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Banks say town planning bills unconstitutional

The Association of Cyprus Banks believes that some provisions in the three town planning bills currently awaiting parliamentary approval are unconstitutional and has called on the government to think again.

THE government yesterday questioned the postponement of the approval of three town planning bills by parliament over bank concerns regarding a provision on mortgages.

Parliament was expected on Thursday to approve the bills, which include provisions that would allow thousands of buyers to receive their title deeds.

The Cyprus Interior Minister, Neoclis Sylikiotis, wondered why there was a further delay after many months of discussions that were concluded last December.

However, the Association of Cyprus Banks said it had not been consulted about the three bills discussed by the House Interior Committee.

The Association had written to the committee twice, on December 23, 2010 and February 21 this year, asking to be invited to give their views on a particular provision but to no avail. Neither were they sent the bills officially.

The banks went to committee members and informed them of their concerns before the vote.

“We said that it would be right for us to be invited to give our views,” said Michalis Kammas, the Banking Association’s Director General.

According to the banks, the point of contention is a provision that could put an encumbrance on a property or ban its transfer if it has an irregularity.

The banks say that banning the transfer of a property while mortgaged automatically reduces its value and consequently the lender’s collateral.

In the February 21 letter, the banks asked for the controversial provision to be removed suggesting that it could also be unconstitutional.

But the Interior Minister said that adopting the bank’s suggestion could render the whole procedure void.

The Association stressed that it was in favour of the town planning reform.

“We want these changes to be made so that it brings order in the market,” Kammas said. “It is to everyone’s benefit.”

Over 100,000 people remain without Title Deeds to their property due to irregularities at the time of construction or changes later on, or due to previous developer mortgages..

The new bills will allow buyers to legalise the irregularities, for a fee, and receive their Title Deeds.

Apart from town planning matters, the government has also drafted two bills to regulate mortgage matters that are under discussion at the House Legal Affairs Committee.

Kammas said banks have been consulted on those.

Editors Comment

No bank in its right mind is going to advance money to buy something that has no intrinsic value – such as any property that has the potential of being issued with a ‘poisoned’ Title Deed.

In October last year, the Cyprus Association of Valuers and Property Consultants pointed out that there were currently 120,000 properties without Title Deeds. And although some 20,000 applications for Certificates of Final Approval were in the pipeline, it was unclear how many Title Deeds are held up as a result of developers not repaying their mortgages.

Readers' comments

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  • Costas Apacket says:

    This is amazing!

    It’s OK to saddle the poor buyer with all sorts of rubbish that the Developers, Lawyers and Banks serve up, but when there’s any chance it might affect the Cypriot banker boys club they’re up in arms.

    If the banks won’t accept irregularities identified on Title Deeds why should we Customers?

  • Unbelievable says:

    Odd_Job_Bob..

    Putting Cyprus investments to one side, what would any investor do if they were duped into signing a dirty contract and watching his/her investment rapidly declining?

    Any sensible investor would pull out asap.

    Options A – Find a Breach in your sales contract and stop paying the mortgage. You might lose some money, but better in the long run. Look for another investment opportunity elsewhere and learn.

    Option B – Live in hope.. One day, you will get your legal Title Deed and your investment will make a large profit for your retirement at the age of 110yrs. After tax deductions of course.

    Option C – Learn to Belly Dance. Get a weekend or evening job in a club to make the extra money to pay the mortgage. If you can play a musical instrument whilst balancing a glass of ouzo on your head, this will increase your tips. All the extra cash helps!

  • Odd_Job_Bob says:

    Costas Apacket: the answer is never. Kathy-H: I think you’ve missed the point. The banks are the government are the lawyers are the property developers. They belong to the same political elite, they went to the same schools and are part of the same families. If Cyprus property is run to ground (which is happening as we speak) and repossessed property is being sold for a pittance, who do you think will get first pickings? Not us, that’s for sure!!

    It will all end up back in the hands of the people who sold it in the first place.

    Jack the Lad, John Frazer and Unbelievable – I agree 100% with all you say.

    Question is: what do we do now? Cut and run? Live in hope?

    Would love to know your views.

  • Costas Apacket says:

    A significant number of Cypriots appear to be no better than cheap carpet sellers who have convinced themselves that they are somehow greater than this?

    When are they ever going to become grown up, honest people?

  • Kathy-H says:

    The time has come for more than 100.000 thousand buyers. Let’s hope that the government understands how important this issue is and won’t submit to banks’ pressures.

