CYPRUS Property News has received several complaints alleging the use of uncertified Power of Attorney documents to obtain mortgages on behalf of those purchasing property.
In many cases it appears that the banks involved failed to check the validity of Power of Attorney documents and are pursuing buyers for mortgage arrears; using the threat of court action to elicit payment.
Those who have complained to the banks concerned, receive a terse reply:
“The issues you raise regarding certification of the Power of Attorney document do not negate the validity of the contract entered into with the Bank. Under Cyprus law there is no requirement for a formal certification of a Power of Attorney. A power of attorney can be valid even if it bears only the signature of the grantor.”
We have sought legal opinion on the banks’ response to these complaints from one of the Island’s leading law firms. We suggest that anyone in this situation who receives correspondence from a bank in Cyprus chasing them for mortgage arrears replies accordingly.
Legal opinion from a leading law firm
The law in Cyprus provides for the appointment of Certifying Officers who are entrusted with the duty to certify the signature of a person signing a document such as a Power of Attorney.
The purpose of the law is twofold, the one is to facilitate a person to appoint somebody else in order to act on his behalf at his absence and therefore his signature as “principal” is required to be certified, and the other is to ensure the legality and safety of transactions, especially the ones concerning the transfer and mortgage of immovable property in Cyprus.
Generally under s. 7 of the Certifying Officers Law, Cap 39, a Certifying Officer will not certify the signature or the seal of a person unless:
- the signature or seal is affixed to the document in his presence;
- the person signing or sealing the document is personally known to the Certifying Officer, or his identity is attested by two persons personally known to the Certifying Officer, who shall sign the document as witnesses to the seal or signature of the principal party.
The fact that a person signing the Power of Attorney is doing so in the presence of the Certifying Officer, after he shows to the officer his identity card or passport and the officer compares his signature and photograph, is not enough to render the document valid or to allow the Certifying Officer legitimately to certify the signature of that person. On the contrary, such a Power of Attorney is not valid and any transfer, mortgage or encumbrance over an immovable property pursuant to the said Power of Attorney can subsequently be cancelled by the principal.
It becomes evident that private individuals, bank organizations, Certifying Officers and everybody else must be extremely careful not to put themselves in such a situation.
When a Power of Attorney is accepted by the Land Registry, this does not imply that the transfer or even the mortgage of an immovable property is valid, since it is not in a position to identify whether the person granting the Power of Attorney was personally known to the Certifying Officer. The transaction depends on the subsequent behaviour of the principal party, whether he will accept or question it. The Certifying Officers ought to follow accurately the law at all times for both the protection of themselves and of the transactions.
In the case of Georgios Antoniou v Demetras Christodoulou case number 10802, dated 19.2.2003, provides that a signature of a person can be certified by a Certifying Officer only if the person signing is personally known to the officer and that this requirement has nothing to do with the showing of his identity card. The law refers to a pre-existing personal acquaintance other than the introduction at the time of the signing. If this requirement is not satisfied, the alternative way available is to have two other persons attesting the identity of the person signing, who must be personally known to the officer and sign as witnesses. This case was appealed and the Supreme Court approved the District Court’s decision.
There are declarations, documents or transactions conducted by a representative whereby the law does not require the authority to be written and certified by a Certifying Officer. However, with regard to immovable property, and in the present case this is of interest to us, for the declaration of the agent to be accepted, either for the transfer or the mortgage of a property, the law requires the agent to submit a written authorisation/Power of Attorney legally certified by a Certifying Officer in accordance with the provisions of the Certifying Officers’ Law.
Consequently, if such authorisation/Power of Attorney was not legally certified, it may cause the transfer or the mortgage of the property to be declared null and void.
Nigel; Thank you for the reply.
It must be very distressing for people caught in this way.
Lawyers who have drawn down on a loan and made payments for work that has not been completed, should of course be liable, if they did it without their clients approval. However, some people may have signed contracts setting out payment dates and amounts without including conditions as to the build progress. That was a popular ruse used by Developers when drafting contracts and the buyers Lawyers rarely offered any advice on the matter.
Obviously people would want to be sure on this point before taking any action.
Those who feel that they have been conned into a mortgage that they did not want, would also be advised to think very carefully before proceeding. The trouble is that, documentation aside, they might find it very difficult to convince a court that knew nothing about a Mortgage advance.
They are going to be asked how much the purchase price was and how much they have personally paid by way of deposit and so forth. Suppose they say ‘Well, the price was 250,000 and we have paid over 25,000’. They are then going to be asked where they thought the rest came from; a fairy godmother?
There may well be cases where someone could successfully challenge a Sale and Purchase Contract and a Loan/Mortgage Contract, but it would by no means be an easy matter.
