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Land registry’s hands tied on foreclosures

Property foreclosures have already begun but the land registry’s deputy director was unable to confirm whether they relate to primary residences as precisely what constitutes a primary residence is unclear.

BANK-initiated foreclosures of mortgaged properties have already been executed, according to the lands and surveys department, adding to Wednesday’s row between the House legal affairs committee and Finance Minister Harris Georgiades.

“Property foreclosures have already begun, but we are currently unable to confirm whether they relate to primary residences,” deputy director of the lands and surveys department Petros Petrides said. This is because “the criteria of what constitutes a ‘primary residence’ are unclear.”

“If a parent, who already owns a property, buys his child a flat, is that house then a primary residence for the child or not? Does the time spent living in a property make it a primary residence?” mused Petrides.

The official was unable to confirm anecdotal reports that his department has so far received around 6,000 applications for property foreclosures in general.

That figure was cited by Yiannos Lamaris, an AKEL MP and member of the House legal affairs committee.

The committee has been discussing a joint AKEL-EDEK legislative proposal aiming to protect primary residences and the premises of small businesses that are unable to repay their mortgage, by allowing court-mandated suspensions of repayment for a fixed term.

While small businesses eligible to apply for protection under the proposed bill are capped at employing up to 10 people and with a €2 million maximum turnover, no such cap is being considered for eligibility based on home value. The reason, according to sources, is that such a provision would likely raise discrimination issues.

Wednesday’s session at the House was addressed by Georgiades in a letter to the committee, which subtly requests that it abandon its efforts to bring the bill to a plenum vote pending the preparation of a broader-scoped government bill as part of the troika-mandated adjustment programme, the submission of which the ministry has placed near year end.

The finance ministry, the letter argues, agrees with the Central Bank of Cyprus (CBC) and the banks association that lenders cannot be asked to subsidise insolvent borrowers and that the committee proposals create the risk of moral hazard.

“Borrowers that may or may not face crisis-related solvency issues would likely inundate the courts with requests to suspend repayment,” a spokesman from the banks association said.

Committee members deny such a risk, with Lamaris asserting that borrowers who apply for protection would bear the burden of proof as to their inability to pay due to the financial crisis.

“Even the troika, during the latest review, acknowledged the need to protect primary residences,” another committee member said.

The CBC had issued a directive on how non-performing loans (NPLs) should be dealt with by banks, listing guiding principles and offering examples of loan restructuring mechanisms. It has also empowered the – not yet operational – Financial Ombudsman with the authority to mediate disputes between borrowers and lenders. The directive explicitly denotes seeking a court decision on NPLs as the last resort, only to be employed after all other restructuring options have been exhausted.

Finalising the duties of the Financial Ombudsman and rendering the department operational will form part of the government bill. Georgiades’ letter conceded that the troika also favours protection and pledged that such a provision will be included in the government bill, but argued that going the way of the courts cannot be allowed prior to exhausting every restructuring option.

“The finance minister says we should wait for the government bill,” the committee’s chairman and DISY MP Sotiris Sampson said.

“The House has no problem waiting, but the people whose homes are on the line do,” he added.

“If we were presented with a simultaneous commitment by the banks to suspend repossession procedures until the government bill is ready, we would be more than happy to wait.”

Land registry's hands tied on foreclosures

Readers' comments

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  • Robert Bate says:

    Primary Residence means the home you dwell in; not a second property you rent out, holiday home, or investment property.

  • Martyn's says:

    Oh well. Another fine mess developing here. More ‘kicking the cans down the road’ here and looks like everyone will wait for the Troika to force some ‘hard decisions’. Don’t hold your breath!

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