Chris has been contacted by several people who have sold their property in Cyprus, subject to receiving payments after “completion” “by instalments.
It works like this, Chris says.
“A seller – often British- will advertise their property for sale. Often, a buyer cannot be found immediately. Someone will then offer to purchase provided they can do so by paying the purchase price with a good deposit followed by instalments under contract over a period – say monthly for a year or two.”
“Inevitably”, Chris says, “after the deposit and a few instalments, the buyer falls into arrears . He or she will make promises about paying – but nothing materialises”.
“Would you do that in the UK? Chris asks – “of course not”.
So, what has caused the appearance of such contracts? Property prices have risen sharply in Cyprus in recent years. Chris says such arrangements are obviously open to abuse. “Often, an agent will know a buyer looking to buy at a low price. Often, that buyer will be someone who may already have another buyer at a higher price, and they are trying to secure the property.
Sometimes, the agents receive a fee to sell in this way from the buyer, as do the lawyers acting for the seller. Strictly, they should disclose that they are receiving a fee and should advise the seller against selling in this manner. If a buyer cannot raise funds, Chris says, then it is unlikely that they will be able to pay instalments .” This is why banks vet buyers for loans or mortgages. If a buyer can’t raise a loan with a Bank, then they are potentially high-risk borrowers”.
Lawyers there should advise clients fully about the risk of nonpayment. A seller – if determined to proceed in this way – should look at obtaining evidence that the proposed buyer can pay – for instance, evidence of funding, salary and so on.
The biggest problem, says Chris, is that the seller is left “in limbo.” Often, there will not be a penalty clause in the contract, or it will be all but useless—“if a buyer can’t pay an instalment, then they are unlikely to be able to pay interest on top.” Some sellers depend on the instalments coming in to pay for homes in the UK or as a pension-style stipend.
Buyers will then use this as leverage against the seller – often to achieve a further discount.
“The problem is”, Chris says, “that once the contract has been entered into, a buyer has to go to court to enforce the terms of the contract and then to get a possession order against the buyer – a notoriously slow and difficult not to mention costly process in Cyprus “. If the buyer has settled in with his family there is a prospect of having to obtain and then enforce a possession order – something the courts in Cyprus are reluctant to do.
Often, the contract may not contain even a clause stating that the buyer has no right to contest any court action or covering the sellers’ costs for doing that.
The simple thing to do, says Chris, is “don’t do it- wait for a funded buyer to come along and get your money on completion”
The house featured is currently for sale with:
Anta Developers
Andreas Aristotelous
Tel: 25431100
