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Legal lifeline for Cyprus property buyers

Buyers can challenge purchases affected by developers’ mortgages. Once a complaint has been lodged, the Competition & Consumer Protection Service of the Cyprus Commerce Ministry is obliged to investigate.

legal lifelineTHOUSANDS of buyers of property in Cyprus facing the threat of a bank chasing them for someone else’s spiralling debt, or for repossessing property for which they had paid in full, can fight back using a little-known consumer protection law, and, in the process, radically transform the whole property market.

property buyers can make a claim for misselling

Under a 2005 European Union directive on consumer protection that became Cyprus law in 2007, property buyers whose purchase was encumbered by a developer’s mortgage or other charge without their knowledge, can make a claim for misselling. If upheld, that claim would see the original purchase agreement declared void.

The Unfair Commercial Practices Directive 29/2005/EC, which was introduced into Cyprus law as Law 103(1)/2007 on July 18, 2007, states that it is a violation for a business to omit or hide material facts from buyers, which if had been made known, would have influenced the buyer’s purchasing decision.

A question to the European Commission tabled in the European Parliament (EP) last week by British MEP Daniel Hannan says that “it is clearly a material fact that the property being purchased has a developer’s mortgage on it, and that in the event of the developer being forced into liquidation, buyers could potentially lose their homes. This fact is systematically hidden from potential buyers by developers.”

The European Parliament question continues: “Cypriot banks even grant mortgages to buyers without informing them that the developer may also have a prior mortgage of his own on the property.

The Cyprus property market has failed to recover

The property market in Cyprus, which practically stagnated when the economic crisis hit home, has noticeably failed to recover in areas such as Paphos that have previously relied on British nationals buying holiday or retirement homes.

A major factor in this absence of recovery is a growing awareness of the long-standing legal and bureaucratic mess surrounding the issuing of Title Deeds, compounded by an increasing number of reports of sharp practice by developers, lawyers, estate agents and banks.

The British High Commission in Cyprus and a number of British MPs have been inundated with complaints from British nationals relating to the purchase of property in Cyprus. The current UK government is aware of those problems, and recently recommended to the Office of Fair Trading (OFT) that it investigates the question of misselling in relation to EU directive 29/2005/EC. Some of the larger developers regularly market their services in the UK at foreign property fairs, either directly or through agents, so the OFT would be able to take action against anyone found to be breaking the law.

The body named in Cyprus Law 103(1)/2007 as the competent authority for not only enforcing the law’s provisions, but also to actively take steps to change the prevailing attitudes that result in misselling and other unfair commercial practices, is the Commerce Ministry’s Competition and Consumer Protection Service (CCPS).

Cyprus Property Action Group (CPAG) representative Denis O’Hare told the Sunday Mail that when he contacted the CCPS to ask how it was implementing the law in relation to property, he was told that “it does not cover immovable property“.

However, the definition of terms contained in the law defines “product” as “any goods or service, including immovable property, rights and obligations“.

Immovable property necessitates positive obligations on traders

Further, the EU directive clearly states that not only is immovable property covered, member states are expected to introduce additional laws or regulations to ensure this, Paragraph 9 in the Preamble says: “Financial services and immovable property, by reason of their complexity and inherent serious risks, necessitate detailed requirements, including positive obligations on traders. For this reason, in the field of financial services and immovable property, this Directive is without prejudice to the right of Member States to go beyond its provisions to protect the economic interests of consumers.

The directive also states (preamble paragraph 22) that “it is necessary that Member States lay down penalties for infringements of the provisions of this Directive and they must ensure that these are enforced. The penalties must be effective, proportionate and dissuasive.

Under Law 103(1)/2007. when the CCPS discovers a breach, it has the power to do various things, including imposing an administrative fine of up to 5 per cent of the turnover of the person responsible, or a fine of up to CY£150,000 (€256,290). Anyone who hinders the CCPS’s work is guilty of an offence punishable with a maximum fine of CY£50,000 (€85,430) or a 6-month prison sentence, or both.

