From a Dream to a Nightmare
THE long-dreaded day when banks move to repossess homes sold by bankrupt developers with outstanding mortgages could be looming, after one bank has applied to auction up to 70 peoples’ homes.
According to the Cyprus Property Action Group (CPAG) Alpha Bank filed applications to the Land Registry to auction eight plots that were mortgaged to bankrupt property developer Yiannis Liasides.
Liasides’ story will be familiar to followers of Cyprus’ treacherous property market. He ceased trading in 2007 without paying off Alpha Bank, leaving around 250 people in 14 plots who bought properties from him without title deeds.
Now the bank has moved in on eight of the 14 after the official receiver faced opposition from residents and former Liasides directors.
In one of the eight, Anarita, Liasides reportedly made no mortgage payments since 2002, and since then the amount owed to the bank has likely exceeded the value of both land and properties that he built and sold to residents. Unfortunately, as acting interior ministry permanent secretary Andreas Assiotis said, land and buildings are considered as one asset to offset against the liabilities, meaning banks may claim to houses on mortgaged land. “The Ministry of interior tried to make it possible for these to be dealt with separately, but the new legislation does not affect existing contracts.” Assiotis said, adding that buyers should take care to study their contracts before paying any money.
For CPAG leader and tireless property campaigner Denis O’Hare, this position reflects something of a U-turn by the government, which has previously assured buyers’ rights to property, even if they don’t have their title deeds.
“All along the Ministry of Interior has been saying that once a certificate of sale is lodged with the land registry, the buyer is protected. We can now see this myth of protection has been scotched by this action of Alpha Bank,” he added: “All reassurances to Europe about buyer protection have been shown to be hollow.”
For Anarita resident Diane Lloyd-Roberts, 68, who now faces repossession of the house she bought with her then husband in April 2002 despite a personal written reassurance from Interior Minister Neoclis Sylikiotis that her property is secure, the ordeal has proven a harrowing experience.
“The thing is: the (bank’s) loan is only for the land, not the house I paid for. How can they take my house?” said Lloyd-Roberts, who despite the stress of the situation is remaining defiant.
“I’m on the list with the others… I’m scared and I feel like I’m in a nightmare I can’t wake up from. But over my dead body will you get me out of here. I won’t go without a fight.”
The mortgage was taken out on her property just before she bought it, and had she been informed of this at the time by her lawyer, she said, she would have cancelled the sale. “We visited the lender bank who informed us that our developer had not paid anything back from loans he took out on our property in 2002.” She was later advised to borrow to pay off the developer’s mortgage, and the Ministry’s current advice is to get a good lawyer.
Instead Lloyd-Roberts took it up with the Cypriot authorities, complaining to the Competition and Consumer Protection Service in May 2011, and last month, with CPAG’s help, to the European Court of Human Rights to investigate the Cyprus government’s breach of the EU Unfair Commercial Practices Directive (UCPD).
So, what’s next? Well, this depends, in part, on the Land Registry, which can either approve or decline Alpha’s application, and whichever they choose could prove to be a pivotal moment in the Cyprus property market.
With an estimated €6 billion in mortgages in Cyprus a landmark auction could see other cash-strapped banks following suit, leading to potentially thousands of the 100,000 or so property owners – 30,000 or so foreign buyers – without title deeds facing repossession. According to Minister Sylikiotis, the Land Registry can block a bank’s application and should this happen, the rightful owners will remain in situ and the already ailing banks will have lost their money to the unscrupulous developers. Whether the banks or the buyers win, it seems the Cyprus property market is sure to lose with either dwindling investor confidence or reluctance from the bank to lend to developers.
The Ministry is assuring house buyers like Lloyd-Roberts that their rights are protected, while advising buyers to beware and victims to seek out a trustworthy lawyer and upholding a banks’ legal right to the assets on mortgaged properties.
In the meantime, Alpha Bank’s appointed (and independent) liquidator for Liasides developers, Ninos Hadjirousos, will continue his unenviable task of gathering everyone with a claim on the land and finding an alternative solution to auction and repossession.
Hadjirousos said the banks don’t want to see residents’ houses repossessed – a claim borne out by one case last year when a bank allowed a couple to stay in their home until death, after no one showed at the repossession auction.
However, Hadjirousos has struggled to get on board with Liasides property residents, who are wary of beginning the process without an assurance from the banks that they can stay.
“At the moment the residents have their property and no one would give assurances without knowing how deep the waters are,” he said.
The already treacherous waters have also been muddied by a group of ‘professionals’ who are taking payment – up to €5,000 per purchaser- in return for assurance that they will get their deeds, and who are discouraging residents from sending their details to Hadjirousos.
With the ministry on the fence, a pending EU investigation into unfair practices surrounding property sales and a financial crisis putting a strain on all actors, a negotiated compromise through the receiver could be if not the quickest, then the only solution.