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Cyprus property mis-selling could cost €1 billion

Cyprus must adopt a clear plan to resolve the many cases of mis-selling if its once thriving property market is to breathe again – and the cost could reach a billion Euros argues George Kounis.

IN ‘A Plan for All Reasons: Six Months On‘ (a White Paper published by Maxwell Alves Solicitors in the City of London), George Kounis a Consultant with the firm, argues that Cyprus must adopt a plan to clear, what he compares to the “Stables of Aegeas” if the Cyprus Property market which is vital to the economy and the Banks are to breathe again.

“The cost could be up to a billion but it is a necessity that has been ignored for far too long”, he argues. He points to the Directives issued by the Central Bank of Cyprus since 2003 asking the banks to put the brakes on the property selling frenzy which inevitably created the bubble and the aftermath we are witnessing and warning them against lending in foreign currencies. “The Banks admit to no wrongdoing, but the evidence says otherwise”, George Kounis continues. “In any event, what happened is not only morally but also legally wrong and they will be tied up in court battles for many years if they continue to ignore the strength of public sentiment and the determination of their victims to see justice done.”

And it is not only Banks and property developers that made money out of this. The Government of Cyprus profited from taxes on mis-sold properties, lawyers, sales agents and various other service providers benefited and even HM Revenue and Customs in the UK managed to get its share by claiming tax on interest earned on escrow accounts. They are now all sitting back watching the banks take people to court for over-inflated loan balances without even bothering to repossess their properties first because they say they are worthless. “This is obscene”, comments Kounis.

Foreign currency mortgages that rose by 40-60% when property values fell by 70% are only part of the story. Rental incomes have tumbled, and rent guarantees offered by property developers (usually by adding the total guarantee commitment to the price) have been dishonoured. The banks took the risk of lending on overinflated property prices, ignoring the Loan to Value ratios imposed by the Central Bank of Cyprus, but now they do not want to face the losses. The Government enjoyed the benefits but now refuses to step in.

The White Paper promotes a plan that will see all parties benefit from a fair, effective and prompt settlement. It will cost a lot of money to resolve but, it is money that the various beneficiaries should not have made in the first place and it will be much cheaper than putting thousands of cases through the courts with doubtful results. It is estimated that loan repayments lost because people have been forced to default run into millions every month. By settling with these borrowers, those that can keep their properties will resume repayments at reduced rates, whereas new buyers will be found for those who cannot afford to keep their properties even if a substantial reduction is made to their loan balances.

Maxwell Alves is not the only firm that represents clients in this predicament but it is the firm that has been proposing a non-litigious approach to the problem on behalf of their clients for some time now. George Kounis, will be in Cyprus from 25th February to 12th March for high level meetings to promote the proposed plan.

Readers' comments

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  • Denton Mackrell says:

    Unfortunately, without a radical change of government policy and practice, caveat emptor cannot operate here in Cyprus in any meaningful sense of the term. The diligent as well as the feckless buyers were all lied to.

    As AndyP so rightly suggests, there was and apparently continues to be a deliberateness of deception on a very large scale usually involving the very professional advisers (lawyers) that buyers ought to be able to rely on for their honesty and integrity in revealing any deception by vendor parties.

    Mis-selling? I call it conspiracy to defraud.

  • andyp says:

    Mis-selling generally refers to information that was not disclosed to a buyer which if it had been would have led to the buyer most likely not signing the contract in the first place.

    Two examples from my own experience are-

    1. My developer NOT actually owning the land when our contract of sale was signed.
    2. My developer having a 64,000 Cyp mortgage on my property before my contract was registered.

    Would we have signed if we had known the above? Absolutely not.

  • Ampleaphrodite says:

    With respect to the writer of the original article, who works for a firm that hopes to make money from the problems facing some buyers of property in Cyprus, just what is this ‘mis-selling’ that is constantly mentioned?

    Whilst some buyers have undoubtedly suffered from bad practice and downright deception both in the UK and in Cyprus, a great many others are UK buyers who blithely bought property abroad in the good old days, when properties were relatively cheap and mortgages were quick and easy. Many should not have bought in the first place and, finding themselves clobbered by the financial crisis of 2008, found themselves in huge difficulties.

    Encouraged by ambulance-chasing non-legal ‘experts’ and, in some cases, by professional firms, they have since jumped on the bandwagon of claiming that they were ‘mis-sold’ the property and demanding rescission of their Contracts as a result. How many of them read the papers they were signing properly? Too many just wanted the property, without doing the homework or the sums. If the crisis hadn’t happened in 2008, they would be very happy now, calling it an investment, but they took a gamble, which hasn’t paid off and they now seek to blame anyone but themselves.

