Not every risk-taker gets to drink champagne

23.05.2024

REAL ESTATE

How lawyers helped a creditor enforce a claim against a debtor's property

The situation

Alexey did not have the full amount and turned to his Cypriot friends Sergey and Oksana asking them to lend him €500,000 for 3 months. Within that time he expected to sell the house, make a profit and repay the debt. Sergey drew up a loan agreement with Alexey and handed over the money.

But something went wrong. A week after the deal, the developer dug a pit for the second phase of the complex right in front of the house's facade. Now, to sell the property without a loss, he had to wait at least until the noisy construction work was over.

Four months later the creditor of the unlucky investor came to the law firm WhiteWins. Sergey understood that Alexey had no money, but had other properties against which a claim could be enforced.

The request

The debtor owned an apartment in Limassol. He agreed to transfer it to the creditor in settlement of the debt.

The powers of attorney prepared by the parties for their lawyers also had to be checked. Both the creditor and the debtor were in Russia and could not travel for the deal.

The question was how to link the property transaction with the termination of obligations under the loan agreement. The deal amount also had to be calculated so as to include all registration costs, duties and fees, since the debtor still had no money.

Are there ways to transfer the apartment to the creditor other than a sale and purchase agreement?

The parties do not live in Cyprus permanently. Can the deal be carried out under two powers of attorney issued to lawyers?

What amount of additional transaction costs should be built into the price of the apartment?

To link the loan agreement and the apartment deal, the parties need to prepare and sign a settlement agreement. In it the parties confirm that the transfer of the apartment extinguishes the borrower's obligations under the loan agreement.

An assignment agreement is not suitable as a way to transfer property. To register the transfer of ownership with the Land Registry, a sale and purchase agreement must be drawn up.

The lawyers also calculated the property transfer tax, stamp duty and title fees, as well as the cost of the company's services. All these costs were included in the purchase price, so in effect they were covered by the buyer.

The standard powers of attorney prepared by the client had to be redone: the Cyprus Land Registry only accepts powers of attorney in a specific form, in Greek or English. Such a power of attorney can also be signed in Russia, but in that case it must be apostilled.

The result

WhiteWins lawyers prepared correct powers of attorney, which the parties signed in Russia, apostilled and sent to Cyprus.

The loan agreement was supplemented with a settlement agreement. In it the parties tied the sale of the apartment to repayment of the debt and the termination of all of the debtor's obligations under the agreement.

The WhiteWins team did most of the work remotely. During his next visit to Cyprus, Sergey dropped by the office, but only to thank his lawyer in person.

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