Resale of property without title deeds. “Assignment” or “Cancellation”?
11 October 2019
When purchasing newly developed property in Cyprus, it may take years before a proper title deed is issued in the name of the buyer. Consequently, where the original buyer wishes to resell such a property, without a title deed in his name, it cannot be legally effected by way of an outright contract of sale between the original buyer, now as seller, and the new buyer. Essentially there are two options in such cases. The first option is the assignment of the rights of the seller, under the existing contract of sale with between the seller and the developer, to the benefit of the new buyer. The second option is the cancellation of the original contract of sale between the seller and the developer and the entering into a new and identical contract of sale between the new buyer and the developer. This article explores the process, the legal and the practical considerations of the two options.
Assignment of a Contract of Sale:
The assignment of a contract of sale has the purpose of assigning the existing legal and equitable rights of the property in question over to the new buyer. By assigning the rights to the new buyer, the ownership of the property is effectively transferred to the assignee, who shall henceforth have all rights, including the issuance of the title of the property in his name.
In such case, the seller and the new buyer must enter into an assignment agreement by which the seller, for a purchase price described, unequivocally assigns to the buyer, any and all legal rights resulting from the original contract of sale by which he purchased the said property from the developer. The said assignment agreement must be duly stamped in accordance with applicable law and must be submitted to the relevant District Land Registry where the property is situated.
Before the submission of the assignment contract to the District Land Registry, the seller must settle any accruing payments in connection to the said property as well as any accruing property taxes and capital gains tax arising from the said assignment. Towards that effect the seller must secure receipts of relevant authorities, including a tax clearance.
Once the above documentation is ready the parties (or their legal representatives) must attend the District Land Registry in order to submit the relevant documentation along with designated Form D130 for the assignment of a contract of sale. It must be stressed that a submission fee is applicable on the assignment calculated as 0.5% of the new purchase price of the property with a cap at EUR3000 .
The involvement of the developer is not necessary under this process but the developer must continue to perform its obligations under the original contact of sale for the benefit of the assignee, namely the new owner.
Cancellation and Submission of a New Contract of Sale:
The other option to resell the property is to proceed with the cancellation of the original contract of sale between the seller and developer and the signing of a new contract of sale between the new buyer and the developer. This will in effect achieve to indirectly transfer all the rights of the property from the seller to the buyer, as if the new buyer was the original buyer of the property. In this process the consent and actions of the original seller, namely the developer, will be required, as the new agreement will, in effect, create a direct contractual relationship between the developer and the new buyer, which will be legally binding and enforceable. In most cases there will be a contractual obligation of the developer, under the original contract of sale, to comply with such cancellation request but still, naturally, they may be reluctant to act on account of the administrative burden. In some case processing fees may be imposed on their end.
The process entails the signing of a cancellation agreement between the seller and the developer and the simultaneous signing of a contract of sale, identical or significantly similar with the original one, between the new buyer and the developer. Consequently, the original contract of sale, submitted to the District Land Registry for specific performance purposes, which is cancelled must be withdrawn and there must be a simultaneous submission of the novel contract of sale between the new buyer and the developer. The parties (or their legal representatives) will also be requested to sign a relevant cancellation form provided by the District Land Registry at the day of submission.
It is emphasised that in such cases the Land Registry does not, per se, require tax clearance for the cancellation and withdrawal of the deposited contract of sale. Having said that, section 10 of Capital Gains Tax, as amended, entails an obligation to inform the tax office in such case of cancellation and disclosure of the cancellation and the original contract so that the tax authorities determine if capital gains tax is payable. In other words, the process is feasible without tax clearance but the seller will be liable to pay any tax due if such obligation is determined by the tax authorities at a later stage.
In the case of cancellation, it is noted that the buyer shall undertake the cost of stamping the cancellation and the new sale agreement to be deposited to the District Land Registry, in accordance with applicable law. There are no fees by the District Land Registry fees for cancellation and resubmission of the contract of sale corresponding to the new sale price.
In conclusion, both of the options of “assignment” or “cancellation” are processes capable to indirectly effect transfer of ownership in the context of a resell of a property without title deeds. The final decision on which option is suitable should be made by the parties (and their legal representatives) in an effort to achieve efficiency and practicality, taking into account the relevant factors and the specific circumstances, including the willingness of the developer to act, taxes, assignment fee costs, timeframe, and other relevant considerations, such as whether the property is mortgaged or otherwise encumbered.
For more information on the resale of property without title deeds or any other property related issue you may contact Eleni Miltiadous at email@example.com
Author: Eleni Miltiadous
The above is for information purposes only and does not constitute advice.