Sales contracts: The consequences of their filing at the Land Registry Office pursuant to Ν. 81(Ι)/2011
Article 3 of the Law provides that the filing of the sales contract may be performed by any of the Contracting Parties and it is accepted, only if (a) there is a registration in the Immovable Property Registry of the relevant property, (b) the contract is written and contains sufficient details of the identity of the parties, sufficiently describes the immovable property which is the subject of the contract, states the consideration and is signed by all Contracting Parties and (c) it is filed within six (6) months from the date of its signature in the Land Registry Office.
According to article 5 of the Law, the filing of a contract creates an encumbrance on the property which is the subject of the contract and the encumbrance created follows the priority order that is gets with its filing. In the case where the immovable property, which is the subject of the contract, is a section of real estate registered in the seller's name, the encumbrance burdens the entire immovable property included in the record that exists in the seller's name and, by carrying out a separate registration for such section, the encumbrance is limited to the part of the immovable property which is the subject of the contract.
Therefore, in the absence of any other encumbrances on the property, the contract is filed in the Land Registry Office and with the fulfilment of its contractual terms, the immovable property is transferred in the name of the buyer. In the case of failure to perform the contractual obligations on the part of any of the parties, the other party may claim damages or specific performance of the contract, which is defined in the article 2 of the Law as the execution of the obligations arising from the contract following a Court order, including the registration of immovable property which is the subject of the contract, in relation to which the conditions of the Law were met.
In case of existence of other encumbrances on the property and preceding mortgages, the issue of the execution of the contract of sale is more complex. As it is provided in article 5(2) of the Law, the buyer may pay the mortgagee, subject to the repayment terms of the loan, the amount of the mortgaged debt that corresponds to the subject of the contract and the mortgagee shall be obliged to accept it as amount paid towards the mortgaged debt. In this case the encumbrance that is created with the filing of the contract precedes the encumbrance of the pre-existing mortgage, regardless of the repayment of the entire mortgaged debt. In other words, instead of the payment of the sale consideration directly to the seller, it can be deposited towards the mortgaged debt, which is secured by a pre-existing mortgage, for the execution of the contract to take precedent over the execution of the mortgage. However, it should be noted that this provision applies to contracts that were submitted to the Land Registry Office or were concluded after the entry into force of the Law. Regarding the contracts that were submitted at the Land Registry Office or that were concluded before the entry into force of the Law, this provision applies upon the written consent of the seller and the mortgaged lender.
In any case, according to article 5(3), the encumbrance that is created with the filing of the contract, until the issuance of order for specific performance of the contract or the payment of damages, secures the amount that the buyer paid towards the purchase price or the value of the subject of consideration. The encumbrance is valid until its annulment or withdrawal or the deletion of the filing of the contract.
Furthermore, in certain cases, according to article 5(5), the filing of the contract of sale operates mutatis mutandis as a mortgage instead of an encumbrance. Under the article 5(6), in cases where the Court does not issue order for the specific performance of the contract of sale, but instead it awards damages in favour of the buyer, the encumbrance that is created with the filing of the contract operates as mortgage, from the date of submission of the contract, according to the articles of the Law on Transfer and Mortgaging of Immovable Property, for the benefit of the buyer and for the amount of damages as per the Court order.
