When re-selling under construction or newly completed/developed property in Cyprus, various factors need to be taken into consideration by the seller in order to be able to legalise and give effect to the said sale. As the issue of title deeds is a lengthy process in Cyprus, this article explores the options available for both sellers and purchasers when re-selling newly completed properties in Cyprus in cases where the title deed has not yet been issued and transferred onto the name of the seller.
I bought an apartment from a Developer and I now want to resell it to a third party. There is no title deed to the apartment yet as I bought it off plan at the time and it has only just been completed and delivered to me.
What is the procedure that I need to follow?
If you want to resell property purchased directly from a property Developer and the title deed to the said property has not yet been issued and transferred onto your name (either because the property is still off plan or it has recently been delivered to you), a direct and outright Contract of Sale between yourself and the new purchaser is not possible.
There are therefore two options:
(1) You can either sign a Cancellation Agreement with the Developer cancelling the original Contract of Sale between yourself and the Developer, and at the same time the new purchaser will sign a new identical Contract of Sale with the Developer.
(2) The other option is for you to sign an Assignment Agreement directly with the new Purchaser.
What exactly is an Assignment Agreement?
An Assignment Agreement is an agreement whereby the assignor assigns his rights under the existing Contract of Sale to a third party. The assignor in this case will be you and the third party will be the new Purchaser.
What is the purpose of an Assignment Agreement?
The Assignment Agreement will assign the existing legal and equitable rights of the property under the original Contract of Sale over to the new purchaser.
By assigning the rights to the new purchaser, the ownership of the property is effectively transferred to the assignee (the new purchaser), who shall have all rights under the original Contract of Sale, including the issuance of the title of the property onto his name when the time comes.
An Assignment Agreement does not establish a new agreement, as the original Contract of Sale still exists and is still enforceable.
Do I need the consent of the Developer to assign the Contract of Sale to a third party?
Assignment Agreements do not normally require the consent of the Developer unless this is stipulated within the Contract of Sale. Nonetheless, it is always best to inform the Developer of your intention to assign your rights under the original Contract of Sale. Furthermore, it is always best to ask the Developer to give you a written undertaking that they have received knowledge and have no objection of the assignment.
There is a clause in my Contract of Sale that prohibits or restricts my right to assign my Contract of Sale. What can I do?
Restriction clauses are very common, especially in the construction industry. If you attempt to assign a Contract of Sale (or any other contract), then you risk invalidating the original contract.
In the event that there is indeed a restriction, you should inform the Developer or the other party to the contract that you intend to assign your Contract of Sale in order to receive their written consent.
What if there is a tenant renting the apartment I wish to sell? How do I deal with the Tenancy Agreement and the new purchaser who will now become the new Landlord?
The best way to deal with this issue is through a Novation Agreement that will be signed between the Original Landlord, the Tenant and the New Landlord.
What exactly is a Novation Agreement?
A novation is the replacement of various parties to a contract, in this instance the Tenancy Agreement, with the consent of all parties involved.
Therefore, in this case, the parties to the Novation Agreement would be the Original Landlord (the “Outgoing Party”), the Tenant (the “Remaining Party”) and the new buyer/new Landlord (the “Incoming Party”).
By signing the Novation Agreement, the Incoming Party agrees to take over the rights and obligations of the Outgoing Party, thus releasing the latter from his obligations under the Tenancy Agreement. When a contract is novated, the Remaining Party (in this case, the Tenant) must be left in the same position as they were, prior to the novation being made and the Incoming Party (in this case, the new Landlord) will undertake all the burdens, rights and obligations of the Outgoing Party (in this case, the old Landlord).
If you decide not to opt for the Novation Agreement route, then you have the option to cancel the current Tenancy Agreement with the Tenant and the new Landlord can sign a new Tenancy Agreement with the Tenant.
With this option, it is possible for the Tenant and the New Landlord to negotiate new terms and conditions.
Author: Christiana Askanis
For more information about selling your property in Cyprus, please contact us by sending an email to [email protected] (Maria Kannava) and/or [email protected] (Christiana Askanis). You may also visit our page on www.kannavalaw.com