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No repossession of paid for properties

The troika have advised the government that properties that have been paid for but no Title Deeds have been issued could be exempted from repossession under the provisions of the controversial foreclosures bill.

reposessionPARLIAMENTARY parties are continuing their discussions on the controversial foreclosures bill in efforts to reach a consensus while disagreements between the parties and the troika of international lenders remain.

Yesterday’s session the House finance and interior committees, which lasted several hours, failed to reach an agreement – and further discussions are being held today.

Of the ten proposed amendments to the bill that the government has put to the Troika it’s reported that the Troika has agreed to six if certain provisions are met, and rejected the other four.

According to reports, the Troika rejected proposals to protect small business property and professional residences from repossession and also rejected a proposal to write-off any debt remaining once a property has been auctioned off. The Troika said that these issues will form part of the discussions relating to the insolvency framework to be put in place by 1st January 2015.

On a more positive note, the Troika is reported to have approved amendments to the bill enabling those facing repossession the right legal recourse, a condition that bank shareholders may not involve themselves in the auction of foreclosed properties.

For those who were duped into buying property built on mortgaged land there is some more good news:

According to a written statement by Cypriot government spokesman Nikos Christodoulidis late today (4 September), the Government has included seven amendments into the foreclosures bill. One of these amendments ensures the protection of property buyers who have deposited their sale contract at the Land Registry, but who have not secured the property’s Title Deed.

Readers' comments

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  • @Paul on 2014/09/12 at 11:32 am – Representatives from both the European Commission and the International Monetary Fund have said that the laws passed by parliament are incompatible with the terms of the Memorandum of Understanding.

    Speaking to CYBC yesterday, government spokesman Nicos Christodoulides said that “Under the current circumstances the disbursement of funds is not a given; I think it will not happen.”

    An announcement is expected from the Eurogroup later today – stand by for the fireworks!

    These laws, which have to be ratified by the President before they become law, are likely to change.

  • Paul says:

    On the face of it this seems like good news particularly for those of us who bought properties on land mortgaged to the hilt by the developer.

    When will though these laws come into force? Will they ever come into force? Or will they be voted down by politicians who are in the pocket of the developers and banks?

    Or will the banks still be free to demand excessive amounts from owners in this situation to clear the debt of the developer?

  • @Frank on 2014/09/08 at 3:16 pm – There are already many hundred of people taking legal action against banks in Cyprus – both in the UK and Cyprus alleging the mis-selling of Swiss Franc loans. Get in touch via my contact page if you would like a list of the various groups and their contact details.

    I guess the second part of your question relates to the implementation of ‘The Limitations Law (66(1) 2012)’ (which has already been delayed by eighteen months). The six year limitation is exactly the same as the ‘Limitation Act of 1980‘ that you have in the UK.

  • Frank says:

    @Nigel – observing what is going on my comments are as follows what is the situation regarding wanting to protect your rights to take a Bank to court regarding what we would call (miselling of a bank loan).

    Is it realistic, legally, to be able to take out a (civil case from both Cyprus & UK to) protect from what will be put in place come December, January 2015 in the Cypriot parliament, not allowing home owners to make their cases in the courts against any Bank.

    Thank you

    Frank

  • @js on 2014/09/08 at 11:10 am – The fact that you are restructuring your loan will not require you to change your contract of sale and re-register it at the Land Registry.

    The contract of sale is between you and the vendor and has nothing to do with your loan agreement, which is between you and the bank.

  • js says:

    @Nigel – When does, “purchasers who failed to deposit their contract of sale will not be protected” apply?

    I bought my property back in 2007/2008, but currently it is going through a loan-restructure, this will I believe involve re-registration of contract of sale with the land registry.

    In this case, will I be protected?

    Is there a date by when contract of sale should be registered?

    This is all very scary, and this is the very fact that some people are not paying their loan!

  • @Stuart on September 5th, 2014, at 2:35 pm – Please refer to the article Landmark ruling by the Supreme Court for a description of the case.

    Why not a deluge of cases? Trying to find a lawyer in Cyprus prepared to take a fellow lawyer to court is like looking for hen’s teeth. And there is little point in suing until there’s been a financial loss.

  • Frank says:

    @Nigel

    icw @Frank on 2014/09/06 at 12:01 am – Yes they did receive the money

    Now THAT is a headline!

  • Stuart says:

    @Nigel on September 5th, 2014, at 2:35 pm

    You say the ‘property’ had been mortgaged before they purchased and the ‘contractor’ went bankrupt but is this really equivalent to saying the ‘land’ had been mortgaged before they purchased and the ‘developer’ went bankrupt because, if so, there would surely be a deluge of cases of buyers suing lawyers for negligence?

