Everyprospective buyer must conduct due diligence before purchasing a property, investigating all aspects concerning both the property and the seller, especially when it is a company and intends to develop a plot of land for construction. There are sellers who, through a company, enter into a consideration agreement and undertake to develop the property, enabling the buyer to deposit the sale contract with the Land Registry for specific performance purposes. To this end, the owners who granted the property in consideration co-sign the sale agreement, stating that they are doing so for the purpose of facilitating its deposition with the Land Registry without assuming any other responsibility.

The question that arises is whether or not the buyer is secured by the filing of the sale contract with the Land Registry, or will he be left without a house or apartment and lose his money?

What is certain is that the owners of the property limit their liability only to the right of specific performance and it is up to the seller as a company to develop the property or not. The failure of the seller to proceed with the project, despite receiving advances from buyers, exposes the buyers who may be left without a house or apartment and lose their money. They will suffer for years in the courts and in the end the deletion of the deposition of the sales contract from the Land Registry will be ordered and a decision will be made only against the seller as a company, which in the meantime has been placed under liquidation.

Court decision

A land development company agreed to develop a property for consideration with the aim of constructing a housing complex and entered into a contract with the owners of the property, specifying the houses that each party would receive as part of the consideration. It proceeded with the preparation of architectural plans and sold a number of houses to foreign buyers, receiving advance payments from them. Ultimately, the company was unable to develop the property and was placed into liquidation.

The property owners proceeded to court and obtained orders that they had legally terminated the consideration agreement and deleted its deposition from the Land Registry. The property owners also brought legal action against the buyers of houses that would be built on the property and obtained an order for the deletion of the deposit of their sales contracts from the Land Registry, except for one buyer whose sales contract remained encumbering the property.

The buyer who remained obtained a judgment against the company for the amount of the advance payment and claimed the maintenance of the encumbrance created by the deposit of the sales agreement with the Land Registry, until the amount of the advance payment was paid to him.

The District Court of Paphos issued a judgment vindicating the owners of the property, ordering the deletion of the deposit of the buyer’s sales agreement and rejected his relevant claim.

Conclusion

The court emphasised that the specific encumbrance created by the deposition of the sales agreement is valid until the issuance of a specific performance order or until the award of damages in favour of the buyer, provided that he fulfilled his contractual obligations.

The buyer had two options: either to proceed with the issuance of a specific performance order for the house he purchased but did not build or to seek the award of the amount, as he did against the company, making it a counterclaim defendant. The buyer proceeded to the legal remedy that allowed him to be awarded damages in his favour for the amount of the advance payment he paid to the company.

By this conduct, the buyer chose to benefit by securing the refund of the advance payment, waiving his right to specific performance.

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