’t be separate title deeds in any foreseeable future. But the place is very nice and the price is relatively cheap.

We have not checked the developers title deeds yet (for the whole project, as there are no separate titles yet), but I presume that there must be a mortgage for which the land (for the whole project) serves as the collateral. I wonder whether we can still safely buy this house if we manage to negotiate a waiver with the bank that issued the mortgage to the developer, meaning having the bank sign off any claims to our subplot of land. Will such a waiver provide a 100% protection (assuming there are no other claims) of our property should the developer declare bankruptcy? Also, how much can we expect the bank to charge us for such a waver?

Given the legal complexities, we are, of course, eventually going to retain services of a local independent attorney but at this point I am trying to understand whether we can do it or we better consider only those houses that already have title deeds. I would very much appreciate any input.

Thank you in advance,
Nigel Howarth
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Re: Buying a resale property

Post by Nigel Howarth »

Dear Rafael

The choice of whether you buy a house with Title Deeds or one without is your decision - providing you understand and are prepared to accept the potential risks involved. But to remove all risks, it is best to look for a house that already has a clean Title Deed (i.e one that hasn't been mortgaged, etc).

If you are looking to buy a resale property that has yet to be issued with its deeds, the government introduced a new law in 2011 that gives you some added protection and which is also of benefit to the vendor.

Under that law entitled ‘The Sale of Immovable Property (Specific Performance)’, N81(I)/2011, you and the vendor can use a vesting/assignment contract. This enables the sale to take place without any involvement (or even knowledge) of the vendor.

Under the new law it is also possible to repay an element of the mortgage (if any) to the bank and the balance to the vendor. E.g. If there are 10 houses on the development and there is a €200,000 mortgage on the land, and the property you are interested in buying is priced at €300,000 - you can pay €20,000 to the bank to clear the mortgage to obtain a waiver and pay €280,000 to the vendor.

However, in your case I think it unlikely that the vendor will accept this arrangement.

The waiver will give you 100% protection from the bank that loaned the developer money should he become bankrupt. But there will be some extra charges to pay to obtain the deeds to the property. This would include the Administrators fees who was liquidating the company plus any unpaid taxes owed by the developer (assuming that the Administrator was unable to recover these costs through liquidating the company's assets).

If the land on which the property is built is mortgaged, you can ask the bank for a waiver. They may just give you this - or they may charge. And I suspect their charges (if any) will be based on a percentage of the outstanding amount of the mortgage.

Nigel Howarth
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