  • andyp says:

    @Curious. As Nigel said the police are not interested as I know from personal experience. Neither is the Attorney General who considers a lawyer forging my property contract to be a minor offence and dealt with by the issue of a €1000 fine.

  • @Frank on 2014/09/06 at 12:01 am – Yes they did receive the money.

  • Frank says:

    @Nigel

    You referred to: “a ruling by the Supreme Court in 2010 which ordered a lawyer in Paphos to pay a couple €120,000 after finding him professionally negligent.”

    Do we know if the €120,000 was actually received by the victims of the negligence?

  • @Scruffy on 2014/09/05 at 7:13 pm – Unfortunately you will be considered an unsecured creditor if you bought before the law was changed in 2011 (and that law was not retrospective).

    Please get in touch with me if there have been any recent developments via my Contact page.

  • Scruffy says:

    Trust me, we are not regarded as creditors. Our liquidator insists we are “investors” who simply invested in the wrong company and must pay the consequences. No matter that I’m just a guy who bought a property in Cyprus in which to retire to and is my only property on the planet.

  • @Curious on 2014/09/05 at 5:32 pm – Unfortunately selling property built on mortgaged land is not considered fraud in Cyprus. People have spoken to the police and have been told it’s a civil matter.

    There are fundamental flaws in the system that the government will have to correct if it expects the island’s property market to recover. This is one of them!

  • Curious says:

    Dear Nigel

    I wonder why people who have fully paid for their houses get so worried. These people have a contract with the developer and have fulfilled all their obligations. Surely in case of bankruptcy they are one the side of the creditors rather than on the side of the debtors . If the property they contracted and paid for was mortgaged/sold again it is pure fraud and a case for the criminal courts.

  • demetri says:

    If is of any consolation to the many people concerned, up until now it was being stressed they wanted to protect people who had paid/paying for their homes but their developer was insolvent….

  • @Andrew on 2014/09/05 at 1:26 pm and @Molliemoo on 2014/09/05 at 1:37 pm

    I can only speculate on what will happen to those who purchased properties from a company that has subsequently gone into liquidation. We will have to wait for the law to be published to see precisely what it says – hopefully it will cover this very worrying situation.

    As I said in my reply to Janner on 2014/09/05 at 11:08 am – In my opinion a bank would almost certainly collapse if it seized the homes of good customers who were maintaining their loan repayments as the bank would lose all credibility – and it would also put into question the credibility of other banks – and the ‘safety’ of any contracts in general. This would include companies that are being liquidated by the banks.

    I know that there is a very aggressive liquidator working on behalf of one of the Banks who has demanded a bankrupt developer’s customers to contribute towards repaying the developer’s debt or face the consequences. But I have heard from no-one who has actually lost their home – and hopefully those under threat will have instructed a decent lawyer to protect their interests.

    You can also take some comfort from a ruling by the Supreme Court in 2010 which ordered a lawyer in Paphos to pay a couple €120,000 after finding him professionally negligent. The property had been mortgaged before they purchased and the contractor went bankrupt. The couple lost all their money

  • Molliemoo says:

    I was feeling quite good until I read this bit –

    “Companies going into liquidation is a separate discussion – and yes there are still risks for buyers if their developer goes into liquidation.”

    I just cant get my head around all this. As our site is now in the hands of Liquidators, am I right in assuming this latest development does not apply to us and is the ‘risk’ losing my only home?

    And do the “tools” mention in the Positive Developments… article mean me and the other apartments paying off the developers hidden mortgage?

    I am a pension and cannot pay, so what would happen then?

    Any info gratefully received.

  • Andrew says:

    @ Nigel September 5, 2014 at 12:23 pm “Companies going into liquidation is a separate discussion – and yes there are still risks for buyers if their developer goes into liquidation”.

    Maybe that is the hidden catch. If a developer has had an NPL for years then it is quite likely that his company will then go into liquidation. So maybe buyers are not protected after all. This could be a ploy to quieten down worried home buyers.

  • @Johnny Cyprus on 2014/09/05 at 11:41 am – I think there’s some confusion here. We are talking about non-performing loans and protection for buyers who have lodged their contracts at the Land Registry for Specific Performance.

    Companies going into liquidation is a separate discussion – and yes there are still risks for buyers if their developer goes into liquidation.

    But let’s try and stay on track with the foreclosure bill.

  • @demetri on 2014/09/05 at 11:33 am – The bank will only repossess the property purchased by the defaulting borrower. The extent of that property will be defined in (a) the contract of sale and (b) the loan agreement.

