NEWS & ARTICLES

On June 20, 2024, the Court of Appeal of Cyprus, in the context of Civil Appeal 285/2018 involving the Bank of Cyprus Public Company Limited and the Director of the Paphos Land Registry Department among others, ruled that the procedure for transferring separate ownership titles in the names of trapped buyers is fundamentally unconstitutional as it conflicts with Article 26 of the Constitution. In this case, the Director of the Paphos Land Registry Department approved the transfer of ownership title to a trapped buyer, notwithstanding the fact that a mortgage in favour of the Bank of Cyprus had already been registered prior to the submission of the contract of sale by the trapped buyer.

According to Article 26 of the Constitution of the Republic of Cyprus, every person has the right to freely contract with any third party. The Court of Appeal ruled that since the Constitution grants any individual the right to freely contract, the mortgage agreement signed between the Bank of Cyprus and the construction company, which was filed at the Paphos District Land Registry, takes precedence over the contract of sale of the trapped buyer, which was filed after the filing of the mortgage. The transfer of the ownership title of the unit purchased by the trapped buyer in the name of the trapped buyer deprives the Bank of Cyprus of the right to claim the amount loaned to the construction company, essentially rendering the mortgage void of subject matter. This situation, according to the Court of Appeal, is unacceptable as it violates Article 26 of the Constitution.

The aforementioned decision of the Court of Appeal has led to the suspension of the examination of applications from trapped buyers and has caused significant upheaval among the trapped buyers and the real estate sector in Cyprus in general. While the decision of the Court of Appeal was anticipated, the behaviour of the Bank of Cyprus was not expected, as during the passing of the law concerning trapped buyers, the parliament had obtained the consent of the Cyprus Banks Association. Following this decision, the government and the parliament announced that they would take the necessary measures to protect the interests of the trapped buyers.