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The buyer will pay the sale price of a property directly to the bank and not to the seller. In this way, the seller’s loan to the financial institution will be paid off and the links will automatically be removed from the property and transferred smoothly to the buyer after the payment is completed. Through the new regulation, the Ministry of Finance estimates that it will put an end to the creation of new stranded property buyers.

On the occasion of today’s debate in the Parliamentary Legal Committee of the bill which creates a mechanism for safeguarding the interests of real estate buyers, protecting them against the seller’s obligations to banks and eliminating delays in the transfer of property titles, the Ministry of Finance forwarded clarifications to the Parliament.

The bill, according to the competent ministry, ensures the transfer of the property for the benefit of the buyer, provided that the buyer fully fulfills his contractual obligations to the seller, based on the sales document. In the event that the bank, despite full payment of the sale price by the buyer, does not release the property from the mortgage, then the director of the Land Registry Department, with a Type B certificate issued by the bank upon payment, releases the property and transfers it free from encumbrances.

The innovation of legislation

According to the Ministry of Finance, the great innovation of the legislation is that the sale price is paid directly to the bank account of the seller’s project, with the consent of all parties involved, i.e. bank, seller and buyer (certificate Type A) and that with the full payment of the sale price by the buyer, the property will be transferred free of all encumbrances in the name of the buyer. In addition, the buyer is aware, upon signing the sales document, of the encumbrances that may be burdened on the property. However, there will be no retroactivity and the new regulation will apply to real estate sales transactions that will take place from the day of approval and publication of the legislation in the Official Gazette of the Republic. Existing property buyers will be covered by a legal framework that has been in place since 2015.

Developers disagree

Despite the Ministry of Finance’s clarifications, the Association of Land Development Entrepreneurs still has reservations and disagrees with the bill. With his memorandum to the Parliament, he argues that the bill does not protect the buyer but, as he notes, it is left hanging. He warns that the Cypriot property market will be affected, as foreign property buyers will turn to countries where their investment is guaranteed from the start. At the same time, they suggest that together with the issuance of the building permit, between the bank and the debtor (seller), the percentage that will be retained by the mortgage lender from each sale and that the amount after deduction of VAT should not exceed the share of the apartment in the land, plus 20%, to cover any unforeseen interest/expenses. Also, they ask that the seller has the right to collect any balance of the price, so that he can finance the rest of the project and partially his operational needs.