Interpretation of the Law on Specific Performance

"The Court has broad power to order the Specific Performance of a contract for the purchase of an immovable property”

The changes made in the Sale of Immovable Property (Specific Performance) Law, L.81(I)/2011, serve to the maximum extent the buyer of a property who files his sale contract in the Land Registry. Despite the amendments which have been occurred, there are still cases of buyers who have not taken advantage of the legislative possibility, even after the deadline, to file their sale purchase agreement in the Land Registry following a Court order. In addition, the wrong interpretation given by the Court of First Instance to the provision of the Law on Specific Performance of a sale contract has also been removed. Instead of affirmatively exercising its discretion and ordering specific performance as long as rights of third parties arising from prior encumbrances were not affected, it limited itself to awarding damages for breach of contract. The buyer has owned the property since 1984, the separate title deed was issued, the sale price was paid and the seller unreasonably refused to transfer it.

The relevant provision of the Law

According to article 6(2) of Law 81(I)/2011, in the event that the contract is in writing but has not been filed in accordance with the provisions of this Law or the contract is oral, the Court may order specific performance of when it deems this to be fair and reasonable under the circumstances and as long as the rights of third parties resulting from prior encumbrances or prohibitions are not affected and it is satisfied that –

(a) the contract sufficiently specifies the identity of the contracting parties and the subject of the contract,

(b) there is an entry in the Land Registry of the competent District Land Registry Office, in the name of at least one of the sellers in relation to the immovable property, which is the subject of the contract or which includes the part of the immovable property which is the subject of the contract.

The decision of the Court of Appeal

The Court of Appeal in its decision in C.A.146/21, dated 16.4.2024, in the appeal of the buyer who dismissed his claim for specific performance and awarded damages in his favor due to breach of contract, disagreed with the decision of the Court of First Instance which adopted a strict interpretation of the Law.

The Court of Appeal considered that the above provision was included in the Law in addition to the other provisions of both articles 16, 16A and even article 12 which provides the possibility for a Court to allow the filing of a contract at any time upon a relevant application. With this in mind, the words ". but it has not been filed in accordance with the provisions of this Law." should be interpreted, since it leads that the purpose of the legislator was to provide for those cases where exactly the procedures of the articles have not been followed 16, 16A or 12, empowering the Court to order specific performance of a contract where it considers this to be just and reasonable in the circumstances.

And this discretion, as the Court of Appeal mentions, in view of the reference to "provisions of this Law" seems to be granted both in relation to contracts entered into after the enactment of Law 81(I)/2011 as well as before.

Conclusion of the Court of Appeal

As the Court of Appeal mentions, that the case under consideration is a classic case where it is fair and reasonable to order the specific performance of the contract of sale of the apartment and its registration in the name of the buyer pursuant to Article 6(2).

Finding that the two conditions provided for in Article 6(2)(a)(b) are satisfied, the Court added that a concern is raised in view of the memorandum filed on the property for tax obligations of the seller, since the power provided for in Article 6(2) of the Court can only be exercised if the rights of third parties are not affected. It pointed out, however, that article 7 of the Law provides that the Court may by order, order the specific performance of the contract under any conditions it deems necessary.

Since the buyer paid the purchase price of the apartment a long time ago, while he owns and enjoys this immovable property since 1984, and the seller has no right over the apartment, the Court of Appeal concluded that the discretion of the trial Court should brought in favor of the issuance of an order for specific performance of the sale agreement pursuant to Article 6(2) of the Law. Ιt was taken into account that the buyer was willing to pay the seller's debt to the Tax Department in settlement of the memo and that he would claim the amount from the seller later.

Order of transfer

The Court ordered set aside of the first instance decision and replace it with an order ordering the seller to proceed with the registration of the apartment in the name of the buyer within 10 days from the date of receipt of notice that the memo of the Tax Department has been removed.