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One in four construction firms bankrupt

The Registrar of Companies has been reported as saying that one in four construction firms in Cyprus are going bankrupt due to the pressure caused by the island’s financial crisis.

construction firms bankruptCONSTRUCTION firms are facing severe problems as the industry is collapsing under the massive pressure caused by the financial crisis according to a report in today’s Cyprus Weekly.

According to the report, the Registrar of Companies says one in four constructors are going bankrupt, while liquidators are busy at work.

Companies are seeing their property auctioned off as repossessions spike, although finding buyers has proven to be a difficult task.

Repossessed properties are not only coming from liquidated companies but also from buyers who were left stranded after property developers were unable to repay their loans. Buyers who paid part or the entire amount for a home and were expecting the Title Deeds are now effectively faced with having to pay for their property a second time.

Registrar Chris Iacovides said the problem is that companies have gone bust but their property was used as a guarantee.

An imploding construction sector is causing deep concern due to its contribution to the economy, and its collapse would have a domino effect.

Readers' comments

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  • @tel – you’re almost home and dry.

    But your lawyer needs to check the title to ensure there are no mortgages or any other claims and charges lodged against the property.

    If you’re buying an apartment or a property on a complex with shared facilities, your lawyer also needs to check that the vendor has paid the management fees.

    If it’s an older property it’s a good idea to get it professionally inspected to ensure there are no hidden problems or faults.

    And you have to keep your fingers crossed that the vendor pays any Immovable Property Tax he may owe – plus any Capital Gains Tax arising from the sale.

    Use the checklist in the Free Publications section.

  • tel says:

    Buy a resale with title deeds? Are we home and dry then?

  • Hector says:

    What’s lacking is any court case decisions supporting the victims and punishing the developers/banks etc. whether financially or criminally. The reason that the world does business in the UK is the confidence in the legal system to deter fraud and bad business.

    Cyprus needs to have the rule of law not the law of the jungle.

  • John Swift says:

    Nigel let me thank you for your response, mine and my Wife’s association with Cyprus go back to 1966/7 with HM Forces.

    We didn’t return until 1997, I instantly knew it was the place I wanted to retire to but as we all know those were the happy times for people retiring to Cyprus, by the time our retirement came around in 2008 it was mostly a different story, we got our fingers singed a little and it cost us quite a lot of money for the months that we were in Cyprus.

    We still visit Cyprus usually twice a year and if the lottery fairy did smile upon us we’d definitely buy as we made many friends who we’ve kept in contact with even the daughter of our 1966/7 landlord/lady.

    Once again thank you Nigel.

  • Denton Mackrell says:

    Reported to me by a very reliable source who was present at a recent meeting of large developers: they were all crowing about how the banks were still eating out of their hands and giving them the red carpet treatment so there is no way that they will be chased to pay up on NPLs. I do believe that they really do believe that they are untouchable because, thus far, the banks have indeed failed to repossess and liquidate. That is why the banks (BoC and Co-ops especially) are in such a dire condition. Any bets on whether the Troika will soon dispel the developers’ naïve expectations rather than see BoC in particular hit another crisis next year?

    At the same meeting, the gang were beside themselves with excitement about their next mega project – Varosha’s return to the Republic by the Turks and a new-build bonanza in Famagusta when foreign buyers will come flooding in once again. Ahem! First, Varosha’s return is pure speculation – a bird in the bush. Second, why on earth would foreign buyers, who for years have been confronted with all the horror stories of the Cyprus Property Scandal, ever give any new Cyprus prospect more than a second’s glance? Seems like yet more absurd fantasizing by the developer community.

  • @John Swift – One of those expats will be the subject of a programme on Channel 5’s “Cowboy Builders Abroad” to be broadcast on Thursday 24th April at 20:00 (UK time – 22:00 in Cyprus) – MDE Nest Homes – MD Adrian Mills.

    “Tom and Irene Owens bought a villa in Cyprus for around £150,000 and their son bought the plot next door, but when the couple moved into the property the site was incomplete, with no roads or mains electricity. Worse still, the builder had failed to construct any retaining walls to hold back the hillside now looming over the house and this – coupled with chronic damp problems and subsidence – meant the couple’s retirement was turning into a nightmare. Gabrielle Blackman and her build team face an uphill struggle as they attempt to improve the situation, while Dominic Littlewood encounters more Brits on the island who have fallen foul of the same builder.”

  • John Swift says:

    When we were preparing our move in 2008 the saying on a certain forum (not Paphos People or Virtually in Paphos) was, if you don’t sell up and burn your bridges in the UK you’re not committed.

    This particular forum owner virtually banned the discussion of possible title deed problems (wonder if having a relative in the building trade had anything to do with it).

    “Not that old chestnut again” was his usual response.

    Well we didn’t let other people make our decisions we looked for ourselves and thankfully didn’t take the bait or false assurances of ex-pat property company reps.

    We came out on a trial rental, the biggest rip off merchants we encountered weren’t Cypriots but UK ex-pats, we signed up for the rental of one house to start the following month as it was presently occupied, low and behold the UK ex-pat owner started demanding rent from the day we signed. That was just one example.

  • John Mann says:

    So when is the “confirmed” list being published then? After seeing that BBC programme of that couple being swept away by the romance of buying a property surely there needs to be some “whistle blowing” or in plain words “honesty” about these developers or they will strike again and again, and the next phase of victims will be joining the long first list.

