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Cabinet approves hidden mortgages bill

Interior Minister Socrates Hasikos has announced that the basis of the bill to resolve the ‘hidden mortgages’ problem that prevents thousands obtaining Title Deeds to the property they purchased has been agreed by the Cabinet.

Cabinet approves hidden mortgages billFOLLOWING today’s meeting of the Cabinet (Council of Ministers), Interior Minister Socrates Hasikos explained some of the key points of the ‘hidden mortgages’ bill designed to enable several thousand people to get the Title Deeds to the property they purchased.

“The bill covers several thousand citizens who have paid the full purchase price for their house or apartment but who cannot get its Title Deed either because the vendor (property developer) had mortgaged the property to the bank, or because the vendor has not paid the monies due to the state such as VAT, income tax, social insurance etc.”

He noted that the bill would guarantee that purchasers affected would be able to obtain the property’s Title Deed and, having done so, they will be able to sell, transfer or mortgage the property.

Asked to clarify, Mr Hasikos made it clear that the law will cover all cases where the buyer paid the full purchase price for the property and those who have paid a sizeable proportion of the purchase price who may pay the remainder into a special account through the Land Registry when they have the money.

The main provisions of the bill

  • With the proposed changes, for the purpose of issuing ownership titles to the benefit of the entrapped buyer, authority is granted to the director of the land registry department to exempt, eliminate, transfer, cancel mortgages and or other encumbrances, depending on the case and under conditions.
  • Specifically, the sale price must have been paid in full by the buyer. In case of an outstanding amount, the buyer can deposit it in a special temporary account managed by the land registry director.
  • The director will have the power to transfer mortgages to other property belonging to the seller. If no such property is available, the director can transfer the encumbrances on individuals who guaranteed the seller’s obligations and, at the time the agreement was signed, had acted as board members, or owned over 10 per cent of the seller’s share capital.
  • The bill concerns the seller’s obligations to banks and the state.
  • To benefit from these provisions a sales contract for the property or part thereof, must have been submitted to the land registry department by December 31, 2014.

Readers' comments

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  • @Marian on 2015/06/29 at 11:05 am – No – you will not be able to get the deeds to the property you purchased until they have been issued. Once the bill has been finalised it will be given to the political for their comments. It will then be debated by MPs and any horse-trading may result in changes before it is voted into law.

    And there is a possibility that it could be challenged in the Supreme Court.

  • houlou says:

    Chris I have known to be a champion of pessimism, but this time if the govt doesn’t take action it affects their ability to get funds….here are the extracts from the MOU that affect deeds issuing etc

    http://www.mof.gov.cy/mof/mof.nsf/Memorandum%20of%20Understanding%206th%20review.pdf 6th review – FINAL 18.6.15

    PAGE 5
    1.12. Prior to the granting of the seventh disbursement of financial assistance, the authorities will, after taking into account comments by programme partners, present draft legislation to programme partners, that

    • ensures that property buyers who have paid the purchase price in full, will have their title deeds transferred within 6 months after their issuance;

    • puts obligations on all parties involved to ensure that the procedures releasing encumbrances and transferring the title can operate without delay and as automatically as possible; and

    • provides safeguards against abuse, inter-alia by introducing a mandatory escrow account to route all payments related to a property transaction, as well as adequate compensation for the parties involved, if available.

    By end-June, the legislative measures will be adopted by the Council of Ministers. Furthermore, the CBC will, in close cooperation with Ministry of the Interior, provide to programme partners a financial sector impact assessment regarding title transfers and lifting of encumbrances by end-June.

    The authorities will propose legal or contractual standards for property sales contracts and connected loan and mortgage arrangements by end-October, as well as further legislative and administrative measures necessary to incentivize the swift transfer of title deeds by end-October.

    PAGE22
    Housing market and immovable property regulation
    5.3. Action is required to ensure property market clearing, efficient seizure of collateral, and swift transfer of property rights. A particular risk arises from legal disputes, which may be due to incomplete documentation of ownership and property rights and the slow pace of judicial procedures.

    The Cypriot authorities will ensure that:

    • by Q2-2015, the House of Representatives will adopt amendments to the Street and Building Permit Law to ensure the enforcement of the deadlines for issuance of certificates of completion by the supervisor engineers;

    • the working group on title deeds issuance will review all procedures from the planning permit application to the issuance of title deeds (working closely with the Task Force on title deeds). By end-June 2015, the Cypriot authorities will submit for consultation with programme partners a report detailing the main obstacles for the title deeds issuance and recommendations on ways how to streamline these procedures during 2015, including a catalogue of tolerated deviations from building and planning permits. A further comprehensive streamlining of building, planning and title deed procedures will be proposed by the authorities following the completion of the in-depth analysis in progress.

