Consider the following example (a relevant judgment of Areios Pagos is cited below): a borrower transfers his sole asset (e.g. a piece of real property) by way of parental gift to his daughter, deliberately depriving the lending bank of a certain source from which to recover its claim, while his remaining visible estate is insufficient to satisfy that claim. As a result, the bank’s claim against the debtor, arising from the loan agreement, risks being frustrated.
To address such situations — which arise frequently in practice — the legislator has introduced the institution of revocation of an alienating juridical act as a fraudulent transfer, with the aim of protecting the creditor against an insolvent debtor where the latter has rendered himself fraudulently insolvent by hastening to divest himself of his assets, so as to deprive the creditor of the ability to satisfy his claim through compulsory execution against those assets.
What is an action for revocation of a fraudulent juridical act?
In an action for revocation of a fraudulent juridical act, the debtor’s insolvency must also exist at the time the action is filed. A parental gift made in performance of a moral duty is subject to revocation. A transfer by a debtor father, by way of parental gift of real property to his daughter, made with the aim of harming the creditor (the bank), where he knew that after concluding such juridical acts no further estate would remain to him, intending to place himself in such a financial condition that the bank would be entirely deprived of the ability to satisfy its claim. The disputed parental gift from father to daughter bears the characteristic features of a gratuitous juridical act and is set aside.
Is the revocation action time-barred after five years from the date the notarial deed was drawn up?
The revocation action may set aside any type of notarial deed transferring real property (sale, parental gift, donation, etc.) effected by the debtor in fraud of his creditor. This action is time-barred upon the lapse of five years from the date on which the notarial deed of transfer was drawn up, and not from the date the deed was registered with the Land Registry or the Cadastral Office, nor from the date on which the creditor became aware of the transfer. The revocation action is not subject to court stamp duty, nor is it registered in the books of claims (Larissa Multi-Member Court of First Instance 202/2000).
In the relevant judgment of Areios Pagos (Areios Pagos 88/2023), the transfer of real property by the debtor to a third party that brings about a reduction of his estate also includes any disposition made out of moral duty or for reasons of social propriety, since the fact that such disposition is made in performance of a relevant moral obligation can justify neither the harm to the creditors, nor the debtor’s preference for fulfilling his moral obligations over his legal ones, while a parental gift constitutes a disposition made out of liberality and the relevant juridical act is therefore gratuitous. Creditors are entitled to demand the revocation of any transfer made by the debtor to their detriment, provided that the remaining estate is insufficient to satisfy them.
The conditions for the protection of creditors are:
1) The existence of a claim against the debtor which arose at the time of the transfer and which has become due and payable by the date of the first oral hearing of the revocation action.
2) A transfer by the debtor to a third party, which includes inter alia any serious and intentional (non-simulated) disposition or alienation by juridical act or other action that brings about a reduction of the attachable estate, irrespective of whether onerous or gratuitous, as well as any disposition made out of moral duty or for reasons of social propriety, since the fact that such disposition is made in performance of a relevant moral obligation can justify neither the harm to the creditors, nor the debtor’s preference for fulfilling his moral obligations over his legal ones (Areios Pagos 805/2013, AP 1217/2014). A parental gift constitutes a disposition made out of liberality and therefore the relevant juridical act is gratuitous; nor can it be inferred otherwise by characterising it as a donation, as regards the amount that exceeds what the circumstances dictate.
3) Insufficiency of the debtor’s remaining visible estate to satisfy the creditor, which is causally linked to the alienation. Such insolvency of the debtor must exist not only at the time of the transfer, but also at the time the revocation action is brought, which is the critical moment for determining the harm to the creditor (AP 778/2015, AP 708/2017).
4) Intent of the debtor, that is, intention to harm the creditors. Such intention is deemed to exist where the debtor knows, at the critical time of the transfer, that by transferring his asset he will fall into such a financial condition that the estate remaining to him will be insufficient to satisfy the creditors, since in that case it is obvious that the debtor knows that the consequence of his act is harm to the creditors, which he accepts; the fraudulent character of the alienation is not negated where, in addition to the intention to harm the creditors, the debtor pursues other purposes in parallel.
