Erection of extra floor by developer

The buyer of an affected apartment is entitled to terminate their sale agreement and claim their money back and compensation for any damage suffered

A seller who chooses to add an extra floor to an under-construction apartment building to increase their profit is in breach of the apartment sale agreement and is liable to compensate the buyer when they choose to terminate the agreement.

The construction of one more floor, beyond those provided for in the architectural plans, even if the competent authority grants such permit afterwards, amounts to a material violation of the apartment sale agreement, reduces its value as well as the share of the apartment in the communal areas and entitles the buyer to terminate the agreement and demand the return of their money, as well as compensation for any other damage he may have suffered.

It is important that the buyer is diligent about protecting their rights in an agreement to purchase an apartment in a building under construction or to be constructed, having proper conditions added to it. The agreement must describe the apartment, state its location and floor, the number of floors of the building and the apartments of which it consists, the architectural plans and any permits must be attached as an integral part of the agreement and it must state that the apartment includes a share in the common areas of the building and that the seller will erect the building according to the plans.

Supreme Court decision

The Supreme Court made an important unanimous decision in C.A.246/2015, dated June 4, in an appeal by a buyer whose claim for damages for the termination of the purchase agreement was rejected by the court of first instance as a result of its violation by the seller, who erected another floor, turning it from a two-story into a three-story apartment building.

The buyer visited Cyprus and the complex and found that an additional floor was being built in the building in which the apartment he bought was located.

With a letter from his lawyer, he terminated the agreement due to the violation of an essential, withdrew the agreement from the Land Registry and demanded the return of the money he paid. The seller denied breaching the agreement and the dispute ended up in court.

The court ruled that there was no breach of the agreement with the construction of the third floor in the building, as it ruled that the property the buyer purchased under the agreement related to the apartment and not the entire building.

The Supreme Court did not agree with the court of first instance ruling saying that it ignored the term and the interpretation given to the property for sale, which on the one hand referred to the architectural plans bearing the signature of the parties, are an integral part of the agreement and show the construction of the two-story apartment building, and on the other hand to the inclusion in the property of the share and co-ownership of the common areas of the building and the swimming pool.

Supreme Court conclusion 

It held that based on the content of the disputed agreement, it was clear that the agreement referred to both the apartment and the common areas of the complex and that at the time of signing the agreement, the common understanding of the parties was the sale to the buyer of the apartment in a two-story building, as shown in the plans, granting a share in its common areas.

Therefore, the construction of a third floor in the block of flats entailed the reduction of the buyer’s share of the common areas, thereby constituting a breach of the terms of the agreement, since the block of flats was not erected with two floors as shown in the plans, regardless of the fact that the seller had secured the relevant permits for this.

The trial court erred in its interpretation of the agreement and in concluding that the buyer unreasonably terminated the agreement and so the relevant grounds of appeal were valid. The term of the agreement provided that, regardless of any other remedy, the party in breach of the agreement was liable for the payment of damages.

The Supreme Court added that the purpose of damages was to restore the innocent party to the position he would have been in if the agreement had been enforced and awarded the buyer the amount he paid, plus costs which he paid to his lawyer, with legal interest and all court fees and costs.

George Coucounis is a lawyer specialising in immovable property and the founder of George Coucounis LLC, based in Larnaca, coucounis.law@cytanet.com.cy, Tel: 24 818288