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Pay developers’ debts or lose your home

MEP Edward McMillan-Scott has raised a question in the European Parliament asking whether Cyprus has contravened the UCPD and what can the EU do to protect the rights of property buyers.

Edward_McMillan-Scott_MEPMcMILLAN-SCOTT MEP’s question concerns British property owners who face losing their homes in the UK (and other EU member states) if they fail to repay the debts of their now defunct property developer SNK Venus Homes Exclusive Ltd.

Question for written answer E-011456/2012
to the Commission

Rule 117
Edward McMillan-Scott (ALDE)

Subject: Payment of developers’ debts in Cypriot property cases

Purchasers of property in the Elena Gardens development in Xylofagou, Cyprus, have recently been told by the Cypriot Government that they will, in effect, have to pay off the debts of developers who have gone into liquidation without completing building work.

SNK Venus Homes Exclusive Ltd went into liquidation after taking GBP 840,000 from a purchaser without completing the construction of his villa, and leaving some four or five other buildings incomplete as well.

The property purchasers had been assured, by both lawyers and the Cypriot Government, that they were covered by something called ‘specific performance’, which protects the purchaser in all circumstances and ensures that they are registered as the legal owner of the property to which their contract refers.

The Cypriot Government has allowed banks to lend large amounts of money to developers using, as security, properties already sold to unsuspecting purchasers and registered with the land registry. The developers have since defaulted on these loans and, in the case of SNK Venus Homes Exclusive Ltd, gone into liquidation as a result.

Property owners who refuse to pay back the developers’ debt to the banks risk having any properties they may own in other EU countries repossessed to cover monies the banks recklessly lent developers against properties they did not own in the first place.

Whilst national property rights are indeed a matter of subsidiarity, could the Commission:

1. explain what can be done at EU level in such cases to protect innocent property buyers from across the EU?

2. state whether Cyprus, in this particular case, has contravened the Unfair Commercial Practices Directive (2005/29/EC), specifically Article 7 on ‘misleading omissions’, which states that a commercial practice shall be regarded as misleading if ‘in its factual context, taking account of all its features and circumstances and the limitations of the communication medium, it omits material information that the average consumer needs, according to the context, to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise’?

Further reading: Payment of developers’ debts in Cypriot property cases

About Edward McMillan-Scott

First elected in 2004, Edward McMillan-Scott is a Liberal Democrat MEP for Yorkshire & Humber and Vice-President of the European Parliament for Democracy and Human Rights. He has been elected four times as European Parliament Vice-President.

On 25 September he won the top award, for ‘Outstanding Contribution’ in the 2012 MEP Awards presented by the Parliament magazine, Brussels sister publication of Westminster’s House magazine.

Readers' comments

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  • Pete says:

    As a rider to pollymarples question, in my contract it states ‘all debts, taxes etc etc are the responsibility of the vendor’ but that hasn’t stopped Alpha bank trying to sell my house instead of approaching the guarantor of the loans. It also hasn’t stopped them coming to me to repay certain loans taken out long after I got my specific performance.

  • James JH Lockhart says:

    Thanks Robert for your actions, Let us hope the Germans expose the artful ways of the Cyprus property market.

  • Robert Briggs says:

    @ James JH Lockhart, I have just wired this article, in German & English to the Der Speigel and De Welt Newspapers. R.B.

  • Frank says:

    Is Mr McMillan Scott correct when he says that: “Property owners who refuse to pay back the developers’ debt to the banks risk having any properties they may own in other EU countries repossessed to cover monies the banks recklessly lent developers against properties they did not own in the first place.”?

    It was my impression that only the property used as collateral for loans by the developer was in jeopardy. (This, because it remained the developer’s legal property until the buyer received title deeds: despite the developer having received payment in full.)

    I had thought that “properties they may own in other EU countries” would only be at risk if the buyer’s own debts were in default: not the debts of a third party; such as a developer.

  • pollymarples says:

    Where in the Contract of Sale did it specify the purchaser was responsible for the Vendor’s debts?

  • Steve says:

    It was very public-spirited of Mr McMillan-Scott to raise this issue again, following similar letters to the EU Commission by a number of other Euro MP’s. However, the question has already been answered. In 2010, European Commission Vice-President Viviane Reding provided one of her many responses on the subject of Cyprus’s contravening the Unfair Commercial Practices Directive (2005/29/EC), specifically Article 7 on ‘misleading omissions, in which she said that the EU could only intervene at government level if an issue of EU law is involved.

    Apparently, no such issue is involved because the Cyprus courts have said on at least one occasion that depositing a purchase agreement at the deeds office does not demonstrate sufficient ownership rights to a Cyprus property and therefore the “owner” is at liberty to sell to someone else, to rent to someone else or to use the property as collateral for a loan.

    If you have problems understanding the apparent lack of logic in this whole thing, you need to take classes in Cypriot citizenship and/or read some books on how to think like a European Commissioner.

