The European Union Directive
According to Article 11 of the "Unfair Commercial Practices Directive" 2005/29/EC Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the provisions of this Directive in the interest of consumers.
Included in the definition of such means are legal provisions under which persons may bring such unfair commercial practices before an administrative authority competent either to decide on complaints or to initiate appropriate legal proceedings.
Such unfair commercial practices also cover a special category described as misleading commercial practices.
Legislation in Cyprus
As a result of the adoption of the Directive in relation to unfair commercial practices harming consumers' economic interests, legislation was passed in Cyprus in July 2007 in the form of The Unfair Commercial Practices of Businesses Towards Consumers Law 103 (I)/2007.
The relevant administrative authority in Cyprus is the Director of the Consumer Protection Service.
The Consumer Protection Service and its Director issue administrative decisions, according to the legislation relating to unfair commercial practices.
Misleading Commercial Practices Decision
An interesting decision was issued earlier this month by the Director of the Consumer Protection Service, the range of the content of which brings to the surface several problems that may arise in case a purchaser of land on which to build a house fails to seek proper legal advice prior to such a purchase.
Examined by this decision were the commercial practices of a company involved professionally with the sale and development of land for the purpose of construction of residential properties. The object of the decision was to determine whether such practices were unfair in the sense of being misleading.
The Facts of the Case
The complainants were the original purchaser and her daughter to whom an assignment was made of all her rights and obligations which arose from the original contract with which the land was purchased with the simultaneous obligation on the part of the developer to construct a house on the same plot. The complaint was made in relation to the developer's failure to reveal material information which if known to the original purchaser then she would not have given her consent to the actual agreement.
The material information not revealed was the construction of the house without having obtained the necessary town planning and building permits as well as the existence of a mortgage on the building plot on which the house was going to be constructed. The mortgage as such prevented the transfer of the property to the name of the purchaser even though she had fully complied with all her contractual obligations.
It was decided that the developer had implemented an unfair commercial practice through the sale of the building plot with the purpose of constructing a house on it without having previously secured the requisite town planning permit and building permit, while also failing to inform the complainant that there was a mortgage on the land.
This unfair commercial practice was considered to be a breach of the relevant legislation.
Furthermore, it was a misleading commercial practice since a declaration was made by the developer that the actual sale was legal whereas this was not so. In fact, since the construction of the house was forbidden without first securing a building permit then the developer had illegally signed the contract for the sale of land and construction of the house.
The Director concluded that more than one breach of the relevant legislation had been committed by the developer and thus imposed a fine of €70,000.00.
The complaint was made in 2019 even though the relevant events occurred about 12 years ago. This decision highlights and clearly demonstrates the need for obtaining proper legal advice prior to purchasing property in Cyprus.
Originally published by Michael Kyprianou, July 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.