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MPs vote to protect home buyers (update)

MPs have voted to protect home buyers who are unable to obtain the deeds and who face the threat of losing their homes if their developer fails to repay his loans or becomes insolvent.

MPs vote to protect home buyersPARLIAMENT on Thursday voted to ban foreclosures of homes whose owners could not acquire title deeds and could be at risk of losing their property because the developers could not repay their loans or have become insolvent.

The proposal was submitted by main opposition AKEL.

It was approved by 23 votes – AKEL, EDEK, Greens, Citizens Alliance, and independent MP Zaharias Koulias – to 21 from DISY, DIKO, and EVROKO.

The proposal amended a provision included in the main foreclosures law, which exempted such properties from repossession until April 30.

“Our intention was for it to be permanent so innocent people are not punished,” AKEL MP Aristos Damianou told the Cyprus Mail.

Such properties will be exempted provided the buyers paid at least 80 per cent of the sale price or have fully complied with their contractual obligations towards the seller.

According to the report drafted by the House Finance and Interior committees, the amendment was deemed necessary because the issue has not be resolved to date, despite the government’s pledge.

Resolving the matter is included in the terms of the island’s bailout.

The government has set up a task force, which must calculate the scale of the problem and propose solutions by the end of May.

The bill seeks to protect buyers who could find themselves in trouble as the crisis continues and more and more developers fold.

Developers’ land and buildings are counted as assets that need to be offset against their debt to banks, which gives lenders a claim on people’s properties that had been mortgaged by developers even if the buyers had paid for them in full.

The banks readily lent to property developers, especially between 2004 and 2008, fuelling an unsustainable frenzy of activity which roughly tripled prices.

The outdated legal framework enabled property developers to sell on property that was already mortgaged.

It is thought that some 30,000 people, Cypriot and foreigners, may be affected.

Readers' comments

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  • @James on 2015/03/21 at 6:58 pm – Unfortunately, as many property developers are ‘strangers to the truth’ I suggest to ask the Land Registry to carry out as this will show whether there are any mortgages or other claims that will prevent the transfer of the property to your name. You can find an article on how to go about this with the relevant form at New title search procedures in Cyprus.

    If there are other claims lodged against the title that are dated after your contract of sale, these can usually be cleared by applying to a court.

    (In one case a couple sued their developer for ‘Specific Performance’ and the judge instructed the Tax Office to provide the necessary documents that would enable the transfer to take place – the couple did not have to pay the developer’s tax liabilities.)

  • James says:

    Nigel, Thanks for all the info on this subject but wonder where we fit into the scheme of things. We bought our apartment in 2004, completing and paying in full in 2005. Developer assures us no mortgage on property and Title Deeds application submitted to Land Registry last year. HOWEVER, we do know they are one of the large developers who owe the taxman a 7 figure sum, and whereas they may not have a mortgage as we know it they were on the Board of Bank of Cyprus and we believe they were given vast unsecured loans. Where does that leave us, we wonder? Needless to say we found out that our solicitor is in league with said developer.

  • Andrew says:

    Assuming they cant foreclose when a buyer has paid a developer. How then could they force the said buyer to pay a DEVELOPER’S debt.

    In the event of a shortfall when the banks can’t foreclose, but the property remains the asset of the developer how will buyers get their deeds.

    Is this another cunning catch 22 plan ?

    The banks should write down THEIR losses. Taxpayers should not foot the bill.

    Home buyers should be issued with title deeds without further delay.

  • scruffy says:

    @Peter Davis

    “I don’t think the banks will roll over despite their incompetence or collusion”

    The banks were the only participants in the whole deeds scam that were FULLY aware what was going to happen to the purchasers of property as only the banks were FULLY aware who legally owned what collateral.

    Even lawyers who made an effort were limited to information at that time. Although they were able to find out if the developer had the land previously mortgaged the banks refused to divulge whether the mortgage was still active, in arrears or paid up.

    Since a huge percentage of projects were originally mortgaged its not hard to see how the problem is now so big.
    Government officials were spouting that, provided you had deposited your contract with LR within a stated period you were the LEGAL owner of the property.

    The system was not fit for purpose.

    However, out of everyone working within this corrupt system, the only players who held ALL the necessary information and knew what the end game was going to be, were the banks.

    IMHO this alone makes them the prime culprit in the whole sorry saga

    So, they may not want to roll over despite their collusion, but it is up to us as citizens to stand up and protest should the taxpayer be asked to pay.

    The arrogance of the modern day bank is down to this notion that, regardless of how they behave, we can’t let them fail.