  • Jack the lad says:

    I suspect that the Banks will do anything possible to hold up legislation that will allow deeds to be issued in any form. If all the outstanding title deeds were in a position to be issued tomorrow, the banks would then have to collect the outstanding mortgages on the land from the developers.

    And that is where the real problem lies. The developers don’t have the money. If they can’t pay, then the banks would have to file against the developers, the developers would declare bankruptcy, the banks would chase the purchaser only to find that in many cases the building is also mortgaged by another bank. The banks are unwilling to write off any debts even though many have not seen payments of interest for many years. The bottom line is that the banks collateral in many cases is worthless. At the moment, the banks can include in their accounts loans ‘covered by suitable collateral’. They don’t even need to report these loans as non-performing loans even if they have huge arrears. This collateral for BOC for example could be your development’s plot of land. Similarly, Hellenic, Alpha, Marfin etc. etc. could hold mortgages on 10 of the properties on that land using the contract of sale as collateral. They can’t both foreclose because the asset is the same one!!!

    You can see evidence of this type of ‘creative accounting’ used just today when Cyprus Airways has announced it’s figures for 2010 and INCLUDED a €20 million payment from the Government, which was voted on last week and has yet to be approved by the EU. When did they include the payment? In their 2010 accounts!!!!!!!

  • Unbelievable says:

    @Jon Frazer – You and many others have drawn the same conclusion. It’s clear that Cyprus likes to operate in a dirty cloak & dagger tribal way when it comes to land and Title Deeds. The whole system stinks!

    Cyprus is a lovely place to live if you are not caught up in any legal matters. I lived there for 2yrs and I’m half Cypriot myself. After seeing the way of life and how people treat each other, I decided to move back to the UK. I would not allow my young children to grow up in such a backward village tribal society.

    My personal opinion is, the RoC are using the same dirty tricks as the TRNC for Title Deeds and land.
    Cypriots will think, if the North can get away with these scams – why not us as well?

    ROC will NEVER see their land or property in the North again, so they do not want to lose what little land they have left in the South.

    Greece’s rating has just been downgraded again to below Junk. This will have an effect on Cyprus and their financial status will get worse by the end of this year.

    TUFF !

  • jon frazer says:

    My comment is a general one, but loosely connected to this thread.

    I have long wondered why certain specific areas of Cypriot property law are classed as “Ottoman”. Why were these not changed to British law (like almost everything else) when the country was under British governance? I’m thinking particularly of the seeming absence of any strict requirement to transfer title deeds on the purchase and full payment for a property.

    I really raise this because I wonder if perhaps a law professor could comment on the history of this aspect, as I suspect that it could be part of the institutionalised fraud which has been discussed earlier in this thread.

    If for argument’s sake the notion that certain specific areas of law (which could be regarded as “legitimate”, though archaic) were allowed to remain unaltered, although causing massive problems to numerous buyers, then the beneficiaries, ie lawyers developers and bankers could “legally” perpetrate this huge scam.

    And that is exactly what I have come to the conclusion that this is.

    I have also long felt that, having sold off much of the “family silver”, the only way that a (now) largely lazy and spoilt younger populace could get most of it back (and if necessary, repeat the scam), would be to follow this scheme.

    Add to this the fact that 70% of deputies are lawyers, and the tribalistic nepotism that prevails in this society, along with it’s closedness and language idiosyncrasies, and I think this could all be a “clever” conspiracy…..

    I suggest all this in a hopefully constructive spirit, as perhaps if the root underlying flaws in the law were investigated and challenged, then we might get somewhere.

  • andyp says:

    Thanks Nigel. Request submitted.

    Unbelievable. I kind of guessed that, unfortunately.

  • @steve & @andyp – I have an analysis of the new laws as they were proposed in 2009, written by a professor of law. If you would like a copy, contact me.

    However, the proposals have been revised since 2009 – and as they have not been published, I cannot comment on them.

    But the primary aim of the original proposals seemed to be an attempt to increase the flow of money into the government’s depleted coffers.

    And as for it’s enforcement, here’s an extract from the analysis:

    “The holder of the building and planning permits under this law must notify the authorities within 21 days from completion of the project that such works have indeed been completed. Completion of works means the removal, for any reason, of all machinery and workers from site and the stoppage of any works for a continuous period of two months”.

    How do they think they are going to implement this? Employ a team of watchmen to keep an eye on the site 24/7 for two months to ensure no-one does any work? It’s ridiculous!