@Johnny Cyprus – As these properties were purchased off-plan the lawyers, allegedly acting on behalf of the buyers, would have authorised the bank to make stage payments to the developer as the construction work progressed. This is where the money went. (But having said that, I received an email from someone yesterday whose lawyer approved payments for all the stages even though they not been completed – all this person got for their money was a concrete skeleton).
Did the lawyers pocket any of the money? Who knows, but I wouldn’t be at all surprised if commissions were payable somewhere in the scheme of things.
That’s strange Nigel.
What happened to the money from the Loan advance?
Did the Lawyer pocket it?
@Johnny Cyprus – thanks for your comment. In some cases reported to me buyers did not want or need a mortgage, but the lawyer (allegedly) acting on their behalf under a PoA obtained one for them regardless.
The first thing these people new about these mortgages was when the bank started writing to them demanding money.
People did not receive mortgage application forms, terms and conditions or any other correspondence from the bank. I assume, maybe wrongly, that the bank sent these to the lawyers.
Should also mention –
90% of the house owners are Cypriot, so they stood a much better chance over foreign investors like yourselves.
What can we say :-(
The above legal opinion may not be helpful:
It concerns the validity of a buyers devolved Power of Attorney.
A Developer mortgage is a matter between the Developer and his Financier.
If a Developer defaults, then his financier may foreclose on the security he holds. If that is the roof over your head, you have a problem.
Some banks may be reticent to simply seize the property and sell it. They may open negotiations with the buyer, looking for a way of offsetting their loss. It sounds horrible for those caught in this trap, but that is the way it is.
It has been suggested that one might seek to have the original sale contract set aside, because ones Lawyer has signed it without a valid POA. Where would that get one though? One would have to go to Court. Is it reasonable to expect that the Court of Equity would direct that the Contract be cancelled and the Buyer given all his/her money back?
Where would the money come from? The Developer is already under water.
Maybe the Court would tell the Lender to get lost and hand the property over to the buyer forthwith, free of any encumbrance. If that was done on a large scale it would cause the collapse of the whole financial system and we would all loose our savings.
A buyer who has taken a mortgage out himself may be encouraged to think that he can walk away from the mortgage if his Lawyer has used an invalid POA. Wait a minute; what documents are involved and what evidence is there that the buyer intended to take out a mortgage? Loads of stuff. Loan application forms, letters of advance, payments, repayments, statements. If you want to rely on this for an exit, you had better do it before the money comes through.
You are personally liable for any mortgage you take out. If the lender is unable to make full recovery by repossessing and selling the mortgaged property, then he can seek further recovery and any income, savings or other assets you have may be at risk.
That’s rough I know, but that’s the deal.
Of course it’s rough too when people in Cyprus have paid for their property, only to find it doesn’t belong to them after all. That wasn’t the deal.
Incidentally if anyone forges your signature on a document, it would have to be done for personal gain, otherwise it is a Civil rather than Criminal matter.
@andyp – sorry to hear that. That’s not a nice situation to be in, if someone has fully paid for their property but the developer still has YOUR land mortgage!
My father-in-law had to wait 18yrs for his title deed. There were 30 property owners who all got together and demanded the developer let go of the title deed and divide it up as he should legally do. The developer stung each person for about £6k CYP. They didn’t argue as they desperately wanted the Title. The developer had NO mortgage but he still kept everyone waiting 18yrs
What a dirty scumbag!
@Mike. Thanks but I will bet there are many in similar or worse positions than we are.
@Nigel (12.43). I do not think you will find that I said this was strange. In fact I can quite understand why these advocates would not wish to be named and any help is welcomed as far as I am concerned.
@Unbelievable. I do not have a personal mortgage only my developers.
@Unbelievable – you are not insignificant in the grand scheme of things. If you have any doubts concerning the validity of the opinion, what I suggest you do is print the Certifying Officers Law, Cap 39 and have it translated independently.
@ Nigel,
I’m a simple blogger that wants to share views and opinions with others alike.
I am not a ‘Leading Law Firm’ I do not operate a business.
I’m insignificant in the grand scheme of things.
What I do know, is Cypriot Lawyers and the Government DO NOT act in the interest of the common people.
We ALL know that many many Cypriot lawyers operate fraudulently and the honest lawyers DO NOT what to put name to their ‘Expert’ opinions.
At the end of the day – We all draw our own conclusions.
“Never believe anything you hear and only half of what you read”
@andyp –
I totally agree that not paying the Cyprus mortgage is a very serious step to take and something that MUST be discussed with a UK & Cypriot lawyer first!
I believe that a large majority of investors will never see their rightful Title Deed to the land that their property sits on.
