- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Cyprus property buyers still at risk twenty years after collapse

IF you are British and of a certain age, you will remember “All Our Yesterdays”. It was a television programme, produced by Granada Television, which ran weekly between 1960 and 1973 and again between 1987 and 1989. The format was simple: a presenter introduced snippets of newsreel that had been shown in cinemas 25 years ago that week.

There isn’t an equivalent television programme in Cyprus. But if there was, it would soon be showing a news snippet about a Cypriot property development company by the name of A. Pieris Estates Ltd which collapsed in the mid-1980s. Information about the affair is sketchy, but I believe it was one of the biggest property development companies operating in Cyprus at that time.

There’s an old saying “the bigger they come, the harder they fall” – and Pieris Estates was no exception. Their collapse affected diplomatic ties with Kuwait and the affair dragged on until 2006 at which time the European Court of Human Rights ordered the Cypriot Government to pay €29,000 to four Greek Cypriots for allowing their case to drag on in Cypriot courts for more than two decades.

Lessons learnt

Did the Cyprus Government learn anything from the collapse of this property developer and the subsequent furore? It seems not!

Here’s a 5 year old article from the Cyprus Mail published on 27th September 2003 that mentions the infamous Pieris Estates affair. It talks about a very familiar subject – the rights of property buyers.

What about the rights of the buyer of property?

PRESS REPORTS suggest there are about 55,000 individuals awaiting title deeds for their properties. Most of them have paid developers the full amount agreed for the property, but still have no clue when the title deed will be issued. They may have to wait for years, as they are at the mercy of the developer, his bank and government bureaucracy, all of which have their own agenda.

One thing is clear: protecting the buyer is not a priority for any of them, because when a developer goes bankrupt an individual without a title deed will lose what he has paid for. The banks will take over the collateral and the householder will be left homeless and tens of thousands of pounds worse off. This is exactly what happened when the notorious developer Pieris Estates went under back in the 1980s. The bankruptcy even affected diplomatic ties with Kuwait, since many of the buyers left in the lurch were from that country.

Yet 20 years later the authorities have still to ensure that the buyer is fully protected legally. In fact the authorities contribute to the whole problem by delaying the issuing of planning and building permits. It should take three months for each permit to be issued, but can actually take anything up to two years. This puts pressure on developers to start projects without the necessary permits, which can give rise to disputes with the authorities that prevent the issuing of title deeds. If there is a part of a building that has no approval from the authorities, no deeds are issued.

There have been cases in which no deeds were issued for 30 flats in an apartment block, because the owner of one flat had arbitrarily violated the building permit conditions. It seems absurd to penalise 29 other owners over one person’s stupidity, but it happens all the time. What is astonishing is that the state is losing hundred of millions of pounds as a result of this shambolic state of affairs, because without title deeds no transfer taxes are paid. So it does have a real incentive to speed up its processes. In the above case, for instance, why were the 29 flat-buyers not issued with title deeds?

The same should apply to the banks, which demand that the entire loan to the developer is paid off before they release the title deeds which they hold as collateral. In many cases developers use the loan facilities they have for one project to start work on another. The result is that the original project is not paid off – and the bank does not release the title deeds. In fact banks gain from the title deeds not being issued because they are entitled to charge 1.5 per cent interest on the value of each property being used as security.

Things are gradually changing, however. The Central Bank is now pushing banks to view each development project separately. Thus, developers would not be allowed to use loan facilities for one project to finance another. Also, banks will have to allow the issuing of title deeds for properties which have been repaid by the developer – for example, if 50 per cent of the loan has been repaid, deeds would then be issued for half the flats in a block.

These are steps in the right direction which offer some protection to the buyer, but government departments must also speed up their procedures, because as things are they are providing some developers with excuses for not handing over title deeds. This is certainly not in the best interests of the buyers whom the state should be protecting.

Copyright © Cyprus Mail 2003

Although Pieris Estates collapsed more than 20 years ago, the Cyprus Government has done little to protect the interests of property buyers since that time. I hope it doesn’t mean that we’ll have to wait another 20 years for it to get its act together and change its archaic laws.

If we are forced to wait, the Cyprus Government could find itself facing many more embarrasing cases in the European Court of Human Rights.