Why proper planning when buying a property matters. The case of an unmarried couple buying property on joint names.

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An unmarried English couple found a re-sale apartment to buy in Paphos, Cyprus to use as a holiday home. The process started smoothly as the due diligence we conducted came out clear, and the couple proceeded with what it appeared to be a straightforward matter.

Unaware at the time of the complications that would arise, the partners decided that one of the two would pay for the entire purchase price, but they would have the contract on both their names. They also decided there was no rush to transfer the title deed and postponed it for later. As these matters may give rise to problems in the future, we advised the parties of the risks and opined to the contrary for both, but they were happy to proceed as they had decided. They did not at the moment see the value in preparing for the risks of the future or conducting any estate planning.

The purchase process itself proceeded quickly, the contract was signed and lodged in the Land Registry, giving the couple ownership rights over the apartment. They paid the purchase price and took the keys to the apartment, and for some time everything was normal.

Not long after that, however, an unfortunate event occurred. Mr M’s partner, Dr R (who had not paid for her ½ share of the apartment) passed away. That may not have been problematic, had she (Dr R) not been married without letting us know in the process. Dr R had never been divorced nor left a will, and as such her husband Mr R had a claim on the property which he was unwilling to forego.

Mr M on the other hand, who had paid for the whole apartment, wanted the entire ownership of the apartment and not only half share. While we had warned Mr M that Dr R’s share would go under inheritance law to her heirs, he had not realised how imminent that could have been.

A dispute arose for which the legal aspect of the situation was not clear as it would rely on the Court’s exercise of discretion. On the one hand, Mr M could claim that Dr R held her ownership of the ½ share of the apartment under an implied (resulting) trust in Cyprus which operates similarly as in England. However, the existence of an implied trust had to be claimed, proved and decided by the Cyprus Court. If that wasn’t taken to Court and proven to be the case, then under inheritance law, Mr R, the surviving spouse of the non-paying partner of Mr M was entitled to the ½ share of the apartment.

Practically, there were significant challenges in proceeding to Court, as the costs, timing, and stress involved may not have justified the value of the dispute. In fact, the legal costs for both parties would have likely come close to the value of the ½ share of the apartment in dispute, while the Cyprus Court’s decision could have taken 5-10 years to be issued (considering the likelihood of an appeal). Besides, as the Court had the discretion to rule on the existence of the trust of the apartment, there was a risk that judgment could go either way. As such, we considered that going to Court was not the best option (even if our client Mr M had the stronger case) and advised Mr M, the paying partner, to solve the case through out-of-Court negotiations.

We worked with both parties and their respective UK lawyers in trying to reach an amicable solution. This was not easy considering the emotional “hurdles” in the case and the acrimony between the parties.

After very long negotiations, the parties reached an agreement to transfer the other ½ share to Mr M and for him to become the absolute owner of the apartment. The easiest way to do this was to conduct an assignment of the ½ share to Mr M from Mr R. However, to do so there had to be a conclusion of the estate administration of the deceased Dr R in both Cyprus and the UK which took years to finish. Finally, when they were finally concluded, the assignment agreement was signed, bringing a successful conclusion to the dispute between Mr R and Mr M.

However, that was not the end of the story for Mr M, who had another hurdle to overcome; the transfer of the title deed that was postponed. Several years had passed since the purchase of the apartment, and the original sellers would have to be located to sign the necessary documents for the property transfer. Their lawyers in Cyprus did not have any contact with them since the sale which was by now several years ago, and we were unaware even if they were still alive as they would now be in their 80s.

To solve this, we hired a firm in the UK which specialises in locating people and found the sellers to be alive and well, to the relief of Mr M. They were happy to liaise with their Cypriot lawyer to prepare the necessary documents and powers of attorney to finalise the transfer of the title deed.

After a very long process Mr M finally obtained the title deed on his name and saved the apartment he bought with his own hard-earned money. He was now free to use the apartment as he liked, to rent it or even sell it and let go of the past.

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Polycarpos Philippou & Associates LLC