WHAT IS A 'TRAPPED BUYER?'
A ‘Trapped buyer’ is a term often used to refer to property owners in Cyprus who have purchased real estate without title deeds. Although this may seem somewhat peculiar, this practice is common across Cyprus. It is especially prevalent when purchasing off-plan or properties in new developments.
A LEGAL PROMISE
Buying a property in a new development typically means that title deeds will only become available after a formal legal process is completed. This means that these purchases are based on a legal promise instead. Although this concept is straightforward, it is entirely dependent on several other factors that can take several years to complete. This, in some cases, has left some property buyers unable to obtain their title deeds.
NO GUARANTEES
The reality of the situation is that there are several obligations that have to be fulfilled by all stakeholders concerned before any transfer of title deeds can take place. These often include legal, along with several financial obligations. All of these need to be met in full before any such process can continue. If these obligations are not met, then title deeds are simply not issued. This often causes delays and, in some cases, a constant legal battle. Many have found to their dismay that this occurs mainly because of outstanding debts, owed by the developer in the form of mortgages or finance agreements, still attached to their properties. This means that creditors often block the transfer of deeds until all monies owed, usually by the developer or a previous owner, are paid.
SEEKING A LEGAL SOLUTION
Defined as trapped buyers, these property owners are often subjected to a series of legal battles in their attempts to obtain title deeds. Although most remain optimistic, they still face an uphill legal struggle with no guarantee of an outcome. 10,000 such cases are currently pending in Cyprus, and the government, because of this, is actively seeking a legal solution to the matter. They are attempting to achieve this by introducing a series of new amendments to relevant legislation. Previous attempts to do this, however, have been thwarted by creditors.
AN APPEALS COURT DECISION
A new law, which was passed in 2015, was enacted to enable the land registry to re-examine all applications for title deeds. This was halted, however, when an appeal was launched by several creditors. The appeal found that the new law was, in part, invalid. This was based on the fact that it would cause lenders to incur unrecoverable losses. As a result, the land registry still has no right to transfer any title deeds of properties that still have debt attached to them.
NEW SOLUTIONS
The Interior Ministry and the Land Registry have since made renewed efforts to create an environment that will find the 2015 law to be constitutionally valid. This, in effect, would reverse the recent appeals court decision. They have stated that, provided there is documented evidence that the buyer, in all cases, has fulfilled all of their financial obligations, then they should be able to proceed to secure a transfer of title deeds.
A COMPLEX LEGAL ISSUE
Whilst the legal issue remains somewhat complex, the Interior Ministry and the land Registry remain confident that a solution can be reached. In light of this, the Interior Ministry has put forth several proposals to help resolve the issue. All current applications remain pending until this can be clarified.
TRAPPED PROPERTY BUYERS
There are currently over 10,000 trapped property owners across the island. Some of these buyers, having fully repaid their home loans, are still unable to obtain title deeds. This is mainly because their properties are still being affected by developers with unpaid debts. Although the government has issued further assurances, there is still no viable solution in sight. As this problem remains relevant, their continued frustration and disillusionment is still apparent.
Some of these property owners are also facing the prospect of paying off the outstanding debts that are owed by their respective developers. Others are also claiming that they are being forced to act or face foreclosure because of these debts. In equal measure, most of these trapped property buyers are blaming the banks for helping to create this situation. They maintain that if banks had enforced the proper use of funds in the first instance, then this situation might have been avoided.
As a result, all concerned are constantly being urged to take immediate action to resolve the issue. The majority of political parties, aware of how urgent the situation has become, are also demanding a change. They are asking for the government, which fully acknowledges the urgency to protect trapped buyers at risk of losing their homes, to use new legislative measures to resolve the issue from a legal point of view. This would then obligate banks and credit acquisition firms to find just solutions that would assist buyers.
The government has recently stated that constant efforts are being made to find a legislative solution to the problem. This comes after a recent court ruling that originally declared some provisions in favour of trapped property buyers unconstitutional. This resulted in reversing several facets of the original ruling in favour of creditors. This forced the government to re-examine the bill, and they are now working on a new bill that will be presented to parliament within the near future.
