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Do not ignore Cypriot bank writs for loan non-payment

If you receive a writ from a bank in Cyprus for the non-payment of a housing loan / mortgage or a termination notice, the worst thing you can do is bury your head in the sand in the hope that the problem will go away.

IN RECENT days it has emerged that UK clients are now being served with writs from Cypriot Banks in relation to the non payment of loans taken out for the purchase of property in Cyprus.

The writs give the recipient a period of 30 days in which to file an appearance in court in Cyprus to defend the claims made within those writs and a further period of fourteen days in which to file a formal defence; this latter time frame can be extended in most instances to allow for the preparation of that defence.

It is therefore critical that any client being served in the UK seek legal advice from Cypriot counsel in order to respond within the stated deadline as failure to file the required appearance in Cyprus will result in the court progressing the claim in the clients’ absence and securing judgement; there would then be no opportunity to challenge the judgement or its subsequent enforcement.

Such enforcement can take place on properties in England as the judgement of the Cyprus Courts can be registered (this is a formality) and executed in England.

Additionally clients are also receiving Termination Notices from the banks in relation to the non- payment of the loans (Writs are likely to follow) and it is again critical that clients formally respond to these notices and to counter claim concerning the content of such notices.

We strongly advise that any recipient of such writs or termination notices act to address the matter and not simply ignore the service and the potential implications to the same.

We remain entirely at everyone’s disposal in this regard to answer and address any concerns.

Judicare

Readers' comments

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  • @Investor – I do not believe there is any evidence to suggest “that the majority of POAs out there are either uncertified, improperly certified, falsified or all of the above”.

    From the information that been passed to me, it appears to be limited to an issue with a couple of Paphos-based lawyers and a particular Certifying Officer.

    It appears that one of these lawyers arranged mortgages for buyers using the PoA without providing them with any information about the mortgage enabling them to decide whether to proceed or not – some of those buyers didn’t even need a mortgage!

    There is also evidence to suggest that a number of P.60s were fabricated by someone in the sales chain to ensure mortgages would be granted.

  • Investor says:

    Thanks for posting that Nigel. It highlights that the majority of POAs out there are either uncertified, improperly certified, falsified or all of the above. That is only one issue here though.

    POA aside, at the heart of this is a loan agreement that was not seen, signed or agreed by the borrower, even though clauses in the contract clearly require this. The loan agreements are one-sided in favour of the bank and the developer, giving all the rights to the bank but none of the contractual obligations. Banks released far too much money far too soon to developers without presenting any evidence to justify this, and incurring extra interest for investors, in spite of the loan agreement clearly stating that drawdowns would be commensurate with build progress.

    And if this wasn’t enough to convince someone that this is clear breach of EU consumer protection law, the EU Commissioner has made it pretty clear that the failure of banks and developers to disclose vital information to investors about the material fact of pre-existing mortgage loans on the land, is a breach of the Unfair Commercial Practices Directive, which is law in Cyprus. That in itself, is enough to render the loan agreement null and void.

    But then, I think I’ve gone off on a tangent here. Apologies for taking up space!

  • andyp says:

    RE PoA’s.

    We were recently required by our new lawyer, whom we do trust, to complete a PoA. We duly signed it and sent it back. A few weeks later he sent it back to us advising that this was invalid and we were instructed to take the document to a UK Notary Public who would witness our signatures confirm our identities and stamp the document. Before signing the Notary checked with us that we new exactly what we were signing and the implications thereof. Cost £40.

  • @Investor – Regarding the incorrectly certified Power of Attorney documents, here is an article written by George Coucounis – a Larnaca-based lawyer.

    Validity of a Power of Attorney

    The validity of a power of attorney is an issue concerning many persons, physical or legal, who use Cyprus for investment and business purposes.

    They are worried whether their transactions in Cyprus or abroad are valid or if they will be declared null and void due to the power of attorney given by them not being legally certified. The issue is quite serious, since it affects the safety of their business transactions and no one can depend on the counterparties’ good will. They are quite right to be concerned on how they can resolve the issue so that not to find themselves later in an unpleasant situation involving them in risky situations.

    Many people and companies use power of attorneys to transact, prepare and sign minutes, resolutions, declarations and other documents which are not legally certified, since the persons signing them either are not present at the time of the certification or they are not known to the certifying officer. The question arising is whether these transactions are valid or not.

    There are declarations, documents or transactions conducted by a representative whereby the law does not require his authority to be written and certified by a certifying officer. On the other hand, the law in other cases requires such authority to be written and legally certified in the form of a power of attorney and if not, the transaction performed may be declared null and void. The issue may also be examined on whether a party ratified or disowned the transaction or whether, due to his behaviour, the principal is estopped from denying the validity of an act or a transaction, either by conduct or through the principles of equitable or proprietary estoppel.