  • Unbelievable says:

    @Andy – ‘how do we stop it’

    You Can’t & Your MP or MEP Can’t stop this mess

    If you have been DUPED into signing a fraudulent sales contract – STOP PAYING THE MORTGAGE.

    Find a BREACH of CONTRACT fast

    Prices started to drop in 2007. That was 4yrs ago and there is no sign of a recovery soon.

    Cyprus property prices might recover in 10yrs time, but for now, most properties are in negative equity.

    When property prices do recover, you will need Title Deed and Final Certificate of Approval to obtain its FULL market value

    WHITE ELEPHANTS have been sold to foreign investors !

  • Odd_Job_Bob says:

    I LOVE Uboat’s comment, “there are likely to (be) a great deal of properties all over Cyprus worth NOTHING …. Just give people the title and start again fresh from 2012?”

    I also love Unbelievable’s comment “people might start throwing the keys back and saying – tuff, I can no longer afford to pay this mortgage for something that’s worthless”.

    If we work on the premise that the Cyprus government are NOT thick (OK, big assumption, but bear with me), then they have considered the above statements.

    They have thus either completely dismissed them as being rubbish, nonsense, scaremongering, who do they think they are, it can’t happen etc or they accept them as being if not possible then highly likely.

    Let’s assume they believe the latter.

    Under normal circumstances, you can’t sell a property twice: once sold, you get your money, you use it wisely, you go on to do something else.

    What if the commodity you’re selling is very, VERY finite and there’s not much else, what do you do after it’s been sold?

    I know it’s a MASSIVE conspiracy theory, but if the two esteemd gentlemen’s comments are to be believed (and I am totally in agreement with them) and so is the government, then the proposed legislation is INTENDED to cause the situations they’ve described.

    The plan goes like this:

    1) We sell our land to foreigners and they give us money

    2) We make their assets worthless and they give them back

    3) We clean up our act and say “WORLD EXCLUSIVE – Cyprus Property Now Clean, foreign buyers come hither!!!”

    4) We sell it all again. No-one gets prosecuted, everyone (Cypriot Property Developers, the largest of which just so happen to be in the government) parachute’s out of their debt, a new set of ex-pats get shafted.

    Sounds like a plan to me….

  • andyp says:

    @ Steve. OK understood. Likewise I am totally against these bills for the same reasons see my earlier post of 5 March 9.08. They will not really help anyone except the developers and now probably the bankers.

    I suppose the question to all is How do we stop it?

    I made a suggestion on Nigel’s forum section last night but this would, even if supported by anyone, be too late to help stop these bills or the revisions that the bankers will undoubtedly come up with to save their skins at our expense.

  • Unbelievable says:

    This is a practice that’s been happening well before Cyprus joined the EU.

    Everyone thought the sun would shine forever and it would all workout nicely, even though you all have to wait for your title deeds.

    Now they are part of the EU and the financial bubble has burst (all over the world), banks are now seriously panicking as they may lose out.

    If you owe the bank £1, it’s your problem
    If you owe the bank £100,000k, it’s their problem

    They are worried people might start throwing the keys back and saying – tuff, I can no longer afford to pay this mortgage for something that’s worthless.

    If the banks start taking thousands to court, they will all be exposed for this fraudulent mess that everyone has been DUPED into !!!

    Naughty naughty little Cyprus. Got your fingers burnt now haven’t you :-)

  • Steve says:

    @ Andy
    The specific issue of poisoned title deeds has received hardly any comment. The majority of negative opinion revolves around other issues like developer mortgages, which is a legitimate beef, but not the end of the story. Title deeds at any price is a mistake. The way things are being presented is a take it or leave it position where we have to accept a lot of bad with a little bit of good. I can understand that owners under threat of losing their property through a mortgage default by a developer don’t feel inclined to look at the rest of the story, but if real progress is to be made then every aspect that is wrong needs to be vigorously opposed and that is not happening.

  • U Boat says:

    I agree with the comments, but what about the Developers whom will not, or make every excuse not to complete a development and hence the title deeds can not be applied for. While keeping to themselves areas originally designated as green areas for building when they see fit to. All properties on my development where sold some years ago then the developer decided to build 3 house on our green area. Again, holding up title even more. Now they have been done there is space for possibly another two properties should the developer want to play his ace card again.

    No planning authority or lawyer seems able to stop it. But still the banks lend to buyers to buy these new houses or resale properties on my development?

    They obviously don’t care as long as they can sign you up to a loan/mortgage agreement.