5) Knowledge of the third party. The third party must know of the debtor’s intent, that is, his intention to harm his creditors; an autonomous intention of the third party to harm the debtor’s creditors is not required, nor is collusion between the debtor and the third party to harm the debtor’s creditors (AP 638/2004, AP 1677/2008). The third party’s knowledge is not required under Article 942 of the Civil Code (AK), where the transfer was made by way of gratuitous cause (AP 1320/2019, AP 28/2017).
- See also article Purchase of Real Property
- See also article SYPOTHA – Unauthorised Constructions
- See also article Eviction of Tenant
- See also article Change of Name or Surname
- See also article Payment Order
- See also article Certificate of Inheritance
- See also article Renunciation of Inheritance by a Minor
FREQUENTLY ASKED QUESTIONS ON DEFRAUDING OF CREDITORS – REVOCATION OF PARENTAL GIFT
1. My debtor has transferred a property to his child — what can I do?
Where a debtor transfers his property to his child by way of parental gift or donation, while owing you a due and payable debt, the law grants the right to bring an action for revocation of the fraudulent juridical act (Articles 939 et seq. of the Civil Code (AK)). By means of this action, the property notionally returns to the debtor’s estate, so that you can attach it and obtain satisfaction through the auction. An important element is that, where the transfer is made by gratuitous cause (such as a parental gift), it is not even necessary to prove the child’s knowledge of the parent’s intent, pursuant to Article 942 of the Civil Code.
2. What conditions must be met for the action to succeed?
Four conditions are required cumulatively. First, the existence of a claim that arose prior to the transfer and is due and payable by the time of the hearing. Second, a transfer that reduces the debtor’s attachable estate. Third, insufficiency of the debtor’s remaining visible estate to satisfy the claim, which must also subsist at the time the action is filed. Fourth, intent on the part of the debtor — that is, knowledge that no sufficient estate will remain to him after the transfer. The case-law of Areios Pagos (indicatively AP 88/2023) is settled in holding that a parental gift is a gratuitous juridical act and is subject to revocation, even if the parent invokes a moral duty.
3. Within what time must the revocation action be filed?
The revocation action is extinguished upon the lapse of five years from the date on which the notarial deed of transfer was drawn up — not from the date of registration with the Land Registry or the Cadastral Office, nor from the time the creditor became aware. This is a strict limitation period, so prompt action is required as soon as the transfer is identified. The investigation is carried out by checking the competent Cadastral Office or Land Registry. In cases older than five years, the action is dismissed as inadmissible and this remedy is irretrievably lost, so timing is a critical factor for success.
4. What documents and evidence are needed for the action?
What is required is title to the claim (court judgment, payment order, private loan agreement, invoices, cheques, etc.), a copy of the parental gift deed, a registration certificate from the Land Registry or Cadastral Office, as well as evidence substantiating the debtor’s insolvency — a certificate confirming the absence of other real property, bank statements, E9 tax forms, unsuccessful attachments. It is also useful to gather evidence on the temporal relationship between the debt and the transfer, which supports intent. The action is brought against both the debtor and the third party who acquired the property, and is filed with the Court of First Instance of the location of the property.
5. What chances of success does such an action have?
Where the conditions are met and the transfer is gratuitous (parental gift, donation), the chances are particularly high, as no proof of the third party’s knowledge is required. Case-law consistently rejects the argument that a parental gift was made out of moral duty, treating it as a disposition made out of liberality. Difficulties usually arise in proving the insufficiency of the debtor’s remaining estate and the temporal connection with the debt. It is noted that the revocation action is not subject to court stamp duty nor is it registered in the books of claims (see Larissa Multi-Member Court of First Instance 202/2000), which significantly reduces the cost for the creditor.
6. What is the role of the lawyer in such cases?
The lawyer first verifies that the claim meets the conditions (arisen prior to the transfer, within the five-year period), identifies the transfer through the Land Registry, assesses the debtor’s financial situation and gathers evidence of insolvency. He drafts and files the revocation action, represents the creditor in court and refutes the opposing party’s allegations of moral duty or earlier transfer. After the revocation judgment is issued, he undertakes the measures of compulsory execution (attachment, auction). Ziamparas D. & Associates Law Firm has many years of experience in cases concerning the protection of creditors and the revocation of fraudulent transfers.