    According to the Contract Law, an “agent” appointed to do any act for another or to represent another in dealings with third persons, his authority may be expressed or implied and no consideration is necessary to create an agency. An authority is said to be expressed when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case and the things spoken or written, or the ordinary course of dealing may be accounted circumstances of the case.

    An agent having authority to do an act has authority to do every lawful thing which is necessary to do such act. An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business.

    Moreover, an agent has authority, in an emergency to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own cases, under similar circumstances.

    With regard to immovable property, 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.

    Therefore, people must be very careful when becoming agents for another person, the power of attorney signed to be legally certified. Moreover, when acting as agents, they should inform their principal of their acts so that not to leave any room to the principal to question them. By doing so, the principal, being aware of the act, will be obliged to ratify it and such ratification may be expressed or implied in the conduct of the person on whose behalf the act was done. If the principal elects to disown it, he must do so immediately, otherwise he will be considered as having ratified it.

    For a power of attorney or other written authorisation to be considered as legally certified:

    • the principal must sign or seal it in the presence of the certifying officer,

    • the principal must be personally known to the certifying officer or if not,

    • his identity must be attested by two persons who are personally known to the certifying officer, who shall sign the document as witnesses to the seal or signature of the principal party.

    The provisions of the law are strict and unambiguous referring to a pre-existing personal acquaintance other than the introduction at the time of the signing.

    Therefore, 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 the Land Registry 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.

    (Other lawyers have differing opinions on this matter)

  • andyp says:

    @Investor.

    I have no idea but you might want to post your comments as a new subject in the forum section in case someone can help.

  • Robert Briggs says:

    @ Investor Comments, what is a POA? Please let me know. R.B.

    (PoA – Power of Attorney – Nigel Howarth)

  • Investor says:

    @Nigel, the High Court action taking place in London is arguing for British investors to sue the bank and developer in the UK. What I am speaking of is different.

    If I receive a writ, this means the bank is taking me to court. Yes, I could put up a defense or counterclaim, but what the Brussels regulation clearly states is that I should do neither, but contest jurisdiction. If I sue the bank, yes jurisdiction is in Cyprus. If the bank sues me, and because I am the consumer and ‘weaker party’, the Brussels reg states that I must be taken to court in my country in residence. Brussels 1 is why investors who have tried to take their crooked Cypriot lawyers to court in the UK, have failed to do so, for the sole reason of jurisdiction and lawyer’s right to be taken to court in his/her country of residence. The inverse applies.

    It doesn’t matter that the bank claims Cyprus has jurisdiction in their loan contracts. The loan contract is illegal, taken out with an illegal POA, and in any case, the Brussels Reg does not allow the bank to change law about jurisdiction simply by stating it in a contract. And I will not be held accountable for a term in a contract that I have never seen, signed or consented to. If I take action against the developer or bank, yes, that will have to be in Cyprus. But if I receive action commenced in a Cyprus court, jurisdiction will be contested.

    There have been several specialists in EU law who have reiterated this. I would welcome more research on the matter, as I am neither a legal bod nor signed up with one.

  • Curmudgeon says:

    Assuming you don’t have the Title Deeds and the property is worth less than the outstanding loan, then perhaps consider declaring yourself bankrupt in Cyprus might assist. The developer can then pay your loan/mortgage off in order to get the property back!

    If the law has been changed to allow us to pay a bankrupt developers illegal loans and mortgages on our properties in order to prevent the lender(s) from claiming the property, why can’t the we process be reversed.

    Oh, I get it…..the developers loans etc were illegal, ours are not.

    P.S. Before you make yourself bankrupt take legal advice but not in Cyprus!

  • Odd_Job_Bob says:

    Oh, and another thing.

    If the Euro IS spinning its way towards the dustbin of history (as both of its predecessors have done), then out of the ashes will arise the new Euro currency: please welcome the EUROMARK!

    It’s really a Deutschmark, but so as to not rub our noses too much in the fact that now Germany will be calling all the shots – their currency their rules, I suppose – they’ll try to pretend it’s for all Europe. Which it probably will eventually be…

    Anyway, what this will mean is that the old Euro will be worth less than an England football manager’s promise to win Euro 2012 (sorry Woy, I know you didn’t ACTUALLY promise).

    Apart from a few exceptionally unfortunate Swiss Franc mortgagors, most of the money we owe to Cyprus banks is denominated in Euros. With debts to repay in a worthless currency, the longer we delay, the less we have to pay.

