A bill has already been drafted and put to a public consultation by March 2, to create a mechanism to safeguard the interests of real estate buyers, protect them against the seller’s obligations to banks and eliminate delays in the transfer of property titles.
The mechanism provided by the bill ensures in advance that the transfer of real estate will take place immediately and as soon as the buyer fulfills his contractual obligations. In particular, it is provided that in order to file the purchase and sale document in the Land Registry, the seller must, in addition to the mortgage, remove any other encumbrances on the property (due to the seller’s debts). When the mortgaged property reaches the buyer, he in turn will have to pay to the bank (and not to the seller) up to 80% of the sale amount of the property, in order to repay the seller’s loan to the financial institution. When the buyer pays the money to the bank, the encumbrances will be removed from the mortgaged property and this will be transferred to the buyer.
Since 2013, in the context of the implementation of the fiscal consolidation memorandum, the Republic had committed to the troika that it would take measures for the rapid transfer of real estate titles, which did not happen.
After the first attempt failed, the Republic, in the context of the implementation of the Recovery Plan, through which the country will disburse up to € 1.2 billion, pledged to the European Commission how to deal with the delays in the transfer of securities. It included in the Cypriot plan a provision that would amend the law on the sale of real estate (special execution), so as to safeguard the interests of buyers in advance. The bill protects the buyers of real estate, who will quickly secure property titles, puts a brake on the creation of trapped buyers and at the same time prevents the increase of non-performing loans.
The provisions of the bill
Among other things, the draft bill stipulates that in order for the purchase and sale document to be deposited in the Land Registry, in addition to the mortgage, the seller must remove any other real burden on the property (due to the seller’s debts). When the mortgaged property reaches the buyer, he in turn will have to pay to the bank up to 80% of the sale amount of the property, in order to repay the seller’s loan to the financial institution. That is, instead of the buyer paying the seller, he will pay the money directly to the bank, to ensure that the seller’s loan will be repaid. When the buyer pays the money to the bank, then the encumbrances will be removed from the mortgaged property and will be transferred to the buyer.
It should be noted that the mortgaged property will be on behalf of the buyer, ie it will act as collateral for the loan he received from the bank. According to the bill, in case a bank neglects or refuses the transfer of the property to the buyer, the Land Registry will have the right to transfer the property to the buyer, regardless of any encumbrances borne by the real estate or prohibitions borne by its owner. real estate.
Two types of certificates
The bill provides for two types of certificates. Specifically, the type A certificate is the statement of the seller’s mortgage lender, of which the buyer will be informed. The seller’s mortgage lender will be obliged to release the property from the mortgage, if the buyer deposits in the seller’s account the total amount of the sale price of the property. As we were told, certificate A refers to the payment of up to 80% of the money by the buyer to the seller’s bank account.
With the type B certificate, the property is released from the mortgage. The bill adds a new article to the law, according to which “any amount deposited by the buyer in the seller’s bank account specified in the written statement, will be considered as payment by the buyer, under contract, against or for payment (depending in the case of) the sale price of the immovable property which is the subject of the contract “.
Also, the mortgage lender, upon accepting the amount, is obliged to issue a written proof of payment to the buyer. In addition, the immovable property is transferred, regardless of any encumbrances borne by the immovable property or prohibitions borne by the owner of the immovable property subject to the contract and which follow the contract as a matter of priority. According to the draft bill, the court can issue a special execution order, if before the filing of the contract there is already a mortgage that is encumbered by the real estate, object of the contract, if it is satisfied that the buyer has paid the entire amount specified in the written certificate.
It must be approved by the end of the year
It is worth noting that the Ministry of Finance put the bill to public consultation, in order for those interested to submit their views by March 2. Informal consultation with land development entrepreneurs, banks and the Central Bank was carried out during the preparation of the draft bill.
The bill must be approved by Parliament no later than December 31 , 2022, as it is a prerequisite for the 4th installment of the Recovery Fund. As the Ministry of Finance points out, the disbursement of the resources of the Recovery Fund is inextricably linked to the timely achievement of all the goals and milestones set for each of the investments and reforms of the Recovery Plan.