    The only genuine winner if this comes to pass is the developer.

  • @Pippa on 2015/03/21 at 8:30 am – It means what it says – buyers who have paid at least 80 per cent of the sale price or have fully complied with their contractual obligations towards the seller will not have their homes repossessed.

    The property will remain an asset of the developer (as the property is registered in his name).

    The crucial question is whether buyers will have to contribute towards the developer’s debt. I would have thought that if the bank can recover its money by foreclosing on the developer’s unsold properties and land banks, that shouldn’t be a problem. However, if there is a shortfall in the money recovered someone will have to pay – the buyer or the taxpayer I expect.

  • Peter Davis says:

    The bottom line is who will take the hit on this?

    Not the developer who has spent or hidden the money abroad or amongst family members. He’ll keep the merc and grand villa

    Not the owner/occupier of the property who is safeguarded.

    I don’t think the banks will roll over, despite their incompetence or collusion in the matter. They will take ‘dynamic action’

    The solicitors for their incompetence? You’ll hear the cries from the Plenum, bearing in mind 95% of the members are also developers.

    So that only leaves the taxpayer. So why should the taxes I have to pay go to any of these groups. So my standard of living will fall to cover someone else’s problem.

  • Pippa says:

    Sorry if seems seems a stupid question. Will this bill, if agreed, mean that a property, paid for in full, or with a fully service mortgage will not be considered to be part of the developers assets, and therefore the purchasers will have no obligation to settle to developers debts before they get a clean set of title deeds, or is that yet another false hope?

  • kufrahdog says:

    A sensible step forward but not far enough, as it does not facilitate directly the transfer of property title to buyers.

    I want to legislation specifically to facilitate the transfer of property title through the removal of impediments like hidden developer mortgages, developer tax debts and the degrees of property illegality brought about by developers deliberately violating planning and building regulations and laws without the knowledge or agreement buyers. KD.

  • Molliemoo says:

    Yippee!! (with fingers crossed)

    Thank you Nigel.

  • @Molliemoo on 2015/03/20 at 5:03 pm – “Am I right in interpreting the article above as Parliament has voted to ban foreclosures in cases such as ours?”

    Yes you are – apologies if my earlier reply was unclear.

  • Gerald Bowers says:

    We recently moved to Cyprus from Ukraine, where we have a house fully paid for but will never be able to sell due to the war.

    I said to my wife “Why didn’t we buy a property in Cyprus all those years ago instead of buying in Ukraine?”

    Now we realise it might have been worse if we had bought property here in Cyprus.

    So, here we are now just renting and happy about it.

    I still finding amazing that here in an EU member state we have this crazy situation where so many people could lose there homes.

  • Molliemoo says:

    Sorry, still confused.

    My developer will not repay his ‘hidden’ mortgage on the land and we have Receivers (done nothing so far) in. Developer’s mortgage was dated before we unknowingly bought our properties.

    Am I right in interpreting the article above as Parliament has voted to ban foreclosures in cases such as ours?

  • Scruffy says:

    @Nigel

    Absolutely correct Nigel. That is why I have been saying for months now (understandably, to the annoyance of many) that I was glad that the opposition parties were obstructing the implementation of the foreclosure laws. Whilst it was obvious that their main priority was to protect themselves and their buddies they were inadvertently protecting those of us caught in the deed trap.

    It was becoming blatantly obvious that the government were not interested in protecting anyone and wanted to push the laws through as quickly as possible. This was indeed evidenced by the total lack of effort by their so called “Task Force” to supply the relative info by October 2014, as instructed to do so by the Troika.

  • @Scruffy on 2015/03/20 at 2:52 pm – The ‘Task Force’ should have developed an action plan addressing at least,

    (1) the removal of administrative hurdles for the transfer of title,
    (2) the provision of tools to encourage the release of encumbrances on properties to facilitate title transfer, and
    (3) the development of contractual standards for land sales contracts and connected loan and mortgage arrangements.

    by the end of October 2014! Heaven only knows what they’ve been doing – six months it would appear they done zilch.

  • @Mollimoo on 2015/03/20 at 2:37 pm – That’s correct – in cases where mortgages were lodged at the Land Registry after a buyers contract was deposited, those buyers are protected because their contract takes precedence over the developer’s mortgage.

  • Dunn Good says:

    The Alpha Bank took us to court in 2011 for arrears in payment of our loan in CHF, we paid a Barrister in Cyprus nearly £800 to read over our case and were advised that it would be costly and probably no use trying to defend. However the Bank has not repossessed the property, probably because we are still maintaining it. We have it rented and were asked for all the rent monies to be paid to the Bank, my reply was if you want all the rent then you find a tenant and pay the management Co. The Bank replied that they were happy to accept the net rent after we had caught up with payments to the management Co. We do not have Deeds. I doubt we will ever have the use of it again during our lifetime but the Bank will (if rented) eventually get their money.