  • andyp says:

    I think it is essential that anyone caught up in this mess must defend themselves at the Cypriot Court in the first instance otherwise they have lost. I believe but stand to be corrected that under EU law that is a FACT with no recourse thereafter.

    I fear a lot of people may have been duped not realising that their mortgages would commence long before their properties were completed, if at all. Yet another failure of ones Legal advisors.

    I do not have the answers but why should people pay for unfinished property and why have the Banks let the developers run up such unserviced debt? Actually I do have a single answer which, in my opinion, is coordinated fraud.

    Yet again the usual suspects will no doubt walk away.

  • Joseph Hughes says:

    Nigel,

    You don’t need to attend a Cypriot Court in person to defend yourself, any appointed Lawyer can act on your behalf. The facts on a EEO are listed below:

    EEO REGULATION

    This is the method of choice as it enables simple, quick enforcement within the EU. It can be used for money judgements obtained for uncontested claims. It should usually be used, when possible, in preference to other regimes which take longer and which are more complicated.

    The EEO Regulation can be used if the debtor:

    agreed to the debt, and this has been approved by the court in a consent order;

    did not defend the claim at all, so there is a default judgement;

    did not defend the claim in court when it was tried.

    A real benefit is that the application is made to the English court by completing a straightforward form plus the provision of a completed EEO certificate (which the court will issue), the judgement, any costs certificate and a document confirming service of the claim if applicable.

    Once the EEO certificate is issued the judgement is treated as if it had been delivered by the court of the enforcing member state. Local methods of enforcement, on which local advice should be taken, can then be used.
    The Brussels Regulation

    This Regulation also applies to all EU countries. There are relatively straightforward procedures for the mutual recognition and enforcement of EU judgements. Generally, you should only use this method within the EU if the EEO Regulation method is not possible – for example, because you have a judgement resulting from a contested hearing or if you need to enforce a non-money judgement.

    It only applies to judgements or orders in civil or commercial proceedings, and does not apply to criminal, bankruptcy or insolvency proceedings or proceedings involving the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills and succession. It also does not apply to arbitration awards, including court orders which give judicial force to an arbitration award. For issues relating to the enforcement of arbitration awards generally, see the Out-Law guide to Best Practice in International Arbitration.

    A drawback is that you make the application in the enforcing state – that is, abroad. You will need to file various documents, including the judgement and a certified translation. The exact procedure and requirements are governed by local law, so local advice should be taken.

    As long as certain formalities are fulfilled, the enforcing court should declare the judgement enforceable without re-examining the case. However, once the judgement is recognised you still have to go on and take local enforcement steps on which you should take local advice.

    Effective service on the debtor once recognition is obtained can be difficult since natural procedural rules may still apply despite the EU Service Regulation which harmonises service through the EU.
    There are grounds of appeal. An appeal might be successful if, for example:

    the judgement goes against the public policy of the enforcing member state;

    the judgement is irreconcilable with an earlier judgement given in a member state involving the same causes of action and between the same parties.

    Pending any appeal by the debtor you can, however, take measures to preserve assets in the enforcing member state.

  • Odd_Job_Bob says:

    This is a really difficult situation, to which, if we work it through (with a purely hypothetical example!), there is only one viable solution:

    A buyer doesn’t pay his mortgage as he can’t afford it. He feels aggrieved that he doesn’t own his property, probably never will, that there is a huge mortgage outstanding on it taken out by the developer, that the value of his property – with or without deeds – is really very little (if anything) and that he will be charged all sorts of made-up fees and charges for as long as he owns it (even though he doesn’t really etc).

    Plus, if he fights the mortgage arrears procedure it’ll cost him huge legal fees (and he’ll lose as the Cyprus legal system may be somewhat slanted and NOT in his favour). However, for as long as Cyprus is an EU member, any debts he has in Cyprus can be pursued on any property he’s got elsewhere in the EU. All true so far?

    He also knows that Cyprus is bankrupt and needs EU bailouts to survive. However, the EU is broke and WILL break up/ disappear without a trace some time soon. Even if he pays all outstanding mortgage arrears, solicitors fees that will be incurred, transfer tax, CPT, VAT, upgraded municipality fees etc etc etc, he’ll still be asked to cough up for the developer’s defaulting loan.

    So, solution is clear: IF HE CONSIDERS HIS PROPERTY IN CYPRUS AS LOST (which, I admit, is a BIG if): DELAY payment. He should delay for as long as he can. Follow the legal procedure by appearing in court when asked (delay it as much as possible, obviously) and never pay a penny until it’s finally impossible not to. Then still don’t. He WILL lose his property here, but in truth, it’s lost already. If his delay tactics mean Cyprus has already left the EU by the time repossession arrives, all well and good – his UK assets can’t be touched. If the Cyprus legal system gets its act together and can find against him before EU membership is but a distant memory, then he can fall back to the second line of defence: a court in the UK.

