On 20/06/2024, a landmark ruling by the Cyprus Court of Appeal in Civil Appeal No. 285/2018 has struck a significant blow to thousands of so-called “trapped buyers”—individuals who, despite having paid in full for their properties, have been unable to obtain their title deeds due to developer debts and outstanding mortgages. In 2015, the Cyprus Parliament amended the Transfer and Mortgage of Property Law (N. 9/1965), introducing provisions (Articles 44IH–44KZ) which aimed at protecting buyers of immovable property who were unable to secure title deeds because the developers had mortgaged the land to banks institutions. In some cases, they Trapped Buyers were also under the risk of losing their purchased properties, due to the mortgages having priority over their deposited sales agreements. These provisions allowed Buyers who had fulfilled their contractual and payment obligations to apply for the issuance of separate title deeds and the transfer of ownership, even without the developer’s or mortgagee’s consent. The law was seen as a lifeline for thousands of foreign and local buyers caught in legal and financial limbo.
The Ruling of the Court of Appeal declared the relevant provisions unconstitutional, violating creditors’ constitutional rights by allowing the transfer of title deeds while bypassing existing mortgages and other encumbrances, upholding arguments brought forward by banks and creditors. The decision effectively invalidated the legal mechanism that allowed buyers to bypass the rights of secured creditors (typically banks) when seeking title transfers.
The implications of the Ruling, included immediate suspension of all pending and new applications under the “trapped buyers” law by the Department of Lands and Surveys, transfers already completed under the now-unconstitutional provisions may face legal challenges or be declared void and thousands of property owners are once again left in uncertainty, despite having made full payment for their homes or apartments. Recently, the Department of Lands and Surveys has been directed to resume processing applications under the current legal framework, but with an important limitation: title deeds will only be issued if the property is free of prior encumbrances. This means that applications will proceed as usual, but where a mortgage or other burden predates the sale, no title deed can be issued unless those encumbrances are resolved. However, for properties without such legal burdens, title issuance may now proceed normally.
This move partially reinstates the previous system, offering some relief to buyers who have been waiting for years. Still, the revised approach excludes a significant number of Buyers whose properties remain encumbered, perpetuating legal uncertainty until a new legislative solution is enacted. Many of these buyers, despite having paid in full, are still without title deeds due to mistakes or omissions by Sellers or Developers. Moving forward, a new law is urgently needed—one that clearly favours buyers who have paid in full, are in possession of their property, and have timely registered their sales contracts. Such buyers, especially when unaware of any existing encumbrances, deserve greater legal protection. The proposed legal reform should also account for past shortcomings—such as the absence of a requirement to verify encumbrances or to use legal representation when drafting a sale agreement. This left room for misrepresentation or concealment by Developers. To address this, a mandatory written disclosure of all encumbrances by the seller should be introduced, with strict penalties for false or misleading information. A Special Administrative Committee could also be established to assess individual cases. The committee would determine whether the Buyer acted in good faith and whether there are legal or financial avenues to discharge the property of its encumbrances, allowing for the title to be transferred.
Furthermore, for the protection of the Buyers, escrow mechanisms should be introduced, ensuring that payments go directly toward clearing existing debts on the property. In addition, the State could be empowered to cover part of the developer’s debt to the bank, enabling the title transfer to proceed. The State would then assume the creditor’s position, supported by a dedicated fund or guarantee scheme. Such mechanisms are already in place in other EU countries, where state intervention helps address social and legal injustices in the property market. Cyprus can also follow these international models to become a leader in legal and social reform within the EU.
The Minister of the Interior, announced that the government is working closely with the Law Office of the Republic to explore constitutionally sound alternatives to resolve the issue. He acknowledged the complexity of the matter and affirmed the State’s commitment to protecting affected Buyers within the limits of the law.
In conclusion, the Supreme Court ruling has revealed constitutional flaws in the previous legislation and has reopened a complex and painful chapter for thousands of property owners. While the partial reinstatement of the process for unencumbered properties is a welcome step, it is not a long-term solution. A new, well-balanced legislative framework is needed—one that ensures justice for all Buyers, stability for lenders, and renewed confidence in Cyprus’s real estate market. As the Government seeks alternative legal solutions, affected individuals must remain proactive in securing their rights.