Latest Headlines

Repossession agreement leaked

Some details of the agreement reached between the Cyprus government and the Troika of international lenders to ease the procedures for property repossessions have been leaked to the media.

home repossessionALTHOUGH the Cyprus government remains tight-lipped about details of the agreement reached with the troika easing the procedures for property foreclosures, some details have been leaked to the media.

According to information we have received, which we cannot confirm at this time, the key provisions of the law required to make repossessions more effective and less time-consuming include:

  • An assessment of the value of the property in question will be made by the bank and its owner(s). If there is a discrepancy between the two valuations a further valuation will be made by an independent third-party appraiser.
  • The property will be auctioned with a starting price of 80% of the its value as assessed by the above valuation procedure. The price will remain confidential and its publication will constitute a criminal offence.
  • The selling price of the property will remain valid for a period of three months, after which it will be reduced to 50% of its valuation.
  • If the property has not been sold within a year, its value will be re-assessed, but at no time will its selling price be dropped below 50% of its valuation.

The repossessions bill and a second bill on the subject of insolvency are designed to address the issue of non-performing loans, which are currently hovering around 50% of all outstanding loans.

European Commission officials have warned that the repossessions law has to be approved by Parliament before any new aid is distributed.

Readers' comments

Comments on this article are no longer being accepted.

  • Stuart says:

    @Nigel on July 29, 2014 at 9.12 am

    Thanks, Nigel, for clarifying this very important and significant point.

    If indeed this has been agreed with the Troika, it will clearly have a major impact on the ability of banks to tackle the issue of non-performing loans in the form of mortgages on primary residences.

    It also contradicts the clear intent of clause 1.5 of the April 2013 Revised MoU bailout terms which will presumably have to be revised yet again if this is intended as a binding agreement between the Cyprus government and the Troika.

    The MoU seems to be a rather blunt instrument when put to the test as we have seen previously when its goal posts have moved and even the stadium changed to accommodate the protestations of the governing authorities which are undoubtedly set to continue.

  • @Stuart on 2014/07/28 at 11:30 pm – It’s a government edict, which I understand has been agreed with the troika.

  • Stuart says:

    @Nigel on July 28, 2014 at 9.27 pm

    You say that: “if it is your primary residence, the bank will not take your home from you”. Is that a Cyprus banking decision or a government edict?

    Since it would appear that a large proportion of the 50% non-performing loans are, in fact, mortgages on primary residences, how will the Troika requirements be satisfied if such cases are exempt from repossession?

    Clause 1.5 in the April 2013 Revised Cyprus MoU bailout terms states: “Collateral property can be seized within a time span of 1.5 years from initiation of repossession proceedings but in the case of primary residences, this time span could be extended to 2.5 years”.

  • @kalin kostov on 2014/07/28 at 9:02 pm – If it is your primary residence, the bank will not take your home from you.

    You need to discuss the problem with the bank and work out a payment plan with them (the banks are under instruction from the Central Bank to do this).

    You will no go to jail!

  • kalin kostov says:

    So..one day the bank will have my property as we are unable to pay it.. and I owe the still €130,000 and the value is around 80-90 now..whatever price they sell it..I will still owe them between €30-60,000 I guess…
    can someone advice what is going on then? Going to jail?! How the heck will pay the difference?! With the income we currently have we can afford to pay that amount in next..what…40-50 years?!
    Greatly will be appreciate any advices or opinions…
    Thanks to all…

  • UBoat says:

    Thank you Nigel !

    I had forgot about that …. conveniently … Seems I’m more like the Cypriots than I thought.

  • @UBoat on 2014/07/28 at 5:49 pm – If you bought off-plan you would have got a home loan (not a mortgage).

    A mortgage is secured against the property for which it is granted and is recorded as a charge against its title. As there will be no property if you buy off-plan (and no title) you will get a home loan, which the developer draws down to build the property.

    Once the title has been issued and you’ve paid the Property Transfer Fees, the home loan is converted to a mortgage by the bank and it is secured against the property (and the Land Registry will charge you 1% of the loan amount advanced).

  • Peter Davis says:

    @ MartynG

    My friend. You ask who the 3rd valuer will be, well my friend, my cousin’s villas are worth much more yours.

  • UBoat says:

    @Nigel July 28, 2014 at 2:32 pm

    “Many of the properties that are seized should have Title Deeds as the majority will have been purchased using a mortgage – and you cannot get a mortgage unless the property has a Title Deed. But there will be some purchased using home loans.”

