Supreme court judgment of particular practical value to both landlords and tenants
Stavrou v. Theocharidou, Civil Appeal No. 126/2017 (Supreme Court, 17/07/2025)
Rent Control – Automatic termination of contractual tenancy – Jurisdiction of the Rent Control Court – Absence of certificate of approval and legality of the tenancy agreement – Appellate intervention in credibility findings
Our firm successfully represented the Respondent landlady in this appeal, which was unanimously dismissed by the Supreme Court (Malachtos, Ioannides, Efraim, JJ.), with costs awarded in favour of the Respondent.
The facts
The Appellant leased two shops owned by the Respondent for an initial period of four years (1.6.2006 – 31.5.2010), which was automatically renewed for a further two years, until 31.5.2012. The shops had resulted from the subdivision of a larger space into individual shops, without the necessary permits having been secured, with the result that they could not lawfully operate as shops.
A few months after the commencement of the tenancy, the Appellant was informed of the legal status of the premises and was offered the opportunity to terminate the tenancy with a refund of the amounts he had paid. He chose, however, to continue the tenancy, using the premises as storage space for a business in which he had an interest, operating in neighbouring shops within the same building.
Following the accumulation of rent arrears, the landlady sent a written notice demanding payment within 21 days and, in the absence of any response, filed an application before the Rent Control Court seeking the eviction of the tenant and recovery of the arrears. The tenant counterclaimed for the return of all rents paid since the commencement of the tenancy, together with damages of €200,000.
The first-instance Court accepted the evidence of the landlady's witnesses, rejected the tenant's version of events, and entered judgment for rent arrears of €14,630, dismissing the counterclaim. The tenant appealed.
The legal points of the judgment
- Automatic termination of the contractual tenancy and jurisdiction of the Rent Control Court
The Appellant challenged the jurisdiction of the Rent Control Court. The Supreme Court upheld the first-instance finding that, pursuant to section 11(4) of the Rent Control Laws, the written notice demanding payment of rent arrears sent by the landlord to the tenant is also deemed to constitute proper notice which automatically terminates the tenancy agreement. Upon termination of the contractual tenancy, a tenant who remains in possession of the premises becomes a statutory tenant, a fact which confers jurisdiction on the Rent Control Court.
- Absence of a certificate of approval: the use is unlawful, not the contract
Perhaps the most central legal point of the judgment concerns the interpretation of section 10(4) of the Streets and Buildings Regulation Law, Cap. 96. The Appellant argued that, since no certificate of approval existed for the premises, the tenancy agreement itself was illegal and, consequently, unenforceable.
The Supreme Court distinguished between the legality of the possession and use of the building, which, in the absence of a certificate of approval, was indeed unlawful, and the legality of the tenancy agreement itself. The fact that a tenant cannot lawfully use the premises he has leased grants him the right to terminate the agreement and to pursue lawful remedies. If, however, he elects not to terminate the tenancy, he remains liable to pay the agreed rent.
In the present case, the tenant not only failed to terminate the tenancy when he learned of the problem, but allowed it to be renewed for a further two years, possessing and using the premises throughout. His argument that the agreement was illegal was rejected.
- Appellate intervention in credibility findings
The judgment reaffirms the well-established principles governing appellate intervention in the trial court's assessment of witness credibility, with reference to Solomou v. Vineyard View Tourist Enterprises Ltd (1998) 1(A) C.L.R. 300 and Baloise Insurance Co Ltd v. Katomoniati (2008) 1(B) C.L.R. 1275: the appellate court intervenes rarely, and only where the findings are manifestly unsustainable, unreasonable or arbitrary, or where the assessment of credibility is problematic due to logical inconsistency or a flawed evaluation of the evidence presented at trial. Provided the findings were reasonably open to the trial court, there is no room for intervention.
On this basis, the Court of Appeal found no valid ground for disturbing the first-instance finding rejecting the tenant's allegation that it had been agreed that the rents paid would be refunded if the relevant permits were not secured.
- The importance of pleadings
Also noteworthy is the Court's observation that the allegation of a promise to refund the rents had not been pleaded by the Appellant: his counterclaim for the return of the rents was founded on the unsuitability of the premises, not on any contractual undertaking by the landlady to refund them. The judgment serves as a reminder that allegations which are not pleaded cannot form the basis of a remedy.
The outcome
All grounds of appeal were dismissed and the appeal was dismissed in its entirety, with costs of €2,000 plus VAT awarded in favour of the Respondent.
Practical significance
The judgment is of particular practical value to both landlords and tenants:
For landlords, it confirms that the notice demanding rent arrears under section 11(4) simultaneously operates as a notice terminating the contractual tenancy, paving the way for the jurisdiction of the Rent Control Court.
For tenants, it stands as a clear warning: discovering that the leased premises lack the required permits or a certificate of approval confers a right of termination — not a right to remain in the premises without paying rent. A tenant who, with knowledge of the problem, elects to continue the tenancy remains fully bound by his contractual obligations.
Our firm handled the case on behalf of the successful Respondent. For further information on rent control and immovable property matters, please contact us.