    • the title deed issuance backlog of immovable property units with title deed issuance pending for more than six months drops to less than 3,500 units by Q4-2015 (backlog refers to (i) applications, (ii) units that are eligible for the “ex- officio” issuance of title deeds, required certificates and permits). The ex-officio cases will automatically be counted in the backlog from the date the certificate of final approval is being issued by the respective Local or District Authority. To that end, the Cypriot authorities will continue to provide to programme partners granular data on the stock of backlogs of permits, deeds, certificates, and mortgages associated with the underlying properties and continue publishing the quarterly progress reviews.

  • Marian says:

    Does this mean we can go to the Land Registry this week and get our Deeds without any encumbrances. We paid cash and signed our contract before any mortgages were taken out or any taxes that haven’t been paid were put on the Deeds. Hopefully Nigel can answer this.

  • Chris E says:

    Dear houlou

    In response to you question to Nigel Let’s hope it all pans out for the better soon, and although early days. Would comment that it is early days but most likely will end up in tears.

    Just like the friends from the North who are facing similar consequences built on poor regulations, enforcement, lack of transparency/control based on the financial benefit of others.

  • houlou says:

    @jjmaes, yup Nigel deserves to be crowned champion of the people who have been basically ripped off by a combination of lawyers-bankers-state-developers all had a hand in the mess created…..as Hasikos mentioned there was just a frenzy of buy buy that fuelled the property bubble…irresponsible lending, massively inflated valuations, no regulation of who could build sell etc no standard for selling, no checks by land registry at time of submitting sales agreement….

    Let’s hope it all pans out for the better soon, and although early days, I await to see the proposed catalogue of building infringements that will be easily resolvable (for a very small fee Hasikos said) there are many people too who are stuck without the cert. hence cant proceed at all to the next steps in acquiring deeds…

  • jjames says:

    @ Nigel June 25th 2015 12.40
    “I did discuss this ‘hidden mortgage’ problem along with several other issues when I met with the Troika last year. I would like to think that I helped contribute to resolving the problem – but who knows.”

    Presumably this means that the Troika have not communicated with you since your meeting, Nigel?

    If that’s the case then shame on them! Like others here I am sure that you have made an invaluable contribution to resolving the problem and the politicians need to get their heads out of the clouds and maintain regular contact with people like yourself who have experience of, and the expertise to deal with these issues at ground-level.
    Also what about some thanks from them if it hasn’t already been forthcoming?!

  • @Warbler on 2015/06/25 at 9:59 pm and @holou on 2015/06/26 at 7:21 am – Changes introduced to the IPT law last year make the purchaser responsible for registering with the Tax Office and paying the tax directly to them from the time they take delivery of a property; those changes are not retrospective.

    Before those changes were introduced the registered owner of the property was responsible for paying IPT, so I expect this will be reflected in the new law.

    @holou – If there are building infringements preventing a Final Certificate being issued, there can be no Title Deed and this proposed law will not apply. (But the government is preparing a catalogue of tolerated deviations from building and planning permits as agreed with the troika – and I expect this will help to overcome a number of planning infringements).

  • @houlou on 2015/06/25 at 9:43 pm – if one of the buyers fails to maintain their loan repayments and the bank takes action against them, it is only the property they purchased that will be seized by the bank not the whole development.

  • holou says:

    @warbler, this is a good question, e.g developer has paid diddly squat towards i.p.t or even communal charges and not registered with the tax office the names of the purchasers he sold to….do buyers step forward and pay tax outstanding on their portion of a project? or leave it as is and hope that they are covered by the bill if it is passed as law.

    PS Mr.Nigel for sure will say that such buyers ought to have informed tax authorities of the property details, even if vendor had not..BUT there are cases e.g where there is no stipulation in sales contract who is responsible for taxes, combined with the fact that the developer is at fault for non issuing of deeds-ie building infringement meaning no cert.of final completion…..In such cases developer is the one who owes……

  • Warbler. says:

    Hi, this is great news, can I just ask would the bills that the developer claims to have paid on our behalf over the year’s also still be payable or would it just be a straight forward paying of the transfer fee ?

  • houlou says:

    @Nigel, taking into account the bill covers sellers obligations to banks and the state

    I am hmmm trying to get my head around the following case…
    A Developers land is used as collateral to secure mortgages for his buyers (so developer got paid in full via the bank that arranged the loans, he owes nothing to bank)…a set of these same buyers are not servicing their loans and a ‘forced’ sale is being pushed through by bank regarding those buyers…but because no separate deeds exist bank is going after whole plot.