  • Whirlybird Rtd says:

    (Clive of Payia says:

    April 20, 2014 at 10:03 am

    I bet they are only technically insolvent and their money is already hidden away in overseas accounts or with relatives unconnected with the business. Your heart beads for them doesn’t it.)

    I agree that this is probably the case in 99% of the so called bankruptcies in Cyprus. I’m sure this is what has been done by our developer who has 3 developments and has put a memo on them all.

  • kufrahdog says:

    This article, which one notes is from Phileleftheros Public Company Ltd, is yet another ‘sound bite’ that characterizes so much of the journalism reporting property related issues in Cyprus. The heading refers to ‘construction firms’ and yet the bulk of the article indirectly and directly references developers. Readers seldom acquire comprehensive, accurate and balanced reports from scurrilous articles such as this and therefore it is no wonder that they could become confused.

    The line that ‘Buyers who paid part or the entire amount for a home and were expecting the Title Deeds are now effectively faced with having to pay for their property a second time.’ is indefensible by any business and moral standard, and bears testimony to the corrupt and squalid business practices exercised by banks and lawyers ably supported by politicians bent on retaining power. This is one example of how the few elite retain dominance over the many less well-off in Cypriot society and one which Machiavelli would have recognized and understood perfectly; but it has no place in modern society or in the member states of the EU. KD.

  • Stuart says:

    Can anyone answer the highly significant question posed by Robert Briggs below? Who would want to buy a repossessed property that has the probability of attracting further legal problems because it has no Title Deeds?

    Exactly the same question arises concerning the sudden increase in new building applications being lodged at the Land Registry. Presumably these properties are being built by the remaining majority of construction firms that are still solvent.

    So, will all these exciting new developments also come with full, clean and immediately unencumbered Title Deeds at point of sale or is history merely repeating itself?

  • @All – There seems to be some confusion, I’ll try to explain:

    With a few exceptions, property developers do not build properties – the put out tender invitations to ‘constructors’ (building contractors) and the company submitting the winning bid gets to build the development and is paid by the property development company – resulting in the problem referred to in the report.

    If there is no/little development taking place, the building contractors get no/little income to pay their labour force.

    Property is used as collateral (not a guarantee). A Guarantor is a person who guarantees to pay for someone else’s debt if they default on a loan obligation.

    Liquidators and receivers (who invariably act on behalf of the bank that loaned the money) have an obligation to try to recover what is owed from the guarantor(s).

  • Clive of Payia says:

    I bet they are only technically insolvent and their money is already hidden away in overseas accounts or with relatives unconnected with the business. Your heart bleads for them doesn’t it.

  • Frank says:

    This is a chicken and egg situation. Assuming that “construction firms” include the Developers, it seems invidious to suggest that they are victims of the financial crisis. They, in collusion with the banks, are the true authors of that financial crisis.

    My sympathy is strictly reserved for the innocent parties who will suffer. For the Developers, I say: “As ye sow, so shall ye reap”. May you share fully in the misery which you have inflicted on your victims.

  • ivan says:

    I believe the government make the problem bigger by attaching unpaid taxes to properties already sold!

    Is it correct that when a property is sold in Cyprus and the contracts completed the government can then apply the sellers unpaid capital gains tax bill to the property?

    The lawyer handling the purchase could not possibly find this debt as it didn’t exist until the deal was completed.

    If it is correct then that is the Cyprus government allowing people to walk off without paying their tax bill.

    I hope that is not the case as it doesn’t make buyers very confident and damages the market even more.

  • Pete says:

    I wonder how many of these developers managed to move money out of the country prior to being made bankrupt?

    One report recently stated someone who was made bankrupt but was found to have moved 20 million out of the country. But the question of culpability still remains; if a bank continue to grant loan after loan after loan without a single penny ever being repaid, does that not put them or their staff at fault?

    In one of the cases currently with the liquidator mentioned above, the bank have continued to ignore all the guarantors and are pursuing the innocent home buyers. Indeed, Mr Iacovides stated he would pursue the guarantors and make them bankrupt too, but that was last June and it wouldn’t take eleven months for any guarantor to hide their money or move it elsewhere.

  • Janner says:

    ‘The problem is their property was uses as a guarantee’! Is this a surprise to anyone? Shock horror!! Well, if this is true it must mean that multiple loans are register against individual properties which don’t have title deeds!! This would mean it is an unholy mess without anyway of undoing unless someone is willing to take the hit for this corrupt practice (fully endorsed by Cypriot government and EU)…mmmmmm….waiting for the next instalment of ‘u blink first’!!!

  • Robert Briggs says:

    Do these auctioned off & repossessed properties come with full, clean and immediate unencumbered Title Deeds at point of sale? Please inform. RB.

  • mh says:

    Let this be a warning to anyone thinking of completing on a property in Cyprus. The Banks are now throwing around offers of 30/40% off your current outstanding loan. Don’t be fooled to take them up on it! 3 out of 4 developers are in dire straights when no hope of paying off outstanding loans on the land your property is built on.

    The Bank then comes to you to pay off their loans and all outstanding tax’s on the land.

    If you never want the title deeds or never want to sell or legally rent your property out then go for it, buy.

  • George says:

    I feel for them being in the industry in South Africa myself. They are collateral damage the developers are still rich and the poor suffer.

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