Understanding the Legal Framework, Procedure, and Obligations of the Parties

In the Cypriot legal system, the transfer of property rights through an Assignment Agreement is a widely used contractual method for transferring rights and obligations under an existing sale agreement—particularly when the title deed of the property has not yet been issued in the name of the original buyer (assignor). This practice is especially common in cases involving off-plan properties, properties under development, or investment re-sales.

Legal Framework

The legal basis for property assignments in Cyprus is founded on the following laws:

1. Contract Law, Cap. 149

This law governs the general principles of contract law in Cyprus and permits the assignment of contractual rights and obligations, provided certain conditions are met.

2. Sale of Immovable Property (Specific Performance) Law, No. 81(I)/2011

This law allows buyers of immovable property to protect their rights by depositing the Sale Agreement with the Department of Lands and Surveys, granting legal force against third parties and enabling the right of assignment.

3. The Transfer and Mortgage of Immovable Properties Law of 1965 (Cap. 224, as amended)

This law outlines the processes related to property transfer. However, assignment of contractual rights does not constitute formal title transfer and does not require registration of title until the title deed is issued.

Registration of the Assignment

For the Assignment Agreement to be legally effective:

• It must be in writing and signed by both assignor and assignee.
• The agreement must be stamped at the Tax Department, based on the agreed consideration (value).
• It must be lodged with the Land Registry, accompanied by:
  • The original stamped Sale Agreement.
  • A declaration by both assignor and assignee.
  • Any required supporting documentation.

Once registered, the Land Registry updates its records to reflect the rights of the assignee under the original Sale Agreement.

Obligations of the Assignor

The assignor (original buyer) holds the following obligations:

• Full Disclosure: All terms of the original Sale Agreement, payments made, and any existing encumbrances must be disclosed to the assignee.
• Provision of Documentation: Relevant documents such as the Sale Agreement, receipts, and any communication with the seller must be handed over.
• Declaration of Assignment: A formal declaration confirming the transfer of rights must be executed.
• Good Faith: The assignor must act honestly and avoid concealing material information or misrepresenting facts.

Obligations of the Assignee

The assignee (new buyer) assumes several responsibilities:

• Acceptance of Terms: The assignee accepts all terms and conditions of the original Sale Agreement and undertakes to fulfil any remaining contractual obligations.
• Notification and Consent: The seller or developer must be notified of the assignment. In many cases, the developer’s written consent is required.
• Tax and Fees: The assignee is responsible for stamp duty, potential VAT (if applicable), and any registration or transfer-related fees.
• Registration Duties: The assignee must ensure the Assignment Agreement is properly registered to protect their legal rights.

Tax Implications

• Stamp Duty: Payable on the value stated in the Assignment Agreement.
• Capital Gains Tax (CGT): May apply to the assignor if a profit is realized from the assignment.
• VAT: If the property is new and subject to VAT, the assignee may be liable for VAT on the outstanding portion of the purchase price.