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Acquisition of Immovable Property: Need for Obligatory and Independent Legal Representation?

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Land registration is exercised by the Department of Lands and Surveys, one of the oldest government departments which commenced operations in 1858. The system was significantly developed in 1929 by completion of mapping, registration, and valuation of immovable property, following a cadastral general survey conducted by the authority at the time.

This had led to the legislative reform of 1945 by which the Ottoman laws and many of the later colonial laws were repealed. This reform comprised mainly of two laws: The Immovable Property (Tenure, Registration and Valuation) Law, CAP 224 and the Wills and Succession Law, CAP 195. The most striking effect of the said law reform was the rationalization and simplification of the law on property (categories of land, prescription, and inheritance). The 1945 legislation has been the subject of several amendments to date but nevertheless remains in force and forms, along with other related laws, the basis of the Cyprus property law system.

The system of immovable property registration is a system of registration of title. A registered person is considered to be the undisputed owner of the immovable property and his title to ownership is absolute, subject to the Director’s power to correct errors or omissions and the inherent power of the Courts to order the amendment or nullification of a registration.

The basic and most fundamental rights in land are the right to the use and enjoyment of the land, the right to income arising from land and the right to alienate or transfer land. These rights may be affected by contract, by legislation or by tenure.

There are two types of holding right or title over real estate in Cyprus, that is freehold and leasehold. Most Cyprus properties sold or purchased or otherwise disposed of constitutes freehold property. Land or immovable property may most commonly be acquired, inter alia, through transfer by way of gift or sale or exchange, by way of succession and pursuant to the provisions of an express trust.

Real estate has always been a safe long-term investment for Cypriots. The accession of Cyprus to the European Union in 2004 has led to an immense number of acquisitions of real estate in Cyprus for various reasons and purposes, by both EU and third-country nationals. In this respect, the increasing growth in the construction and real estate industry have consequently raised dealings with land or other property to thousands each year.

However, the need for maintaining legal security and protection in any given land or property transaction is of paramount importance for any interested or concerned party to such a transaction. This presupposes the obtainment of independent and reliable legal advice from the outset, in view of avoiding any unforeseen or potential pitfalls and undesirable consequences in the future. The complexity of the relevant laws and the formalities which need to be adhered to, make this imperative.

The recent past has shown that, particularly to the sale of off plan properties, buyers have repeatedly found themselves “trapped” in transactions that afforded no legal security. Victims of later bankrupt developers, of already mortgaged properties or of fraud, are only a few of the instances lacking clear legal advice and independent legal representation in conducting such transactions. There are other numerous cases where the seller had imposed his own advocate to act for the buyer, thus lacking impartiality. Consequently, the result has been the engagement of all these innocent persons in expensive and time-consuming legal battles with no certainty at all as to the outcome and further the negative impact to the good reputation of Cyprus as a safe destination to invest especially by foreign nationals.  

Legislative intervention has come at times to safeguard the conduct and finality of these transactions and moreover to protect the rights of innocent parties who, by default of acquiring legal advice or independent legal representation were inevitably faced with imminent financial and other consequences. This was done to cover the loopholes in legislation but not in absolute success.

It is believed that time has come for a more comprehensive solution that would serve proactively the rights of persons or entities wishing to transact in land or property at the Land Registry.

This necessitates the involvement of the legislature to enact and apply a system/framework that would make obligatory the handling of a property dealing or conveyancing to a competent, independent and experienced advocate representing either of the parties, or at least the buyer who is in most cases the party at risk, rather than leaving such appointment to the option or discretion of the parties. Further to this, no legal document should be left to be deposited within the Land Registry as per the Law, without the prior written verification or otherwise certification that such an advocate representing the affected party has advised accordingly this party of any hazards or legal implications surrounding the transaction.

The duty of care owed by the advocate in such a case would be to act with transparency in order to ensure, to all reasonable extent, legal protection to the party affected and to minimize any contingencies arising in the future, based on the principles set out in the landmark case issued by the Supreme Court of Cyprus in Muriel Beaumont and other v. NK [2010] 1 ΑΑΔ 525, which has in essence adopted English authorities on the matter with particular reference to Pilkington v. Wood [1953] 2 Αll E.R. 810

The duty of care owed by an independent and competent advocate in such a case would be to take all appropriate measures which, although not exhaustively, include the following:

  • Identify the key legal issues and determine the steps necessary embracing the transaction.
  • Identify any inherent dangers and warn the party about them.
  • Conduct all necessary customary enquiries and more importantly conduct a comprehensive search at the District Land Registry in which the property is situated, in view of ascertaining the existence of any mortgages, memos, encumbrances or other charges on the property which take in priority, pursuant to section 51A (2) of the Immovable Property (Tenure, Registration and Valuation) Law, CAP 224.
  • Where the property in question bears no separate title of ownership, identify and warn the client of all issues concerning the issuance of a title in the future and under what circumstances this matter may be at peril. Further, conduct a search to determine that an urban planning permit or a building permit is in place and if not, clearly advise party of all possible risks.
  • If the seller is a legal entity, to conduct an appropriate due diligence search and provide advice on any issues or risks arising as to seller’s insolvency.
  • Review the terms of the Contract with special reference to terms as to consideration, mode of payment, time prescribed to delivery of possession or of issue of separate title or of transfer, and all other related matters important to full execution of the Contract.
  • Arrange for payment of stamp-duty imposed by Law on the Contract.
  • Deposition of the Contract with the Land Registry giving priority over any charge or encumbrance later registered.
  • Supervise and take all actions to ensure that all formalities are met until transfer of the property or otherwise at the Land Registry.
  • Provide legal advice on all stages.

The above description of duties summarizes the measures and actions that advocates must take in protecting or safeguarding the interests of people wishing to transact in property. The aim of a professional is to assist parties and especially foreign nationals to have a clear view of the land registry system and the Law.

That is why we need to accept now more than ever, that the obligatory appointment or assignment of this work to independent and experienced advocates is necessary to ensure that the land registry system, with its rich history and its now developed form, is not exploited at the mercy of those who do not contract in good faith. The matter is left to the hands of the legislature.

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