    Remember, Cyprus banks do not want his Cyprus assets (as they are worthless), they want his money and UK assets. Don’t let ’em have ’em.

  • @Joseph Hughes – Regardless of your feelings on this matter, if you fail to defend the claims made in a court in Cyprus, an EU Enforcement Order may be issued against you.

  • @Geo – you are correct.

  • Geo says:

    I understand that you need to defend these claims in Cyprus and then if a judgement is made against you only then can you defend the necessary enforcement hearing in the UK.

  • Joseph Hughes says:

    Absolutely no point in turning up to defend yourself in a Cypriot Court because you won’t win as the courts will side with the banks & developers even though the developers would be behind bars in any other European country by now for selling properties with other mortgages on them, promising title deeds and not delivering years later etc.

    The defence for many is that the banks did not safeguard their customers who purchased mortgages through them.

    The arrogance and ignorance of Cypriot banks is for a reason…making as much money as they can out of the purchaser. My advice is to notify your local MP, the more MP’s that support people from the UK being taken to the cleaners by corrupt banks/developers the better. The only way to defeat the Cypriot banks will be outside of Cyprus in a European High Court by issuing a counter claim. This would need many MP’s from the UK to put pressure on the government for support.

  • @Denton Mackrell – I agree that the banks attitude towards people is totally unreasonable and it does nothing to enhance their reputation.

    Sadly, I learnt a few minutes ago that one person was put under so much duress by a bank that he recently committed suicide.

  • Denton Mackrell says:

    @Nigel. It’s labyrinthine or should that be Byzantine – or perhaps both! Looking at the bigger picture and catching the mood of blog posters here and elsewhere, the facts about the legal process which you have kindly clarified may well be correct but as far as potential new buyers are concerned it just adds yet another dose of poison to them ever buying a property in Cyprus.

    Cyprus banks can indeed chase foreign buyers for alleged personal mortgage defaults but when this all buzzes around the Internet it just adds to these banks’ already appalling image and reputation on developers’ hidden mortgages and attempts to liquidate the innocent buyers’ property if the developer defaults/goes bust e.g. Froiber, Liasides.

    To paraphrase the jibe against President ‘Tricky Dicky’ Nixon, ‘would YOU buy a second-hand car from such people?’

  • Kevin says:

    Why would anyone expect to pay a loan when they do not own their own property? No title deeds no payments! Shame on the Cypriot legal system it’s nothing more than a sham.

  • @Mary Berriman – There is no requirement for a Cypriot court to transfer the hearing to a UK court. Also, I know a chap who got a judgement from a Cypriot without using a lawyer – he presented the case himself.

    It isn’t Cyprus making the rules as it goes along. Regulation (EC) No 805/2004 creates a European enforcement order for uncontested claims. It lays down minimum standards to ensure that judgments, court settlements and authentic instruments on uncontested claims can circulate freely.

    For more information see REGULATION (EC) No 805/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

  • There appears to be a number of mis-understandings on the process and other matters in the article:

    @Baileyboy – This situation is not exclusive to a particular situation at the Eastern end of the island. There are several developments across the Island where people are no longer paying their mortgages for one reason or another. This notice serves to advise them what they need to do.

    @Steve – I do not know what defence will be applicable in cases where people are receiving writs. Each case needs to be assessed and a formal defence submitted as appropriate to that case. I cannot envisage that any lawyer will do this investigation and preparation of a formal defence for nothing, be they a firm such as Judicare or anyone else.

    Once a judgement is issued in any court within the EU, that judgement can be enforced in any other EU country using an ‘EU Enforcement Order’. It is not limited to Cyprus and the UK – it could be a judgement made in Germany against a citizen of France, etc.

    @peter – This has nothing to do with the banks repossessing homes, they are pursuing people who are not paying their mortgages. The banks actions are not limited to foreign nationals, Cypriots are also being issued with writs.

    @Investor – Jurisdiction in these matters rests with Cyprus (although I appreciate that there may be High Court action taking place in London next month to challenge this). As things stand, a judgement made in a court of an EU member state can be enforced in any other EU member state via an ‘EU Enforcement Order’. The defendants may offer a defence in the court where the case is heard, but they will have no opportunity challenge the judgement in the country in which it to be enforced.

    @AnnDee – As I mentioned in my response to peter – these writs are not restricted to British buyers. Many nationalities are receiving them – including Cypriots.