  • Scruffy says:

    This news is so far VERY positive. Another important discussion took place yesterday resulting in MPs voting to ban the selling of loans to third party, non Cypriot Liscensed financial Institutions, (I think till May 15th)

    This is important too as there was a likelihood of banks trying to offload properties already foreclosed on before any new foreclosure laws could be put in place.

    It must be said that these votes are very close and I suppose the proposals are in grave danger of being scuttled but we must try to remain positive.

    I would imagine nothing will be passed at least until the end of May which is when the appointed “Task Force” must provide the Govt with the relevant numbers they have requested.

  • Mollimoo says:

    Surely it must apply to all those with ‘hidden’ developer mortgages which were in place before we bought. As I understand it, if the Developer took a mortgage out after the date of lodging our contracts, then those people were protected anyway?

    I’m getting a bit confused here!

  • @Andrew on 2015/03/20 at 1:23 pm – Are innocent people protected from being punished? Not until the law has been passed by parliament and published in the Gazette.

  • Andrew says:

    An almost 50/50 split is worrying.

    Many thousands of people will have their contracts lodged AFTER a developers mortgage. These are the people who remain vulnerable!.

    “Our intention was for it to be permanent so innocent people are not punished,” AKEL MP Aristos Damianou told the Cyprus Mail.”

    So are the above group protected or not?

    If the law is not retrospective it is worthless.

  • @Gary on 2015/03/20 at 1:12 pm – I would like to think that the law (assuming it is passed) will protect those who bought before the law comes into force. As you say it would be meaningless if it only applied to those who bought after the law was introduced.

  • Gary says:

    Nigel,

    Surely the law, if all goes to plan, has to be retrospective? The vote is based on protecting buyers currently in this predicament. I can’t imagine there will be many new purchasers who would now be caught out by developers debt knowing what we now know.

    I’m taking this as a huge positive at this stage as it’s the first time I’ve clearly seen the correct language used to describe and attempt to address this ‘elephant in the room’.

  • @Stuart on 2015/03/20 at 8:29 am – George Psyllides called me this morning (there will be another article in the Sunday Mail). He also sent me a copy of the law and we exchanged emails on the subject. The article has been changed “Such properties will be exempted provided the buyers paid at least 80 per cent of the sale price or have fully complied with their contractual obligations towards the seller.”

    Currently we interpret that to mean that if the person took out a loan and the bank has paid the money to the developer, then the bank will not foreclose on the property even though the buyer has not repaid at least 80% of his loan.

    However, if the buyer has stopped repaying his loan because the developer is heavily in debt and/or in liquidation and they feel they are throwing good money after bad then the bank will pursue that buyer and possibly repossess the property.

    I know that many have stopped maintaining their loan repayments due to the perilous financial situation of their developer.

  • @Carol on 2015/03/20 at 8:43 am – Much depends of whether the developers debts take precedence over your contract of sale. If his unpaid dents were lodged at the Land Registry after your contract of sale was deposited you are not at risk of losing your home. However, the liquidator will possibly charge you in the region of 11% of the purchase price for getting the deeds issued (this is their standard fee).

    If the developer’s debts take precedence of your contract of sale (i.e. they were lodged at the Land Registry before your contract of sale was deposited) then you are in the invidious position of facing the risk of losing your home unless you repay an element of the developer’s debts to the bank.

    So there is a possibility that yesterday’s vote will help you – but the law has to be approved by parliament and the President before it becomes the law – and even if it is passed, it may not be retrospective.

    I can assure you that the troika are well aware of this problem – I discussed this issue at some length with them last year see Nigel Howarth meets the troika. They are also aware of the consequences for the island’s property market if the banks start repossessing homes that people have paid for.

  • Carol says:

    Oh yes we have paid in full for ours and our developer has been put into Liquidation. The Liquidator has been put in place and has been their for a year and so far done nothing. The committee for the site has worked hard to get us through to the issuing of the deeds and these have been given to the Liquidator so where will that leave us ?????

  • Stuart says:

    This narrow victory of just 2 votes will be very good news for all those who have paid in full for their properties but not so good for those who, for whatever reason, have not been able to afford 80% or more of the ‘value’ whatever that value is deemed to be and by whom. Presumably it is the asking price at the point of sale but ‘value’ is a debatable topic as we all know.

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