    Cant you get a mortgage without a title deed ? Some one should have told BoC 12 years ago when I got one ?
    lol its all going to end badly I think.

  • Richard Hernaman says:

    Why would anyone bid on a property when it is put up for auction for a 20% discount when they can wait three months and get it at a 50% discount?

    Also, surely, the bank when have to declare the reserve price otherwise how will buyers make an informed decision.

  • @All – One of the reasons for introducing this law is to put pressure on those who can afford to pay, and who are currently reluctant to pay, to cough up or face the consequences. So I do not envisage tens of thousands of properties flooding the market.

    If tens of thousands of properties are seized and subsequently sold at auction, this will put further downward pressure on property prices.

    Many of the properties that are seized should have Title Deeds as the majority will have been purchased using a mortgage – and you cannot get a mortgage unless the property has a Title Deed. But there will be some purchased using home loans.

    If the bank tries to sell any properties without clear Title Deeds, no-one in their right mind is going to buy them unless they’re prepared to take a risk.

    What normally happens with repossessions and auctions is that the bank will recover what it is owed and anything left will be passed to the loan defaulter.

  • @billy on 2014/07/28 at 1:16 pm – At the moment, I don’t know. But hopefully it will only apply to unsold properties that the developer has on his books.

    Yours is a question that everyone is asking and it is very worrying for all concerned.

  • MartynG says:

    Point No.1, it’s leaked, we know not by whom, or for what reason, or reward? But let’s assume what’s leaked is accurate……

    Now: from practical experience (at the Lending end, elsewhere in the world) there will likely be a sizeable Gulf between bank and borrower valuations, following which how ‘independent’ in this country will the 3rd Valuer be?

    Next, point : made below: how Confidential in a largely Cypriot culture will the established Asking Price be? Will vultures discover ‘ways of finding out’, how scared will they be by threat of inprisonment? Hardly at all would be my view in a majority of cases.

    Also, again made below after all the publicity, who, in a right and sober mind, would buy a TD-less property – and my guess is these will form a significant proportion of the total no. Of NPLs.

    And then what happens if no buyers come forward to pay 50% of valuation, in the final analysis a property is worth only what a willing, or even ‘interested’ ! buyer will pay in any particular market? ‘Dutch Auction’ or somesuch?

    And finally, in efforts to shift the pile of Repossessions, how willing will the banks be to re-lend on them, in efforts for the bank to claw its way out of the mire? My experience shows quite a few responsible and creditworthy potential buyers seek partial-funding, and often will pay a higher price if the loans are granted. How will bankers, many with a flawed track record over many years, make, or be allowed to make, decisions of these kinds?

  • billy says:

    Does this apply just to people who havent/cant pay their mortgage? Or does it apply to Owners who have paid in full but the Developer has disappeared from the country with a pre-existing mortgage on the land and owing millions to the Bank?

  • Stuart says:

    And who does the bank imagine are going to buy all these repossessed properties at auction, even if the price is reduced to only 50% of the original valuation?

    Then there is the question of how many of these, if any, have their full Title Deeds because without them, no-one in their right mind is going to buy anything.

    And finally, what happens to all the owners who will have had their homes repossessed? If 50% of all outstanding loans are non-performing, there are going to be an awful lot of homeless people in Cyprus.

  • Mike says:

    Such care, time and effort to keep selling prices a secret. Why not make them freely available to anyone in the property bying market to assist in them making a decision on where and what they may possibly be in a position to buy. It would seem that if as much time, effort, energy and money was put into introducing legislation that was transparrent and straightforward and not designed to protect or shield criminals and charlatans then perhaps the country could begin to regain the respect and love of the International community once enjoyed that these last two generations have spectacularly destroyed.

  • Jim says:

    It appears to be an auction that is anything but public.

    It is more like a bid & tender arrangement. All bids will be secret upon pain of imprisonment.

    This is open to all kinds of corrupt brown envelope type scenarios.

  • Andreas says:

    Normally the bank will take a loss if the selling price does not cover mortgage.

  • to whom it may concern says:

    And how will the bank obligate the people to pay..lets say the other 50% if they sell the property? Or will fill up the jail with them?! This is nonsence…. USA scheme from 2009 coming over I think….

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

  • Text size

Back to top