  • Johnny Cyprus says:

    Janner I think that we can all share your confusion.

    In the UK, if a limited liability company fails to pay it’s debts, a creditor may seek judgement of the debt.

    If the judgement is in the creditor’s favour then the court will direct that the debt be paid, normally forthwith. If it remains unpaid, the creditor’s remedy is usually to then seek a winding up order. A receiver would be appointed and this would normally trigger crystallisation of any securities. The company’s creditors holding mortgages could then normally seize the securitised assets and unsecured creditors would have to be satisfied with whatever was left.

    That is how things are supposed to work, but there has been so much fiddling about with things in Cyprus that it is very difficult to see how things would work here.

    One might understand how some people whose properties form the security for a Developers loan might think of suspending the repayment of any mortgage that they have taken out on the same property. After all if there is a risk of losing your property because the developer has defaulted, why throw good money after bad?

    It is a risky path to take, but the government is almost encouraging people to do just that by complicating the rules of forfeiture. They say that they are going to protect your main residence from seizure in just about any event.

    But somebody is going to have to pay up. The bank depositors could lose more money, the ECB loan could be written off, people could lose their houses or the debts could be paid.

  • demetri says:

    @Nigel what you said totally makes sense in your post below, BUT if non loan paying person ‘a’ who has a loan secured against a common plot of land that both properties are built on i.e buyer ‘a’ and ‘b’s properties, then the bank would have the right to re-possess all homes of purchasers a and b that sit on the land, thus putting obstacles in the way of the conned buyer ever getting a title deed?

    Or would common sense prevail and the banks look at who actually was indebted to the bank and go ahead and re-possess individual properties of buyers who are non paying? (again this cant be done as there are no separate tile deeds to the properties that were built yet) Never ending cycle it seems

    Nigel Howarth says:

    September 5, 2014 at 10:48 am

    @demetri on 2014/09/05 at 9:20 am – Firstly the fact that person ‘a’ on a development isn’t maintaining their loan repayments will not affect the ability of person ‘b’ on the same development to acquire their Title Deed – they will not be held liable for person ‘a’s debt.

  • @Mike on 2014/09/05 at 9:59 am – We’ll have to see the precise wording of the law once it’s been published in the Gazette – but I fear that purchasers who failed to deposit their contract of sale will not be protected. Maybe the government will announce another amnesty as it did in 2011 (see New specific performance law increases safeguards.)

  • @Janner on 2014/09/05 at 9:57 am – Unfortunately people did not think the problem through. Any bank would almost certainly collapse if it seized the homes of good customers who were maintaining their loan repayments (regardless of whether the property was built on mortgaged land) as the bank would lose all credibility – and it would also put into question the credibility of other banks – and the ‘safety’ of any contracts in general.

    As for civil claims etc. these will hopefully be addressed by dealt as reported in ‘Positive developments on hidden mortgages‘ where it talks about “(2) the provision of tools to encourage the release of encumbrances on properties to facilitate title transfer.”.

    As for the upcoming stress tests, the Bank of Cyprus has recapitalised so there should be no problem. And there are tens of thousands of unsold properties that the banks could seize.

    It’s also worth bearing in mind that some of those not paying are ‘strategic defaulters’ – i.e. they have the money to pay but are refusing to do so. The foreclosures bill should help ‘encourage’ them to cough up.

  • @demetri on 2014/09/05 at 9:20 am – Firstly the fact that person ‘a’ on a development isn’t maintaining their loan repayments will not affect the ability of person ‘b’ on the same development to acquire their Title Deed – they will not be held liable for person ‘a’s debt.

    As for any unpaid taxes owed by the vendor, I believe this will be dealt with as reported in ‘Positive developments on hidden mortgages‘ where it talks about “(1) the removal of administrative hurdles for the transfer of title.” – but we will have to wait and see.

  • @Pete on 2014/09/05 at 9:19 am – We did discuss problems of hidden mortgages and the risk posed to those who had been deceived into buying property built on mortgaged land. I would like to think I had a hand in this.

    But I’m sure the Troika would have corroborated what I said with other sources.

  • Mike says:

    On the face of it and with first reading this seems to be excellent news and goes a little way to restoring faith in the Troika’s abilities and agenda. Assuming they maintain their stance and do what is right and do not permit the ‘artful ways’ that some deputies wish to introduce then it’s a big welcome to the 21st Century and real world. So good to note that..”the Troika rejected proposals to protect small business property and professional residences from repossession and also rejected a proposal to write-off any debt remaining once a property has been auctioned off”. Common sense obviously does prevail.