    Some owners have changed things and added sheds etc, and why not all the Cypriots do it. So there are likely to a great deal of properties all over Cyprus worth NOTHING if this goes ahead. What a mess. Just give people the title and start again fresh from 2012?

  • andyp says:

    @Steve. Not sure what you mean Steve by your last paragraph as there has been a lot of opposition to these Bills. I think Nigel may even have written an article about it several weeks ago if memory serves.

  • Steve says:

    I have written at least three posts to this website in the past three months citing the problem of poisoned title deeds, particularly through the practice of developers having ignored the provisions of planning permission, for instance building over footpaths, ignoring height restrictions, building over or too close to boundaries and other stipulations which will result in the issuing of poisoned title deeds that will not allow the property to be sold without the owners first correcting the faults. There are massive negative consequences for the buyers’ estates when they die and enormous short term issues with complexes in which some owners will not contribute to fixing the problems, the responsibility for which the new legislation takes from the developers who caused them and puts firmly on the shoulders of the new owners.

    The lack of even one response on these issues until today suggests to me that denial and selfish self interest is a real problem regarding the Cyprus property debacle and owners are going to deserve generally what they are going to get.

  • @baileyboy – it seems that the banks did write to the committee twice to express their concerns, but their letters were ignored.

  • Denis O'Hare says:

    CPAG has argued from the outset that this ill-conceived ‘tainted title deed’ legislation is unconstitutional and undermines buyers’ rights (see article). The unethical banks having supported this dishonest property industry, including the granting of buyer mortgages on these illegal properties, have now suddenly woken up and found that they too could be affected by the consequential devaluation and new legal status of the properties e.g. a property with a ‘restricted’ (poisoned?) title deed cannot be mortgaged or sold.

    Moreover, a property which cannot be sold is effectively worthless, never mind devalued, hence these caring banks’ concern about the lender’s collateral.

    Here is the relevant constitutional Article :

    ARTICLE 23 – Property Rights

    1. Every person, alone or jointly with others, has the right to acquire, own, possess, enjoy or dispose of any movable or immovable property and has the right to respect for such right.

    The right of the Republic to underground water, minerals and antiquities is reserved.

    2. No deprivation or restriction or limitation of any such right shall be made except as provided in this Article.

    3. Restrictions or limitations which are absolutely necessary in the interest of the public safety or the public health or the public morals or the town and country planning or the development and utilization of any property to the promotion of the public benefit or for the protection of the rights of others may be imposed by law on the exercise of such right.

    Just compensation shall be promptly paid for any such restrictions or limitations which materially decrease the economic value of such property: such compensation to be determined in case of disagreement by a civil court.

  • baileyboy says:

    Why have the banks waited until this late stage to intervene? Is this part of a ploy to delay the proposed legislation becoming law?

  • cab says:

    oh! so now as the wall becomes ever closer to the bankers backs we hear the word LEGALITY?

    two mortgages on one property? is this legal with no disclosure.

    When is complicity going to become a crime in Cyprus?

    lawyer + bank + property developer = 3 vultures waiting on the tree for the victim sorry buyer to appear on the horizon.

    now that no-one is coming over the horizon what are these vultures going to feed on?

  • Andrew says:

    Imagine paying for a new car and having it delivered without an engine or gearbox. Then being told that you cannot have the engine or gearbox until the manufacturer pays for the steel used in making the car. Then imagine this happening to a huge percentage of new car buyers. This could surely never happen, yet the same thing happens every day when buying your home in Cyprus.

    Would it be too much to expect Banks to stop holding buyers to ransom after the same Banks have failed to secure their loan repayments from a developer.

    Should Banks not be made to write down their own losses and let innocent buyers have free title to their property.

    Maybe that is why Banks give themselves such big bonuses. Like lawyers, when Banks win they win and when they lose they win.

  • andyp says:

    How about the Banks banning a mortgage on a property that is already mortgaged? No legislation required.

  • andyp says:

    In my opinion these Bills would only produce more costs and misery to the victims anyway. Why should we pay for rectifying the developers shoddy work or blatant disregard to the planning conditions? Even if we did pay we then have to pursue the developer through the courts to get our money back (unlikely to see a Euro) and we will probably still not get our deeds as the developers still have an outstanding mortgage.

    What is the point?

    As for the Banks I would not give them a penny as they have been heavily involved in this fiasco and only show interest when they may be financially exposed.

  • Costas Apacket says:

    Another delay for Title Deeds legislation??

    Who could have possibly predicted this??????

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