Anyone new to Cyprus and this saga, must understand that Greek Cypriots have been waiting 35yrs for their land & property in the North to be returned to them. They have constantly asked the EU to help resolve this matter and still they wait…
In years to come..If Cyprus and other EU countries are forced to drop out of the EU, then these countries will operate on their own laws as they did before.
If you guys think that continuing to hand over your CASH and paying well over the market value for your property investment is a good sound business move, then carry on..
In my humble opinion, I would not and could not afford to lose what little money I have left.
@andyp @unbelievable – I don’t know why you find this strange – there are several articles here giving legal opinion without naming the law firms that provided those opinion. E.g.
https://www.news.cyprus-property-buyers.com/2008/10/13/lobby-slams-property-tax-scam/id=00506
https://www.news.cyprus-property-buyers.com/2008/10/19/immovable-property-tax-fraudulent-practices/id=00517
One might ask, unbelievable, why you conceal your identity?
andyp,
So sorry to hear of your predicament. It is astounding that what is considered blatant fraud and a criminal act in any other country is a civil matter in Cyprus – allegedly.
The last Ombudswoman was a waste of time, very eloquent and articulate but in no way interested in any matter where the state organs were at fault (the investigation and subsequent action against the relevant department is the prime function of a Government Ombudsman / woman). However as you have no doubt heard too many times “but this is Cyprus”. It’s as if those four words make it right and legitimise fraud, corruption, nepotism and criminal activity.
Cypriotness was once the byword for warmth, hospitality, honest, integrity and morals. Today it is the byword for criminality & lies. What a crying shame for the majority who are still as honest as the day is long but will suffer due to the actions of a minority.
@ Unbelievable.
Not paying a mortgage and legals in hand but not really suitable for discussion on this thread.
Just posted as a warning for others –regrettably you cannot afford to trust your own lawyer but I am sure most know that by now.
Nigel,
Can you explain to all of us why a leading law firm permits its legal opinion to be published herein but declines to put its name to it? What is it afraid of?
Nigel
Am I overstating things if I say this could be an extremely useful piece of law which might offer a way out to a lot of us?
I take it the law firm wishes to remain anonymous precisely because this could possibly be highly detrimental to the banks and (bad) lawyers’ interests; in which case, I’d respect their wish.
Is it possible to group together buyers who might have unlawful POAs, and bring an action as a group (class action?) in the Cyprus courts?
I’d certainly be interested in doing so if it was at least possible.
I don’t understand the circumstances of this matter:
As long as a buyer does not have the property Title registered in his/her own name, the Developer can take out loans using the property as collateral. Such Developer mortgages can be registered at the District Land Office without recourse to the buyer.
The buyer may have paid the full contract price, together with Stamp Duty and filed the sale contract registering it as an charge with the Land Office, within the stipulated period under the so-called ‘Specific Performance’ provisions. Even so the Buyer has no statutory right to even be informed that the Developer has subsequently taken a mortgage out secured on the property.
I agree that the above seems completely crazy, but it is common practice in Cyprus and continues unabated.
To what documents are the forged signatures in this case being applied? It would seem that the forger may have gone to unnecessary trouble.
Sorry to say Nigel that I did report it to the Paphos Police. I even had my complaint written down and went to the trouble of getting it translated in to Greek so there were no mistakes.
The Police to be fair did question her but were not really interested as it was “a property matter” and a civil offence as you have obviously come across before.
She even told them I was simply asking her for money hence I know the Police actually spoke with her.
I was asked to appear at the police station again but was not arrested!!!!!!!!!!!!!!
How can forgery of a legal document resulting in being landed with a developers mortgage not be a crime?
@andyp
Don’t tell me you’re still paying the mortgage after being conned,duped,ripped off?
Don’t be scared to take this to court if you no longer wish to pay any more money.
You wouldn’t put up with this in the UK,so why do it in Cyprus?
@Nigel – I don’t understand why the lawyer wishes to remain hidden? This just doesn’t add up?
@andyp – I have heard from other people who have had this problem. Some have reported it to the Police in Paphos, who have refused to investigate telling them that it is a civil offence and not a criminal one.
No doubt the Police in Paphos will be adding robbery and murder to their list of ‘civil’ offences.
Have you tried writing to the Chief of Police in Nicosia about the problem?
Our ex Lawyer did not even bother with a power of attorney.
She simply photocopied our signatures on to some pages of a new property contract (some pages had no signatures and some only had the developers signature). We had never seen this contract and yet she managed to get it registered thus leaving us with a substantial developers mortgage.
@Unbelievable – you cannot see the name of the law firm because I honoured its request not to publish it.
Hello Nigel,
I can’t see the name of the ‘leading law firm’
Can you please share the name of this law firm to all readers?
Thanks