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Trapped Property Buyers in Cyprus: The Bank of Cyprus Appeal
Bank of Cyprus Public Company Ltd v Director of the Department of Lands and Surveys, Paphos and Others
Trapped property buyers in Cyprus were directly affected by this appeal because it examined whether the Land Registry could transfer a property to a purchaser while removing a mortgage that had been registered before the purchaser deposited the sale agreement.
The dispute placed two protected interests in direct conflict. The purchaser had paid the agreed price and obtained a separate title deed, but Bank of Cyprus retained an earlier registered mortgage over the underlying property. The Court of Appeal was required to decide whether the 2015 trapped-buyer procedure could extinguish that security without the bank’s consent and without equivalent compensation.
This case note separates the underlying facts, the first-instance proceedings, the four grounds of appeal, the constitutional reasoning and the later legislative response. The commentary section is reserved for the author’s independent professional analysis.
The Case at a Glance
The Purchaser
The Secured Creditor
The Administrative Decision
The Constitutional Result
Material Facts and Procedural Chronology
Mortgage Y3758/2003 was registered in favour of Bank of Cyprus as security for lending provided to V.M. Developing Limited.
Michael James Joyce entered into a written agreement with the developer to purchase an apartment in a building to be constructed on the mortgaged land.
The sale agreement was deposited with the Paphos Land Registry for specific performance. It ranked after mortgage Y3758/2003 but before mortgage Y781/2005.
A separate title deed was issued for the apartment. The judgment records that the agreed purchase price had been paid.
The purchaser filed trapped-buyer application AEA 1744/16 under Part VIB of Law 9/1965, seeking transfer of the apartment into his name.
The Director issued a Form IE notice stating an intention to transfer the apartment and release, remove or cancel the encumbrances affecting it.
Bank of Cyprus objected to the intended transfer and removal of its mortgage.
The Land Registry rejected the objection and indicated that it would proceed unless the bank obtained a court order within 30 days.
Why priority mattered
The earlier mortgage, Y3758/2003, preceded the deposited sale agreement. The later mortgage, Y781/2005, followed it. The constitutional dispute therefore centred on the statutory removal of the earlier security, not merely the existence of any mortgage over the development.
The Application Before the District Court
On 23 October 2017, Bank of Cyprus applied to the District Court of Paphos. It sought orders cancelling, terminating or suspending the Form IE notice and the Director’s decision rejecting its objection. It also sought to prevent the transfer of the apartment and the removal of the encumbrances.
The application pleaded that the provisions introduced through Law 139(I)/2015 were unconstitutional. The principal challenges were based on Article 23 of the Constitution, which protects property rights, and Article 26, which protects freedom of contract. Arguments were also advanced under Articles 25 and 30 and the principle of separation of powers.
The District Court dismissed the bank’s application without determining the constitutional issues. In substance, it accepted objections that the bank had not used the statutory opportunity to request transfer of the mortgage to another property belonging to the developer and was therefore prevented from relying on its mortgage rights in the manner asserted.
The lower court treated the constitutional question as unnecessary once those objections had been accepted.
QUESTION ON APPEAL
Could the constitutional challenge properly be left undecided when the statutory procedure itself authorised the proposed removal or transfer of the bank’s earlier mortgage?
The Four Grounds of Appeal
Ground One: Mortgage Priority
Ground Two: Constitutionality
Ground Three: Reasons
Ground Four: Costs
Why the Court of Appeal Determined the Constitutional Questions
A Necessary Issue
The Court of Appeal concluded that the constitutionality of the statutory mechanism was necessary for the proper determination of the dispute. The second ground of appeal therefore succeeded.
No Remittal for a New Hearing
Rather than return the case to the District Court, the appellate court determined the constitutional questions itself. The factual background was sufficient, the issues were legal, and the parties had presented their positions at both levels.
Delay and the Overriding Objective
Approximately six years had passed since the first-instance judgment. The Court considered that a new hearing would not serve the public interest or the overriding objective of the Civil Procedure Rules. It nevertheless clarified that purely legal issues do not automatically justify avoiding a retrial in every appeal.
The Constitutional Analysis
Protection of the Bank’s Property Right
The Court treated the registered mortgage as a protected property right. Removing mortgage Y3758/2003 from the apartment would not merely regulate its exercise. It would eliminate the security over the property selected by the contracting parties.
The statutory mechanism did not provide fair and reasonable compensation. Moving the mortgage to another property was not necessarily equivalent because the replacement property could have a different value, be subject to earlier encumbrances or provide weaker priority.
The Court concluded that sections 44ΙΘ to 44ΚΒ, as introduced by Law 139(I)/2015, were incompatible with Article 23 beyond reasonable doubt.
Freedom of Contract and the Selected Security
The mortgage embodied a contractual security arrangement between the bank and the developer. The parties had selected specific property as security for the lending.
Section 44ΚΒ allowed the Director to release or move that security without preserving the mortgage agreement in the form chosen by the contracting parties. The Court found that this interfered with freedom of contract.
Relying on Pitsillides and Another v Director of Lands and Surveys, the Court also recalled that the Director cannot determine, and still less extinguish, property rights without a court order. Section 44ΚΒ was consequently found incompatible with Article 26.
ARTICLES 25 AND 30
Challenges Not Established
The Court did not find that the disputed provisions infringed professional freedom under Article 25 or the protections associated with Article 30. The decisive constitutional findings rested on property rights and freedom of contract.
The Judgment and Final Orders
Appeal Allowed
The Court of Appeal allowed the appeal and issued the orders requested in paragraphs A, B and C of the bank’s application dated 23 October 2017. The Form IE notice, the rejection of the bank’s objection and the disputed procedure affecting the mortgage were set aside.