  • Andrew says:

    “Property owners who refuse to pay back the developers’ debt to the banks risk having any properties they may own in other EU countries repossessed to cover monies the banks recklessly lent developers against properties they did not own in the first place”.

    How can that be possible unless the buyer has used his other EU property as surety, in some way, in order to buy a Cyprus property.

  • joanne arnold says:

    Something needs to be done asap as the corruption in Cyprus is destroying lots of peoples lives. Everyone get your MP to highlight the situation. The more people speak up the more things will happen. Lots of families are due to lose a lot if no-one takes an interest.

  • James JH Lockhart says:

    Would it not be good contacting German newspapers and explaining the artful ways of the property market, and how the Cypriot authorities turn a blind eye to it?

  • steve smith says:

    Now a glimmer of light has been cast on these shady and illegal practices let us make sure they come under the full spotlight!

    I urge ANYONE and EVERYONE who has been effected or knows someone who has been effected by these shameful practices to get behind this. Anyone who is able to spread the word to other social media sites I urge to do so.

    Contact YOUR MEP’s / MP’s get them to join the all party commission looking into Cyprus property problems (details available elsewhere on this site) and together lets put pressure on OUR ELECTED GOVERNMENT to take action! – The only response I have had from David Cameron was a printed card effectively saying sorry it’s not our problem – it’s time we made sure it is!

  • paul lambert says:

    I agree with Frank, its certainly time for the EU to write another ‘stiff’ letter to the Cypriot government, who get really worried and concerned when they receive one !If there is still anyone left in the UK who feels that it is beneficial to UK citizens for us to remain in the EU, then please knock on the door of the secure cell you are currently in and ask the mental health nurse to throw away the key ! Surely the off hand way the EU deals with complaints from British MEPs is signal enough that they just want our money and wish we would all just shut up and let the gravy train that will provide them with huge pensions, carry on as it always has. I have very recently been through a year long income tax investigation by HMRC, triggered by the fact that I had an overseas bank account(opened without my authorisation !) EVERY ASPECT OF MY INCOME AND EXPENDITURE WAS SIFTED THROUGH WITH A FINE TOOTH COMB. I had to produce every kind of document to justify my income and expenditure. The EU, since its inception, has NEVER produced accounts that have been certified as a true reflection of its income and expenditure. There is obviously one rule for EU bureaucrats and another rule for the rest of us. My new year’s resolution is not to try and stop myself getting fat but to stop Eurocrats getting FATTER ! Do whatever you can to pressurise your MEP to ask more embarrassing questions of the EU – and believe me there is a never ending supply .

  • Martyn says:

    Any rational, sober, upright individual would surely answer Yes to Point No.2.

    Even the people who drafted and agreed the Unfair Commercial Practices Directive back in 2005?

    So sad, so very sad, that the many of practices used by some developers, bankers, and lawyers on this island are so flawed, dishonest, corrupt – and certainly not ‘consumer orientated’.

    It’s time we ALL got behind this and other so-far slow moving initiatives, to ensure Justice for this deceived and, importantly, to ensure nasty things like these cannot ever happen again.

  • Pete says:

    Hopefully Mr McMillan-Scott and the rest of those involved in any sort of justice within the EU realise that it’s not just SNK Venus Homes who are affected by this malicious piece of Cyprus slyness.

    The Liasides debacle is also set to turf pensioners out of their homes even though many have paid up front and in full and Alpha bank had no part in funding the build. But under what passes for law in La La Land Alpha bank claim they not only want the land, (already paid for) they want to snatch everything built on it, which no doubt they’ll sell to some well placed friend eager to seize the opportunity to capitalise on a piece of chicanery that would shame all but the most vile of people.

    And while Mr McMillan-Scott is about it, perhaps he could find out why Alpha bank refuse to go after the guarantor of the Liasides loans and why they claim they lost the paperwork? Perhaps he could also find out why the original liquidator felt obliged to resign after three years of getting nowhere?

  • Frank says:

    This calls for a ‘firm’ letter to the Cyprus Government.

  • Fighting For Justice says:

    ‘Non-privileged’ applicants, who may include individual employees, employers and trade unions, can directly complain to the European Court of Justice about acts of the EU institutions, but only under certain conditions: ‘Any natural or legal person may directly complain against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former’ (Article 263 TFEU).

  • Fighting For Justice says:

    Countries have the power to take action against another country under Article 259 of the Treaty of the Functioning of the European Union but they rarely do.

    It is time the UK Government started protecting its citizens.

    Incidentally individuals also have the right to report nations to the Commission under Article 258.

    It is time there was a concerted effort to bring Cyprus to the table and make it responsible for its obligations.

  • Costas Apacket says:

    Let’s see what sort of vacuous non-answer the EU comes up with for this excellent and accurate question.

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