Cyprus property sale and purchase agreement: buyer's liability for late payment of property payments
Today we would like to highlight the issue of the buyer's liability in the event that he/she fails to pay any instalments under the contract on time.
Before we move on to the buyer's liability, we would like to draw attention to such a concept in the contract as grace period - a period during which the buyer has the opportunity to delay payment for a certain period of time (in practice from 7 days) without incurring negative consequences for him. For example, if the payment of the first instalment under the contract is due on 30 August and the contract stipulates a grace period of 7 days, the buyer has the right to make payment within 7 days without incurring any liability for him.
If the buyer fails to make payment within the grace period, the contract may stipulate the following types of liability:
Accrual of %
So, if the buyer fails to pay/timely pay a payment under the contract, the seller has the right to charge interest on it. In practice, sellers fix in the contract that the seller has the right to charge interest at 1) a fixed rate or 2) the average rate of a certain bank.
However, in the course of negotiations between the buyer and the developers, we would recommend to try to remove from the contract provisions on the average rate of the bank, fixing only the fixed rate of interest accrual, so that the buyer, when signing the contract of sale of real estate had an idea of the amount of the penalty for late payment of the next payment under the contract.
Cancellation of the contract
In addition to the option to charge interest, sellers also include in the contract the option to terminate the contract.
Problem for the buyer: the buyer has almost fully paid for the property, but the last payment is overdue (or suddenly could not pass the compliance of the bank), and the seller has chosen the option of cancellation of the contract.
What REVERA?
- delay the cancellation option as much as possible
- to regulate in the contract the refund of all amounts paid by the buyer for the property
Best practice for negotiating terms
In practice, the contract of sale of real estate stipulates the seller's right to sell the property to a third party in the event of termination of the contract. In addition, the contract may regulate the calculation of the amount to be returned to the first buyer depending on the amount of the sale to a third party. To ensure that the seller does not abuse his right to sell the property to a third party, the following can be agreed:
- mandatory prior approval of the third party and the sale price by the buyer
- The sale price cannot be lower than the market value of the property (the market value is assessed by an independent expert).
However, in practice, developers rarely agree to such conditions because they complicate the procedure of selling the property to a third party.
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