Grounds Resolved
The second ground concerning the failure to decide constitutionality succeeded. The fourth ground concerning costs also succeeded. It was unnecessary to determine grounds one and three.
Costs
The bank received €2,500 plus VAT, where applicable, for the appeal. Its first-instance costs were also awarded, subject to calculation by the Registrar and approval by the competent judge. The costs orders were made against the Director and the purchaser.
Why This Decision Matters for Trapped Property Buyers in Cyprus
The judgment should not be reduced to the proposition that every part of the trapped-buyer legislation was invalid in every factual situation. The central constitutional problem was the administrative removal of a mortgage that predated the deposited sale agreement, without the mortgagee’s consent, equivalent replacement security or fair compensation.
The distinction between earlier and later encumbrances is essential. The purchaser’s deposited sale agreement followed mortgage Y3758/2003 but preceded mortgage Y781/2005. The Court’s reasoning concentrated on the destruction of the earlier secured right.
THE HOLDING IN PRACTICAL TERMS
A social objective, even one directed at protecting fully paid purchasers, could not be implemented through a procedure that extinguished a prior secured property right without constitutionally sufficient safeguards.
The Legislative Response Under Law 110(I)/2025
The legislature responded through the Immovable Property (Transfer and Mortgage) (Amending) Law of 2025, Law 110(I)/2025. Its preamble expressly identifies Civil Appeal 285/2018 and the findings under Articles 23 and 26.
Under the revised mechanism, where registered encumbrances or prohibitions predate the deposited sale agreement, written consent is generally required from the persons benefiting from them before release, removal or cancellation.
If consent is not obtained and the purchase price has been fully paid, the revised law provides for a court application within 45 days of the refusal. The Court may make the necessary order where the refusal is found to be abusive and unjustified.
The 2025 framework therefore introduced judicial supervision into the treatment of prior secured rights. The 2024 judgment explains the constitutional defect in the former administrative mechanism. Law 110(I)/2025 provides the later statutory response and must be considered when advising on a current trapped-buyer application.
Judgment, Legislation and Official Sources
The analysis is based on the published judgment and the relevant statutory texts. The sources below are provided as direct editorial references.
- Full judgment: Bank of Cyprus Public Company Ltd v Director of the Department of Lands and Surveys, Paphos and Others, Civil Appeal 285/2018, 20 June 2024
- Law 139(I)/2015: the amending law that introduced the former trapped-buyer framework examined by the Court
- Law 110(I)/2025: the legislative response following the constitutional judgment
- Consolidated Law 9/1965: current text of the Immovable Property (Transfer and Mortgage) Law
- Constitution of the Republic of Cyprus: Articles 23 and 26
Legal Notice
This case note provides general information on a published Cyprus judgment and the related legislative framework as reviewed on 28 July 2026. It is not legal advice. The availability of relief under the current trapped-buyer provisions depends on the dates, title status, payment history, registered encumbrances, notices, consents and procedural steps in the particular property file.
PRIVATE PROPERTY LAW ENQUIRY
Review the title, sale agreement and encumbrances together
A confidential property-file review can identify the priority of registered interests, the applicable statutory route and the evidence required before a transfer, objection or court application is pursued.
Commentary by Grigoris Aivazidis
Lawyer and International Tax Adviser
Cyprus Bar Association Registration No. 7940
In my considered view, the unanimous judgment of the Court of Appeal represents a legally sound and constitutionally necessary determination. While the protection of trapped property buyers constitutes a legitimate and important public objective, such protection cannot be secured through the removal of prior registered mortgages or interference with established contractual rights without adequate constitutional safeguards.
The significance of the judgment extends beyond the circumstances of the individual purchaser and mortgagee. It reaffirms that legislation enacted to address a serious social and economic problem must remain consistent with the constitutional protection of property and freedom of contract. A legislative solution must balance the rights of purchasers with those of secured creditors and other affected parties. It should not merely transfer the consequences of a developer’s default from one innocent party to another.
The proceedings also highlight a matter of wider concern regarding the time required for a dispute of substantial legal and practical importance to achieve final appellate determination. The underlying application was filed in 2017, while the appeal was determined in 2024. During this period, the legal position of the purchaser, the mortgagee and the other interested parties remained subject to continuing uncertainty.
A first-instance judgment retains its legal effect unless set aside or otherwise suspended. Nevertheless, where that judgment is challenged on appeal, the dispute has not attained final appellate certainty. This distinction is particularly important in property matters involving ownership rights, secured lending and considerable personal investment.
The proper administration of justice requires not only a legally correct determination, but also its delivery within a reasonable period. The Court of Appeal’s judgment provides essential constitutional clarification. At the same time, the duration of the proceedings demonstrates the need for a more efficient judicial process in cases where prolonged uncertainty may materially affect homes, investments and registered property rights.
The case also provides an important practical lesson. Property disputes of this nature may continue for many years and, in particularly complex circumstances, may extend across decades. The most effective protection is therefore established before the transaction is concluded. Purchasers and vendors should obtain independent legal advice before signing a reservation agreement, paying a deposit or assuming binding contractual obligations.
A properly conducted transaction should include verification of ownership, searches for mortgages and other encumbrances, examination of planning and building documentation, appropriate arrangements for the release or discharge of existing security, carefully drafted payment conditions and timely deposit of the sale agreement for specific performance purposes. These safeguards cannot eliminate every future dispute, but they can materially reduce the risk of a party becoming trapped in prolonged litigation over rights that could have been secured at the outset.