The terms of an agreement on the basis of which parties agree to exchange immovable properties determine their rights; where no time for the transfer is specified but it depends upon the issue of the title deeds, reasonable time must be given by the parties taking into consideration the reasons for the delay of the counterparty. The option to terminate the agreement presupposes its breach, which an average reasonable person will understand in a manner that creates no doubt as to the fact that the time limits have been exceeded. When the innocent party did what was expected from him to fulfil his obligation and awaits the counterparty to fulfil his own obligation, but he does not respond unreasonably, the innocent party has the right to terminate the exchange agreement and be released thereof. For the termination to be considered valid and justified, violation of the Contract Law is required, which provides the following: “Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time. The question “what is reasonable time” is, in each particular case, a question of fact”.
As long as the party who delays informs the other party that the delay is due to the procedure for the issue of the title deeds to be exchanged and that reasonable steps have been taken at the Land Registry, the matter must be considered carefully. The mere lapse of the time given through a notice to the other party who is in delay, to appear before the Land Registry for the exchange of the properties, does not give the right to his counterparty to terminate the agreement. The Supreme Court in a judgment issued on 16.10.2018 addressed the above issue and held that the court of first instance wrongly decided that the appellant violated the terms of the agreement, thus giving the respondent the right to terminate the agreement. The contract concerned the exchange of a house belonging to the appellant, purchased from a developing company with two building plots belonging to the respondent. The court of first instance did not take into consideration that the developer was responsible for issuing the title deed and the company as well as the appellant informed the respondent for the various steps taken regarding the issue of the title deed.
The Supreme Court underlined that the above facts were important when examining if the time given by the respondent to the appellant for the issue of the title deed was reasonable. These terms of the exchange agreement, either seen alone or in connection with its other terms, were not capable to justify the court in interpreting them in the manner it did when examining the violation. What the parties agreed was to take forward the procedure for the issue of the separate title deed as soon as possible. This is the exact meaning of the said term as it can be understood by an average person. The Supreme Court found wrong the finding of the court of first instance that the respondent had given reasonable notice for the issue of the separate title deed of the house; therefore, the notification given to the appellant to appear before the Land Registry for the transfer of the exchanged properties was not justified. Hence, the termination of the agreement by the respondent was unlawful.
The Supreme Court concluded that due to the success of the appeal and the setting aside of the first instance judgment, the exchange agreement continues to be in force. It is up to the contracting parties how they will proceed having in mind that the separate title deed of the house has been issued.
George Coucounis is a lawyer specialising in the Immovable Property Law, based in Larnaca, Tel: 24 818288, [email protected], www.coucounislaw.com