Cyprus Mail

‘Trapped’ purchasers in limbo

Purchasers of mortgaged immovable property, referred to as ‘trapped purchasers’, seem to be in limbo after the challenge of the constitutionality of the trapped buyers’ law by a credit institution before the District Court of Paphos on the ground that it violates the right to freedom of contract, as safeguarded by the Constitution. The issue was raised in an application filed against the decision of the Director of Lands and Surveys to remove and cancel the mortgages burdening four shops for which separate title deeds had been issued to register the shops in the name of their purchaser.

The credit institution secured an interim order suspending the procedure for the removal of the mortgages and the transfer of the registration of the shops in the name of the purchasers until the full and final hearing of the said application/appeal. The interim judgment of the court affects not only the said purchaser, but also thousands of other ‘trapped purchasers’, since it is possible that the Land Registry will abstain from taking any decision for the removal or cancellation of mortgages burdening purchased immovable property, pursuant to avoiding the imposition of any liability on the State until the outcome of the said case.

The ‘trapped purchasers’ legislation was enacted last year and enables purchasers of mortgaged immovable property who have no title deeds to obtain a separate title deed and transfer the purchased property in their name free of any mortgage.

In the aforesaid case, the decision of the Director was taken in the process of transferring mortgaged immovable properties in the name of the purchaser under the terms of the sale contract which was deposited at the Land Registry. In its interim judgment dated 25.10.2016, the court referred to the aforesaid procedure, which was laid down under the law that enables any person affected by a decision of the Director to file an application/appeal against the said decision within 30 days from becoming aware of it, holding that the credit institution disclosed an arguable case. The court stated that the basic argument the credit institution raised are unconstitutional.

Furthermore, the argument of the purchaser that a law is presumed to be constitutional until it is proved to be unconstitutional beyond any reasonable doubt was upheld and reference was made to the power of District Courts to examine the constitutionality of a law. The credit institution complained that the aforesaid articles violate its right to freedom of contract. The court held that the aforesaid legislation interferes with existing rights and obligations arising from mortgage agreements between the credit institution and the vendor, without issuing a final decision on the matter.

It added that the credit institution has the right to designate another immovable property of the vendor or its directors and guarantors on which the mortgage may be transferred and in the event that there is no such property, the Director will proceed with the removal of the mortgage and the deprivation of the credit institution’s rights which arise from the mortgage. Consequently, the credit institution demonstrated a visible possibility that the said law is incompatible with the Constitution.

The court concluded that the subject matter of the application/appeal is the correctness and legality of the decision of the Director of Lands and Surveys which has not been implemented yet and in the event that the Director proceeds with its implementation then the credit institution will incur damage amounting to the value of the four shops which will be transferred in the name of the purchaser, reducing in this way the value of its mortgages and taking away its security. Hence, the court made the interim order final and emphasised that the said law regards the purchasers of immovable properties mortgaged by the vendors, although the purchasers have paid the purchase price in full.


George Coucounis is a lawyer specialising in the Immovable Property Law, based in Larnaca, Tel: 24 818288,[email protected],


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