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District Court clarifies the status of charge/memo on real estate entered prior to the stay of a judgment debt

18 February, 2019

Under Cyprus law, a judgment creditor is entitled to submit and request the registration of a judgment comprising a monetary debt with the competent Land Registry and such registration  immediately creates an encumbrance on the immovable property owned by the judgement debtor and prohibits any sale or alienation. This method of enforcement is very common in Cyprus and is widely known as the registration of a “memo”, which derives from the Latin term ‘memorandum’ which means a note. A necessary condition to achieve the registration of a memo is for the judgement debtor to be beneficially interested in the immovable property and for this to be registered in the judgment debtor’s name. Notably, this registration must be made at the district where the immovable property is located. Thus, a memo, on the one hand, secures the enforcement of the judgement and, on the other hand, creates a barrier which prohibits the alienation or encumbrance of the Immovable Property (e.g. sell, transfer or mortgage of the property).

In many occasions, while a judgment creditor rushes to enter a memo once the judgment is issued in order to stop any alienation of real estate of the judgment debtor, at the same time the judgment debtor rushes to file an appeal against the first instance decision. Under Cyprus law, an appeal does not operate as a stay of execution of the appealed decision, except if a Court order is issued for this purpose. Hence, an appeal is often accompanied by an application for the stay of execution pending appeal.

In the recent case of NL v T issued on 20 December 2018 by the District Court of Limassol, the Court considered the circumstances where a memo/charge was registered in the Land Registry and, thereafter, the Court granted a stay pending appeal in favour of the judgment creditor. In this case, on 17.08.2016 the District Court of Limassol issued a judgement which ordered NL to pay a specified amount to T. A few days later, NL appealed this decision and simultaneously filed an application seeking a stay of execution of the District Court decision (Stay Application). A few months later, the District Court decided in favour of a stay of execution on terms which were satisfied by NL. However, as noted, in the meantime and prior to the issuance of a stay order, T had registered a memo over NL immovable property in order to secure the repayment of the debt. When T was requested to remove the memo, they disagreed, arguing that the memorandum was validly registered given that on the day when it was registered, there was no order in place which stayed the judgment or otherwise prohibited registration.

NL filed a new application seeking the annulment of the memo on the ground that a stay of execution was ordered and that the continuance of the existence of the memorandum was contrary to such stay. After hearing arguments, the Court ruled that the registration of the memo with the Land Registry must be set aside, since any other route would be tantamount to execution of the judgement, which was now stayed. As pointed out by the Court, such execution would not be fair any longer, given that a stay of execution had been granted on terms satisfied.

This ruling clarifies an issue which was long debated, namely as to the handling of a memorandum registered prior to a judgment becoming stayed. It is now established, albeit in the first instance, that the Court may exercise its discretionary power in order to set aside a registration of a memorandum, which has taken place prior to the issuance of a stay of execution order and pending appeal.

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