A lawyer who is very familiar with the Cyprus property market told the Sunday Mail that “to my knowledge, the 2007 law has not so far been used“, and despite its having been published in the Government Gazette, did not think many lawyers – let alone consumers – would even be aware of it.

The lawyer said that the issue of misselling property by omitting crucial facts was clear-cut, and the first line of protection was reliable legal advice: “You should be explained the law in Cyprus, you should be explained your rights, you should be explained what is involved in the deal, and then as a responsible adult, you make your decision.

The Competition & Consumer Protection Service are obliged to act

Regarding the CCPS’s responsibilities as the competent authority, he said: “Once a claim has been lodged with the CCPS, they are obliged to investigate.” If the CCPS were to fail to act, an alternative would be to make a proper claim to the courts, asking for an agreement believed to be based on misselling to be voided, “As soon as you get a judgement in your favour, you would then ask for a remedy, which would include a claim for damages to cover monies paid, compensation, etc.”, the lawyer said,

He added that, depending on the details of each case, a separate request might be needed to oblige a developer to assume liability for repayments under a mortgage agreement covering the purchase of a property.

O’Hare was unequivocal about who needs to act: “The competent authority is the CCPS, They are the ones who must enforce the law, and must rule on whether or not misselling has taken place, It’s black and white – the law is there to make sure that consumers are aware of things that might dissuade them from entering into a purchase agreement.”

The implications for the Cyprus property market are huge

He added: “Now that we know that misselling is a crime in Cyprus law, will the CCPS ensure that this behaviour is stamped out? Not to do so would be to compound the original crime.” The implications for the Cyprus property market are huge.

Proper enforcement of Law 103(1)/2007 may well drive a number of unscrupulous developers out of business, quite apart from the prospect of the banks having to deal with their own liability and at the same time sort sound loans from the unsound from among the estimated €7 billion in property- related mortgages.

One major bank is already having to deal with its sizeable exposure to one developer said to be facing financial difficulties, compounded by unconfirmed allegations of the misselling of Swiss franc mortgages to purchasers of property from that developer.

What is certain for many property-buyers today is that the current situation simply cannot be allowed to continue unchecked.

Legal lifeline for Cyprus property buyers

Readers' comments

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  • Tom says:

    The only way for Cyprus to sort out it’s massive property problems is for someone in the Government to show some guts and integrity and set up a forward thinking, proactive working group, with a mandate for change and action.

    Otherwise Cyprus is sunk without it’s holiday and expat generated income. It will make Greece look wealthy.

  • Paul says:

    Peter

    How does one go about applying for ‘Doctrine of Part Performance’ and do you know how much it costs?
    It seems to me this is the better route to secure ownership and protect ones assets.
    Presumably I would have to use a solicitor?

    Best Regards

    Paul

  • Mike from UK says:

    Peter Ruse is correct in saying that contacting your MEP and MP is a must. The only way to try and keep the whole issue of property sales alive is to keep lobbying and force the issue.

    i have already sent a note to my MEP updating him on the latest consumer protection info

  • Costas Apacket says:

    The SH one T is about to hit the fan.

    Yes the Cypriot jackals will try to wriggle out of this any way they can, but it’s our job to keep the pressure on, so write to your MP and MEP’s using this website http://www.writetothem.com/ or via the address given on the BHC website.

    Paste a link to this article in you contact so that your MP and MEP’s can read it themselves.

    The key is to do it now!!!!

  • Peter says:

    Paul, if you use the system of ‘misselling’ all that happens is the contract is cancelled as void. So you get the €50k you paid for the villa in 1998 and the villa which is now worth considerably more is returned to the developer, so he’s quids in and you’re homeless.

    It is better to use the ‘Doctrine of Part Performance’ to force through the sale and make you the legal owner by using the court to order the title deeds be transferred into your name. This is an ‘equitable remedy’.