    @Costas Apacket – See my response to AnnDee above.

  • Mary Berriman says:

    Surely the Courts would have to transfer the hearing to a UK Court to serve a writ if the mortgage holders reside in the UK, before they can put any judgement etc on any of the UK properties. Can they get judgement if the Mortgage holder writes and states that they cannot get to Cyprus for the hearing.

    If they do hear the case in UK surely the UK Courts will agree with the problems of the ‘title deeds, poor workmanship, over charging mortgagees and loans on land etc.,’in Cyprus? I am not a lawyer, but in UK one can defend themselves without using Solicitors, in Cyprus you cannot talk unless you use a Lawyer.

    It seems that Cyprus makes rules as it goes along, they state the Courts are run by mostly British rules but changes to suit?

    I would like to hear other peoples opinion on this.

  • Clive says:

    Perhaps now is the time for all the “British property-type groups” to get together and serve notice to the banks by publishing through a Public Notice in the Greek Cypriot and English newspapers, that any Cypriot or Cypriot-based bank issuing Writs and/or Termination Notices should immediately apply directly to the British Judiciary system for the recover of monies.

    If these Public Notices were repeated every day for about a week the Cypriot banks would get the message and maybe that would be the end of the matter.

    Would the Cypriot Government, about to take on the Rotating Presidency of the EU, want their dirty dealings aired in public? I think not. Come on! Beat them at their own game for once.

    Other non-Cypriot nationalities could do the same for even greater effect.

  • Costas Apacket says:

    Are any other nationalities being served with writs or termination notices or is it just the Brits?

  • UBoat says:

    SORRY it may seem a silly question, Why are these being sent out? Are they just sending them to people who genuinely not paying or just forgetting to not paying loans/mortgages etc.

    Or is there something more sinister to than that? I.e. the bank is chancing its luck on generating more cash or property reserves?

    regards
    UBoat

  • AnnDee says:

    Good advice, but how many developers are getting writs for non-payment of their loans and why aren’t the banks going for their personal assets. Different set of rules for foreign buyers eh?

  • Investor says:

    Whilst I agree that any writ should not be ignored, Judicare fails to explain how European law affects the issuing of writs to UK citizens. The Brussels Regulation suggests that the Cypriot courts would have exclusive jurisdiction in proceedings concerning rights ‘in rem’ in immovable property. However the writs that have been issued from Alpha Bank to specific named persons in the UK are not ‘in rem’, they are clearly ‘in personam’.

    In such cases, the Brussels regulation suggests in its stipulations regarding consumer contracts and consumer protection, that the weaker party, which in this case would be the individual investor, has the right to be taken to court in his/her country of residence (or other country of choice), and in his/her own language. If the stipulations of Brussels Regulation were not adhered to, then a UK court should refuse to recognise any Cypriot court judgement, including a European Enforcement Order.

  • Cyprodite says:

    We have two mortgages. Both in Swiss Frank for houses bought during the property boom. One is with the Bank of Cyprus and the other with Alpha Bank. Both banks have been cooperative in this time of financial crisis. You need to communicate with the bank.

  • peter says:

    I thought parliament had decided that banks couldn’t go for possession of property that was subject to a loan default? That would be the first step in trying to recover a loan. This appears to be a case of discrimination against johnny foreigner as per usual in an attempt to bolster Cypriot banks with funds from the sale of their victims foreign assets. If Cypriot defaulters are not pursued with equal vigour it is a case for the European Court.

  • Steve says:

    I wonder what defence there can be that will save the debtors’ UK houses or other assets. Cyprus is not the UK and I don’t think defences based on misselling work nearly so well here as they would back home. Maybe it can be argued that the asset that is the subject of the mortgage should be sold. That could be a godsend if there is a title deed problem. It’s a pity Judicare did not give an example or two. Maybe you have to pay for that, so I wonder what Judicare charge for the service.

  • Baileyboy says:

    This a terrible position these owners find themselves in.

    What the article doesn’t make clear is that these properties are apparently no where near completion and will never likely to be.

    It is claimed the banks will not release funds to the developer who cannot afford to complete the development.

    Owners are advised to use a good Cypriot lawyer and I would recommend the lawyer who is one of the panellists on PICAS. See our web page for details: http://www.picas-cyprus.com

  • Nick - Larnaca, Cyprus says:

    Although Cyprus banks may be entitled to pursue non-payment through the legal system in Cyprus and the UK, there is a certain amount of irony at work here.

    When people wish to pursue the banks for their errant behaviour and irresponsible lending practices all kinds of barriers and delays arise, perhaps involving many years of unnecessary expense and personal heartache for those affected.

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