    As for third parties in Cyprus profiting from a situation, surely that’s just a way of life here, at every level of society and profession?

    I do, of course, deplore the Title Deed situation, but don’t think this is a part of the majority of the mis-selling claims or of this particular article.

  • Frank says:

    @Steve – I have to agree with you. There is little sign of altruism within the Cyprus property problems: other than the generous labours and vigilance of Nigel and the strenuous lobbying by CPAG: notably Elizabeth and Denis O’Hare.

  • @Elizabeth – the ‘IT’ will not be posting here again – he’s also been banned from at least one other news outlet following numerous complaints.

    It appears his only objectives are to pile abuse onto those who post comments and to promote his log cabin business.

  • Steve says:

    Reading this, I dreamed a little dream and now it’s back to reality. We can just add this to all the other bad stuff about the Cyprus property market. Mr Kounis is writing this piece and coming to Cyprus because he thinks he can make some money out of it. One has only to look at the record of Cyprus courts to realise that it is just another kite that will not fly. Mind you, if so many people are fool enough (like me) to buy property in Cyprus, some of them may pay out for this.

    Just ask yourself, if you can’t get title deeds or even establish a legally enforceable interest in your property by depositing your purchase agreement at the deeds registry, how is this going to benefit anyone but the lawyers handling it?

  • Costas Apacket says:

    A non-legal approach is worth a try, but I honestly can’t see anyone in Cyprus willingly giving up the spoils of their corrupt practices, deceit and lies without it being forced out of them with the full force of European Law, a statement which in itself is a bit of a dichotomy.

  • Frank says:

    Sadly, this cleaning of the Augean Stables is most likely doomed to the same fate as the previous metaphor for resolution: the untying of the Gordian Knot by Neoclis Sylikiotis; i.e. Stygian failure.

    My preferred solution, also from Greek legend, involves Nemesis, the goddess of revenge.

  • John Swift says:

    The above article hits right to the heart (or should it be hearts) of the matter?

    We saw what was going on and decided not to buy but rent for a while in 2008, we ignored the offensive comments about not being committed and the way things developed we made the right decision.

  • Elizabeth says:

    @Stuart,
    Where is our all-knowing “Mr Holland” now? and who else but CPAG (with a lot of help from their many friends) was behind the requirement to issue title deeds being included in the Troika bailout conditions?

  • Adrian says:

    The Cypriots have been feasting at the top table and now the bill has arrived and they don’t wont to pay it.

  • Stuart says:

    No need to submit a comment as its all been said before. Just re-read the comments from 6 months ago to the article ‘A plan for all reasons’ listed above under RELATED CONTENT and you’ll see what I mean. Enjoy!

  • Martyn says:

    It has been clear to many of us previously involved in property and development finance and ‘control’ elsewhere in the world that the general culture and laxity of control in the Cyprus ‘boom’ years would build-up untold potential misery for those innocents who got ‘sucked-in’ to buying, often it seems without reasonable advice or legal or administrative protection.

    Using the eye-watering figure of €1bn helps draw serious attention to the multi-tentacled abuses which went on and hopefully now initiatives such as this will start to get the underlying resultant problems addressed. So well done Maxwell Alves and others who are ‘grouping’ actions, generating much-needed publicity. This will inevitably affect RoC property values still further as wider publicity will further surely reduce demand for both new and existing properties, especially those where ‘owners’ remain without Title Deeds.

    And by now the Troika will surely have started to include the costs of remedying all these abuses in their overall calculations as to a final Bail-Out figure – which in my humble estimation will reach close-on €20bn – before anything can be finally calculated and agreed. Is such an amount for such a relatively tiny EU country likely to be ever capable of repayment? No, especially with property sales and values, exacerbated by likely massive increase in the numbers of repossession and distress sales causing property values to fall still further, reminiscent of what we saw happening in Spain, Ireland and Portugal as long as 4-5 years ago.

    Those gas reserves, quality and quantities and the cost of tapping them, not to mention the management thereof!, just better be good or else the longer-term outlook for the Cyprus economy will remain bleak also!

  • andyp says:

    “ego straono tse poulo”

    I guess that sums up the experience of many of us in our dealings with our “trusted” advisers most particularly our “lawyers” who we paid to safeguard our interests. Many did not and the good guys mostly remain silent!

    Will the Cyprus establishment admit their failings and try and resolve matters to help victims? No.

    Have many of us not been saying for years that this fraud is a conspiracy between government, banks developers and lawyers?

    Cyprus may well need a vibrant property industry to help it survive but as both the Russians and Chinese are starting to complain about their treatment there would appear to be no change in their lack of ethics and zeal to seek new victims rather than resolve the problems and as such deserve nothing.

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