    My only concern is in the wording, perhaps Nigel can pass informed comment – what of a property paid for in full for which the contract of sale is not accepted to be deposited at land registry due to outstanding vendor taxes. Would it be protected? as in theory the contract of sale is not deposited.

  • Janner says:

    @Nigel Howarth,

    I appreciate what you are saying about the risk to properties elsewhere in the world if you do not keep up payments on your housing loan. However, many people have stopped paying because there was no protection against the bank repossessing your property as it had been used as collateral for someone else’s loan. If the bank cannot repossess property used as collateral for a developers loan then how does this help them to recover the huge debts of the top 20 highest borrowers for example? This new statement changes things in that your property should be safe providing you pay your loan. It does not solve the problem of not having your title deed which must place you at risk as you’re not the legal owner.

    What about civil claims by a contractor against the developer? The bank may not repossess but if the contractor takes the developer to court for non-payment and the contractor wins and the developer cannot pay would the court not have the power to force sale of the assets owned by the developer (i.e my property) to pay the debt? I’m not sure of this but thought I’d throw it out there!

    As stated earlier, if the bank cannot repossess properties used as collateral for someone else’s loan (developer for example) then doesn’t this increase the pressure on the banks for the upcoming stress tests? Surely, if the assets used as collateral for the developers loan are now unrecoverable then this puts the banks in a worse position? I don’t wish to sound negative about this new policy/bill development but I don’t really understand how it can be done.

  • demetri says:

    Yes sounds positive but as in every case with laws passed here I have a feeling it will come with some catches, so purchasers who have submitted sale contracts are protected full stop?

    Slightly off topic but what happens regarding issuing of deeds lets say developer unwilling/unable to pay taxes, be capital gains or IPT or what happens in the case where someone’s property was used as collateral to secure another persons loan (and this other person in non paying) as per Janner’s post?

    I am pretty sure that without the Inland Revenue getting what it’s due from the developer and in the second case the bank getting what its due from non paying purchaser (that secured the loan on the back of others all with the blessing of bank n developer), then these people won’t get their deeds unless they a. pay the developers debts b. pay off debts owed by another person who owed the bank….correct?

  • Pete says:

    I may be barking up the wrong tree Nigel but would this have anything to do with your Troika meeting?

  • @Andrew on 2014/09/04 at 9:27 pm – You may have missed the changes I just made to the article. All buyers who have deposited their contract of sale at the Land Registry will be protected.

    It looks as if the government may have finally come to their senses (with a little ‘encouragement’ from the Troika.)

    The government has had more than a year to formulate proposals on this foreclosure bill. Why do they insist on leaving such matters to the very last minute when they know there are thousands of people at the precipice.

    From other reports I’ve seen today it seems AKEL will not be supporting the bill. The only reason we’re in this situation is that the Catastrophias government didn’t act when it should have done. In a TV interview Catastrophias went as far to blame the ‘capitalist system’ for the collapse of the economy rather than admit his own and his government’s gross incompetence and stupidity.

  • Andrew says:

    Taken at face value, this sounds like very good news. However at the moment it is only one of many proposals and nothing is certain.

    Of course it is only right and proper that innocent buyers should never lose their homes due to some developers bad debt.

  • @Janner on 2014/09/04 at 4:08 pm – Some breaking news just in.

    According to a written statement by Cypriot government spokesman Nikos Christodoulidis, the Government has included seven amendments into the foreclosures bill, one of which ensures the protection of property buyers who submitted the purchase contract document, but have not secured title deeds.

    I’ll edit the article to reflect this.

  • @andyp & Janner – The devil will be in the detail of the law (assuming it’s passed into law). Once it’s published in the Cyprus Gazette I’ll be able to say more.

    As for people maintaining their home loan repayments, I cannot envisage a bank seizing the property because its owner’s mortgage (developer) is non-performing. No bank in its right mind would take such action against one of its good customers. If any bank in Cyprus did that what little trust that remains in the banking system would be destroyed.

    Some of those in this predicament have contacted me for my opinion – and I advised them to maintain their loan repayments or face the consequences.

    (I know that some people are not maintaining their loan repayments because they’re in negative equity. Very foolish as they could end up losing their home in the UK (and elsewhere in the EU) if the bank took action against them.)

  • Janner says:

    And the safeguard against repossession for those paying their housing loan is……?

    What’s to stop the bank from repossessing properties which were used as collateral for someone else’s loan? Nothing from what I can see!

    Those who are refusing to pay their loans due to this safeguard not being in place will not be encouraged to pay!

  • andyp says:

    Sounds good but I will celebrate only when it is a done deal.

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