    Other set of buyers on same plot developer direct in full without involvement of the banks (not knowing land their homes were on is encumbered).

    Would the law if passed cover the latter buyers?

  • @Lyn on 2015/06/25 at 1:30 pm – To my way of thinking (which could be different to Mr Hasikos) the bank, on behalf of the buyers with loans, have paid the developer the full price for the property.

    So the fact that people still owe money to the bank is of no relevance.

    But we’ll have to wait until the law has been agreed and published before we can be sure.

  • @houlou on 2015/06/25 at 1:01 pm – That’s very good news UPDATE. Hopefully this will be reported in the media.

    This was reported about 15 minutes ago in the Phileleftheros:

    Nicosia: The setting for reducing the property transfer duties of 50% is only valid for two years, stated the Minister of Interior, Socrates Hasikos. Speaking on state radio, Mr. Hasikos also said that the issue will be put for approval at the next meeting the Cabinet. As regards the bill for the enclaved homeowners, Mr. Hasikos explained that they can benefit those who have paid off the property of the seller or the development entrepreneur or have paid 80%. He clarified also that the buyer is guaranteed and if the seller’s bankruptcy. In connection with the reaction of the President of the Association of Municipalities for the government’s proposal to levy part of the taxation of real estate attributable to the municipalities, the Minister of Interior described the concerns excessive and unjustified. The government, he said. Hasikos, heard the voice of the people and assured the municipalities that will continue to collect money to them in installments.”

    See more (in Greek) at: http://www.philenews.com/el-gr/oikonomia-kypros/146/263900/ypes-i-meiosi-ton-metavivastikon-telon-akiniton-tha-echei-ischy-dyo-chronia

  • houlou says:

    Well Mr. Damianos of AKEL says the bill needs to be carefully reviewed, and that AKEL are in support of trapped buyers, but they would like to see who ends up paying the bride as they say in Cyprus! ie the banks should take absorb the hit for lending the way they did to developers…..however as far as I can see so far, I have understood this is what Hasikos is suggesting anyway! and Hasikos suggests even the ‘state’ will pay (well actually have monies owed to them by the developers rather than the unfortunate souls who got ripped off by them)

    Just hope when it comes to vote time, that nobody throws a spanner in the works in order to cover the banks.

  • Lyn says:

    Hi Nigel; thanks for your valiant efforts. I see this as an excellent development and a step in the right direction. As always the devil will be in the detail but this is very encouraging news for those who have paid their loans off in full or have the funds to deposit the balance owing on their loans into a special account with the Land Registry. Do we know how the new procedures will apply to those who still have a long way to go on their loans? Lyn

  • houlou says:

    Nigel, Hasikos this morning also mentioned

    Αφερέγγυος developer

    insolvent developer

    BUYERS should be covered

  • @mollimoo on 2015/06/25 at 11:48 am“we our now in the hands of the Receiver” – as there was nothing in the announcement about companies in liquidation, I put a could of ‘feelers’ out. As soon as I have any news, I will let everyone know.

    I did discuss this ‘hidden mortgage’ problem along with several other issues when I met with the Troika last year. I would like to think that I helped contribute to resolving the problem – but who knows.

  • 王明到 says:

    fantastic! Cyprus will earn more!

  • @Chris B on 2015/06/25 at 10:15 am – I suggest you wait to see what the new law brings.

    If you want to find out what the debt covers, I suggest you ask the Land Registry to carry out a Title Search – see New title search procedures in Cyprus for information and forms. (It will cost you around €20.00)

    When you have the results of the search, send them to me and I will let you know what the debts are.

  • mollimoo says:

    I think this is fantastic news and I’m sure it wouldn’t have come about without your input Nigel from your prior talks.

    However, as we our now in the hands of the Receiver – not heard anything from them though, does anyone know how will that work for us? Am I also protected?

  • houlou says:

    @steve r , Hasikos was interviewed on rik radio this morning between 7:45 and 8:00 I think, you will be covered if you have paid in full pure and simple, vendor debts cannot hinder issuing of your deeds to you….in your case re infrastructure, he mentioned they are also looking into helping those who have no cert of final completion-thus no deeds, gave an example a 1.00m being 1.20m and holding things back! again this will be addressed so the buyer can get deeds-albeit with perhaps some notes about wall being mentioned on deeds…..hope dies last

  • Chris B says:

    Good Morning Nigel

    We purchased a villa in 2002, from the developer DND, paying in full, the directors of this company disappeared from the island as I’m sure you are aware. We moved here permanently in 2009 and since then have been using the Lawyer Savvas Savides of Michael Kyprianou Ltd.

