Declaring the Actual Value of a Property

This article examines the pitfalls of not properly specifying the price when selling or buying a property.

The vendor and the purchaser of an immovable property should declare its actual value at the time of their agreement, so to avoid the risk of losing the property or the price due to any subsequent violation of the agreement by either of the parties.

Tax evasion and the payment of less transfer fees should not make the parties commit an illegality, since in such a case their agreement will be declared void and unenforceable. Moreover, the doctrine of estoppel may be raised against them because of their behaviour or their written declaration at the time of the transfer of the property, preventing them from claiming the actual sale price. Goodwill and trust are factors to be avoided and each party must safeguard and protect his rights, despite being considered suspicious. It is unacceptable the vendor to sell and transfer his property by declaring a lower price at the Land Registry and expect to receive the balance later entrusting the purchaser.

A party to a property transaction and in particular the vendor shouldn’t accept the purchaser’s promise that he will pay the price after the transaction is completed and to declare a lower price for the property at its transfer. The vendor exposes himself at a high risk to lose the balance of the price, since the purchaser may allege later, after the transfer is made, that he has fulfilled his part of the agreement.

Such an incident occurred whereby a vendor accepted the purchaser’s promise and it took him more than 10 years of Court proceedings to receive justice and to recover the other half of the price of his property sold and transferred to the purchaser. The vendor sold his property at the agreed price of £260.000, received half the price in cash and the purchaser promised him to pay the other half in shares in a company which was to be listed in the Stock Exchange. The agreement was oral and the parties, at the time of the transfer at the Land Registry, declared the price to be £130.000 which was the amount paid in cash. The purchaser refused to pay the other half, stating that he had completed his part of the agreement and that the actual price was the one declared at the Land Registry.

The case was referred to the Court whereby the District Court rejected the vendor’s claim and he appealed to the Supreme Court which recently set aside the judgement. The Supreme Court did not accept the reasoning behind the judgement of the District Court, since there was no valid reason to reject the evidence of the vendor’s representative regarding the actual price for the sale of the property. Moreover, it examined the issue of illegality of the agreement and decided that it is a rule of justice that illegality in an agreement makes it unenforceable and no Court can enforce an agreement which expressly or impliedly is prohibited by the law.

Article 23 of the Contract Law provides that every agreement of which the object or consideration is unlawful is void. The issue of illegality was not raised in the defence of the purchaser but only during the final address. The legal principle is that where there is illegality, it must be raised in the pleadings. However, where illegality is obvious and is adduced from the facts of the case, the Court has an inherent jurisdiction to examine the issue in order to avoid illegality.

The Supreme Court, having taken into account the absence of illegality in the pleading of the purchaser and that it was not so obvious from the facts of the case to examine it, decided to set aside the decision of the District Court. Moreover, it held that the agreement when entered into did not contain any elements of illegality and during its completion the amount paid in cash was declared, since the balance was to be paid in stock shares. The transfer of the property took place a few days after the agreement had been entered into, whereas its completion was to follow with the allotment of the shares.

Therefore, there was no obvious illegality at the time of the transfer when the price was declared to be £130.000, since adequate explanation was given, the Land Registry valued the property at a higher price and the relevant transfer fees were paid. Consequently, the vendor succeeded and obtained a judgment for his money.

About the author

George Coucounis

George Coucounis is an experienced lawyer practicing in Larnaca, Cyprus. Educated at University College (London) and Thessaloniki University (Greece), George is fluent in English and has been practicing law in Cyprus since 1982.

Recent articles