The Politics of Homeownership and Title Deeds (3)

This final Part 3 of our articles on the property trap is about good practice. In the previous articles we explained the traps laid by others to catch purchasers and the problems the latter often experience as they fall into the traps. The present paper is about how not to fall in those traps in the first place.

This article should be treated as a charter of knowledge and preparation for every purchaser. It offers a protective gear and plentiful of practical ammunition to allow purchasers to survive most of the onslaught and the complexity of the task. This article, together with the previous two, should provide any intending purchasers enough information to prepare them for the task and challenge of purchasing a property; to take good stock of their intentions and actions and to proceed with caution but also with confidence in full knowledge that they are mentally well equipped to negotiate the risks and come out of the task pleased enough that their purchase is relatively safe. We do not offer a warranty or promise that following the simple rules below will give purchasers full cover. Basically, we are back to the dictum, “buyer beware”. If there is a trap laid out there, and one knows about it, the logical action is to avoid it if possible. The onus, therefore, is on purchasers to ensure that they know what they are doing. We offer useful sign posts. How they are followed is a matter for purchasers alone and who remain solely responsible throughout.

Rule 1: know your property

It is important, as we repeatedly commented elsewhere, not to be taken by the hype of dazzling advertisements, persuasive and smiling builders, estate agents or occupiers of the property, and a desire to leave the “rat race” for something more attractive and an assumed better lifestyle. We all need to be hopeful in our lives but we can achieve better results by taking certain precautions. Get to know the property and learn to ask the relevant questions. Is it structurally sound? Can I risk buying without a surveyor’s report? Has it all services (water, electricity, telephone) provided and connected to the mains? Is the price right? Has it title deeds? Is it mortgaged? Most importantly, purchasers must visit, see and inspect the property – not just once but at least three times. Just like people, first impressions matter but you get to know them better with experience. We are always surprised that some purchasers are intent in buying a property over the internet for instance by just choosing properties by visiting developers’ or estate agents’ websites. In such instances, we make and give raw, sharp and rough comments and advice about the many risks and pitfalls. Basically, we tell such purchasers in no uncertain terms to reconsider and stop dreaming. It does the trick for most but interestingly some still choose to pursue their fantasies irrespectively. Such behaviour normally ends in tears and frankly purchasers who do so against advice deserve what they get and should not thereafter blame others for their own misfortunes. So, purchasers ought to go out of their way to see, inspect and judge the property and carefully think matters over.

Of particular concern here are cases of buying off plan or under construction properties. They are of unknown quantity and quality and purchasers must be very careful. Many a people have suffered serious losses out of such purchases. For example, such properties may never be completed to plan or worse they may prove to be “ghost” properties i.e. non-existent. When this happens, the only thing left in the purchasers’ hands are the worthless promises of the absentee and richer vendor, the scrap of paper that once was called a drawing plan, and lots of shattered dreams.

Rule 2: know your vendor and estate agent

It is important that you know first hand who is selling you the property. The vendor (developer or not) may be selling it and the estate agent may be promoting it but they both have a common purpose: to make a living or a gain. So forget the niceties and check them out. Ask for the vendor’s credentials and most importantly whether s/he is indeed the legal or sole owner or joint owner. For example, s/he may have built the property on somebody else’s land which means there are co-owners and indeed the absolute owner, until separate title deeds are issued, are the land owners; or s/he may just own it jointly with a partner or an ex-partner who are unaware of the sale; or that his/her property for sale is mortgaged to a third party. Check on the estate agent if s/he is registered. If not, be doubly suspicious. Most serious, check whether the two are connected in any way. The vendor and the estate agent may actually be one-and-the-same family (husband and wife and other relatives for instance)! They may, alternatively, have a direct interest in the project i.e. the estate agent may be one of the co-owners or has invested a share in the development of the property. There may not be any illicit activity in that respect but the purchaser can at least weigh up the facts and decide whether the purchase is a viable proposition.

Rule 3: watch your wallet and do not promise or sign anything yet

When you are satisfied and ready to buy, you will need to reserve the property. However, do not give any money to anyone nor should you make any promises and importantly ought not to sign anything whatsoever prior to seeking independent advice. This is the time when a purchaser ought to recognize that a lot is at stake and seek out professional assistance from independent advisers. Purchasers who try to cut corners here by pretending that by by-passing professional advice (be it a surveyor’s report or legal support) will save them money could find themselves regretting their move for the rest of their lives. Seek assistance and let your professional appointees handle both the preliminaries (deposit/reservation fee, any initial paperwork etc) and the rest of the work required. This wise move may both save you money and by and large ensure a safe landing. If you find that the vendor and/or the estate agent pressure you into a deal (e.g. that they will sell the property elsewhere if you do not leave a deposit, or if you do not sign papers) walk away or just stick to our rule and advice. Express your interest and give them the name of your independent lawyers to deal with. If the vendor or his/her agents cannot accommodate this arrangement, then you better find another house from a different source.

