The "Trapped Buyers Law" in Cyprus, formally known as Law N.139(I)/2015, was enacted to address the predicament of buyers who, despite fulfilling their contractual obligations by paying the seller the full purchase price of the property, were unable to obtain the title deed. This issue primarily arose due to outstanding mortgages, unpaid taxes, or other encumbrances on the property created by the seller.

The law was designed to protect buyers who found themselves unable to secure a title deed despite having met their contractual responsibilities. It allowed such buyers to apply to the Land Registry of Cyprus to have the property transferred to their name and obtain a title deed without the seller's consent.

In order to submit an application as a trapped buyer, the applicant needed to demonstrate that they had paid the full purchase price as stipulated in the sale agreement, that the sale agreement had been duly lodged with the Land Registry of Cyprus, and that the failure to transfer the property was due to circumstances beyond their control.

The Land Registry would then assess the application to identify any mortgages or encumbrances affecting the property. If the application satisfied these criteria, the property could be transferred to the buyer's name, and a title deed issued. Since the law's enactment, it has facilitated the resolution of a longstanding issue in the Cyprus real estate market, enabling many trapped buyers to obtain their title deeds.

However, on 20th June 2024, the Court of Appeal of Cyprus issued a ruling following an appeal by a banking institution against a District Court decision concerning trapped buyers. The Court of Appeal held that the transfer of the property to the buyer should not proceed if there were mortgages on the property, as this would infringe upon the rights of the bank as creditor. The Court deemed certain provisions of the law unconstitutional, particularly where it sought to protect buyers at the expense of the seller's creditors, thereby recognizing the banks' right to retain mortgages.

In light of the Court of Appeal's decision, the authorities have suspended all applications previously submitted to the Land Registry and ceased accepting new applications. It is anticipated that amendments to the law will be required following this ruling.

Prospective buyers should seek legal counsel before proceeding with any property purchase in Cyprus to ensure that their rights and interests are fully protected.

Author: Cathy Georgiou, LL.B. Senior Advocate