"I have heard about vendors of land selling a property, the buyer registering the contract of sale and yet the vendor can mortgage the land again."
"Furthermore that in respect of the sale proceeds in the future that any gain over the original purchase price would be utilised in repaying the subsequent mortgage taken out by the vendor."
"Is that true?"
"I have looked into and studied your query and please find herein below my reply:"
"The purchaser who has deposited his sale contract with the District Land Office, has nothing to worry about if thereafter the land will be mortgaged by the Vendor."
"The sale contract has priority over the mortgage. Consequently the proceeds from the future sale of the property will not be used for the repayment of the subsequent mortgage."
""The deposit of the contract of sale creates an encumbrance, which expires within six months from the date of the contract of sale or six months from the last date of transfer specified therein. Where only part of the property is sold (a building site or field under division or flat, office or shop under construction) the encumbrance is attached to the whole of the immovable property until the issue of a separate title for the part so sold. This means that the encumbrance created shall thereafter be limited to the part of the property so sold. Until the issue of a separate title, the vendor may transfer his property subject to the contract of sale, which is deemed to be a mortgage on the property so transferred, in the name of the new owner (purchaser). The contract of sale is binding upon the purchaser. The vendor may also choose to mortgage the property. In this case, the contract of sale is deemed to be a prior mortgage (subsisting before the new mortgage)"
nhowarth wrote:Let me assure you that I know buyers in Paphos, Pissouri & Larnaca whose property was mortgaged by the developer AFTER their contract of sale was deposited for Specific Performance at the Land Regstry.
"So you can buy mortgaged property, pay the developer in full for it and take posession - then the developer can take out a further mortgage - it's all perfectly legal!
I would be very interested to know how many properties are affected by this - and it's very obvious to see why some property developers are 'reluctant' to proceed with getting Title Deeds issued.
What happens in reality when you sell the property is that you can recover what you paid for it, but any profit goes to paying off the developers mortgage - clever eh?
1.3. With respect now of having a sale and subsequently the seller / developer mortgages the property, we find, again, that there is a reasonable safeguard to the unsecured buyer. Provided a buyer deposits the contract with the Lands Office within 2 months from the purchase date, this contract/deposit acts as a charge on the property and it is ahead of any mortgage or other charges that follow. So, if for any reason you buy a property and then the developer mortgages the “project” land and for whatever reasons he defects, as a result of which the financiers sell the whole project including the sold property, at least the buyer will get the value of the property back as a first claim ahead of the mortgage. Surely this is not a good situation and looking at it on the other hand, if a developer has a project of 50 units and sells the one and subsequently the developer mortgages the remainder, [but since he has no separate titles he must mortgage the whole project] the way it is suggested by you, is that he must not be able to do so.
1.4. Yes, it is a problem, should you wish to resell your property if it has no title, that is why care is needed both in terms of choice of your agent/developers/solicitor. We know that this is more a theoretical recommendation and it does not solve existing problems. We can say that there is a move now to increase the purchaser’s protection rights, by introducing some form of insurance guarantee etc. We have to wait and see but the solution of a Bank Guarantee is so costly, so as to be ineffective.
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