    What is wrong is that it will cost the buyer even more money to get their rights, and the lawyers are in a win win situation when it is the lawyers who are responsible for this mess.

    The other thing to do is go for the lawyer (recommended and already been done by one expat couple) but the case will drag on for several years. What is needed is a war chest so that no one individual is put to the expense, and then pick the lawyers off one by one, until the “Pips Squeak”

    But as I’ve said all along buy in Cyprus and you will lose your home, your capital, and your sanity.

  • Epaminondas says:

    My wife bought a lot in Limassol Ayios Athanasis about fifteen years ago but unfortunately we live in Canada and we were hoping to return to Cyprus for our retirement. We tried to sell it for more than a year so far without any results . To our astonishment we found out the main reason why id wasn’t easy to sell it was probably no title deed given by the seller developer at that time and that our next door neighbour who is Doctor infringed in our property rights and took a big part of it without any permission ,and without asking us. I would like to Know if there is anything we can do to force him out of our property.

    It looks like in Cyprus the law of Jungle and the law of the powerful supersedes any Cyprus state laws.

    Τα μεσα η Θεση και η δυναμη των ισχυρων αγιαζουν τον σκοπον, αδικουν το αδυνατο ανθρωπο και τον εξευτελλιζουν χωρις να μπορει ο αδυνατος να βρει το δικαιον του τις περισσοτρες φορες. Θα σας παρακαλεσω εαν σας ειναι δυνατο να μας συμβουλευσετε τι,και αν μπορουμε να κανουμε κατι , στην περιπτωση αυτη της αρπαγης μεριδιου της περιουσιας μας απο ενα εντιμο δηθεν πολιτη.!

    Sincerely Nondas Epaminonda

  • paul ruse says:

    Well we can all read the above, and it’s there in black and white.

    Now is the time to get onto your Euro MP your UK MP the press not just newspapers TV and radio.

    Strike while the iron is hot, don’t wait, do it now! Or loose it. Doing Nothing is what they are relying on.

    Remember Conner Odwyer, he is probably worn out. He deserves your full support now, not I’ll do it later now!

  • Matt says:

    Charles – this article will give thousands of house owners immense hope and relief. It sounds so easy and straight forward doesn’t it?

    In reality, what will really happen…

    Thousands of complaints will be lodged with the CCPS which will be investigated and take another 5-10yrs. There will be nothing the EU can do to speed up the process!

    Mean while..as we speak, developers & Lawyers are probably moving their money into other bank accounts (probably overseas banks) and transferring anything they own into other family members names.

    When the CCPS finally bring the developers & lawyers to court. They will have to declair themselves bank rupt as they cannot repay any outstanding debts or fines.

    A small prison sentence will be imposed. No big deal really.

    ….back to square one. House owners may be forced to lose their rightful property!

    What Cyprus has been doing for years is a type of Ponzi scheme (scam)

  • Andrew says:

    Can this law be enforced retrospectively (Law 103(1)/2007 on July 18, 2007).

    Will this law provide protection for those who were missold prior to that date. What happens if the developer is declared bankrupt in the meantime.

  • Peter says:

    The object of using the ‘misselling’ is to ‘void’ a contract. In voiding a contract the court will return the parties back to the period prior to the contract, as if the contract never happened.

    If for instance you have paid €200,000 for your home the court will order the builder to return to you the €200,000, it may or may not also order costs be paid by the builder.

    In other words it will delete the contract as if it never happened. There is a difference between a contract that is avoidable and a void contract.

    So you get your €200,000 back from the developer and the property is returned to him, problem is he doesn’t have the €200,000 he used it to buy a new BMW each year and keep his wife in opulence, and you can’t get blood from a stone.

    So you return the property to him, as you don’t get to keep the property and have the €200,000. So you now have no where to live.

    So the developer resells the property which has been returned to him at an inflated price, as property has gone up in value. So you’ve given your house away, but do you think your original €200,000 will be returned…..Correct another brand new BMW in his garage.

    But this is Cyprus after all.

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