    DND have a lot of outstanding debt with the Bank of Cyprus, they mortgaged time and time again the land our property plus 11 others is built on, to obtain this. We were informed by our Lawyer that the bank are holding us responsible for these debts, the last figure quoted was 700,000 euro including the interest that has been added since the first mortgage.

    Despite every effort to communicate with the Bank our Lawyer has been unable to get a breakdown of exactly what the debt covers. Coincidentally, since the talk regarding giving people who have paid in full their title deeds clear of memos, the Bank have within the last week given our Lawyer individual offers for us all. The villas are of very similar design, there is very little difference in size and the original asking prices were 120,000 Cyprus pounds, 125,000 and 135,000.

    The offers from the Bank are all different and vary from 11,000 to 20,000 euro with no explanation as to how they were calculated or exactly what we would be paying for.

    We have never had any direct communication from the Bank even though several of us are customers of theirs.

    We are now wondering should we pay, which we are not happy about, or wait to see what the new law brings.

    Thank you for all you are doing to help people in our situation, we follow your web page with great interest.

  • Steve R says:

    I have a contract with a developer which had 2 directors. The property was paid for in full but both directors fled the island before the infrastructure on the site was complete. My contract carried personal guarantees by both directors. There are no developer mortgages against the site but there are endless amounts of individual claims against the company. Is there light at the end of the tunnel for me. I don’t think so.

  • chris says:

    This is Cyprus we are talking about here the title deeds bill will not be resolved until the Government are finally backed in to corner that only option is to follow there friends out of the EU exit door.

  • john de lacey says:

    @Houlou, I hate that phrase when people say, “my sources tell me”, it just means nothing.

  • houlou says:

    Nigel anyway of drawing up some kind of letter on the line of the one you sent Hasikos please?, so as everyone ‘trapped’ can send to Hasikos or whoever for that matter has proposed the bill?

    ….I think it would be good for ‘them’ to know that what is being proposed makes sense at last……or is there some other property action group that can promote the same…?

  • houlou says:

    If this is passed as law…what happens to all those unfortunate buyers who have already ended paying any extra amount (on behalf of developer) to secure their titles?

  • houlou says:

    @Scruffy & all, yes is good news, and it is all over the news today, but as others have said we have to wait and see…I remember not long ago votsis and his proposal to dump the i.p.t tax on buyers (regardless of whether you have deeds or not) thus lightening the load on the developers (buddies,family or even himself who knows he may be one)…and eventually he got the evil and frankly stupid bill voted into law…..

    Don’t lynch me for saying this again, but my ‘source’ who believes bill will be voted on in Oct, thinks it will be passed as law also….that was the general feeling he said….

    Way I see it is the way interior minister Hasikos sees it, why punish innocent buyers if there is a problem between the vendor and the bank or vendor and the state…..purely and simply put there is no reason (unless of course you live in Cyprus the land of the free, which prides itself on the fact it borrowed a lot from the uk legal system and land registry systems!bahhhh) as I write I am watching Hasikos speech…..

  • scruffy says:

    Thanks Nigel. Very positive from the government though. I expect there will be substantial opposition from MPs, or attempts to amend the bill at least, given that many are developers or associated with developers in some way. I can’t see them taking kindly to seeing their assets wiped out at the stroke of a pen.

  • Gary says:

    At this stage, it is clearly fantastic news. We will all remain cautious, of course, as it is likely there will be some ups and downs along this rocky road. But at least it’s out there being debated in Cabinet and recognised as a major issue. Fingers crossed everyone.

  • @scruffy on 2015/06/24 at 1:55 pm – Once the bill has been finalised it will be given to the political for their comments. It will then be debated by MPs and any horse-trading may result in changes before it is voted into law.

  • Pippa says:

    At last it seems something has been put in place, it will now be up to the ‘civil’ service to implement the requirements of the bill in a timely fashion. Which may be the new stumbling block and a way of holding on to title deeds. Now the next action must be on properties on those developments that have not been completed, where the property that has been paid for in full is being held to ransom at the whims of the developer.

  • scruffy says:

    Fantastic. Does approved by the cabinet mean that its just a matter of passing it into law, or are there other hurdles to overcome before that happens?

  • houlou says:

    Lets hope they vote it through my ‘sources’ say by October it will be voted on….unless anyone else has heard otherwise?

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