If you or your legal advisers pay the vendor or his/her agents a deposit on the property, ensure that this is subject to contract and is refundable – just in case, for any reason, you may not proceed with the purchase. The way the deposit or reservation fee is paid and worded before a contract of sale is completed or in the contract of sale itself can make all the difference whether it is refundable or not. So check that your lawyers do the correct thing.

Rule 4: select your professional advisers carefully

Assign your purchase and trust to professionals who will work for you and you alone. That is to say, appoint your professional legal or other advisers in full knowledge that they are independent of the vendor and the estate agent. Do not ever feel afraid to ask them (and if in doubt get them to confirm it in writing) whether they have any pecuniary interest in the property (or the bigger housing estate within which the property is found). As in the case of estate agents, many such professionals may have, for example, investments in the development, construction and sale aspects of the project. They may be holding directorships and/or shares in the companies which own the land or, if not the same companies, those which are responsible for the construction or sale of the properties in question. The emphasis then in choosing your representatives must be on their declared independence (or where they cannot be independent request that they declare their interests), knowledge, reliability, efficiency and their strong sense of personal and social responsibility (i.e. to represent you with a conscience – something crucial but shamefully missing or in short supply in this time and age).

Rule 5: search the title and status of the property

Your legal representatives must carry out a title search. Prior to proceeding to contract and thus committing oneself, a thorough investigation about the property pays dividends. Everything about the property particularly planning and building permits, certificate of approval, services provided, common areas of use and whether there is a general agreement that binds all purchasers to a common legal obligation to manage and share administration and costs, ownership and title deed, mortgages or other encumbrances (such as memos), structural integrity, disputes and third party claims and so forth. If the property comes without a title deed, your legal advisers ought to explain to you the risks and how those risks can or cannot be covered. This advice may allow you to make an informed choice.

Rule 6: take cover under a sale of contract worthy of consideration

Accepting a contract of sale presented to you by the vendor, estate agent or anyone else who is not your independent legal adviser is a very risky concern. The contract must be cleared by your legal advisers or preferably you should rely on your independent legal advisers in writing up a contract that meets your specific requirements for that specific occasion. It must clearly state all the owners and co-owners, the precise nature of the property bought, boundaries, permits, design and drawing plans, any extras etc. included in the price, any mortgages or other encumbrances. If the property is mortgaged a mortgage release from the vendor’s bank together with the bank’s consent and promise to allow the transfer and registration of the title deed in the name of the purchaser is a must. It provides an assurance that if the vendor defaults, the property will not be under threat from the debtors and the purchaser will keep his/her property. If there are any other charges on the property like memos it is important that these are discharged and removed before signing up. If the vendor or his debtors are not willing to oblige, just walk away and do not give it a second thought. Also, ensure that the contract stipulates a reasonable time, after completion of the property or the signing of the contract, when the certificate of approval and the title deed will be issued and the latter to be transferred and registered in the name of the purchaser. An option for penalties should be included in case the vendor does not keep those promises without good reason. A good contract must also include an option for the purchaser to be able to cancel the contract of sale and resell the property at any time after taking possession. Conversely, there must be a clear obligation on the vendor (and that means all co-owners) to assist in the process. S/he is, after all, for as long as s/he remains the title deed holder, the one who has a legal right to sell. But beware. Some vendors do not agree to this due to the many complications and pressures (including matters of taxation) and where they agree they may impose a charge of up to CYP 3000 (Euros 5,125.80) though this figure has been known to reach higher. Finally, try hard not to pay the whole of the agreed purchase price until separate titles are issued in your name. If at the end of the day you are not happy with the cover that the contract may provide or the vendors are not willing to offer adequate cover for you, again do the correct thing: walk away from the deal. There are plenty of other properties to buy from safely and better vendors to deal with.

Rule 7: pay the stamp duty and deposit the contract at the Land Registry

On signing the contract of sale, within a month of that date ensure that it is properly stamped (that is to say you need to pay the relevant stamp duty at the local tax office) otherwise there is a penalty for the delay and within two months of the same date deposit it at the Land Registry for specific performance purposes. This will act, until separate title deeds are issued, as a charge on the property and will protect your legal rights in case of breach of the terms of the contract by the other side.

Good luck and safe hunting!

Professor Dr. Andonis Vassiliades & Maria Chimonides

© Prof. Dr. Andonis Vassiliades, December 2007. No part of this article may be used or reproduced in any form without prior written permission from the authors.

Professor Dr. Andonis Vassiliades is Professor of Law, Criminology & Penal Justice and a Clinical Psychotherapist.

Maria Chimonides is a Lawyer and a Legal Consultant.

They are at The Law Office & Research Centre:
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This article first appeared in In Touch Magazine, pp. 26-27, issue 14, 2008