Transfer of Property by Assignment Agreement in Cyprus
Understanding the Legal Framework, Procedure, and Obligations of the Parties
In the Cypriot legal system, the transfer of property rights by Assignment Agreement is a common contractual method used to transfer the rights and obligations under an existing sale agreement—especially in cases where the legal title of the property has not yet been registered in the name of the original buyer (assignor). This practice is particularly widespread in transactions involving off-plan properties, immovable property under development, or investment re-sales.
Legal Basis for Assignment in Cyprus
Assignment Agreements are primarily governed by:
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The Contract Law, Cap. 149
This law allows the transfer of contractual rights and obligations from one party (the assignor) to another (the assignee), provided certain conditions are met. -
The Sale of Immovable Property (Specific Performance) Law, No. 81(I)/2011
This law enables the buyer of immovable property to secure their interest by depositing the Sale Agreement with the Land Registry, giving the agreement legal effect against third parties and allowing future assignments. -
The Transfer and Mortgage of Immovable Properties Law of 1965 (Cap. 224 as amended)
This law provides for the procedures related to property transfer, though title transfer by assignment does not necessarily require registration unless and until the final title deed is issued.
When Is an Assignment Agreement Used?
An Assignment Agreement is typically used when:
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The assignor has signed a contract of sale with a developer or seller and wants to transfer their rights to another buyer (the assignee).
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The title deed has not yet been issued, or the legal ownership remains with the original vendor.
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The assignee agrees to step into the shoes of the assignor and eventually receive legal title upon issuance.
The original Sale Agreement must have been duly stamped and deposited at the Land Registry for the assignment to be legally effective.
Registration of the Assignment
The Assignment Agreement must be:
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Drafted in writing and signed by both assignor and assignee.
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Stamped at the Tax Department (based on the consideration or value of the assignment).
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Deposited at the Land Registry, accompanied by the original Sale Agreement and the necessary supporting documents, including a declaration by the assignor and assignee.
Upon successful deposit, the Land Registry will update the records to reflect the rights of the assignee under the original contract.
Obligations of the Assignor
The assignor (original purchaser) has the following legal and contractual obligations:
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Full Disclosure
Must disclose all terms of the original sale agreement and any issues, payments made, or encumbrances. -
Delivery of Documentation
Provide the assignee with all relevant documents, such as the Sale Agreement, receipts, and correspondence with the seller. -
Declaration of Assignment
Execute a declaration confirming the transfer and relinquishment of rights. -
Good Faith
Must act in good faith, without withholding material information or misrepresenting the status of the contract or the property.
Obligations of the Assignee
The assignee (new purchaser) undertakes the following:
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Acceptance of Terms
Accepts the original Sale Agreement’s terms and conditions, and assumes any remaining obligations, including outstanding payments to the seller. -
Notification and Consent
Notifies the seller or developer of the assignment (in most cases, consent is required from the developer/vendor). -
Tax and Fees
Is responsible for paying stamp duties, potential VAT (if applicable), and any transfer-related fees. -
Registration Duties
Ensures that the Assignment Agreement is properly registered with the Land Registry to secure legal rights.
Tax Implications
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Stamp Duty applies to the Assignment Agreement, based on the amount or value of the assignment.
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Capital Gains Tax (CGT) may apply to the assignor if the assignment results in a gain.
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VAT: If the property is new and subject to VAT, the assignee may be liable for VAT on the remaining purchase price.
Conclusion
Assignment Agreements provide a practical legal solution for transferring property interests before the issuance of title deeds in Cyprus. However, they must be carefully structured to comply with applicable legislation and to protect the rights of both parties involved.
Whether you are an assignor or assignee, it is essential to consult a qualified lawyer in Cyprus to ensure the transaction is valid, enforceable, and free of legal risk.
For professional assistance with drafting or reviewing an Assignment Agreement, feel free to contact Michalaki, Pitsillidou & Co LLC at +357 99345000 or visit us at 🌐 www.impklawyers.com
For clear, practical advice tailored to your situation, feel free to reach out to our office directly also, contact us.
The information provided by Michalaki, Pitsillidou & Co LLC is intended solely for general informational purposes and should not be construed as professional or official legal advice. It is recommended that you do not take or refrain from taking any action based on the above information without first seeking legal or other professional guidance.
