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The EU and the Cyprus property scandals

The Cyprus Property Action Group considers the implications of the EU Unfair Commercial Practices Directive on the property scandals taking place in Cyprus which, it believes, could have monumental implications.

SINCE the Cyprus Mail article ‘Legal Lifeline for Cyprus Property Buyers’ following MEP Daniel Hannan’s question on the matter to the European Commission, many buyers have assumed that if their contract was signed before December 2007 that they were not covered by the law; however this may not be the case.

could have monumental implications

The Cyprus Property Action Group (CPAG) firmly believes that the actions of developers in holding on to Title Deeds and especially taking out mortgages which encumber them is also an infringement of EU Directive 2005/29/EC and the Cyprus law 103 (I) /2007 which transposed it, regardless of when any sales contract was signed. This could have monumental implications.

To quote: “This Directive shall apply to unfair business-to-consumer commercial practices, as laid down in Article 5 (Prohibition of unfair commercial practices), before, during and after a commercial transaction in relation to a product”.

In order to support consumer confidence the general prohibition should apply equally to unfair commercial practices which occur outside any contractual relationship between a trader and a consumer or following the conclusion of a contract and during its execution.” We consider that until a clean Title Deed is transferred to the buyer any developer is infringing this law.

transfer title immediately a property has been paid for

The Directive also states that “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 economic interests of consumers.” Clearly this means that buyers of immovable property should be protected even more stringently by the Government of Cyprus, which is ultimately responsible for consumer protection. We also believe that a positive obligation on a developer would be to transfer an individual Title Deed immediately a property is fully paid for, as happens elsewhere.

Furthermore, the Directive states “A commercial practice shall be unfair if: it is contrary to the requirements of professional diligence”, and also that “professional diligence’ means that the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practices and/or the general principle of good faith in the trader’s field of activity.” We would argue that it is neither honest market practice nor good faith to deny buyers their Title Deeds or to allow them to illegally move into a property without a Completion Certificate, both of which can involve considerable risk for the buyers and especially so if the developer has a mortgage on the development.

pushing the EU lawmakers to rule on developers’ practices

The Directive itself has an annex which currently details 31 different commercial practices which in all circumstances are considered unfair and CPAG, through its supporting MEPs, will be pushing for the EU lawmakers to rule on the developer practices rather than these being tested in the failing Cyprus courts.

Since the Directive came into force, and due entirely to a spectacular lack of enforcement by the Government, this law has also been broken at sales time, by the various players through omission of material fact – i.e. developer mortgages – meaning that literally thousands of cases of infringements by developers, lawyers, banks and estate agents have taken place.

The Directive states “Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the provisions of this Directive in the interest of consumers.

lawyers have not been advised of the law

It also appears that the Government failed in its responsibilities to even publicise these consumer protection laws as the Directive mandates: “Member States shall take appropriate measures to inform consumers of the national law transposing this Directive and shall, where appropriate, encourage traders and code owners to inform consumers of their codes of conduct.” When I started researching this law even the lawyers I contacted had not heard about it – two years after it had been transposed into law!

To quote further: “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.

As much of the basic information on these infringements, including buyers’ details, can be obtained from Land Registry records CPAG will be advocating that the European Union obtains full breakdown of the data gathering and monitors the punishment of the transgressors. Potentially this could provide massive funding towards any rescue plan – and any dodgy businesses will be more quickly culled.

no buyers should be forced to repay a developer’s debt

Finally, in the face of what could be massive sanctions from the EU, we believe that the Cyprus Government should quickly mitigate against this by guaranteeing that no buyer should be forced to settle a developer’s debt or taxes in the case of their developer going bust and that all buyers should be issued with a fully legal temporary certificate of registration (Title) forthwith.

They should then start taking this toxic developer debt out of the banking system for the good of everyone concerned and perhaps the property market would then have at least a fighting chance of some recovery.

Editor’s notes

Further Reading (English)

Directive 2005/29/EC ‘Unfair Commercial Practices Directive’

UK Office of Fair Trading ‘Consumer Protection from Unfair Trading’

Further Reading (Greek)

Οδηγία 2005/29/EK «Οδηγία για τις αθέμιτες εμπορικές πρακτικές»

Ο νόμος αριθμός 103(Ι) του 2007

Ο νόμος αριθμός 98(I) του 2007

Readers' comments

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  • Costas Apacket says:

    The principles of contradiction and corruption are alive and well and in daily use in Cyprus.

    Unfortunately the ordinary everyday honest and hardworking people of Cyprus do not appear able to stop this happening for some reason.

  • Andrew says:

    Well done Denis. You can`t keep a good man down.

    In logic, the Principle of contradiction is the second of the so-called three classic laws of thought. The oldest statement of the law is that contradictory statements cannot both at the same time be true, e.g. the two propositions A is B and A is not B are mutually exclusive. This is the statement of the law given by Aristotle. It takes no account of the truth of either proposition; if one is true, the other is not; one of the two must be false.
    Sadly though ” Bullshit baffles brains” and this place is apparently run by cattle farmers.

    Let us hope that the light at the end of the tunnel is not just an EU parliamentarian shining a torch.

    Is it too much to ask for for the Title Deeds to your home?. I wonder.

  • Hector says:

    Well done to the Cyprus Property Action Group. It is absolutely right to draw attention to the responsibilities that the ROC government accepted when it grasped membership of the EU and took all the benefits that came with it.

  • dimitri says:

    If this does all boil down to ignoring eu-law and imposition of fines again then the cy government is no stranger to paying eu imposed fines. They have been fined for pollution emissions when it comes to burning dirty fuel for electricity generation…been fined for not providing a list of coastal areas that are prone to flooding due to the potential rise of sea levels (italy and a few more have been fined too) and the list goes on, car import tax etc etc

    End of the day i think that the banks and the government are to intertwined with backhanders and favours still playing too much of a role in politics here, the government wont let the banks take a hit.. this will minimize any justice for the masses whilst the fat cats get fatter on the public’s back, sad, but my opinion,

  • Matt says:

    And what can be done in the meantime to stop Developers, Lawyers & Estate Agents moving their proceeds (money they have gained from duping 1000’s of house buyers) elsewhere?

    If they are ever taken to court, they will plead poverty and let off with a small fine. In the meantime, they bankrupt their companies and the banks will try to recover the monies from SOMEONE!

    Will the Cypriot Criminal Investigation Department trace the money and force these people to REPAY their DEBTS!

    The whole system is rotten and corrupt to the core.

  • @Steve

    We are expecting an imminent reply to MEP Daniel Hannan’s question to the European Commission about Developer mortgages in Cyprus.

    Stay tuned in for progress.

  • Steve says:

    Since accession to the EU in 2003, Cyprus has chosen to ignore various EU directives and has simply used tax-payers money to pay fines where they have been imposed for non-implementation.

    In this case, the Cyprus Commerce Ministry’s Competition and Consumer Protection Service (CCPS) is the state agency charged with interpreting the relevant Cyprus Law, 103(1)/2007, and implementing it. They have already acknowledged that they are aware of its existence and have chosen not to apply to it to immovable property.

    Meanwhile, the European Commission has not announced any intention of – or the further consideration of – intervening in property issues in Cyprus.

    I don’t really see the developers and their associates in the legal profession quaking in their boots.

  • Costas Apacket says:

    The endgame nears!!

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