Beneficial ownership and constructive trusts could stop TRNC property auctions

John and Julie Cooper, one of the villa owners at Greatstones which the HBPG/Construction Union deal failed to help, has been advised that the auctioning of their property could be prevented by establishing Beneficial Owners status. In the UK a Court of Appeal case Oates v Stimson [2006] EWCA Civ 548 established that if two parties had previously reached an oral agreement for Mr Oates to sell his interest to Mr Stimson and so the latter met all the outgoings and paid for certain improvements over an eight year period, despite not formalising the sale, Mr Stimson was established to have Beneficial Ownership status.

Although the Law of Property (Miscellaneous Provisions) Act 1989 requires a  sale to be in writing, the Court of Appeal decided that the conduct of the parties had created a constructive trust, “rendering it unconscionable not to permit him to enforce the oral agreement”. In the UK this means that ownership of part of a property could belong to someone who is not party to the original mortgage and if the mortgager was to fall into debt the Bank could not take all the property to repay the debt. If they had been married it might have been different.

The implications of this for those in North Cyprus who enter into a contract with a builder who mortgages the already sold property is that, if UK law was to apply, then a constructive trust would have been formed in which, despite the builder owning the land, the full or part payment has given the purchaser Beneficial Ownership status. However, if the property had been mortgaged before the first payment was made then this would not be the case.

So, if you find that after paying for a property and becoming Beneficial Owner, a mortgage is placed on your property then the Bank, and not you, could have a problem as they should only have lent on the basis of what the builder owned and in this case it would have been, according to UK law, and natural justice, very little.

The Coopers say that they are been charged £2500 to establish Beneficial Ownership status and having rejected the HBPG/Cons plan feel that it could be a much cheaper avenue which once established would allow others in the same situation to follow. But, despite this being common sense and, in terms of UK legal decisions, legally obvious, is the TRNC legal system going to endorse such a sensible approach to a situation where a seller can benefit twice from a property and where a sale contract does not establish legal ownership.

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