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General: Overseas Property Problems: Title ownership

Problem: title ownership

Considering how big a deal buying a property is to the average buyer, it’s hard to fathom why so many of them are prepared to buy a home overseas in such a ‘devil-may-care’ fashion. When it comes to the conveyancing process for example – something considered so important when buying in the UK - people still make little effort to investigate the ‘boring but important’ issues involved.

One of the most common problems resulting from this is lack of full title ownership. Thousands of properties have been sold without title deeds, and from a legal point of view, if you don’t have the title deeds to your property, then you don’t own that property. There have been many instances of shady vendors selling property they have no rights over, sometimes to more than one person, and this is a particular risk in countries with an unstable past or a history of population displacement.

Indeed, in some countries where British people regularly ‘buy’ property, foreigners are not even allowed to own property. Small wonder, then, that some foreign buyers get a nasty surprise – often several years after they have parted with their money.

Title problems have been encountered in many different locations, but is particularly widespread in Cyprus. After the Turkish invasion of Northern Cyprus in 1974, the Cypriot government relaxed its housing laws to provide displaced Cypriots in the north with homes in the south. Their land and houses were then sold by the Turkish authorities, and many were bought by Britons. Turks were also displaced from the south to the north. And, as a result, when it comes to the question of ‘legitimate ownership’ of property, things are very unclear. You may not be aware, for example, that Larnaca’s Airport is actually built on old Turkish land.

Around 130,000 property owners are waiting for the deeds to their property and 30,000 of these are foreign buyers. The implications are far-reaching – you don’t just lack legal ownership, you won’t be able to borrow against the property, make any changes to it, and you’ll have difficulty selling it on the open market. Cyprus is, however, tackling the problem and has said that it will start to issue some of the title deeds that are still pending, but it’s a slow process and it could take years to clear the backlog. If you want to buy in Cyprus, it’s possible that you’ll face a long wait to get the title of your property registered.

But buyers have experienced title issues in many other locations too, including Spain, Croatia and Montenegro.

How to avoid this situation

Always consult a reputable independent lawyer. One of the biggest mistakes is failure to obtain independent professional advice, or for buyers to use the developer's solicitor, who will often be biased towards their client. It’s best to use an English-speaking lawyer who is proficient in your chosen country’s property laws.

If you’re taking out a mortgage to finance the purchase of your overseas property, a lender not already connected to the development/property will normally (but not always) do its own checks to make sure that the title deeds are in place, otherwise it wouldn’t be a secure asset for them.

Even in countries where UK-style land registry systems are still evolving, it’s often possible to find out the title history of a property. It may have no title deeds at all, disputed deeds with different owners claiming the land or buildings, or a ‘clear title’ which means that the next owner has undisputed rights to the property. If you find that the property has no title history, it’s often best to simply walk away.

Another approach is to consider resale properties only, which should hopefully already have a title deed, rather than off-plan properties where you have to put your trust in the developer. In some countries, estate agents receive up to 15 per cent commission for selling new-build properties and only around five per cent for resales. There’s little incentive, therefore, for them to promote resales. However, it’s still important to check how long the property was previously owned for, and this is something your lawyer can look into.

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